DIGITAL MARKETING
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Are You Ready for 2G Digital Shopper Marketing?
Generations of digital innovation reveal a pattern: the first gen (1G) re-creates the original, while the second (2G) creates something better. The first CGI animal was an owl in the 1986 movie Labyrinth; today we have the Avatar Na’vi. The first cell phone in 1973 mimicked landline; today we have diverse mobile platforms.
Digital shopper marketing is going through a 1G to 2G transition. The familiar pattern is this: the first generation of digital re-creates, the second generation creates. Marketing is becoming more targeted and dynamic, while shopping is becoming more relevant and simple (see poll below).
There are many forms of 1G digital shopper marketing. E-circulars, digital coupons and social media
are of particular interest due to their high adoption by consumers. The use of e-circulars, sometimes called digital circulars, began with web pages that simply presented the full-color, fold-out weekly ads inserted in newspapers or sent via mail. As this first generation has evolved, highly tactile experiences such as virtual page-flipping have been introduced. Helpful features such as filtering by category have also been added.
Digital coupons, meanwhile, began with graphic tiles on web pages that mimicked the appearance of coupon books or FSIs. Users digitally “clip” these coupons with their computer mice and print them out to be toted to the store. These can also be sorted by category.
Social media started with friending brands as if they were individuals. This simulated several real world activities. Expressing affiliation with brands online is the latter day bumper sticker or T-shirt. Sharing this affiliation with your friends is like broadcasting a word-of-mouth recommendation. And joining groups with shared affinity is a rapid-fire way of opting into a mailing list or attending a show or convention.
The 1G world of e-circulars, digital coupons and social media is a great improvement over their physical origins. But the 2G world provides more significant enhancements.
How does such 2G targeting work? Often called “personalization,” it typically follows one of three approaches: letting shoppers opt in to the kinds of offers they wish to receive, using collaborative filtering or similar techniques to make recommendations (based on what like-minded shoppers have chosen), or using a shopper’s purchase history to deliver the most relevant offers. The last approach has the best track record for driving incremental sales and customer satisfaction. But targeting based on purchase history is prone to excess, so the best approaches intervene to tune out potential annoyances. This includes “share of requirements” filters that would kill Pepsi offers to Coca-Cola enthusiasts and recurrence filters that cut repetitive offers.
Let’s look loser at the transition of 1G to 2G tactics.
1G digital circulars do several things well to get people into the store and buying more. They:
- Feature weekly or seasonally promoted products.
- Promote launched or re-launched items.
- Localize product presentations based on store traits.
- Accentuate departments to which more traffic is desired.
- Organize content to facilitate pre-trip searches and list making.
But 2G e-circulars provide personalized communications that are targeted and provide four additional outcomes. They:
- Expand purchases of popular products.
- Cross-sell complementary products.
- Re-activate lapsed product buyers.
- Align with individuals’ purchase cycles.
Next, let’s consider 2G digital coupons. 1G digital coupons help turn a mass medium such as FSIs from push to pull, as shoppers log in or opt in for offers. However, 1G solutions don’t distinguish between new and current buyers, or target specific actions such as multi-unit purchases or more frequent purchases. They provide modest marketing gains as they move from mass carried to mass clicked. But they can do better.
And they already do. As with digital circulars, 2G digital coupons also employ targeting to serve the right offers to the right consumers based on shopper behavior. Three proven methods include:
- Attracting new buyers by selecting and targeting the shoppers most likely to try.
- Expanding consumption among current buyers by increasing purchase frequency and units.
- Re-activating lapsed buyers by bringing back those who switched brands or defected from the category.
Finally, let’s look at 2G social media. Such programs do a better job getting shoppers to invest time and effort in not only affiliating with the brand, but actually promoting it. 2G social media do three things particularly effectively:
- Reach emotional loyalists.
- Engage them not just in clicking, but shopping.
- Offer them insider status
What does 2G digital shopper marketing provide to shoppers? When marketers get targeting right, shoppers experience it as relevant. With 2G digital circulars, personalization allows shoppers to quickly see the items they most prefer. A shopper survey by Catalina Marketing showed that consumers participating in one of its 2G coupon programs were inspired to act on the relevant mobile offers they received. Specifically:
- 42% of shoppers were driven to stock up.
- 36% were driven to purchase more of a specific product.
- 30% were driven to try something new.
- 10% were driven to switch brands.
The transition to 2G Digital Shopper Marketing is underway. Are you ready? Here are three guidelines to follow when changing over:
Principle 1: Go beyond redemption.
Evaluate not just response quantity, but response quality. With digital coupons, look for programs that report responses by key customer segment. How did you do with loyal buyers? What about new buyers?
Know where your ROI leverage is. Did you drive incremental purchases from loyal buyers? Good. But what behavior did you change? Did you get them to buy more frequently? More units?
Principle 2: Don’t jail shoppers in static segments or zones.
You already know that you shouldn’t simply cluster shoppers by age, family size or other demographic element. In a similar vein, don’t stop with generalized definitions of consumption like “healthy eaters” or “indulgent buyers.”
Instead, look to create a fluid approach to segmentation in which classifications change based on the product campaign or the question asked. In other words, create unique segments based on brand objectives and shopping behavior for every campaign.
Principle 3: Look for ways to bet after the race has started.
Some buys need to be placed at the beginning of campaigns. That’s OK, but just don’t make those are all your bets. Plan campaigns with identified tests in place so that one campaign informs the next, and so on. Test different values, single versus multiple units, pairings of complementary items, and other ways to vary the incentives.
“Some might interpret the arrival of 2G solutions as an event heralding the sunset of 1G. But nothing could be further from the truth,” says Dan Frechtling, vice president of DS-IQ. “Just as with Boomers and Gen X, 1G and 2G digital solutions will prosper together until the former retires and the latter rises to leadership. Digital shopper marketing programs with 2G characteristics will coexist alongside campaigns with embedded 1G traits. Rather than being at a sunset, we are in the middle of an evolution, providing myriad opportunities for marketers to succeed.”
(See poll on home page).
This article was adapted from the white paper, “Beyond Redemption: 2G Digital Shopper Marketing”
by DS-IQ, Bellevue, Wash. and from a presentation on this topic by Dan Frechtling and Joe Battoe
at the Shopper Marketing Summit in Chicago. For more information, visit: www.ds-iq.com, and www.smartretailmedia.com.
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