2015 Christmas: Another Year of Heavy Discounts

Consider this a prognostication on the future. Translated: my best guess with a bit of intelligence thrown in for good luck.

I’m taking what is actually happening in the economy and going to the logical conclusion for this holiday season (to be more politically correct). Here’s a few key data points to start the discussion:

All in all, I think we’re shaping up for a tough Christmas season. The combination of high unemployment and low wage growth typically results in lower consumer spending. Add in high inventories at companies and I think you’ll see a brutal season of markdowns and less-than-ideal margins on the retail side of things. This will add to the downward pressure on spending (people are saving the extra money, not splurging at this point) and creates a downward cycle.

How are you planning your 2015 holiday sales? Heavy on discounts? Big sales gains expected? I’m curious where business are planning because they have the best intelligence on what is happening now. But my economic look into the future seems to indicate heavy discounts and less spending.

Reuters has an interesting article on retail sales projections here.

The Death of Banner Ads – and the Implications

Right around the corner we have iOS9 (just ask Siri for a hint). And with it we get Apple’s adblocking technology. At first blush, big deal, right? But after looking under the covers, I think it’s going to be a very big deal.

First, a little reality for you: banner ads are not effective advertising. Agencies keep selling them and ad buyers keep buying, but the real data is monstrously bad. And there’s a reason for that: (a) most banner ads aren’t visible by humans; (b) visible banner ads are ignored by 82% of the people that might see them; and (c) Most banner clicks are accidental (especially on mobile). All of which leads to horribly bad recall, low interaction and a lack of value in banner ads for marketers and consumers. Including the accidental clicks, the click-through rates tend to be less than 1 per 1,000 viewers. That’s insanely bad marketing spend.

However, banner ads do work in certain instances, mainly around retargeting. If a user visits your ecommerce site then goes to the WSJ or a blog, it’s worth targeting them. Because they are familiar with your brand, they tend to have more awareness of the ad and click through rates are higher. So the modern marketer can use banner ads for other things than burning through all that pre-IPO, pre-revenue cash. And on the other side, they provide content producers with a critical stream of revenue that helps keep content free. Would your favorite blogger work as hard without some ad revenue to make him feel like it’s worthwhile? (Obviously I’m the exception, I don’t make a freakin’ thing on this blog).

Saying all of that, iOS9 only impacts mobile usage, so this doesn’t mean instantly banner ads go to zero. And it needs to be utilized by end users, which will take time. However, marketers need to get ready for ramifications of this change, which I think will be huge a year from now. Here are some conclusions I’ve drawn about what it means to block mobile banner ads:

  • Eventually it means the death of the banner ad as we know it. Mobile is rapidly gaining share on virtually all sites. If you aren’t at 50% of visits now, you’re probably close. This could quickly wipe out half of ad impressions available outside of bots (e.g. non-human viewers) and make 0.06% click through rates look impressive. In the short term, it probably means increased cost per view with lower inventory.
  • It drives up the value of content to marketers. Instead of placing banner ads, we’ll look to place inline content on blogs and heavily trafficked media sites. The banner ad budget might transition more into something like a PR/media campaign aimed at getting space on targeted blogs. And this likely means paid placement along with a content creation budget.
  • Ironically, this isn’t likely to have much impact on sales for ecommerce players. In order to make banner ads look like they are driving sales, you had to do analytical gymnastics with the numbers. All it impacts is those questionable awareness or engagement numbers that implied you were hitting 70% of the target market. Hell, it might make you more profitable.
  • It’s also likely to move banner ad budgets more toward social media. Facebook and Twitter are apps that can find a way to fit and pseudo-target your population. They will become the de facto place to drive online awareness through a mobile device. There are very few ad-friendly other places you’ll be able to find folks on mobile.
  • For content producers, it may lead to app creation and even charging for content. You’ll have to be very good to get folks to pay, but I could see building out an app that can circumvent the ad blocking technology. I’m still thinking through this angle.
  • And, of course, it supports Apple’s new News app, which isn’t likely to have issues with blocked ads. These ads are not nearly as targeted and only for large marketers (read: rich marketers). It isn’t a cheap place to show up, which helps with the brand value of the marketing, but makes those that calculate cost per click very uncomfortable.

Online advertising is moving more and more toward creating branded experiences for your most loyal fans. Immersive sites that entertain as much as they educate will continue to drive visits, awareness and affection toward your brand, which hopefully results in sales. But I think we need to start thinking about a post-banner ad world and how we drive traffic through content.

Banner ads have long been the most pathetic form of online advertising. Bad creative around jumping monkeys or deceptively concealed ads don’t help anyone. Consumers hate the retargeted ads that follow them around the internet. So I’m not sure we lose a lot in throwing out banner ads (except for the publishers, of course). But I think we do need to rethink how to recreate our marketing campaigns without the ad spend toward banners. Search can’t soak up more dollars (everyone is maxed out there). It has to be good creative and good content that can be repurposed across key websites.

Do you agree? Also see Doc Searl’s take on adtech here, which I appreciated.

The B2B Miss: Ecommerce Excellence

B2B ecommerce is an interesting conundrum. It has the ability to both cut expenses and drive up sales, however it rarely gets the funding or attention needed to succeed. There are exceptions of course, like Staples, that understand the massive value capture that can be made with a solid ecommerce presence. However the development of a B2B ecommerce site usually falls not under marketing, but under a sales executive, who has no experience in driving ecommerce in a way that really gets to the value available.

On the buyer side, B2B ecommerce is in high demand. Business buyers shop online in their personal lives and are very comfortable with it. In fact, research here and here (as examples) show that B2B buyers are digitally moving through the sales funnel without assistance from salespeople more and more. Sales is focusing on closing (as they should) but if your digital isn’t doing the work, you’re missing out on long-term growth opportunities. Add to that the ability for digital to personalize, which translates to upselling and cross-selling to your buyers. This drives real value that is difficult to get through a salesperson in 2015.

The world is moving and many, many businesses are missing the boat.

What is the problem? As I mentioned above, a lot of times the problem is in the structure of the company. B2B sales is under a sales team and lead by an executive who doesn’t really understand why marketing matters. But ecommerce strength comes from marketing, not sales, and requires an experienced marketer to do well. In order to excel, a business needs to bring in the skill set from outside and give them the support they need. Which takes us to the second problem: money.

It takes investment. In a time where we’re cutting costs left and right, investing in a strong ecommerce platform seems expensive. Isn’t it just exchanging one channel for another? In my experience, a good ecommerce and digital marketing arm can give you a significant lift in sales from your current customer base in addition to cutting costs over time (typically you can reduce customer service and sales team members with a good ecommerce presence). The initial bump is seen from your smaller or less important customers, because they aren’t getting the sales attention they need now. But even the bigger guys will respond as well.

Finally, the single biggest problem is that B2B executives often don’t realize the potential value of ecommerce in their business. It takes real digging to understand the costs of taking an order today versus taking one online. And it takes experience to realize how digital marketing can lift sales; e.g. why the investment should be made. This is a cultural shift in the company and a political problem over and above the first two issues. It’s more likely to change due to competitive shifts or threats than it is due to a lightbulb going off in someone’s head. Unfortunately, that means a lot of businesses are going to be eaten alive in the new digital world. That’s already happening now (taxis, department stores, even cigarettes are being eaten by digital) and will continue to happen. Is your industry next?

My recommendation is to bring in talent and invest in the plans. Early on focus on email and paid search to start supporting your sales them. Then add ecommerce and make it world-class instead of focusing on reducing the investment. Long-term it has a massive payoff for most companies. It won’t save a company with poor products, but it absolutely can drive good product to the next level. Your customers are shopping online just as they do at home. You should be there to meet them.