A Marqui Whitepaper

Invisible Marketing: What Every Organization Needs to Know in the Era of Blogs, Social Networks and Web 2.0

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Abstract The evolution of technology has caused a fundamental power shift in consumer behavior. Thus, businesses that wish to maintain their competitive edge must rethink the way they market in general, and re-align their marketing organizations so that they are more closely connected to — if not completely intertwined with — sales, customer support, and other critical business units. This new approach to marketing, call it “Marketing 2.0,” is as much an attitude as it is a set of tools and techniques. This paper offers an introduction to the ideas of Marketing 2.0, grounded in the context of recent technology and marketing history, and provides advice to marketers looking to understand and succeed in the “invisible” domain. For those looking for additional guidance on specific areas, such as blogging, Really Simple Syndication (RSS), multicultural marketing and Search Engine Optimization (SEO), please take a moment to review our other whitepapers at http://www.marqui.com/Solutions/Whitepapers.aspx. ©2006 Marqui, Inc. All rights reserved. Marqui does not warrant, guarantee or make representations concerning the contents of this document. All information is provided “AS-IS” without express or implied warranties of any kind. Marqui and the Marqui logo (we call him “Jack”) are trademarks of Marqui, Inc. All other company, product and service names and brands are trademarks or registered trademarks of their respective owners. Whew. Glad to get that out of the way.

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INTRODUCTION Marketing used to be largely about one-way communication: from companies to crowds. Indeed, traditional advertising, public relations, direct marketing and other components of the marketing mix were all fundamentally broadcast in nature: carefully controlled communications sent from individual companies to broadly-defined audiences. The hope was that the same marketing message, distributed across a large enough crowd, would reach enough interested individual customers to make the “spray and pray” expense worthwhile. Now, however, having gone through rapid, technology-fuelled changes in recent years, marketing is increasingly about two-way conversations; conversations where crowds are talking to crowds. Marketing in the world of social networks, blogs, and Web 2.0 involves a myriad of interlocking, inter-dependent conversations between people inside the company and outside the company: crowds talking to crowds. The carefully groomed and managed, top-down message delivered by a CEO-appointed and controlled spokesperson has been replaced by multiple, messy conversations going on “out there” among your customers, competitors, observers and employees. More than a decade ago, novelist Don Delillo said, "the future belongs to crowds.” The future success of your business, it seems, also belongs to the crowds — both inside and outside your organization. Such seismic changes, from a marketer’s perspective, can be unnerving. But with great change comes great opportunity. Smart companies see signal in all this noise, and are starting to respond in innovative ways; to acknowledge the wisdom of the crowds and employ technology to reap remarkable benefits.

MARKETING DEFINED “A few thousand years ago there was a marketplace...Traders returned from far seas with spices, silks, and precious, magical stones. Caravans arrived across burning deserts bringing dates and figs, snakes, parrots, monkeys, strange music, stranger tales. The marketplace was the heart of the city, the kernel, the hub, the omphalos. Like past and future, it stood at the crossroads. People woke early and went there for coffee and vegetables, eggs and wine, for pots and carpets, rings and necklaces, for toys and sweets, for love, for rope, for soap, for wagons and carts, for bleating goats and evil-tempered camels. They went there to look and listen and to marvel, to buy and be amused. But mostly they went to meet each other. And to talk.”

— Christopher Locke (Levine, Locke, Searls, Weinberger. The Cluetrain Manifesto. Perseus Publishing, 2000.)

This is what markets used to be like. Few of these original markets exist nowadays, of course, and those that do are a shadow of their glorious pasts. Istanbul’s Grand Bazaar still stands, and is an astounding home to nearly 5,000 dealers in rugs, gold, slippers, quilts, furniture and all

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manner of treasures — but it’s no longer the great crossroads, meeting place, and melting pot of Eastern and Western civilizations. Over the course of thousands of years we’ve moved from markets to marketing — from a place people go to trade and talk, to a thing that gets done (usually by companies to consumers). Much has changed (and much lost) along the way. Consider, for example, how marketing has been defined by the American Marketing Association: “…an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.” As the definition suggests, the marketer’s job was (and in many ways still is) to define and communicate “value” and bring together customer relationships of benefit to the company. Throughout the 20th century, the business function of marketing grew and matured as a means to drive brand awareness and generate demand. Marketing is the reason why people know about products and why they want them. The traditional, base-level toolset of the marketing function are the Four P’s: product, price, place and promotion. If the marketer was able to successfully balance their approach to these Four P’s, they stood the best chance of moving a potential customer through the classic cascade response to marketing, neatly abbreviated in the 1950’s concept of AIDA: Awareness, Interest, Desire, Action. The theory and practice of marketing, as envisaged by marketing guru Dr. Philip Kotler and others, was neat, formulaic and predicated on a unidirectional flow of brand communication: crisply defined messages being pushed out by the marketer towards the broad, undifferentiated mass of potential target customers. In this “Marketing 1.0” way of doing things, the tools of the marketer included print collateral, print and broadcast advertising, direct mail, telemarketing and the traditional public relations system of news releases and media pitches. In the Marketing 1.0 world, the marketing department seemed to exist as a silo, walled off from other areas of the firm — most notably from the sales department — with little or no interaction with other groups. Once a potential customer had been made Aware of the company’s brand, had their Interest and then their Desire aroused, and ultimately been inspired to Action, the marketer could happily hand the “lead” to the sales people, dusting their hands in satisfaction and moving on to the next campaign. In this environment, Sales and Customer Service were the parts of the organization that talked to customers. The closest Marketing came to contact with actual customers was through the carefully controlled environments of the focus group, the market survey, and product testing in the field.

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Meanwhile, the honest truth about Marketing and Sales in the 1.0 world was that they almost agreed — explicitly or not — to ignore each other. Both parties have always had the same goals: to boost revenues for their company. But the silo mentality lead to Marketers not knowing their customers as well as Sales; and Sales not knowing their products as well as they should, or just not subscribing to the view of the world conceived in isolation within Marketing. Sales, in such a disjointed setup, would often succeed — almost in spite of Marketing. As Sales talked to customers every day, and learned the things the customers wanted to hear, Marketing’s carefully sanitized, officially sanctioned corporate messages would get mixed up, misused, abused, or just plain ignored in the quest to find the right words needed to close the deal. Thus, it’s not surprising that measurement has been, for decades, one of the least popular topics of conversation among marketers. In many cases, Marketing took comfort in the belief that their job was primarily to influence success, not to drive it. The consensus was that it was entirely possible to claim success for a marketing program without seeing a direct net increase in sales. Sadly, in a marketing world without measurement, the fuzzy relationship between marketing spend and business performance made marketing programs a cost item that could be cut arbitrarily at any time. Management could always feel justified in doing this, of course, because from their point of view, Marketing lacked discipline: In went cash, out came noise. The classic joke about marketing says: “I know that half the money I spend on advertising is wasted; I just don’t know which half.” Metrics issues aside, given the extraordinary changes in consumer behavior and the power shifts brought about by the Web (in both its 1.0 and 2.0 iterations), Marketing 1.0 is less and less effective, as we’ll see. First, though, we need to look at those Web power shifts in a little more detail.

EVOLUTION OF TECHNOLOGY Although we are now far removed from the ancient concept of markets, today we have a new kind of global marketplace: the World Wide Web. The Web is a virtual bazaar that is changing and shaping our culture and society just as deeply and dramatically as the markets, forums and agoras of history. The Web is a marketplace — a marketplace built around the online conversations of millions of souls — connecting, communicating, buying, selling, teaching, learning and entertaining, from all corners of the globe. Further, the Web has shifted power in this global marketplace to the buyers (or “consumers”, if you prefer); enabling a world in which people with an Internet connection can find just about anything they want and compare prices easily, no matter where they live. For Marketers, it provides access to a greatly expanded pool of potential customers, and the low cost of access makes it easy for individuals as well as businesses to offer goods and services.

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And it’s a market that continues to expand at breathtaking speed. In 1997, there were 77 million Internet users. According to the Computer Industry Almanac, there are now more than 1.08 billion. In the United States alone, the latest Nielsen/NetRatings figures indicate that at-home Internet penetration has reached 74% of the population. A Jupiter Research report in early 2006 showed that, on average, Internet users now spend around 14 hours a week surfing the Web, the same amount of time they spend watching TV. But beyond the numbers... the billions of users, the trillions of email messages and dollars... and beyond the endless, important discussions trying to predict the Web’s effect on our institutions, there’s something else. The Internet is fundamentally influencing the way we think and behave — in fact, people now find the Web indispensable. More than three-quarters of respondents in a recent AOL/Roper Starch report said that being online “made life better in some way.” The report also found that two-thirds of respondents would prefer to have an Internet-connected computer — rather than a telephone — if stranded alone on a desert island. What is it about the Web that makes us want it and need it so? David Weinberger, another of the Cluetrain authors, wrote an essay in 1999 that became, in altered form, chapter two of the book. A few lines from the summary to Dr. Weinberger’s essay seem relevant here:

“The Web has engendered an unexpected lust, a longing for something. We don't even know what the Web is for but we know we must have it.

The longing is to escape the framework of management that promises to protect us from the wild forces around us, but requires us to deny our individual voices.

The Web promises this by providing an unmanaged environment that subverts the org chart, enabling people to hyperlink themselves together.”

The Web is, in essence, a vast globe-shrinking system of communications technologies; allowing buyers and sellers, employees and employers, friends, relations, fans and flamers to connect, learn, share and communicate with each other regardless of time and place. The key thing to note here: much more important than the technologies behind the Web is the fact that it’s about people. This was always the case, although if you look back to the early Web circa 1995, it might not have been so obvious back then. The Web of a few years ago was flat, one-dimensional. Its contents stayed static and didn't adapt to the user. Most corporate Web sites were essentially brochure-ware — online replications of the company’s print marketing collateral. Web 1.0 didn’t offer much in terms of personal interaction and it didn’t facilitate conversation. For marketers and customers it was, in effect, still a broadcast, one-to-many medium. In Web 1.0, the simplest answer to the “what is it about the Web” question was: Marketing. Impressive, glossy marketing “storefronts,” for sure — but it was still Marketing 1.0.

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Just under the surface of the corporate, version 1.0 Web, however, another view of the purpose and power of the new medium was growing inexorably. Driven by technologists and innovators, reveling in the joy of interaction with smart, interesting people in far-flung lands, a different answer was already emerging. In fact, the early adopters had already figured out one of the principal benefits of this new communications network long before the invention of the Web. On the precursor Internet of e-mail list servers, bulletin boards, and discussion forums, people were already reaching out to each other around the world and talking. They were already bypassing the tightly controlled channels of the companies they worked for and the broadcast messages of the sellers they bought stuff from — sharing notes on the best products, the worst customer service, where to find good sushi, how to hack their VCRs, and much, much more. At the same time, many of these technologists were also working together on ways to push the envelope beyond the early, static experience of Web 1.0. A huge amount of energy, innovation, and (for a while) money was flowing around the rapid, aggressive development of new Web technologies. Things went horribly wrong when the crazy boom years of the early Web came to a screaming, shuddering end with the collapse of the dot com-fuelled stock market bubble. All was far from lost, however, and the innovation didn’t simply stop or disappear. The Rise of Web 2.0 Two years ago O’Reilly Media Vice President Dale Dougherty used the term “Web 2.0” to describe a new set of technologies and applications arising out of the ashes of the late 90’s dot bomb. Dougherty wasn’t necessarily the first to use the term, but he and his colleagues at O’Reilly have certainly done a great deal to popularize it. The term certainly caught the attention of the media and online commentators, and countless articles, blog posts and conference presentations have cited the rise of the new Web. As a consequence of all this attention, “Web 2.0” has fast become one of the most-over defined concepts in history. There are literally hundreds of overlapping and sometimes conflicting interpretations of what the term really means. A Google search for “definition of Web 2.0” brings up 21,700 results. Attempting to understand the idea by reading a number of these different definitions might quickly lead one to believe that Web 2.0 is a little like the fictional consumer product so beautifully satirized in an old Saturday Night Live skit. Like “new Shimmer,” Web 2.0 can seem like it’s “both a floor wax and a dessert topping!” For our purposes, however, we do need to settle on a functional definition and get on with it. It’s useful to characterize Web 2.0 in terms of how it is different from what came before. Tim O’Reilly helpfully refers to Web 2.0 as an “architecture of participation” which seems like a useful thought. Let’s go with that.

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With Web 2.0, the Web is no a longer static and mainly one-way medium, where visitors to sites merely read the content fed to them and play no active role. Instead, we're seeing a brave new Web in which users participate and connect to each other using services as opposed to sites. The experience is becoming much more interactive so users aren't simply sitting and watching content on the Web go by. Suddenly, users can do something with the content they see — even when it's not their own — and they can do so instantly. With advances in the way the technology works, rich, complex applications are no longer limited to personal computer desktops. Entire CRM systems, photo-editing applications and office automation suites can now be completely browser-based, with few if any functionality limitations. The transition of the Web from a loose-knit network of isolated information silos into a rich computing platform serving complex Web applications is changing the very way that the Web is being utilized, and the ways in which markets (and marketers) interoperate. Rather than being seen as a technology simply to deliver information, the Web is now often viewed as a platform that leverages collective intelligence — an online community, an architecture of participation. One of the earliest and most infamous examples of a Web 2.0 application was Napster, the peer-to-peer file swapping service that leveraged the personal music catalogues and infrastructure across its user base, thus facilitating music sharing. More recent examples of how the platform is being utilized are companies like Flickr (now owned by Yahoo!), a service which facilitates photo sharing, and Wikipedia, a Britannica-rivaling online encyclopedia entirely built by a community of volunteer contributors. All the best examples of Web 2.0 applications (we’ve provided links to the above examples and a few more at the end of this whitepaper) share some common characteristics: a) they’re driven by fundamental changes in attitude towards the Web, b) they leverage linked community-building ideas such as blogging, tagging and wikis, and c) they use new communications channels such as Really Simple Syndication (RSS). The unifying theme of this next generation of technologies ties back to the comment from David Weinberger we used earlier: Web 2.0 enables people to “hyperlink themselves together,” greatly increasing the power of individuals and changing how customers hear about products and services. Blogs and other forms of “user-created media” are a big part of the former change, while keyword-based search engine marketing explains much of the latter. To drive the point home a little more, consider this scenario: a smaller, nimbler competitor you’ve never heard of has figured out the magic combination of search terms the best potential customers are using to find your company’s site. They’ve just bought up the top five search terms in your space, and they’re pulling traffic to their site in numbers you’ve only dreamed of. The result of all this is that the onus now weighs heavy upon companies to move from monologue to dialogue, and to fully participate in communities where customers demand more involvement and expect personalized, culturally-appropriate information. The Web is growing up, and people now have much more real-time ability to connect and interact in real time. These people are both

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your market and your employee base. As has widely been said, markets are becoming conversations.

IMPACT ON MARKETING Now the marketing world hasn’t exactly stood still in the last several years. There have, of course, been many changes and improvements in the way companies approach their markets. One of the most interesting macro-level marketing trends of the last quarter of the 20th century was the increasing importance of segmentation and personalization in the marketer’s toolkit. If Marketing 1.0 was primarily a broadcast-based, one-to-many business, the next evolutionary stage of marketing (Marketing 1.5, perhaps?) was defined by the marketer’s efforts to run one-to-one campaigns. Using many of the same delivery vehicles as before, supplemented by newer marketing tools such as e-mail, marketers made increasing efforts to narrow the focus of their programs, defining and segmenting their audience, and crafting pseudo-personalized materials and messages sent directly to specific individuals. At one end of the evolutionary arc of one-to-one marketing you find the early efforts by organizations such as Reader’s Digest to personalize their mass communications, using mail merge systems to run personal data into form letters telling “Dear Stephen J. King” that he “may already have won $3,000,000.” At the other end of the arc is the ubiquitous quasi-personalized insult that is e-mail spam. One way to characterize the shift from Marketing 1.0 to the more recent one-to-one world is to think in terms of the known and the unknown. In a 1.0 world, marketers knew their message and their channels of communication — and they had (for the most part) control over both things. They knew precisely what their ad campaign would say, and knew where they’d bought their placements. They even had some idea of the size of audience they might potentially get for their message, as they were buying media in terms of CPM rates. What they didn’t know so well was who, specifically, would drive by that billboard or read a particular ad. Nor did they really have a terribly good idea of their audience’s preferences and predilections. Sure, they spent untold millions on surveys, market research, focus groups, and product testing — but they didn’t really get to hear what their customers out there wanted, and what they were saying about them every day. They were marketing the known to the unknown. The advent of one-to-one and “permission-based” marketing improved this situation somewhat. Many studies of the marketing world over the years had highlighted the persistent and growing problem that most people didn’t really trust Marketing. An oft-cited McKinsey study of the mid-1990s suggested that only five per cent of consumers trust advertising. Advocates of permission-based or “opt-in” marketing worked from a premise that, in fact, consumers were much more willing to trust marketers than the surveys and studies would indicate. The perfectly reasonable assumption was that trust is based on the establishment of fair relationships over time. The root of the theory was that customers would be quite willing to give

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marketers more information about themselves than traditional advertising effectiveness studies would suggest — just as long as they were approached in the right way and treated with fairness and openness. Marketing consultants Peppers & Rogers Group, the acknowledged experts in one-to-one marketing, spelled out the four key steps of this new approach to reaching customers:

• Identify your target customers. • Differentiate your customers by their needs and their value to your company. • Interact with your customers to form a learning relationship. • Customize your products, services, and messages.

Hence, marketing conferences at the turn of the Millennium were populated with industry executives promoting the importance of trust-based relationships with consumers, strict privacy policies and giving customers the chance to opt-in to targeted marketing campaigns. Web sites started to include data collection and privacy statements, stating that the company would: “not share this information with anyone without [their] permission, but use it to gain a better understanding of who is visiting our site.” Permission marketing, in Seth Godin’s definition, is about “Turning Strangers into Friends and Friends into Customers.” "By talking only to volunteers, Permission Marketing guarantees that consumers pay more attention to the marketing message," Godin writes in his best-selling 1999 book on the topic. "It serves both customers and marketers in a symbiotic exchange." It’s a simple, compelling thought for marketers. If you can get your customers’ permission, you can reasonably assume that your marketing efforts are better targeted to people who might actually want to buy your stuff. One-to-one marketing of this kind offers, in effect, the promise of marketing the known to the known. Marketing 1.5 is certainly an improvement over version 1.0, but it’s not enough — not now that the entire game has changed so significantly. The radical marketing and technology changes of the 1990’s are now being followed by another technology-enabled era of rapid, disruptive change: one of many-to-many marketing. In today’s world of blogs, social networks and Web 2.0, real-time conversations online are increasingly overpowering company-approved messaging and spokespersons to influence customer buying decisions. Blogs, in most cases, completely bypass the officially sanctioned corporate communications channels. Your customers, suppliers, investors and employees can now find each other online, and start talking about you (swapping war stories, stock tips, snapshots) — and these conversations are going on whether you choose to participate in them or not.

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The Evolution of Marketing 1.0 = 1:n (Branding &Demand Creation) 1.5 = 1:1 (Segmentation & Personalization) 2.0 = n:n (Conversations & Communities)

In truth, the conversations were always out there, in coffee shops, book club meetings, over the garden fence, at the corner store; millions of conversations are going on about hundreds of topics relevant to your company every day. The extraordinary thing today is that you can literally watch these conversations as they unfold online. In effect, marketing is turning into a myriad of interlocking conversations between people inside and outside the company. Blogs and online communities give individuals a loud voice in conversations about products and brands, while keyword-based marketing is changing the way corporations disseminate their messages. This is the beginning of what we call Marketing 2.0. It is a more complex and faster-moving environment, one comprised of e-campaigns, rich and dynamic content, data-driven user experiences, global interconnected markets, and broadband ubiquity. Marketing 2.0 is coupled with a corresponding change in the practicalities of how companies address the market. The tools and techniques that comprise the marketing mix have shifted. If Marketing 1.0 was mostly about print collateral, then Marketing 1.5 moved to the web brochure, and Marketing 2.0 is about the entire online experience. In Marketing 2.0, you no longer have tight control of a polished, coherent message stream. Figure 3: The Shift From 1:n to n:n When every employee has the ability to discuss, promote, or disparage your brand online, the notion that you know and have control over your brand message is clearly undermined. And when the voice of every customer — both the happy and the angry — can be heard online, you may have no idea where your next raving fan or ranting detractor might be. Changes in pricing or product are now immediately known by customers and competitors, and they will blog about it within the hour. No longer is access to journalists the domain of your PR agency, and the old adage that marketing is the responsibility of every employee is now an absolute reality. Marketing 2.0 is, in essence, both a many-to-many environment and one where the unknown is marketing to the unknown. Marketing — the way messages about your company are created and communicated, and the process of interconnected relationships with your customers — has become invisible. Even Web-savvy marketers can get caught flat-footed by the new world of invisible marketing. One of the most frequently-cited examples of how things have changed is the story of a blog called “HackingNetflix” — it’s an anecdote worth repeating here. NASDAQ-listed Netflix is the world's largest online DVD movie rental service, offering more than 4 million members access to 55,000 titles. The company has, naturally, developed a loyal

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following among the most experienced Web users. Also, not surprisingly, they see a great deal of discussion of their service among the blogging community. One blogger in particular, Mike Kaltschnee, stands out from the crowd. Notwithstanding the title of his blog (“Hacking Netflix”), Kaltschnee is a true evangelist for the company. As the disclaimer on his blog says, “This site is an independent Web site and has no affiliation or association with Netflix, Inc.” Yet Mike is a passionate believer and advocate for the Netflix service. Mike launched the Hacking Netflix blog in November 2003. By mid-2004, his site was already the second highest result on a Google search for Netflix, just underneath the link to the official company site. Seeking to further his relationship with the company and deliver extra value to his audience, Kaltschnee attempted to engage the Netflix PR department. His email to the company read:

I am working on a new "Ask Netflix" story for my Web site, www.HackingNetflix.com. I would like to put out a request for questions, edit them, and then send them to you for response (you can always decline to answer a question). Are you willing to participate in this story? HackingNetflix.com gets a lot of traffic and has a very loyal group of Netflix fans. I know there are questions not answered by your FAQ that people would like answers to. I would also like to know if I can arrange to get a tour of a distribution center (I live in Connecticut, so a local one would be preferred). I promise to keep this friendly (I do like you guys). Just out of curiosity, have you seen HackingNetflix.com before? - Mike

Experienced PR professionals reading this will quickly realize that in the Marketing 1.0 world, this kind of thing just never happened. When was the last time you had a journalist offer to do a complete fluff piece on your company? Sadly, Netflix did not at first see the value of the conversation. As far as the Netflix PR department was concerned, the value of HackingNetflix was completely invisible. Their two line response to Mike’s polite request read:

We appreciate your interest in Netflix, but we must decline your request at this time. Thank you for your zeal for Netflix and we wish you the best for your site.

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One of the interesting things here is that we only know about this because Mike immediately posted the dialogue on his site, as any self-respecting blogger naturally would do. He wanted to share his frustration with the 20-30,000 monthly visitors to his site, as an example of how big companies weren’t taking bloggers seriously. The good news for Netflix (and for Mike) is that they eventually saw the light and engaged him in dialogue. There’s a very interesting coda to the story too. If you visit the HackingNetflix blog today, one of the first things you’ll notice is sidebar ads promoting both Netflix and their principal competitor Blockbuster. What we have here is a case of companies paying to advertise alongside independent editorial copy about their products and services. Sounds familiar. The key difference between this and Marketing 1.0 advertising, however, is that the editorial is completely dynamic. Risky...But Rewarding It’s not something we’re supposed to talk about, but in the old days it certainly wasn’t entirely unheard of for a company to be persuaded to buy print advertising space alongside an upcoming positive magazine or newspaper article. The “church and state” divide between the editorial and advertising departments the media was always a fuzzy line. The blogosphere example of Hacking Netflix, however, is significantly different for a couple of reasons. First, the tone and topic of Mike’s posts can change at any time. There’s a heightened risk, for Netflix and Blockbuster, of having their ads appear right beside negative editorial from the blogger. Secondly, as visitors to Mike’s blog can post their own opinions in response to his commentary, the risk is considerably greater. At any time, the Netflix sidebar ad could be popping up right next to derogatory or even downright profane comments about the company. The risk of brand erosion here is real enough to give any 1.0-minded marketer nightmares. Just as the blogosphere is having a profound impact on the traditional disciplines of public relations, so other Web technology shifts are driving change in other areas of the marketing mix, as shown in Figure 4. We’ve already seen a shift from PR as the chief gatekeepers and communicators of the corporate message, to a world where potentially anyone in the company can be perceived as a spokesperson.

Figure 4: Technology Driving Changes in Marketing

Print Collateral Web Brochure Online Experience Direct Mail Personalized E-mail RSS (and iRSS) Slideshows Powerpoint WebEx/LiveMeetings Focus Groups Online Research Blog Seeding Print Advertising Banner Advertising Invisible Advertising (SEO)

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Along with these shifts are new performance measures that will delight company executives, boards of directors, and investors. The key trend is toward closed-loop business, where an increase (or decrease) in marketing expenditures can be tied directly to revenues and profits. The direct feedback and measurability of increasingly sophisticated online marketing programs is helping the traditional world of marketing, often (not entirely fairly) perceived as fluffy and undisciplined, become a much more analytical, numbers-based business. Smart marketers are evolving from right-brained to left-brained operations — from intuitive, subjective behavior to more logical, objective approaches. Tighter technology linkages, plus direct feedback channels, like blogs, mean that marketing programs now get a return signal, a kind of sonar-style ping. When a marketing message wafts out into the ether it no longer disappears; instead there can be clear and empirical measures of how effective your message has been. The trouble is, too many marketers and executives are ignoring these messages; they are continuing to manage their marketing expenditures as if they're still in the dark days of Marketing 1.0. And that’s a problem, as marketing is, after all, a business.

MARKETING 2.0’S IMPACT ON BUSINESS The complexity of this new environment is placing enormous pressure on business. There are more and more moving parts to manage in the new world of Marketing 2.0, and the challenge becomes even more complex as communications and feedback now happen in real-time. The impact on the business when things go wrong can be significant. It has been estimated that as much of 30% of the market cap of any company can be attributed to brand value. For tier one brands, this percentage can be even higher. The annual BusinessWeek/Interbrand ranking of the best global brands calculates the economic worth of the world’s major brands. In the most recent report, from July 2005, Coca-Cola was the highest-ranked brand in the world, scoring a brand value of $67.5 billion — or almost 70% of the company’s market cap. Clearly, in a world where the power in communications channels has shifted into the hands of the consumer, and where a brand can have so much value, the business of managing a company’s branding and marketing communications efforts has become critical. As the BusinessWeek/Interbrand report pointed out, “Many of the biggest and most established brands, from Coke to Marlboro, achieved their global heft decades ago by helping to pioneer the 30-second TV commercial. But it’s a different world now.” That is clearly true. For the mainstream TV business in particular, innovative new technology is fundamentally altering decades-old business models. Since the advent of TiVo and other Digital/Personal Video Recorders (DVRs), TV viewers in the U.S. can no longer be viewed as passive consumers of a contiguous stream of advertising-laden media programming. TiVo, and devices like it, let viewers pause and rewind live TV, or skip ahead through the commercials. A

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simple code sequence entered through the viewer’s remote control can even tell the TiVo to skip ahead in 30-second increments, completely bypassing individual commercial blocks. This is liberating, exciting news for the average TV watcher, but it’s the sort of thing guaranteed to give broadcasters, cable companies, ad agency executives and media buyers the jitters. If the most popular TV shows can no longer be relied upon as attractive delivery vehicles around which to wrap high-cost advertising messages, what will happen to ad revenues? It’s hard to assess how much ad revenue is at risk due to systems such as TiVo. In 2002, Forrester research forecast that the “TiVo Effect” would reduce industry-wide spending on TV commercials by $7 billion in 2007, with 75% of advertisers surveyed saying they would be reducing their ad budgets as a result of such skipping technology. Meanwhile, the same report indicated that spending on interactive and video-on-demand advertising would grow to fill the shortfall, reaching $6 billion by 2007. Evidently, advertisers are not ready to give up the ghost yet. Smart, nimble marketers are constantly finding new ways to reach consumers, taking advantage of the new technologies and online techniques to come up with ever more creative ways of winning a share of viewers’ scarce attention. For example, BusinessWeek recently reported that Sony will begin running ads for Bravia flat panel TVs that will let viewers (if they have TiVo) choose among different endings, whether they're watching live TV or a recorded program. What's even more interesting is that Sony is also offering endings tailored based on gender preferences. A menu of "Male" endings revolves around technology, and the "Female" endings revolve around aesthetics. Brad Binegar, CEO of McKinney & Silver, the firm creating the campaign, had the following to say about smart use of interactive TV, "If you provide viewers with a worthwhile experience, they'll absolutely stay engaged, and if you don't, you'll die an expensive, painful death." Brand success still depends upon the fundamentals: a company’s ability to maintain and continually increase mindshare with key constituents — with customers, partners, investors, the media, and employees. As the BusinessWeek/Interbrand research confirms, for a brand to maintain and gain value over time, companies must manage a steady, focused stream of coordinated marketing and communications activities, including all of the traditional elements of marketing and more. Reaping Marketing 2.0 Benefits The challenges of the Web 2.0 world, with customers expecting more engagement, transparency, and open dialogue, make the job of the marketer immensely more complex today than ever before. The tangible pain for businesses seeking to manage their marketing today can be looked at in three separate categories of cost:

1) Direct Costs – Including the cost of using and managing third-party agencies, multiple products, in-house staffing requirements, etc.

2) Accuracy Costs – Dealing with compliance issues (e.g., Sarbanes-Oxley and Reg FD), brand integrity, investor relations, and other costs associated with incorrect information being distributed through unmanaged (or unmanageable) channels.

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3) Process Costs – The time-to-market advantage of releasing information on time, quickly responding to competitive threats, managing outbound marketing information without having to rely on others.

There are numerous examples we could cite of how unmanaged communications have impacted companies in each of these areas. When Apple Computer, for example, accidentally published information about an upcoming product a week early, competitors responded with price changes before the actual Apple product was announced — at a new price almost 5% lower. Apple has seen more than its share of similar issues, resulting in some lengthy law suits with the company seeking reparation from bloggers who have leaked information about forthcoming products prior to their release. The costs in terms of money and reputation can be considerable. It’s pretty much inevitable that just about every company will have a problem with a product or service, resulting in unhappy customers. What has changed, as we’ve already noted, is that disgruntled customers now have a greater reach, a louder voice, than they ever did in the past. News travels very, very fast in the Web 2.0 world — and bad news can spread through the blogvines like wild fire. Scare stories aside, the tales of companies reaping extraordinary benefits from new forms of online social marketing are even more numerous. Smaller companies (in particular) that don’t have the advantage of large marketing budgets or teams can benefit from these new mediums. One of our favorite examples at Marqui is the story of a startup South African winery, Stormhoek, whose founder, Nick Dymoke-Marr, took an unconventional approach to entering the UK market. Shortly after the winery entered the market, Dymoke-Marr sent sample bottles to 150 bloggers in the UK. At the same time, Stormhoek eschewed the traditional approach of a big glossy corporate web site and traditional print advertising — their entire online presence is a blog. The result, according to Dymoke-Marr, is that the wine now has a 19% share of its category in the UK market, and sales doubled from 50,000 cases in 2004 to 100,000 in 2005. Another, even more recent example of how things work in a Marketing 2.0 world can be seen in two experimental campaigns launched separately by General Motors and New Line Cinema. General Motors, a classic example of a Marketing 1.0-generation company if ever there was one, have been surprising Web marketing commentators in recent months with some innovative and remarkable forays into the Marketing 2.0 world. Already one of the scant handfuls of Fortune 500 companies to have confidently adopted blogging as a communications channel, GM recently jumped into the extraordinary world of “mash-ups.” A mash-up involves blending content (music, video, images, etc.) from a number of different sources into an integrated experience. In an online campaign tied into the product placement of the Chevy Tahoe SUV in the TV show “The Apprentice,” GM launched a contest that invites users to create their own Chevy Tahoe advert. At the site, visitors were offered a variety of images, video clips, and soundtrack files to work with, and invited to splice together the visual elements with their own advertising copy.

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As might have been expected, the do-it-yourself ad campaign was instantly popular, with thousands of user-created ads flooding onto the Web. Both fans and detractors of the company gleefully leapt on the opportunity to develop their own message about the Tahoe. Blog posts and newspaper articles started to appear in the hours and days after the contest opened, with most reports lashing the campaign as a foolish brand error on GM’s part. Among the many negative ads created by contest entrants were videos protesting the war in Iraq and criticizing GM’s SUVs as a contributor to the problems of global warming. As thousands of potentially damaging “mash-up” ads started to appear, some media reports criticized GM for being slow to react or doing little in the way of damage control. Within days of the contest launching, the general consensus throughout the blogosphere seemed to be that GM had pretty much shot themselves in the foot with the entire campaign by apparently failing to anticipate the opportunity for people to turn their creative against them by building negative parodies. But GM’s own response to the surge of parody ads tells a different story. In a posting at GM’s Fastlane blog, three weeks after the launch of the campaign, Ed Peper, Chevrolet General Manager, wrote:

“A contest of this sort doesn't come without risks. As we expected, people who are opposed to SUVs for a variety of reasons quickly discovered that they were also welcome to participate. Early on we made the decision that if we were to hold this contest, in which we invite anyone to create an ad, in an open forum, that we would be summarily destroyed in the blogosphere if we censored the ads based on their viewpoint. So, we adopted a position of openness and transparency, and decided that we would welcome the debate.”

A number of high profile bloggers were quick to react to this, praising GM’s openness and offering a more balanced perspective on the success of the campaign in generating attention for the brand. It was certainly a very Marketing 2.0 response. The results of the campaign, as presented by GM spokesperson Melisa Tezanos, seem to speak for themselves. By April 7, 2006 (25 days into the contest), 84% of the total submissions were straight, product-pieces favorable to the Tahoe. Of the remaining 16% of contest submissions, the majority were either generally negative about the entire SUV category, or were used by the creator as a platform to promote specific causes. Only a minority, according to GM, directly attacked the product. In addition, the contest generated nearly 4 million page views, 400,000 unique visitors and more than 22,000 ad submissions. Ed Peper commented, “So, a few media pundits seem to think this social media program was a failure and others seem to revel in the apparent anarchy...In our opinion, this has been one of the most creative and successful promotions we have done.”

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A campaign with some similarities was recently launched by New Line Cinema, to support the opening of a new movie, “Take the Lead”. As a New York Times story on the marketing initiatives surrounding the release of the movie reported, “New Line is sponsoring such unusual marketing initiatives as a chance for computer users to create unofficial mash-ups.” In addition, the studio provided “a variety of blogs, online social communities and Web sites with mash-ups of music and images from ‘Take the Lead’ produced by professional D.J.'s and V.J.'s.” Steve Ellis, chief executive of Pump Audio, the company behind the technology for the online mash-ups, described the goal of the program as encouraging consumers “to make a proactive decision to engage with this content … instead of bombarding them with ads." Russell Schwartz, president of domestic marketing for New Line Cinema in New York, neatly summed up their reasoning in trying to reach an audience of younger moviegoers: “you can’t force-feed them” with traditional top-down advertising, he said, “it’s all about giving these kids our trailers, our songs and letting them take control …our assets become their assets, and that’s how they become fans of the movie.” Leveling the Playing Field One of the unifying themes of these last three examples is that the campaigns are achieving results at a fraction of the usual cost to penetrate a market. Marketing such products as wine, automobiles, and movies is typically very expensive. The cost of entry to the blogosphere, on the other hand is very low — pretty much anyone with an Internet connection can start a blog in as little as five minutes. And using the mash-up idea to attract customers to create their own relationship with the brand in question is also a very affordable way to drive buzz. It seems that in Marketing 2.0 terms, “Return On investment” might best be abbreviated with a lower case “i.” Of course, the moment we start talking about ROi, it’s appropriate that we open the discussion of measurability. It’s entirely possible today, using a relatively simple combination of technologies, to approach true closed-loop marketing measurement, where the dollars and effort spent on marketing campaigns can be tracked from launch, to the point of sale and throughout the customer lifecycle. As shown in Figure 5, the idea of closed loop marketing is a technology-enabled new culture in which customers’ behavior is properly integrated into marketing processes, with a focus on holistic observation and measurement of behavior data at a granular and trend level. The purpose is to allow the marketer to refine activities on-the-fly, responding in real time to tactical imperatives, while keeping true to the defined overall strategy. The analytics capabilities of new marketing technologies allow the marketer to gather direct, immediate feedback on which elements of the marketing mix are working and which aren’t, and to tune their campaign balance at any time.

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Figure 5: Closed-Loop Marketing

For example, at a very basic level, metrics you can easily monitor include:

• Engagement – In its simplest form, engagement can be measured as time spent online with your brand. Depending on your product or service, you may consider extending your metrics to more than consumer time on your site by prompting them for answers to questions online or viewing multimedia information.

• Leads – It's finally easy to create micro-sites (or tailored landing pages) to capture leads as well as profile data from your campaigns — even A/B testing results can immediately be visible and tracked.

• Sales Satisfaction – Online content management and customer relationship management systems now integrate to allow marketers to see the progress of leads through their sales process, and watch their best-performing programs turn to revenue. Poorly performing campaigns are immediately identifiable, too.

• Word of Mouth – This can be done simply through measuring the use of forward-to-a-friend functionality or by using services such as Google Alerts, PubSub, Technorati, and Icerocket to measure company or product mentions.

Another interesting example of the new kinds of measurement available through technology is evident in the work of firms such as SonicBoomerang (http://www.sonicboomerang.com). The company’s “MediaAnalyst” is a customized online solution that monitors, analyzes and measures media exposure and opinion across newspapers, magazines, TV, newswires, the Internet, message boards, and blogs in real-time. Drawing on more than 5,000 sources of opinion, MediaAnalyst automates the data retrieval process and then uses sophisticated natural language processing and something called computational linguistics to read, filter, and interpret the content.

MESSAGE DELIVERY

Communicate with the

right customer via the right

medium

MEASUREMENT Provide rapid

feedback and report

results and effectiveness

CAMPAIGN CREATION

Manage high quality

materials and optimized marketing vehicles

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"The methodologies we have in place are not that valid anymore, but it is a new world, and we have to be brave about it."

– Russell Schwartz; New Line Cinema

The system, in other words, attempts to listen to what people are saying about you online, and assess whether it’s broadly positive or negative. The result is a weighted “sentiment analysis” which can be used to measure the effectiveness of ongoing marketing campaigns against internal benchmarks, competitors, and business results. When measurement techniques such as this, together with Web analytics, and e-mail and RSS analytics, are tied into the systems that are used to plan, create, manage, and distribute marketing campaigns — we have most of the building blocks of a closed loop marketing system in place.

WHAT MARKETERS SHOULD DO ABOUT IT The key question we’re faced with, then, is what is the real value of these technologies to a marketer, and how must our behavior change to take best advantage? The fundamental test of any marketing tool or program, of course, must be the impact on top-line revenue — did the campaign generate demand and produce leads or foot traffic that resulted in actual sales? That idea is nothing new, and the lag between marketing programs and sales will never entirely go away, even in closed-loop marketing. We can, however, do a much better job today of tracking pre-sales indicators; the sorts of things that tell marketers what messages are reaching what audiences, whether it is influencing perceptions, whether it is leading to traffic (virtual or real), and so on. For example, not enough companies pay sufficient attention to search engine rankings. Where your organization appears in search results is a key measure of brand penetration in the world of Marketing 2.0. Studies have shown that if you're not at the top of page one in any given search, consumers will not go much further. Do you know how to improve your "organic" search rankings? Hint: through fresh content, updated regularly — which is why some people say blog is short for better listing on Google. But what most people don't realize is that even an easy-to-use, search engine friendly content management system can radically improve your organic search engine rankings. Smart marketers are also now watching (and reporting on) who's buying ads on their most valuable key words, and how those competitors change every month. Competitive shifts can be anticipated, and product and positioning intelligence can be gleaned from watching key word ad buys. Another example comes from Web analytics. While companies track traffic to their site, they pay too much attention to broad traffic trends, and not enough attention to how the traffic arrives. Some key questions companies ought to ask are: which sites refer traffic to your web presence? How has that changed over time? At Marqui, we’ve discovered that our blog (Marqui’s World) is consistently one of the top referrers to our corporate Web site.

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The fact that we can easily track and measure so much of our marketing activities today is a powerful tool — but raw measurement without insightful analysis is a great waste of valuable data. Among the most important kinds of Marketing 2.0 sonar comes from ads themselves. The rise of pay-per-click models hasn't been without controversy, but it has led inexorably to better measures of campaign effectiveness, with there being a clearer than ever connection between marketing dollars and revenues. You can know almost instantly how effective a marketing campaign is (e.g., what's the click-through rate?) and you can respond accordingly — by changing keywords, modifying the message, or canceling the campaign altogether. No longer do you have to wait a quarter (let alone a year) to see what happens. Results can be gathered, measured, and analyzed almost immediately. The ultimate marketer’s dashboard (something Marqui is working on, incidentally), combines all of the data sources available from as many measurement tools as are relevant, and ties the effectiveness of campaigns in process directly into the sales performance data in the company’s CRM system. Executives have always asked their marketing managers what they would do — and what the impact would be — of doubling their spending, or cutting it in half, and we are finally reaching a point where marketers can answer that question with empirical confidence. Tying the Proverbial Bow Where are we going from here? More marketing velocity and better metrics are coming, as are fewer compromises when it comes to demanding that marketers connect their spending to the organizational top- and bottom-line. At the same time, it is incumbent on senior executives to rethink the traditional marketing model. In a scenario where an endless, iterative dialogue is taking place at all times between buyers and sellers, Sales and Customer Service departments are no longer the only connection to actual customers. At the same time, every employee is now responsible for an organization’s brand. It seems blindingly obvious, but the only way for marketers to know, to really know, what customers want is to talk to them; listen to them. Now that marketers can instantly learn and understand what their markets are saying, a simple truism of marketing-led business behavior is more relevant and important than ever: figure out who your customer is, then make sure that you put them at the centre of everything you do. After all, if you’re not listening to your customers’ real-time requests, criticisms, complaints, and praise: what on earth are you listening to? If the prospect of engaging in conversation directly with real customers scares you, it shouldn’t. Break down the walls between Marketing and Sales in your organization — your sales people are talking to customers every single day. Let them guide you, introduce you, and coach you — then be prepared to react quickly to your volatile and capricious market.

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As the experienced, innovative marketing strategist Tara Hunt put it in a post at her blog, “A good marketer plans a little, but changes a lot.” With instantaneous marketing measurement and feedback now a reality, “If something isn't working, stop, examine it, adjust it, scrap it or put more energy into it, but don't just 'stick to the plan.’” The attitude of Marketing 2.0 is one of openness, authenticity, trust, and responsiveness. This attitude is powered by a set of manipulable dials and switches that connect an organization's conversations about its products and its brand directly to the market, and to sales. The bottom-line for marketers: evolve or fail, because consumer behavior is changing.

HOW DOES MARQUI FIT IN? In a world filled with all of these new communications channels, it is increasingly difficult for organizations to market effectively to key audiences while ensuring consistency in messaging and protecting brand integrity. Recognizing this complexity, Marqui developed the first Web-based suite that simplifies and automates a broad range of marketing and communications activities, including e-mail campaigns, Web content management, Search Engine Optimization, RSS and blogging. The result: better marketing, lower costs, a tightly linked sales and marketing team, and decreased risk of inaccurate or embarrassing information getting distributed. However, we don’t want to end this paper by hitting you with a big sales pitch, so we’ll leave it at that for now. If you would like more information on how our solution can help you leverage Marketing 2.0 or would like to see a demonstration, please contact us at marketingpros@marqui.com or 1.888.662.7784.

ADDITIONAL RESOURCES Additional Marqui Whitepapers http://www.marqui.com/Solutions/Whitepapers.aspx Marketing Blogs Marqui’s World (www.marqui.com/blog) Adventures in Business Communications http://adventures-in-business-communications.blogsite.com/ Diva Marketing http://bloombergmarketing.blogs.com/ Duct Tape Marketing http://www.ducttapemarketing.com/weblog.php Lip-Sticking http://windsormedia.blogs.com/

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Marketing Playbook http://marketingplaybook.com/ Much Ado About Marketing http://muchadoaboutwhatever.blogspot.com/ Neville Hobson http://www.nevillehobson.com/ Seth Godin http://sethgodin.typepad.com/ Web 2.0 “In Action” del.icio.us http://del.icio.us/ Flickr http://www.flickr.com Napster http://www.napster.com Wikipedia www.wikipedia.org

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