Brendan Foley, Principal Program Manager, Microsoft
Consumers First, Advertising Follows: Permission-Based Marketing in 2020
Good Morning, Jane
Jane wakes up at 7 a.m. on October 15, 2020. She glances at her personal dashboard on her tablet PC to see what’s new in her world. After scanning the news and weather, she sees an update from her personalized ad service. Three of her friends have gotten back to her with ‘thumbs up’ on the cashmere sweater from Belleza, her favorite designer brand. The ad service had recommended this sweater based on Jane’s input on her product/service category likes and dislikes, as well as the input from people like Jane and her friends. Jane is very comfortable in providing ongoing input and information about her interests to her ad service, because she knows it will always put her interests first in delivering customized ads to her, and it will never share her data without her explicit permission. Jane has become a VIP customer with the Belleza brand through the ad service. As a VIP, Jane gets the latest news and special discounts, as well as provides input on designs Belleza is considering for next season.
During breakfast, she sees another ad on her dashboard — a bracelet which the ad service thinks would go well with the sweater. It’s not quite what Jane had in mind. She clicks on the feedback link, votes thumbs down and selects a brief reason why, and immediately sees a much better ad for a necklace aligned to her interests. She pins it to her wish list, along with other things she’s been thinking of buying for herself and her family, to think about later.
As Jane goes about her day, her ad service engages her across all the devices she uses – the dashboard on her electric car, her cell phone, tablet, personal computer, and digital television. It’s easy and intuitive for Jane to take action on her terms – whether she’s video chatting with friends and buying through one click a product she sees on a primetime drama they’re watching online; or saving an alert delivered on her cell phone for an upcoming movie playing at the local theater in the mall where she’s shopping. It’s hard for Jane to image a world without her personalized ad service, which explains why she takes action on the ads she sees more than 20% of the time . . .
Is This Really in Jane’s Future?
This highly engaged consumer is absent from today’s world of digital advertising. While paid search benefits from an expression of explicit consumer intent (the search keyword), sponsored listings are only clicked between 1.5-2.5% of the time. With non-search advertising, ad blindness is even more prevalent: scores of banner ads or pre-roll video are ignored on a daily basis with click through rates at 0.1% (or less); deals and commercial newsletters fill inboxes and often go unread.
To reach tomorrow’s consumers and capitalize on the future devices that will be a core part of our daily lives, the digital advertising industry has a tremendous opportunity – and need – to reshape how we fundamentally engage with consumers and deliver advertising. But to do this, we first need to understand where tomorrow’s consumers are going, and then work back from that to deliver the value chain that connects consumers to advertisers.
Tomorrow’s Consumer, Today
The Millennial generation today – individuals aged 16 to 34 – are the mainstream for advertising in 2020. In the U.S. alone, Millennials covers more than 80 million individuals. Worldwide, there are more than 60 countries where 30% or more of the population are young adults or children.
In addition to their future purchasing power, Millennials as an early adopter will influence the expectations and behaviors of older consumers.
Millennials differ from prior generations in many ways, as documented in studies by the Boston Consulting Group, nGenera, and others. They are very comfortable with technology — having grown up with smart phones, tablets, game consoles, digital music players, video/text messaging, and social media, and frequently multi-task across these. In engaging across screens, they want things customized to their interests and simple to use, delivering instant gratification. The concept of the linear sales funnel is no longer valid, as Millennials seek out information before and after purchase from a wide range of sources, and generate their own reviews about products and services to influence others. They are highly social, and trust their friends – not companies – for advice on what they should buy. At the same time, they’re open to providing companies with information about themselves if it clearly leads to getting better products or deals. In doing so, they expect their privacy to be maintained, and demand authenticity from the companies they deal with.
Women as consumers are a critical factor for tapping into the opportunity presented by the Millennial generation and others. Women today drive 85% of all brand purchases made by households, represent the majority of the online market, and account for a greater percentage of social networking activity than men. According to recent surveys, however, many women feel misunderstood by marketers, receiving messages that don’t resonate with their interests or how they want to consume information.
With both driving forces – the Millennial generation and women as consumers — we can exponentially improve advertising engagement by making it a welcomed experience that’s integrated into the consumer’s daily habits across devices. To do this requires engaging in a two-way dialogue about her interests; making the process easy so that it becomes an effortless part of her daily routine; delivering instant gratification across devices by showing ads that reflect her preferences; integrating social networking into the experience; and above all, maintaining her trust and privacy – keeping her in control at all times. A trusting consumer is much more likely to provide her permission and attention to proactive suggestions on what she may like, or show what’s trending now with people like her – to tap into latent demand. Advertising in 2020 will thus be about delivering high quality content — the best possible ad aligned with the individual consumer’s interests – vs. today’s focus on volume, resulting in irrelevant ads which are readily ignored.
But What’s An Advertiser to Do?
While this may sound like an advertisers’ dream – getting their message delivered only to consumers who are clearly interested – today’s reality is a far cry from the ideal. Advertisers have tried to keep pace with consumer’s changing habits, reflected in the rapid growth on online spend for mobile, social, and video in particular. That said, online advertising spend is still significantly lower (20% of total spend) than the percentage of time consumers spend online (33%). A key factor for this is that advertisers and their agencies struggle with executing effective online campaigns. The digital advertising value chain is exceedingly complicated. Hundreds of vendors vying for media dollars: Should the advertiser buy reserved ad inventory on certain devices, applications, or web sites – but when? Or should they bid on ad impressions in real-time, using their own data on consumers combined with that from third parties? And what’s the measurable value for the advertising they purchased?
We need to dramatically simplify how digital advertising can be executed – toward end-to-end solutions for advertisers, which support putting the consumer’s interest first. Starting with the explicit preferences of consumers collected through an ad service, an end-to-end solution brings together insights and data on where consumers are engaging; a breadth of inventory on devices (available on a reserved basis or for real-time bidding on an exchange); post-execution measurement; and the means for brands to have conversations with consumers at all stages of their interest. In this world, the consumer is still in control of the experience, but the advertiser can now reach them effectively on the consumer’s terms toward developing a 1:1 relationship.
Jane, Good Morning
At 9 a.m. on October 15, 2010, Jane gets into the office at Moore & Franklin, a golf club manufacturer. As brand manager, Jane is responsible for driving brand awareness and sales conversion. She logs into her advertising dashboard, which is enabled through a comprehensive digital advertising solution. Through this dashboard, she can run marketing efforts for her target consumers across their various stages of engagement. To target new customers, she can bid on impressions or run campaigns on reserved inventory across devices, focusing on those consumers who have explicitly expressed an interest in her category or brand. For her existing VIP customers who have opted-in, she can offer special discounts and get feedback on new product ideas. She can integrate data with her online marketing activities with that of her customer relationship management system to have a comprehensive view of her customer base. Because the consumers she’s targeting have all expressed interest in her category or brand, she knows her dollars are well spent.
The Year 2020
Digital advertising in 2020 will have the same objectives as it did in 1920 – to bring consumers together with information at the right place and the right time about the products/services in which they have a current or latent interest. By putting the consumers’ interests first and delivering end-to-end solutions that allow marketers to truly engage interested consumers wherever they are, we as an industry have the opportunity to finally realize the promise of permission-based marketing.