Digital Marketing Strategy PDF

 i Praise for D i g i ta l M a r k e t i n g S t r at e gy ‘Simon Kingsnorth has produced a book of compelling quality. So many marketers are inclined to run headlong at digital marketing with a limited amount o...

 i Praise for D i g i ta l M a r k e t i n g S t r at e gy ‘Simon Kingsnorth has produced a book of compelling quality. So many marketers are inclined to run headlong at digital marketing with a limited amount of knowledge. Fingers get burnt and reputations can be lost forever. He has set out some brilliant guidelines for marketers of all levels which will empower them to succeed.’ Damian Ryan, digital marketer, author of Understanding Digital Marketing, Understanding Social Media and The Best Digital Marketing Campaigns in the World II ‘An excellent all-in-one text for today’s digital entrepreneur.’ Jonathan Gabay, keynote speaker, lecturer, brand psychologist ‘Combines a detailed knowledge of digital channel management with classic marketing theory. The result is essential reading for digital marketing practitioners at all levels.’ Emma Wilson, CEO, Harvest Digital ‘It’s all here. An invaluable one-stop guide to navigating the discipline of digital marketing – great for newcomers and an excellent reference for the more experienced.’ Simon Fenn, co-founder, Pancentric Digital ii This book is dedicated to my parents who gave me the foundation that provided me with the opportunity to work on some of the exciting projects I’ve been involved in. To my partner Ali for her support during the long evenings of endless typing and to everyone I have worked for and with to date as you have all helped to shape this book. It is also dedicated to those people who will create the future of this planet (and beyond).  iii Digital Marketing Strategy An integrated approach to online marketing Simon Kingsnorth iv Publisher’s note Every possible effort has been made to ensure that the information contained in this book is accurate at the time of going to press, and the publisher and authors cannot accept responsibility for any errors or omissions, however caused. No responsibility for loss or damage occasioned to any person acting, or refraining from action, as a result of the material in this publication can be accepted by the editor, the publisher or any of the authors. First published in Great Britain and the United States in 2016 by Kogan Page Limited Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licences issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned addresses: 2nd Floor, 45 Gee Street 1518 Walnut Street, Suite 900 4737/23 Ansari Road London EC1V 3RS Philadelphia PA 19102 Daryaganj United Kingdom USA New Delhi 110002 www.koganpage.com India © Simon Kingsnorth, 2016 The right of Simon Kingsnorth to be identified as the author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988. ISBN 978 0 7494 7470 6 E-ISBN 978 0 7494 7471 3 British Library Cataloguing-in-Publication Data A CIP record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Names: Kingsnorth, Simon, author. Title: Digital marketing strategy : an integrated approach to online marketing / Simon Kingsnorth. Description: 1st Edition. | Philadelphia, PA : Kogan Page, 2016. | Includes bibliographical references and index. Identifiers: LCCN 2016007169 (print) | LCCN 2016015803 (ebook) | ISBN 9780749474706 (paperback) | ISBN 9780749474713 (e-ISBN) | ISBN 9780749474713 Subjects: LCSH: Electronic commerce--Management. | Internet marketing. | Strategic planning. | BISAC: BUSINESS & ECONOMICS / Marketing / General. | BUSINESS & ECONOMICS / E-Commerce / Internet Marketing. | BUSINESS & ECONOMICS / Strategic Planning. Classification: LCC HF5548.32.K566 2016 (print) | LCC HF5548.32 (ebook) | DDC 658.8/72--dc23 LC record available at https://lccn.loc.gov/2016007169 Typeset by Graphicraft Limited, Hong Kong Print production managed by Jellyfish Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY  Customer lifetime value 20 Segmentation 23 Boston Consulting Group matrix Summary 28 Further reading 29 References 29 02 30 Aligning with your business strategy v What we will cover in this chapter Customer centricity Business model 31 32 Global strategy 35 Brand 37 Vision 38 Culture 39 Research and insight 40 KPIs 42 Summary 43 Co n t e n t s Further reading 44 References 45 03 46 Barriers and considerations 46 What we will cover in this chapter Technology 47 Skills 50 Budget and resources 52 Business priorities 54 Regulation 56 Summary 63 Further reading 65 References 65 04 66 Planning 66 What we will cover in this chapter The planning process 68 The phased approach 74 Goals 75 Objectives and strategies 77 Action plans 80 Controls 82 People 84 Budgeting and forecasting 85 About the author xi Summary Further reading 05 Search engine optimization 89 87 88 89 About the contributors xii What we will cover in this chapter A history of SEO 91 Researching your SEO strategy Technical SEO 98 Site structure 99 Content 101 Mobile 102 Location 102 Penalties 103 Organizational structure and SEO Summary 106 Introduction 1 Further reading References 06 Paid search 107 108 109 109 What we will cover in this chapter An introduction to paid search Setting up a campaign 112 What is a digital strategy? 1 Measurement and optimization Advanced paid search Summary 118 Managing paid search campaigns – 121 What’s the story of this book? 2 Further reading 122 07 123 Display 123 What we will cover in this chapter A brief history 125 How to get the most from this book 3 Programmatic advertising 127 Types and formats of display advert Ad servers and technological deliver Types of display campaign 134 Planning and targeting display camp Display campaign measurement and Summary 147 Further reading 148 References 148 08 149 01 What is digital marketing? Social media 149 5 What we will cover in this chapter History of social media Should I or shouldn’t I? 150 151 Customer service and reputation ma The SEO angle 153 Where to start? 154 A history of digital marketing 7 Types of social media 155 Content 158 Social advertising 159 Measurement 160 Summary 162 The 4 Ps of marketing 8 References 163 09 165 User experience and transformation What we will cover in this chapter User experience (UX) 165 Porter’s five forces 13 Digital transformation Summary Further reading References 175 181 182 182 Brand or perceptual positioning map 18 10 183 CRM and retention 183 What we will cover in this chapter Defining CRM and retention Contact strategy 187 Customer lifetime value 20 Cross-selling and up-selling 193 Predictive analytics 194 CRM systems 195 Social CRM (SCRM) 196 Loyalty 197 Segmentation 23 Summary Further reading References 11 200 200 201 202 Boston Consulting Group matrix 25 True personalization 202 What we will cover in this chapter What is personalization? 202 Defining true personalization User-defined personalization Summary 28 Behavioural personalization Tactical personalization 208 Single customer view 208 Summary 209 Further reading 210 Further reading 29 References 12 Customer service 210 211 211 What we will cover in this chapter References 29 Customer service principles 212 Service channels 219 Social customer service 225 Measurement 227 Summary 229 Further reading 230 References 230 13 231 Content strategy 231 What we will cover in this chapter 02 What is content marketing? 232 Aligning with your business strategy 30 What is content? Why content marketing? 237 235 What content types should you use? People and process for creating cont Distribution 250 Measuring the value of content International content 255 Customer centricity 31 Audit checklist Summary Further reading References 256 256 258 258 Business model 32 14 259 Analytics and reporting 259 What we will cover in this chapter The data landscape 260 The reliability of data-based decisio Global strategy 35 What are analytics? 262 Tools and technology 265 Attribution modelling 277 Reporting 279 Summary 282 Brand 37 Further reading References 15 Presenting your strategy 283 283 284 284 Vision 38 What we will cover in this chapter Decision making 285 Budget 287 Key channel benefits 289 How channels interact 294 Culture 39 Website 299 Further considerations 301 Structuring your proposal 305 Advocacy 311 Summary 312 Research and insight 40 Further reading References Bringing it all together 313 314 315 KPIs 42 Summary 43 Further reading 44 References 45 vi Contents 03 Barriers and considerations 46 Technology 47 Skills 50 Budget and resources 52 Business priorities 54 Regulation 56 Summary 63 Further reading 65 References 65 04 Planning 66 The planning process 68 The phased approach 74 Goals 75 Objectives and strategies 77 Action plans 80 Controls 82 People 84 Budgeting and forecasting 85 Summary 87 Further reading 88 05 Search engine optimization 89 A history of SEO 91 Researching your SEO strategy 95 Technical SEO 98 Site structure 99 Content 101 Mobile 102 Location 102 Penalties 103 Organizational structure and SEO 104 Summary 106 Further reading 107 References 108  Contents vii 06 Paid search 109 An introduction to paid search 110 Setting up a campaign 112 Measurement and optimization 116 Advanced paid search 118 Managing paid search campaigns – humans versus robots 121 Summary 121 Further reading 122 07 Display 123 A brief history 125 Programmatic advertising 127 Types and formats of display advertising 130 Ad servers and technological delivery 132 Types of display campaign 134 Planning and targeting display campaigns 135 Display campaign measurement and attribution modelling 141 Summary 147 Further reading 148 References 148 08 Social media 149 History of social media 150 Should I or shouldn’t I? 151 Customer service and reputation management 152 The SEO angle 153 Where to start? 154 Types of social media 155 Content 158 Social advertising 159 Measurement 160 Summary 162 References 163 viii Contents 09 User experience and transformation 165 User experience (UX) 165 Digital transformation 175 Summary 181 Further reading 182 References 182 10 CRM and retention 183 Defining CRM and retention 184 Contact strategy 187 Cross-selling and up-selling 193 Predictive analytics 194 CRM systems 195 Social CRM (SCRM) 196 Loyalty 197 Summary 200 Further reading 200 References 201 11 True personalization 202 What is personalization? 202 Defining true personalization 203 User-defined personalization 204 Behavioural personalization 205 Tactical personalization 208 Single customer view 208 Summary 209 Further reading 210 References 210 12 Customer service 211 Customer service principles 212 Service channels 219 Social customer service 225 Measurement 227 Summary 229  Contents ix Further reading 230 References 230 13 Content strategy 231 What is content marketing? 232 What is content? 235 What content types should you use? 236 Why content marketing? 237 People and process for creating content 241 Distribution 250 Measuring the value of content 252 International content 255 Audit checklist 256 Summary 256 Further reading 258 References 258 14 Analytics and reporting 259 The data landscape 260 The reliability of data-based decisions 261 What are analytics? 262 Tools and technology 265 Attribution modelling 277 Reporting 279 Summary 282 Further reading 283 References 283 15 Presenting your strategy 284 Decision making 285 Budget 287 Key channel benefits 289 How channels interact 294 Website 299 Further considerations 301 Structuring your proposal 305 x Contents Advocacy 311 Summary 312 Further reading 313 References 314 Bringing it all together 315 Index 317 A bonus chapter, ‘The future of digital’, and other resources are available at the following url (please scroll to the bottom of the page and complete the form to access these): www.koganpage.com/DigitalMarketingStrategy  xi Ab o u t t h e Au t h o r Simon Kingsnorth is a strategic marketing leader who has built and led marketing departments and consulted to businesses across the world. He has specialized in digital for many years and run campaigns across all digital channels but also has experience running most offline channels. He has a passion for digital-first cultures but above all has a belief that integrated, client-centric strat- egies should be the focus for most organizations. Simon has worked client-side for a wide range of organizations including start-ups, small and medium-sized enterprises (SMEs) and global businesses across a range of business to consumer (B2C) and business to business (B2B) industries and has also been fortunate enough to work with many leading agencies. He is a contributing author to the books Understanding Digital Marketing and Understanding Social Media. Simon also has too many hobbies to count including photography, music and history but the things Simon is most proud of are his two wonderful boys. xii Ab o u t t h e Co n t r i bu to r s Glen Conybeare Glen is Chief Commercial Officer at inter­ national digital marketing agency Stickyeyes (stickyeyes.com). A member of the executive board, Glen is responsible for client services and is heavily involved in business development. Glen has a wealth of international client and agency-side experience, having worked in the UK, United States, Sweden and Gibraltar, and has previously held a number of senior and board-level positions at companies such as digital media agency i-level and analytics company Touch Clarity (acquired by Omniture) as well as co-founding real-time ad optimization company Cognitive Match (sold to Magnetic Inc). He lives in Leeds with his wife and two young daughters and therefore has no free time for hobbies. Murray Cox Murray Cox is Digital Strategy Director at Pancentric Digital (www.pancentric.com) in London where he helps clients make smarter digital decisions to transform their businesses. Prior to going agency-side Murray was a digital journalist in both the UK and Australia for the BBC, Australian Associated Press and the Special Broadcast Service. Murray went digital in 1998 as part of the launch team of the MSN network and has since been involved as the media and many other industries have digitally transformed. He has an MBA from Strathclyde University.  About the Contributors xiii James Bourner James is a digital advertising expert who works for the international independent agency Jellyfish. James has worked for many companies in a range of sectors and his expertise includes online advertising, digital marketing, content monetization and e-commerce. His current passion is programmatic buying. xiv THIS PAGE IS INTENTIONALLY LEFT BLANK  1 Introduction W elcome to Digital Marketing Strategy: An integrated approach to online marketing. Before we get into the meat of the book I thought that you might find it useful if we go over what it’s all about. My inspiration to write this book came from the fact that I have struggled to find supporting material and helpful tips when I have been constructing my strategies over the years. I have always been able to find guides and tips on each digital channel, on user experience, digital transformation, customer service and many more relevant subjects but there are few that bring it all together and also consider how the digital strategy should fit within your organization, no matter what it might be. I hope this book goes some way to filling that gap. Firstly, it is worth looking at what we mean by digital strategy. What is a digital strategy? This is perhaps best answered with a question. Can you sum up in one sentence what you will be trying to achieve over the coming years? If not, then you don’t have a strategy. If you can articulate that but you don’t know how to get from where you are to your end vision, then you don’t have a strategy. If you have a vision and a path to get there then you have a strategy but if that is not based on research, bought into by your leadership team and with clear deliverables then your strategy will almost certainly not be a success. If you were to Google the word ‘strategy’ you would find definitions such as ‘A plan of action designed to achieve a long-term or overall aim’ (www.oxforddictionaries.com) and ‘A method or plan chosen to bring about a desired future, such as achievement of a goal or solution to a problem’ (www.businessdictionary.com). Both of these definitions are of course true, but we need to go deeper. What we look at in this book is how to turn your great ideas and those of your team and business into one strategy that is robust, agreed and aligned with your wider business. This strategy needs to go through some 2 Digital Marketing Strategy clear steps to becoming something you can believe in, clearly articulate, gain advocacy for and work to as a clear plan to deliver you vision. This needs to be accomplished through these core areas: understand what is possible; understand your business and market context; understand your customer; understand the potential challenges you face; plan your strategy for optimal delivery; understand the possibilities within the relevant digital channels and touchpoints; measure and evolve your strategy; gain buy-in. Once you have these in place you have a strategy and so this book is designed to address each of these steps. What’s the story of this book? As mentioned above, this book will talk through each of the key steps to creating your strategy. In Chapter 1 we look at the background of digital marketing, wider marketing and business models to ensure that the strategy you develop is based on proven techniques and models. This gives some academic perspective that is very useful in ensuring that your methods are robust. From here, in Chapter 2 we move on to look at how your strategy must align with your business if it is to perform effectively. Working in silos is a challenge that many large businesses face but whether your business is large or small it will need to be aligned. A business that pulls in different directions runs the risk of pulling itself apart. In Chapter 3 we look at some of the challenges that face digital marketers today. There are many challenges that can completely change the shape of your strategy and so understanding these early on is vital. Once we have the background from these first three chapters, in Chapter 4 we look at effective planning processes and how to ensure your plan is solid and logical before we get into the detail of each channel. In Chapters 5 to 8 we look at some of the key channels. This book is not designed to be a ‘how to’ guide to digital marketing and so we don’t go into  Introduction 3 every channel and the detail of technical set-up, but we do focus on strategic and tactical approaches to each and what that means to your digital strategy. In Chapter 9 we look at user experience, as this is the ultimate destination of most users, and we also examine digital transformation within your organization before moving onto wider marketing techniques in Chapter 10, such as CRM and retention and how these apply to your digital strategy. Personalization (Chapter 11) is increasingly important and the effects of this on customer service and content strategy are examined in Chapters 12 and 13 respectively, as well as best-practice service principles and best-practice content techniques. We look at measurement throughout the book but Chapter 14 goes into detail on tracking, measurement and analysis as well as reporting techniques to encourage knowledge sharing and continuous improvement. In Chapter 15 we examine how we take your strategy and gain buy-in from your decision makers. After you have covered all of these steps you should have a strategy that can withstand the tests of time, aligns with your business and is agreed by your key stakeholders, but that most importantly takes your business on a journey to delivering excellent digital progress for your organization. A bonus chapter, ‘The future of digital’, and other resources are available at the following url: (please scroll to the bottom of the page and complete the form to access these): www.koganpage.com/DigitalMarketingStrategy How to get the most from this book I have written this book as a guide to the strategic elements of digital marketing and it is designed to take you through the core areas and how to get the most from them. One thing I have always found when reading non-fiction books is that I just want to cut to the chase. In fact one thing I talk about in this book is that culture and technology have moved us towards a place where we demand the key information quickly. So, whilst I hope you read the whole book and enjoy it, I have also tried to include helpful tips throughout that will help you to pull out the key elements of each topic. Below is a quick overview of some of these and how you can use them. 4 Digital Marketing Strategy Chapter goals At the beginning of every chapter you will find a set of goals. The purpose of this is to help you to understand what the chapter is trying to cover. By the end of the chapter you should have a solid understanding of all of these key points. Key terms At the beginning of some chapters I also include a list of the key terms used in that chapter. There is a lot of jargon in digital marketing and it is increasing all the time, but these ‘key terms’ sections simply help you to understand some of the more jargon-heavy chapters. Chapter checklist At the end of every chapter you will find a checklist that is effectively a way of checking that you feel you have a good understanding of all of the key points in the list of key areas covered at the start of each chapter. If not, you can flick back to specific sections of the chapter to refresh your memory. Further reading This feature contains my list of recommended reading should you wish to conduct your own deeper research into any of the specialist models, tech- niques or ideas discussed in this book. Case studies Throughout the book you will find case studies on various subjects. These really help bring the point to life (either good or bad) and I find are a great way to understand just how effective (or disastrous) digital marketing can be. I hope these help you to get the most out of the book and you find it useful and enjoyable. Thanks for reading. Simon Kingsnorth  5 What is digital 01 marketing? What we will cover in this chapter This chapter is intended to give you a background into digital marketing, some of the established models used in constructing a marketing strategy and a focus on how they apply to digital. The key areas covered in this chapter are: A history of digital marketing The 4 Ps of marketing Porter’s five forces Brand or perceptual positioning map Customer lifetime value Segmentation Boston Consulting Group matrix Chapter goals By the end of this chapter you should understand some of the key marketing and business models that will help to shape your strategy. You should have an overview of the history of digital marketing to give some perspective to your strategic plan. You should also gain an understanding of consumer behaviour, market factors, segmentation, lifetime value and the 4 Ps of marketing. As with any book, and indeed any marketing strategy, the best place to begin is at the beginning. Digital marketing is an ever evolving and growing beast 6 Digital Marketing Strategy and one that continues to spread its tentacles deep into the processes that organizations have lived by for decades. That all sounds very dramatic but the truth is that it is simply aligned with the direction of travel of the modern world. Digital marketing is (or should be) a part of almost every key business decision from product development and pricing through to public relations (PR) and even recruitment. We touch on why throughout the book. Now is an exciting time to be in digital marketing. Digital marketing is often confused with online marketing. As we moved into the 21st century most businesses had, or were in the final throws of, developing a web presence. E-mail was commonplace and there was tech- nology allowing people to manage this fairly easily. Customer relationship management (CRM) systems had been in place for some time to manage databases. Some companies were placing banners on websites with a similar approach to press advertising. Forward-thinking companies were working on their search engine strategy and even working with some affiliates. All of this was online marketing and, in time, online marketing teams and specialists would begin to appear. So what has changed? The social media revolution has completely changed the internet and consumer behaviour. The penetration of broad- band has increased speed, internet usage and user expectation with over 40 per cent of the world now online and over 90 per cent in many countries (Internet World Stats, 2015). Analytics has grown to the level where we can understand our consumers’ behaviour in real time, including not just their usage statistics but also their demographics and even interests. Mobile has gone smart and tablets have stormed onto the scene and both of these changes have brought along apps. Touchscreen is becoming increasingly common across all devices. Google has become an enormous organization and owns search globally. TVs have gone smart and Bluetooth opens up another level of possibilities. With a naturally ageing population there is now only a very small percentage who are technophobes simply due to age. I could go on, but it is clear to see that digital is now much broader than the online channels of 15 years ago and must be embedded into everything we do. We will discuss the modern digital marketing channels in more detail in Chapters 5 to 8. One key point that needs to be made at this early stage is that the focus of this book is on digital marketing and that the word marketing is as impor- tant as the word digital. Many organizations have moved towards creating digital marketing departments and digital departments that are separate from their marketing departments. It is crucial now, more so than ever, that digital marketing is an integral part of all marketing activities. This includes  What is Digital Marketing? 7 PR, creative direction, brand, CRM, retention, product development, pricing, proposition, communications – the entire marketing mix. Creating a silo for digital activity is very dangerous and only through truly understanding the strategic benefits of fully integrating your marketing from day one will you succeed. A history of digital marketing Digital marketing first appeared as a term in the 1990s but, as mentioned above, it was a very different world then. Web 1.0 was primarily static con- tent with very little interaction and no real communities. The first banner advertising started in 1993 and the first web crawler (called Webcrawler) was created in 1994 – this was the beginning of search engine optimization (SEO) as we know it. This may not seem a deep and distant past but when we consider that this was four years before Google launched, over 10 years before YouTube, and that social media was not even a dream at this point, it shows just how far we have come in a short time. Once Google started to grow at pace and Blogger was launched in 1999 the modern internet age began. Blackberry, a brand not connected with innovation any more, launched mobile e-mail and MySpace appeared. MySpace was the true beginning of social media as we define it today, but it was not as successful as it could have been from a user experience perspec- tive and ultimately that is what led to its downfall. Google’s introduction of Adwords was their real platform for growth and remains a key revenue stream for them to this day. Their innovation, simple interface and accurate algorithms continue to remain unchallenged (although Bing have been making some good steps forward in recent years). Cookies have been a key development and also a bone of contention over recent years with new regu- lation and ongoing privacy debates. Whilst cookies have played a role in the ongoing privacy concerns of digital technology, they have also been a key development in delivering relevant content and therefore personalizing user experience. Web 2.0 was a term coined in 1999 by Darcy DiNucci but not really popularized until Tim O’Reilly in 2004. With Web 2.0 there was no over- haul of technology as the name might suggest, but more a shift in the way that websites are created. This allowed the web to become a social place, it was an enabler for online communities and so Facebook, Twitter, Instagram, Pinterest, Skype and others were born. One trend that has certainly appeared in the last 10 years is an increase in buzzwords. There seems to be 8 Digital Marketing Strategy a new word or phrase for everything. From ‘big data’ to ‘dark social’, new terms arrive all the time. At nearly every marketing conference I attend these days there is one speaker who is trying to socialize a new phrase they have coined. Whilst these buzzwords can inspire us and open our eyes to new ways of thinking they rarely change the underpinning strategic planning of an effective marketing-led organization – and so below we will review some of the established models, with one eye on the digital perspective. To gain a good view of the strategic side of digital marketing we review the following models: Ta b l e 1.1 Marketing strategy models Model Summary The 4 Ps The established marketing model Porter’s five forces A view of competitive positioning Brand positioning mapping Analysing your perceptual positioning Customer lifetime value Understanding true customer value Segmentation, targeting and Understanding the customer positioning Boston Consulting Group matrix Product categorization The 4 Ps of marketing Product Price Place Promotion There have been quite a few variations on the Ps of marketing, including the 4 Ps and 7 Ps, but for this book we focus on the core 4 Ps of marketing – often referred to as the marketing mix. They are product, price, place and promotion. So let’s look at what each of these means and how they apply to digital.  What is Digital Marketing? 9 Product This may be a physical product or it may be your service proposition. The key here is that something is developed that people actually want to buy. Some businesses begin with a product and then try to force that on an audience. If there is no demand for your product and no one is interested then you will not be able to create demand. What does this mean for digital marketing? The key considerations here from a digital perspective are around whether your product can/will sell online. What channels are open to you for your product or proposition? Are there opportunities to make it flexible to be more appropriate for the online or mobile audiences? Does it provide real value for the consumer and is it differentiated from your competitor offer- ings? Is it being updated, serviced, maintained effectively to keep it strong? Are there features of it that can be added or should be excluded for the digital customer and is it fair to do this? An example might be a music album. Three people buy an album. John buys a CD, Maria downloads the album and Robin streams it. All are different consumer behaviours and each person will use your music in a different way. John may proudly display the album on a shelf as he is a loyal fan. Maria may delete some other music from her phone to free up space for the new album. Robin may put the tracks into separate playlists in order to cultivate his collection according to genre or mood. Understanding the different motivations and usage habits for these products is vital to getting your marketing right in the digital age. Price Pricing is the second P and one that can be more of a science than an art. Understanding price elasticity and competitive positioning are angles to consider but we won’t go into the economics of this here – the key factor is whether you are asking for a price that people are willing to pay. The ‘willing to pay’ element of that does of course have many factors behind it such as your brand value, online reviews, product quality and others but there are also numerous tactics that can be employed here. What does this mean for digital marketing? Discounts and offers are certainly not new to digital marketing but the con- cept of fast price comparison and the introduction of cashback and voucher 10 Digital Marketing Strategy sites have certainly changed consumer behaviours. Businesses can take advantage of this through affiliate marketing programmes. Affiliate market- ing is where you promote your products through a third-party website in exchange for paying a commission or fee to the website when an action is taken. This is very common in the comparison, voucher and cashback space as it is very easy to directly track sales and therefore attribute value to the relationship. Commissions are often paid on sales but can be paid on click-throughs or other actions. Affiliate marketing Affiliate marketing has existed for a long time but has a poor reputation. This is due to a lack of clarity around measurement and genuine sales. The industry has improved greatly over the last 10 years, however there is still a need to maintain this channel and it can be resource intensive as a result. One example of this is the need to review sales reports and track them against customer acquisitions to ensure that the customers for whom you are paying for the affiliate website have joined your business. It is good practice also to ensure that your agreement with the affiliate website states that the customer must stay with you for a period of time, where this is relevant to your industry, before you pay the commission. This reduces the risk of fraudulent sales numbers. Affiliate marketing customers will often be deal hunters, due to the nature of how they have been acquired, and so it is important to understand that they may not be the most loyal customers you have and will likely be more price sensitive than your average customer. You may need a specific CRM strategy for these customers to encourage them to stay. We look at CRM and retention in Chapter 10. There is also an expectation in some sectors that prices should be lower online as there are no overheads. It is considered by many that selling online should be cheaper than selling from a retail outlet. One counter to this of course is that there is no need to post products from your retail outlet. Deciding how this fits with your business strategy is key. Another factor to keep in mind is that it costs less to keep a customer than to acquire a new one so retention, CRM and lifetime value are a vital part of your strategy. We examine the digital side of those in Chapter 10.  What is Digital Marketing? 11 Place Location, location, location. Building your shop in the wrong place decreases footfall and ultimately means fewer sales. Having your shop in the right place but not having the stock in the shop is even worse. Having your pro­ duct in the shop in the right location but then not displaying it correctly – so people cannot find it – is also a factor of ‘place’. What does this mean for digital marketing? All of these apply to digital marketing. You may not have a physical shop but your online shop must be easy to find – this relates back to SEO, paid search and most other digital acquisition channels. Once someone arrives is it easy to navigate and find the information and products that they want? Do you have the items in stock and is your site working correctly to dispatch them? Ultimately, if people cannot find what they are looking for then you can expect them to go elsewhere. If this happens online then you can expect them to go elsewhere much faster as speed is much more of an expectation online. Promotion Promotion is what most people think of when they hear the word market- ing. Your TV campaign, your press advertising, your display banners. This is often the first time that people will have any relationship with your brand and sometimes, certainly in below-the-line marketing, this can be a personal relationship. As we all know, first impressions are very important so getting your promotion right is vital. Above and below the line Above-the-line and below-the-line marketing are terms used to differentiate between broadcast and targeted marketing techniques. Above-the-line marketing refers to mass market advertising that is often used to push specific promotional messages out to large audiences or to build your brand. Below-the-line is used to tailor your communications to individuals or segments to ensure a more powerful message. We explore personalization in more detail in Chapter 11. Through-the-line is a term often used and this simply refers to creating an integrated approach by using an appropriate blend of above and 12 Digital Marketing Strategy below-the-line marketing. This is of course what we are advocating in this book. To help you further understand the split, given below is a list of marketing channels that would fall into each bracket: Above-the-line: –– TV; –– radio; –– press; –– display advertising; –– outdoor. Below-the-line: –– SEO; –– direct mail; –– paid search; –– e-mail; –– direct selling. These days promotion has moved far beyond simple advertising and into dialogue. Smart marketing is much more than shouting about your product and much more about taking customers on a journey. That journey does not end at purchase either. There are many standard approaches to good- quality promotion, including being single-minded, insight-driven, integrated, communicating the features and benefits, creating a clear call to action and many others. All of these apply to the digital acquisition channels. What does this mean for digital marketing? One of the challenges with the digital space is that we often have limited space or time to communicate the product promotion. Where a TV advert or press advertisement may have 30 seconds to get a point across, digital will often have 100 characters or less than one second. This therefore creates a real need for impact messaging and, more importantly than anything else, a test-and-learn philosophy. No matter how much you know (or think you know) about your consumers you cannot predict every possible outcome and so being in a constant and evolving test cycle is vital to a culture of con- tinuous improvement – something that is a key value of effective marketing.  What is Digital Marketing? 13 Porter’s five forces F i g u r e 1. 1 Porter’s five forces Threat of new entrants Bargaining Intensity of Bargaining power of competitor power of buyers rivalry suppliers Threat of substitute products or services The next model worth reviewing is the five forces analysis model by Michael Porter. This is used to analyse the level of competition within an industry by utilizing industrial organization economics. The purpose is effectively to ascertain the competitive landscape and potential profitability of an industry. Any changes to these forces can directly affect an industry and the com- panies within it and so it is important to understand them and react to them in order to retain or gain competitive advantage. Michael Porter goes into a greater level of detail than we have space for here in his book Competitive Advantage, which has been used by students and businesses alike for many years in order to understand competition. Porter’s five forces are as follows: Horizontal competition: 1 The threat of substitute products or services. 2 The threat of established rivals. 3 The threat of new entrants. Vertical competition: 4 The bargaining power of suppliers. 5 The bargaining power of customers. 14 Digital Marketing Strategy Threat of substitute products or services This first force is the existence of another similar product in another industry. An example for the digital age might be landline phones versus mobile phones or, more specifically, mobile phones versus smartphones. Were a new smart- phone to be launched that charges via a pod in the home and that has specific benefits for home use, it may attract customers who have always been land- line users and so this is a substitute product threat to landline providers. There are a number of factors to consider when determining if a product is a substitute threat according to this definition. Those factors are: Switching cost: if the switching cost is low then there is a high threat. Pricing: if the other product or service is relatively low in price then again the threat is high. Product quality: if the potential substitute product or service is of superior quality then the threat is high. Product performance: if the other product is superior in performance then the threat is again high. What does this mean for digital marketing? This threat is ever present in the digital age as companies continue to innovate. Tablets have threatened the laptop market and phablets have in turn threatened the tablet market. Holograms, drones and many others continue to impact on more traditional and established industries and this is discussed in greater detail in the bonus chapter, available at www.koganpage.com/ DigitalMarketingStrategy. Threat of new entrants This threat is fairly obvious. A new entrant to a market can be direct com- petition and therefore threaten the success of an established business. There are many examples of this from the digital age, not least Google, Amazon, eBay and Twitter. Google entered the search market and quickly became the leader above many established players due to the accuracy and speed of the results. Amazon grew quickly, defeating more established players through excellent customer focus and introducing innovations in personalization that gave them a distinct advantage. Although eBay was not the first auction site it was very simple and easy to use. Finally, Twitter entered the social media space with a new micro-blogging approach that created a very simple method of sharing new thoughts and insights. It has been relatively easy for online-only businesses to enter many markets in the last 10 to 15 years. Many of the old barriers, especially capital, have been removed.  What is Digital Marketing? 15 Some of the factors that can dictate the threat of a new entrant are: Barriers to entry: for example patents, regulation. High entry barriers are attractive to established businesses as they stop new businesses entering easily. Also low exit barriers help businesses to leave the industry, which is also attractive. In other words, it is easy for your established competition to leave but difficult for new competition to enter. Economies of scale: new entrants are highly likely to be smaller than established businesses and so may not be able to profitably compete on pricing. Brand equity: established businesses have brand equity – a level of trust that comes with being a recognized brand. Although it is true that new entrants do not have this, it can be quickly established with significant above-the-line marketing spend. Industry profitability: if the industry is generally highly profitable then it is likely to attract a large volume of new entrants and vice versa. Government policy: there might be government policy in place that limits the ease with which new entrants can join specific industries. There are many other factors such as location, expected retaliation, tech- nology and distribution and these should all be thoroughly researched and understood in order for strategy to be robust. Barriers to entry – two examples Financial services is a good example of an industry that has high entry barriers. There are many regulatory bodies and licensing processes in this industry and these are different around the world. It can therefore be very challenging for new businesses to gain these licences and understand all the regulations and requirements. Also staff need to be hired who have the expertise in the industry and they need ongoing training. These are all additional costs. Photography is an example of a business with very low entry barriers. To demonstrate this you could ask your friends and colleagues if any of them have a photography website and you will almost certainly find that at least one of them does. With the move to digital photography, equipment can be bought easily, techniques learnt at home and studios set up in your spare room. Anyone can become a wedding photographer or corporate photographer with minimal investment and effort. 16 Digital Marketing Strategy What does this mean for digital marketing? Specifically for digital marketing it is certainly true that new entrants are common to most markets and disruption is commonplace in the 21st century. Factors such as location, economies of scale, brand equity and technology are far less relevant for entering many industries now, for example technology businesses. Technology businesses have grown at pace in recent years and have attracted a great deal of investment as businesses look to disrupt the existing industries. In 2014 for example, funds worth US$1.4 billion were launched by London-based venture capital firms in just six months (London and Partners, 2014). Many of the businesses being invested in offer digital solutions such as marketing automation, analytics and social media. This results in the digital marketing industry being in a constant state of flux – and ensuring you keep pace with these changes is important. Attending events, maintaining strong relationships with agencies and tech companies and reading the tech news are all important ways of doing this. Intensity of competitive rivalry Competitive rivalry is one of the more commonly understood competitive factors and is sometimes considered the most dangerous. The distinct features and behaviours of your competition directly affect your ability to gain competitive advantage. Alongside digital transformation there are many other factors, including: The competitors themselves: the number of competitors and their relative strength are key factors. If your industry has no industry leaders the playing field is fairly level and so competitor rivalry is increased. High exit barriers: if it is difficult to get out then more businesses will stay in, even if they are only breaking even or even losing money. Competition therefore remains high. Slow industry growth: if an industry is growing fast then all players can grow through acquisition without necessarily directly affecting the competition. All those new customers can be shared out. If growth is slow then there are no more customers but just as many companies, so to grow you need to acquire customers from your rivals. In markets where competitive rivalry is high, we move towards ‘perfect com- petition’ or in other words a situation where everyone competes at an even level with no ‘price makers’, only ‘price takers’. Price makers have the power to influence the price they charge, whereas price takers have no effect on the market. I would recommend more reading on Porter’s five forces and generally around economic theory to understand this in greater detail.  What is Digital Marketing? 17 What does this mean for digital marketing? There are many factors to take into consideration here and the recent trend towards modernization in the form of digital transformation is one of these. Moving your business into the digital age can be a slow and expensive process for established businesses. This can certainly create a change in the competitive landscape as younger businesses are more agile. On the other hand it is equally true that the larger businesses, which of course tend to be the more established (although not necessarily), can potentially invest money and resource into creating something at scale with advanced technology that may be less available to less established businesses. Digital transformation can gain you competitive advantage and therefore reduce rivalry. Bargaining power of suppliers Suppliers of products or services to companies are another factor in the competitive nature of an industry. The bargaining power of suppliers directly affects the ability for companies to make a profit and therefore compete. Strong suppliers are able to control pricing and product quality, which lessens a company’s ability to make profit. Weak suppliers on the other hand can be controlled or influenced more by the buyer and so the buyer can retain competitive advantage. Some of the factors that can lead to high bargaining power for suppliers and therefore increased competition are: Few suppliers: if there are fewer suppliers than buyers then suppliers retain more bargaining opportunity. Buyer switching costs: if changing supplier is expensive then the advantage again lies with the buyer. Forward integration: if the supplier is able to produce the product or service themselves then again they are in a position of strength. What does this mean for digital marketing? If you are running an e-commerce operation with physical products then you may be working with a wholesaler for the supply of your goods. It is possible that your supplier may be one of very few or the only supplier of the goods that you are retailing to your customers. In this situation the wholesaler has strong bargaining power as you have limited options. This can lead to an increase in costs and therefore your profit margin. This may in turn lead to a necessity to increase prices, which may result in a decline in sales. Should more wholesalers enter the market then the competition for your wholesaler increases, which passes some of the bargaining power back 18 Digital Marketing Strategy to you. Another option is to look at producing at least some of the products yourself in order to remove further power from the wholesaler. Bargaining power of buyers The bargaining power of buyers is the final force and is simply the ability of consumers to put pressure on companies to lower prices, change their products or improve customer service. Businesses can take a number of actions to reduce buyer power: for example, engagement strategies and loyalty programmes. Some of the factors that influence buyer bargaining power are: Buyer concentration: if there are few consumers and many companies then the buyer effectively has their choice of company. Switching costs: as with most of the other forces, switching costs are a factor. If it is easy for a buyer to switch then they retain the bargaining power. Backward integration: if buyers can produce the products themselves then they again retain the power. What does this mean for digital marketing? One of the best examples of how buyer bargaining power has changed in the digital age is the increased use of social media and review sites to openly rate and discuss products, pricing and customer service provided by businesses. Many consumers will include reviews within their decision-making process and will not buy products that match their requirements if the reviews from their peers are negative. This has even extended to search engines with star ratings openly displayed within results for searches such as restaurants and products, which can increase or decrease click-through rates as a result. The power of the buyer has significantly increased since Web 2.0. Brand or perceptual positioning map It is useful to use a brand positioning map to develop your market position- ing strategy for your products or services. These maps are not, however, built from your views of your marketplace but from the perceptions of consumers and so are sometimes called perceptual maps. These maps give a clear view, albeit a little subjective, of where your brand or products sit versus your competitors, thus highlighting any gaps in the market and demonstrating where there are areas of intense competition.  What is Digital Marketing? 19 Most perceptual maps are drawn with two axes, X and Y. They intersect each other in the centre and so form a cross. This is not the only way to draw a positioning map but it is by far the most common. What you choose to place on the axes is up to you and you therefore need to consider the variables in your industry and what is the goal of your research. If we were to draw a map of automotive brands using the scales of practicality and affordability (see Figure 1.2) we can see quite clearly where the direct com- petition lies in terms of perception and where there may be gaps in the market. This is also useful to determine where your brand is perceived to be and can help you to construct your strategy for moving your brand to where you want it to be. F i g u r e 1. 2 Automotive perceptual map Sporty Ferrari Porsche BMW Audi Toyota Cheap Expensive Jaguar Honda Mercedes Lexus Chrysler Land Rover Skoda Ford Volkswagen Practical Note: The above figure is an example only and not the output of a research paper. It should not be used for decision making within the automotive industry. 20 Digital Marketing Strategy As well as reviewing where your business or brand is positioned today, perceptual maps can also help you to identify opportunities for launching new brands. If the map of the automotive industry shown in Figure 1.2 were to be the output of actual research, you could decide that launching a brand that stands for sports and performance but is in the mid-price range would have little competition and so might be an opportunity. On the other hand you need to combine this thinking with the size of the market. For example, in Figure 1.2 no brands are perceived to be very sporty and very cheap so there is a gap there, but is this because that is not a profitable opportunity or because when people buy sporty cars they expect to spend money and would not trust a cheap sports car? What does this mean for digital marketing? In relation to positioning maps there is no specific difference between digital marketing and any other form of marketing. As mentioned at the start of this book, marketing is the key word. Brand is one of the areas where having an integrated approach is absolutely vital to success. Considering how your brand performs across all marketing considerations is essential, and whilst it is important to include digital within this, it should not have its own separate approach. One thing that is worth bearing in mind here is that it is much easier to launch a brand today than it was in the 20th century. You can fire up your laptop at home, design a logo in Photoshop, create a website using Wordpress, create a Twitter account and build an Adwords account all in one evening. You then have a brand and it is being seen by thousands and potentially millions of people almost immediately. Whilst I would never discourage someone from launching their business or moving fast to do so, I would encourage some thought around your customer perception and competitors and this is where perceptual mapping fits in. Customer lifetime value Customer lifetime value (CLTV or sometimes LTV) is quite simply the value or profit attributed to a customer for their entire customer lifecycle. This can be relatively simple to calculate in some businesses and incredibly complex in others. Either way, one thing is true: there are many factors that influence it and many levers that can be pulled to alter it. Cost per acquisition (CPA)  What is Digital Marketing? 21 has long been used as a key metric in marketing and especially so in digital marketing due to tracking technology and the transparency of data. However, this has certainly been criticized as too simplistic a view. For ex- ample, if you know that a customer spends $100 buying a product from you that has a margin of $50 and it costs you $40 to acquire that customer then you can be happy that you have acquired them profitably. If that customer then leaves and never comes back then we have a simple model. If, however, the average customer comes back another 3.2 times and phones your call centre twice per purchase then you have additional income and expenditure for this customer that is not taken into consideration. The CPA model continues to be used in channels such as affiliate market- ing as it enables businesses to remove the risk of cost-per-click payments where conversions are not guaranteed. It would be far too complicated in most instances to ask affiliates to abide by your CLTV model as so many of the variables would be out of their control. CLTV can be used to determine which customers are the most profitable and to define segments based on this, which can then be targeted appropriately. We will look at segmentation and targeting below. Calculating CLTV There are several different ways to calculate CLTV but for the purpose of this book we focus on the simple approach. I would recommend understand- ing the different models in more detail to fully appreciate the complexities of CLTV and ensure you have a model or combination of models that is appropriate for your business. In order to calculate your CLTV using the simple method you need to have an understanding of the following two variables: 1) number of periods that a customer remains with you (customer lifetime); 2) average margin per customer in a period. In order to help understand these variables there are some common factors that need to be understood and these are therefore also the levers that can be pulled to improve your CLTV: Length of customer lifetime: –– CRM programmes; –– member-get-member schemes; –– loyalty schemes; –– service levels. 22 Digital Marketing Strategy Average margin per customer: –– repeat purchases; –– cross-selling and up-selling; –– returns and refunds; –– pricing and discounts; –– operating costs; –– conversion rates; –– segmentation. The formula in simple terms is therefore as follows: CLTV = Lifetime × Avg Margin To give an example of this we can look at a retailer. This particular retailer manages to attract each customer to its store 3.9 times per week on average and those customers spend $21.69 on average during each visit. We therefore know that the customers are spending $21.69 × 3.9 = $84.59 per week. We want to understand our CLTV in terms of years so we can simply multiply by 52 to get an annual customer value of $4,399. We know that each customer has a profit margin of 10 per cent so we know that our profit per customer is actually $439. On average we know that customers stay with us for 15 years and so our CLTV is $439 × 15 = $6,585. That gives us a target figure to acquire customers. We know that we can spend up to $6,585 to acquire a customer over their lifetime. What does this mean for digital marketing? There are many models in digital marketing that are forced upon us. As mentioned above there are cost-per-acquisition and cost-per-click models that are very common. There are also cost-per-impression (sometimes cost- per-mille), cost-per-action and cost-per-lead models, amongst others. Whilst we are forced to use these as payment methods it is often all too easy to relax into using these as the key performance indicators (KPIs) for running the channels. CLTV is not something that can be implemented purely within one area of your business, but if this model is appropriate then it should be integrated within digital marketing as much as anywhere else. Digital marketers are blessed with exceptional amounts of data (we will look at big data in Chapter 14) so we have the opportunity to understand our customers and the variables involved in greater detail than other areas of the business. This opportunity is golden and should not be wasted.  What is Digital Marketing? 23 Segmentation Later in the book (Chapter 11) we will look at personalization, which is the ultimate goal of tailored communications and is far more possible than it was just 10 years ago. It is, however, still vitally important to understand segmentation as well. Consumers will always have similarities in their behaviours, demographics, buying patterns and other factors that enable you to group them into segments. This enables smarter, more appropriate targeting and messaging within your marketing communications. These groups will have different uses for products and varying perspectives on services. Their lifestyles will be inherently different as will be their needs, aspirations, opinions and much more. Five common forms of segmentation – geographic, demographic, beha­ vioural, benefit and psychographic – are listed below, including the advantages and disadvantages of each alongside how businesses use these methods. Geographic Perhaps the simplest of all segmentation strategies, this is quite simply the location of the individuals being analysed. Businesses that have regional retail outlets will have some focus on this but it can also prove a useful tool to understand where to target your marketing. That could be outdoor or press advertising but from a digital perspective it may inform your geo-targeting or data selection for your strategy. The disadvantage is quite simply that this is very basic and tells you next to nothing about the individuals themselves. Demographic A very common form of segmentation, demographics includes factors such as age, race, gender, education, employment, income and economic status. It is therefore an area of segmentation that gives a reflection of the character- istics of a group of people. Demographic segmentation is used by governments and a very broad range of organizations as it can answer questions such as ‘Who can afford to buy my product?’ and ‘Will this group of consumers be the right age range for my product?’ The disadvantage of this type of segmentation is that there is a large assumption that people with similar characteristics will behave similarly, which is far from the truth. If someone is a French, 45-year-old factory worker who has had a poor education will they behave the same way as all their colleagues in the factory who are of roughly the same age? No. They will have different passions, hobbies and much more. To understand this in more detail we need to understand behavioural segmentation. 24 Digital Marketing Strategy Behavioural Behavioural segmentation is becoming increasingly possible. It has histori- cally been difficult to understand consumer behaviour but in the big data world we are able to understand consumers a lot more, especially those in the digital space. This method groups consumers by buying patterns and usage behaviours. This is an excellent way of talking to individuals in a way that is highly likely to resonate with them. It is useful when talking about specific products or use occasions. Behavioural does not of course give such a black-and-white view as demographic segmentation and therefore is not an exact science. For example, behaviour can change with your lifestyle. Divorce, children and retirement are key examples of when life changes could result in behaviour changes. It is therefore vital to be working with data that is up to date. With behav- ioural segmentation you have the advantage of being highly relevant to your audience whilst also running the risk of missing the mark completely. Benefit Something that is vital to understand in marketing, and in fact business in general, is that perception is key. How you are perceived will impact your career – we all know the clichés about first impressions. Well, this form of segmentation is based around consumer perceived benefit. Many businesses use this to understand the consumer base and to inform product develop- ment and marketing opportunities. A good example of this is the fashion industry. If you imagine retailers of coats and jackets: some consumers will look for warm winter coats for their ski holidays, some for all-weather jackets for their outdoor lifestyle, some for lightweight jackets they can wear whilst exercising, some for smart coats for work and some purely for fashion. The perceived benefit of your coat will appeal differently to each different segment, so perhaps you need to change the perception of your coat or bring out a new range to appeal to a new segment. Psychographic Psychographic segmentation sounds exceptionally complex but it is simply an understanding of a consumer’s lifestyle. This includes studying activities, opinions, beliefs and interests. Understanding these elements can, similarly to behavioural segmentation, result in messaging and products that truly resonate with the individuals. For example, individuals may be environmen- talists, Buddhists, body builders or movie lovers (or any combination of these). Creating segments on this basis creates a more ‘real’ view of the individuals than geographic or demographic segmentation ever could.  What is Digital Marketing? 25 Personas By pulling together the above five forms of segmentation you can create personas, as per the example shown in Figure 1.3. These are effectively descriptions of your segments. Most businesses will create between five and ten of these, as too few results in large groups that are too generic and too many can result in segments that are too small or overcomplicate the targeting approach. F i g u r e 1. 3 An example of a persona Boston Consulting Group matrix According to Bruce Henderson, founder of the Boston Consulting Group, ‘To be successful, a company should have a portfolio of products with dif- ferent growth rates and different market shares’ (Henderson, 1970). This model is similar to the brand perceptual model mentioned above – in that it uses a matrix. However, the Boston Consulting Group (BCG) matrix is used for a very different purpose. The model categorizes products in a portfolio into stars, cash cows, dogs and question marks (Figure 1.4) by looking at market share and market growth. This is why it is sometimes called the growth–share matrix. It is used primarily to maximize long-term value crea- tion in a business by maximizing high-potential areas and minimizing poor performers. 26 Digital Marketing Strategy Cash cows – high market share in a slow-growth environment Cash cows are strong and safe products. They generate money steadily in a market that is not growing at any pace and, as such, do not require much investment. As a result they are highly profitable. Dogs – low market share in a slow-growth environment Dogs are not the strongest part of the portfolio and can in fact be damaging for a business. They tend to break even and so do not offer a great deal of benefit to the business. Businesses will generally look to reduce dogs or sell them off and should be very wary of investing money into them as returns are unlikely. Question marks – low market share in a high-growth environment Question marks are aptly named as they can go in either direction. They are growing rapidly but have a low share so they consume a lot of cash and do not generate a great deal. A question mark can become a ‘star’ if it gains market share and then even a ‘cash cow’ if the market slows, but it also has the potential to be a ‘dog’ if the market slows before it has gained momen- tum. Decisions around what to do with question marks must be based on extensive analysis – to invest or not to invest. Stars – high market share in a high-growth environment Stars generate cash due to having a strong market share but they also swallow up a lot of investment due to the high growth environment. Once the growth declines, stars become cash cows; therefore, having a range of stars in your portfolio that can become the next cash cows is an important strategy.  What is Digital Marketing? 27 F i g u r e 1. 4 The Boston Consulting Group matrix QUESTION STARS MARKS MARKET GROWTH RATE CASH DOGS COWS MARKET SHARE The matrix itself shows not only the position of each product but also, by utilizing the area or size of each category, the value of each product. This therefore gives a snapshot of profitability and cashflows of an organ­ ization. Ultimately, cash cows and dogs are at either end of the scale and so all business units will move to one end or the other eventually and there is a common path: question mark – star – cash cow – dog. Of course it is not the situation for most companies, or indeed the aim, to have a set of products that simply fall into one of these categories – and in fact a blend of these is important to be able to describe your portfolio as balanced: Cash cows exist to supply funds that can be used to invest in the future of the company. Stars, due to their high growth potential and high market share, are the products that build this future. Question marks are items to steer into your next set of stars. Dogs should be removed. One key thing to remember is that the BCG matrix has complications and has been misinterpreted and misused many times, so understanding the intri­ cacies of it and how to apply it (and indeed when to apply it) is crucial. 28 Digital Marketing Strategy What does this mean for digital marketing? The BCG matrix will inform which products you should be selling through which methods and channels, which will influence your overall digital strategy. You can also use it to assess your digital channels themselves and understand, therefore, whether you are applying your focus effectively. For example, is paid search a cash cow or a dog? The value of this channel is often debated and so being able to substantiate where your channels fit on the BCG matrix is a great way to communicate how your channel strategy will be managed. Moving SEO from a question mark to a star is a common goal of businesses that have poor natural search performance but understand the steps to make improvements. We will look at these channels and how to maximize them in Chapters 5 to 8. Summary Digital marketing has moved forward at extreme pace over the last 20 years and the way that people’s lifestyles have changed in the last 20 years is arguably beyond how they had changed in the 50 years before that: the introduction of the internet, mass smartphone usage, tablets, every age group becoming digitally savvy and so on – and the pace is not slowing. Understanding the marketing models that have been established for some time and how to apply them to your digital marketing strategy gives us a foundation to begin our strategy. So there is a lot to think about but it is all meaningless unless we form a strategy that is integrated into our broader business strategy – so we discuss that in the next chapter. Chapter checklist A history of digital marketing  The 4 Ps of marketing  Porter’s five forces  Brand or perceptual positioning map  Customer lifetime value  Segmentation  Boston Consulting Group matrix   What is Digital Marketing? 29 Further reading On the 4 Ps of marketing: Perreault Jr, W D (2004) Basic Marketing, McGraw-Hill Higher Education. This book covers modern practical examples and best practices and pulls together the theory of the marketing mix with the strategic planning approach we discuss in this book. On competitive rivalry: Magretta, J (2011) Understanding Michael Porter: The essential guide to competition and strategy, Harvard Business Review Press Porter, M (2004) Competitive Strategy: Techniques for analyzing industries and competitors, Free Press On brand positioning: Riezebos, R (2011) Positioning the Brand: an inside-out approach, Routledge. This book discusses brand positioning in detail and looks at the different stages of positioning your brand. It is well worth a read to understand the stages of corporate identity, brand architecture, target group analysis, competitor analysis and choosing a market position. On segmentation: McDonald, M (2012) Market Segmentation: How to do it, how to profit from it, John Wiley & Sons. This book includes tips on avoiding big mistakes and determining scope, which are very helpful in the exercise of building a segmentation strategy. On the Boston Consultancy Group matrix: Stern, C W and Deimler, M S (2006) The Boston Consulting Group on Strategy: Classic concepts and new perspectives, John Wiley & Sons References Henderson, B (1970) [accessed 1 November 2015] The Product Portfolio [Online] https://www.bcgperspectives.com/content/classics/strategy_the_product_portfolio/ Internet World Stats (2015) [accessed 1 November 2015] World Internet Users Statistics [Online] http://www.internetworldstats.com/stats.htm London and Partners (2014) [accessed 1 November 2015] $1.4bn of New Tech Funds Set Up in London in Last 6 Months, London and Partners [Online] http://www.londonandpartners.com/media-centre/press-releases/2014/140902- 14bn-of-new-tech-funds-set-up-in-london-in-last-6-months Porter, M (1985) Competitive Advantage, Free Press, New York 30 Aligning with 02 your business strategy What we will cover in this chapter No digital strategy can work independently of the organization it is built within. Integration is vital to any successful marketing strategy. The key areas covered in this chapter are: Customer centricity Business model Global strategy Brand Vision Culture Research and insight KPIs Chapter goals By the end of this chapter you will understand how to align your digital strategy with your business strategy. If there is one message to take away from this book it is that your digital strategy must not and cannot be built independently of your business strategy if it is to truly succeed. We are in the technology age and this brings new  Aligning with Your Business Strategy 31 opportunities for the digital marketer every month. This means that every digital strategy evolves at pace (we will examine real-time planning in Chapter 4) and so the temptation to move your digital strategy forward independently of the restrictions that your wider organization brings can be too much to resist. In this chapter we look at how aligning to your broader business strategy is important and so this temptation must be resisted. We examine some of the areas to consider when ensuring that your strategy is aligned with your business. Customer centricity Many organizations claim to be customer centric, many of those include customer centricity in their values, but not all of these businesses truly make their key decisions with a customer-first mentality. So what? Why does it matter that some do and some don’t? In short, it doesn’t. We are not looking to define what your business strategy should be – the important consideration here is that you are honest about what your values are, as that means you can truly work towards achieving your goals. Being customer centric, in its purest form, means making your decisions around what is best for your customers. This might mean making some financial sacrifices, reducing profits or creating work that does not directly benefit the organization. If your business claims to be customer centric then a good question to ask yourself is whether you really are putting the customer decisions ahead of the financial decisions. This is not to say that putting your financial decisions ahead of y