Digital Marketing Strategy: An Integrated Approach (PDF)

i PRAISE FOR DIGITAL MARKETING STRATEGY This new edition of Simon Kingsnorth’s book keeps pace with the latest developments in digital marketing, which continues to make it a key source of information for digital marketing students during their studies and beyond. Dr Emma Louise Slade, Lecturer in Marketing, University of Bristol It is very rare to find such applicable, accurate and up to date advice in a single resource, which is exactly what Digital Marketing Strategy offers. Simon Kingsnorth’s in-depth understanding of such a broad range of digital marketing channels and topics makes this book undoubtedly an essential read for both budding and experienced digital marketing professionals alike. Carl Hewitt, CEO and Co-Founder, Hewitt Matthews One of the issues with marketing and marketing books today is pre- pandemic thinking. With this third edition of Digital Marketing Strategy, Simon Kingsnorth has really taken the time to bring the book up to date with modern case studies and chapters. This really is a marketing book for the post-pandemic world. Tim Hughes, Co-Founder and CEO, Digital Leadership Associates Impressive depth and rigor, with excellent insights and practical tips. A must-have resource for every marketer and business leader. This is a book you will keep coming back to over and over again. Arek Dvornechuck, Branding Expert, Ebaqdesign This is everything that you need and want to know about digital marketing. Simon Kingsnorth expertly combines the logic and magic of the discipline and brings it together in an engaging and comprehensive way. A master class wrapped up in a book that you should read and use to develop your marketing strategy and grow as a marketer. Suki Thompson, Founder, Let’s Reset ii THIS PAGE IS INTENTIONALLY LEFT BLANK iii Digital Marketing Strategy An integrated approach to online marketing THIRD EDITION 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 publishers 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 the author. First published in Great Britain and the United States in 2022 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 8 W 38th Street, Suite 902 4737/23 Ansari Road London New York, NY 10018 Daryaganj EC1V 3RS USA New Delhi 110002 United Kingdom India www.koganpage.com Kogan Page books are printed on paper from sustainable forests. © Simon Kingsnorth, 2022 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. ISBNs Hardback 978 1 3986 0599 2 Paperback 978 1 3986 0597 8 Ebook 978 1 3986 0598 5 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: Third Edition. | New York, NY: Kogan Page Inc, | Revised edition of the author’s Digital marketing strategy, | Includes bibliographical references and index. Identifiers: LCCN 2022010051 (print) | LCCN 2022010052 (ebook) | ISBN 9781398605978 (paperback) | ISBN 9781398605992 (hardback) | ISBN 9781398605985 (ebook) Subjects: LCSH: Electronic commerce–Management. | Internet marketing. | Strategic planning. Classification: LCC HF5548.32.K566 2022 (print) | LCC HF5548.32 (ebook) | DDC 658.8/72–dc23/eng/20220225 LC record available at https://lccn.loc.gov/2022010051 LC ebook record available at https://lccn.loc.gov/2022010052 Typeset by Integra Software Services, Pondicherry Print production managed by Jellyfish v CONTENTS About the author xiv About the contributors xv Introduction: How will this book transform your digital marketing strategy? 1 What is a digital strategy? 1 What’s the story of this book? 2 How to get the most from this book 4 01 The foundations of digital marketing 6 What we will cover in this chapter 6 The 4 Ps of marketing 8 Porter’s five forces 12 Brand or perceptual positioning map 18 Customer lifetime value 20 Segmentation 22 Boston Consulting Group matrix 25 Customer and market insight 27 Summary 29 Further reading 29 References 30 PART ONE Knowing your business objectives and your customer 31 02 Understanding the digital ecosystem 33 What we will cover in this chapter 33 Paid and organic search interaction 34 Social signals for SEO 34 vi Contents The broad reach of content strategy 35 Display advertising and data strategy 35 Brand and proposition effect 36 The halo effect 36 Attribution and omni-channel 37 The full ecosystem 37 Summary 38 Reference 38 03 Integrating digital into wider organization strategy 39 What we will cover in this chapter 39 Business model 40 Global strategy 43 Brand 45 Vision 46 Culture 47 Innovation 48 Insight, research and analysis 50 KPIs 54 Summary 55 Further reading 55 References 56 04 Understanding the evolving digital consumer 57 What we will cover in this chapter 57 Who is the digital consumer? 58 Digital consumer behaviour 60 How technology affects the digital consumer 62 What does this mean for digital marketing? 63 Summary 63 Further reading 64 References 64 05 Barriers, considerations and data protection in digital marketing strategy 65 What we will cover in this chapter 65 Technology 67 Contents vii Skills 69 Budget and resources 71 Business priorities 73 Regulation 75 Summary 82 Further reading 83 References 84 PART TWO Integrating digital change into your wider organization 85 06 Enabling technologies for online marketing and digital transformation 87 What we will cover in this chapter 87 What is digital transformation? 87 Technology development techniques 95 What does this mean for digital marketing? 97 Summary 97 Further reading 98 References 98 07 Planning your digital marketing strategy – Objectives, teams and budgeting 99 What we will cover in this chapter 99 The planning process 101 The phased approach 107 Goals 108 Objectives and strategies 110 Action plans 114 Controls 115 People 117 Budgeting and forecasting 120 Summary 121 Further reading 122 viii Contents PART THREE Using channel strategy to reach your customers 123 08 SEO strategy and organic techniques 125 What we will cover in this chapter 125 The SEO triangle 126 Researching your SEO strategy 128 Technical SEO 132 Site structure 133 Content and SEO 135 Links and penalties 136 The changing landscape 138 Organizational structure and SEO 139 Summary 141 Further reading 142 09 Building and optimizing a winning paid search strategy 143 What we will cover in this chapter 143 An introduction to paid search 144 Setting up a campaign 146 Measurement and optimization 151 Advanced paid search 153 Managing paid search campaigns – humans versus robots 158 Summary 159 Further reading 160 Reference 160 10 Display advertising and programmatic targeting 161 What we will cover in this chapter 161 Programmatic advertising 163 Types and formats of display advertising 166 Key technology in ad delivery 167 Types of display campaign 169 Planning and targeting programmatic display campaigns 170 Display campaign measurement 175 Summary 179 Further reading 180 Reference 180 Contents ix 11 Tailoring your social media strategy 181 What we will cover in this chapter 181 The evolution of social media 182 Where to start? 183 Types of social media 185 The social networks 190 Content 195 Influencers 197 Social advertising 197 Measurement 200 Summary 201 Further reading 202 References 202 12 Marketing automation, messaging and email marketing – the unsung heroes 203 What we will cover in this chapter 203 Email marketing today 204 The 5 Ts of email marketing 206 How are businesses using email marketing? 210 Account management versus centralized communications 212 Follow-up 213 Regulation 213 Platforms 213 Messaging and SMS 215 Measurement 216 Summary 218 Further reading 218 References 218 13 Affiliate schemes and partnerships to deliver highly targeted leads 220 What we will cover in this chapter 220 An introduction to affiliate marketing 220 Setting up an affiliate programme 223 Affiliate networks 226 Affiliate marketing assets 227 Tracking and measurement 227 Summary 228 Reference 229 x Contents 14 Lead generation that delivers results 230 What we will cover in this chapter 230 Push versus pull – the changing landscape 231 Lead scoring 231 Lead generation across the digital channels 232 Keeping the lead alive 236 Measurement 237 Summary 238 Further reading 238 Reference 238 15 Content strategy – a key pillar of success 239 What we will cover in this chapter 239 What is content marketing? 240 What is content? 245 What content types should you use? 246 Why content marketing? 247 People and process for creating content 250 Distribution 261 Measuring the value of content 263 International content 267 Audit checklist 268 Summary 268 Further reading 270 References 270 16 Personalizing the customer journey and digital experience 271 What we will cover in this chapter 271 What is personalization? 271 Defining true personalization 273 User-defined personalization 274 Behavioural personalization 276 Tactical personalization 279 Single customer view 279 Summary 281 Further reading 281 References 281 Contents xi PART FOUR Conversion, retention and measurement 283 17 Effective Experience Design (XD) 285 What we will cover in this chapter 285 Experience Design 285 XD maturity 286 Three critical requirements 287 Summary 298 Further reading 299 References 299 18 Optimizing your e-commerce platform 301 What we will cover in this chapter 301 Introduction 301 E-commerce platforms 302 E-commerce marketing 304 Digital cross- and up-selling 306 Purchasing and payments 307 Consumer trust 310 Summary 311 References 312 19 Managing loyalty, CRM and data 313 What we will cover in this chapter 313 Defining CRM 313 Contact strategy 317 Cross-selling and up-selling 322 Predictive analytics 323 Technology platforms 324 Loyalty 326 Summary 330 Further reading 331 References 331 xii Contents 20 Measuring success through data analytics and reporting 332 What we will cover in this chapter 332 The data landscape 332 The reliability of data-based decisions 334 What are analytics? 336 Tools and technology 339 Attribution modelling 348 Reporting 350 Summary 353 Further reading 354 Reference 354 PART FIVE Tailoring your final digital marketing strategy 355 21 Providing a smooth online service and customer experience 357 What we will cover in this chapter 357 Customer service principles 358 Service channels 363 Social customer service 371 Measurement 373 Summary 375 Further reading 376 References 376 22 Putting together your digital marketing strategy 377 What we will cover in this chapter 377 Where to start 377 Stage one: assessment 378 Stage two: the foundations 380 Stage three: sophistication 383 Stage four: formalize 385 Stage five: continuous improvement 387 Summary 387 Further reading 388 Index 389 xiii 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 wife 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) including my two wonderful children, Oz and Dexter. xiv ABOUT THE AUTHOR Simon Kingsnorth is an award-winning marketing consultant and global marketing expert who has worked for, and acted as consultant to, many leading businesses across the world. He has delivered highly effective campaigns, strategies and transforma- tion in digital, marketing and other commercial fields and helped both global corporations and start-ups to scale and succeed. He is the CEO of Simon Kingsnorth Consulting – a global marketing company that delivers tailored support to organizations of all shapes and sizes from strategic services such as brand development, content strategy and market entry to tactical delivery such as SEO, social media, copywriting, design and paid search. He is a regular speaker at business and marketing events and trains companies and professionals on a range of marketing, digital, leadership and business disciplines. If you would like to get in contact with Simon you can connect with him on any of the usual social channels or through Kogan Page. simonkingsnorth.com xv ABOUT THE CONTRIBUTORS PATRICK KAL Patrick Kal is a freelance senior social media consultant with a decade of successful experience in social media content creation, community engagement and strategy. Patrick’s career highlights include leading the social media activity for ESPN, (EMEA & NA) which included the first wave of athlete social takeovers, launching ESPN’s Instagram channels, collaborating with Marvel and Disney and provid- ing consultancy for Deloitte and Accenture. He now currently specialises in the automotive sector, applying his experience and insights for a number of global car and motorsport brands such as BMW, MINI, Alfa Romeo, Opel, Jeep, Red Bull and McLaren Racing. MELANIE POLKOSKY Melanie Polkosky, PhD, PCC, is a social-cognitive psychologist and coach/consultant who has been researching and designing experiences for over 20 years. She has published widely in UX, holds six US patents and authored Uncovering Truffles: The Scarcity and Value of Women in STEM. She lives with her husband, two teenagers and one very friendly Labradoodle near Memphis, Tennessee. ELLIOT REUBEN Elliot Reuben has worked in marketing for over 25 years, from building compa- nies in the music and digital industries to agency land, with clients from global household names to small businesses and all points in between. His experience covers everything from brand to execution, advertising to digital. For the last eight years he has been a lead business consultant for a major technology provider and covers multiple verticals and disciplines. xvi About the contributors SIMON SCHNIEDERS Simon Schnieders is the Founder of the UK’s larg- est specialist SEO agency which he bootstrapped to success. He’s also a mentor to start-ups at places like Tech Nation and Seedcamp and a Trustee at a homeless charity in Reading called New Beginnings. His professional background prior to agency life was working in-house at companies like Mail Online where he helped take that business to over- take the NYTimes as the world’s number one English-speaking newspaper website and then onto Zoopla where they went from 0 to a £1 billion IPO in less than seven years. CLARA TOOMBS Clara Toombs has over 10 years’ experience in CRM and defining end-to-end customer journeys. Her passions lie in defining marketing strategies to shape customer experience alongside a deeper understanding of customer behaviour and customer life-time value. Her experience spans a multitude of industries including travel, fashion and financial services. She currently advises start- ups on how to scale their businesses and coaches women in leadership. JAMES WYCHERLEY James Wycherley was Director of Customer Insight and Analytics at Barclays from 2005 to 2015 before joining the Insight Management Academy as Chief Executive. An acknowledged expert on Insight leadership, strategy and commu- nication, he is the author of over 40 IMA publications and in November 2020 published his first book, Transforming Insight: the 42 secrets of successful corporate Insight teams. 1 Introduction How will this book transform your digital marketing strategy? Welcome to the third edition of Digital Marketing Strategy: An integrated approach to online marketing. My original 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 transfor- mation, 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’ and ‘A method or plan chosen to bring about a desired future, such as 2 Digital marketing strategy achievement of a goal or solution to a problem’. 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 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: knowing yourself knowing your customer managing change reaching the customer converting the customer retaining the customer measuring success. 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 perspec- tive that is very useful in ensuring that your methods are robust. From here, we explore the digital ecosystem to understand today’s land- scape and give some perspective to the early formation of the strategy. Then 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 busi- nesses 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. Introduction 3 In Chapter 4 we will look at the digital consumer. Let’s be clear here: almost all consumers are digital consumers today and so we need to under- stand consumer behaviour broadly alongside the idiosyncrasies of these consumers in the digital space. Chapter 5 looks 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. Data, privacy and regulation are increasingly key considerations and we will look at those alongside others. Once we understand our goals and these key considerations from the first five chapters we move on to planning our strategy. First we will look at transformation, an area that is vital to taking your business to the next step on the digital journey. This includes transformation from a technology perspective but also, more importantly, from a cultural perspective. We will then look at effective planning processes and how to ensure your plan is solid and logical before we get into the detail of each channel. Now that we understand how to plan, and what to watch out for, we can get into the meat of the strategy – the execution within each channel and discipline. In chapters 8 to 14 we will 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 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 digi- tal strategy. For the third edition I have added a chapter on affiliate marketing. Incidentally, for a more detailed ‘How to’ guidebook full of practical tips and advice and with unique case studies, you can now pick up my latest book, The Digital Marketing Handbook, from all good book sellers on and offline. Following this, we will look at content strategy and personalization. These two areas are vital to understand in today’s digital landscape as getting them right can make a significant difference to the performance of every channel as well as to your customer satisfaction, lifetime value and retention. From here we look at effective experience design as this is the ultimate destination for most users. I have added a chapter on e-commerce for this edition as this is a key area for most retail businesses. 4 Digital marketing strategy We will then look at retention techniques in areas such as CRM, customer service and loyalty, and how these apply to your digital strategy. Measurement has never been more important and the wealth of data enables us to gain deep insights into performance; we will examine that in Chapter 20. Finally, we will bring it all together and shape your plans into the final strategy. By this point you should know what you want to achieve, the best channels to achieve it and how to get there so this exercise is cementing that into a robust and clear strategy that you can effectively communicate and manage for the coming years. Online resources including lecture slides, activity sheets and implementation guides are available at: www.koganpage.com/DigitalMarketingStrategy/3 How to get the most from this book 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. 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 Introduction 5 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 chapters 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 that were listed in the chapter goals 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. Implementation guides As digital marketing is a constantly evolving field, I have not included prac- tical implementation guides in the book. You will find some included in the online resources. I hope these help you to get the most out of the book and you find it useful and enjoyable. Thanks for reading. 6 01 The foundations of digital marketing What we will cover in this chapter Building a digital marketing strategy cannot be delivered effectively if built independently of business or marketing strategy. We will therefore first need to ensure we have a broad understanding of the underlying principles. To do this we will look at established business and marketing models and how they apply to digital marketing. The models we will review are: The 4 Ps of marketing Porter’s five forces Brand or perceptual positioning map Customer lifetime value Segmentation Boston Consulting Group matrix Customer and market insight 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 plans and, most importantly, how to integrate them into your strategy. 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 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 The foundations of digital marketing 7 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 throes of, developing a web presence. Email was commonplace and there was technol- ogy 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 special- ists would begin to appear. So what has changed? The social media revolution completely changed the internet and consumer behaviour. The penetration of broadband has increased speed, internet usage and user expectation with nearly 59 per cent of the world now online and over 90 per cent in many countries (Statista, 2021). 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 is smart as are TVs and even whole houses. Tablets continue to merge with phones and laptops and apps are now used across multiple devices. Touchscreen is now very common across all devices. Google (or Alphabet) has become an enormous organization and owns search in most countries across the globe whilst Facebook (now Meta) and Amazon have also grown to become global powerhouses, playing in many markets. 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 the late 1990s and must be embedded into every- thing we do. We will discuss the modern digital marketing channels in more detail in Chapters 8 to 14. 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 PR, creative direction, brand, CRM, retention, product development, pricing, 8 Digital marketing strategy 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. To gain a good view of the strategic side of digital marketing we review the models shown in Table 1.1. 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. 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 audi- ence. If there is no demand for your product and no one is interested then you will not be able to create demand. TABLE 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 positioning Understanding the customer Boston Consulting Group matrix Product categorization The foundations of digital marketing 9 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 offerings? 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 differ- ent 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 ‘will- ing 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 concept of fast price comparison and the introduction of cashback and voucher sites have certainly changed consumer behaviours. Businesses can take advantage of this through affiliate marketing programmes. Affiliate marketing 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 10 Digital marketing strategy click-throughs or other actions. We discuss affiliate marketing in more detail in Chapter 13. 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 19. 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 prod- uct 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 expecta- tion 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. The foundations of digital marketing 11 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 16. 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 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 –– email –– direct selling. These days promotion has moved far beyond simple advertising and into dialogue. Smart marketing is much less about 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 12 Digital marketing strategy 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 continuous improvement – some- thing that is a key value of effective marketing. Porter’s five forces 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 indus- try. Any changes to these forces can directly affect an industry and the companies 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 (see Figure 1.1) are as follows: FIGURE 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 foundations of digital marketing 13 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. Threat of substitute products or services This first force is the existence of another similar product in another indus- try. An example for the digital age might be landline phones versus mobile phones or, more specifically, mobile phones versus smartphones. Were a new smartphone 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 landline 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 supe- rior 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. 14 Digital marketing strategy Threat of new entrants This threat is fairly obvious. A new entrant to a market can be direct compe- tition 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. 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 competi- tion 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, technology and distribution and these should all be thoroughly researched and understood in order for strategy to be robust. The foundations of digital marketing 15 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. What does this mean for digital marketing? Specifically for digital market- ing 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 indus- tries. 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, maintain- ing 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. 16 Digital marketing strategy 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 play- ing 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 competition’ 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 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 busi- nesses. 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 avail- able 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 The foundations of digital marketing 17 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 advan- tage again lies with the supplier. 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 neces- sity 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 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 prod- ucts 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. 18 Digital marketing strategy 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 prod- ucts 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 and Web 3.0 will shift this even more. 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. 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 varia- bles 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 afford- ability (see Figure 1.2) we can see quite clearly where the direct competition 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. 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 The foundations of digital marketing 19 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? FIGURE 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. 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 20 Digital marketing strategy 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 a Google Ads 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) 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 example, 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. The foundations of digital marketing 21 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 under- standing 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. 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 aver- age 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 22 Digital marketing strategy 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 20) so we have the opportunity to under- stand our customers and the variables involved in greater detail than other areas of the business. This opportunity is golden and should not be wasted. Segmentation Later in the book (Chapter 16) 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, behav- ioural, 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 The foundations of digital marketing 23 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 reflec- tion of the characteristics 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. Behavioural Behavioural segmentation is becoming increasingly possible. It has historically 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 exam- ple, behaviour can change with your lifestyle. Divorce, having 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 behavioural 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 busi- ness 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 24 Digital marketing strategy 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 jack- ets for their outdoor lifestyle, some for lightweight jackets they can wear whilst exercising, some for smart coats for work and some purely for fash- ion. 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 stud- ying 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 environmentalists, Buddhists, body builders or movie lovers (or any combi- nation of these). Creating segments on this basis creates a more ‘real’ view of the individuals than geographic or demographic segmentation ever could. Personas By pulling together the above five forms of segmentation you can create perso- nas, 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. FIGURE 1.3 An example of a persona Athletic Annie From these demographics we Gender: Female can understand how to talk to Age: 36 Annie. Annie is a working Job: Shop Assistant mother so we Through knowing know she has little Passion: Fitness her beliefs we can time and we need better position our to get to the point. tone and gain her Married Small group of close friends trust. Mother of two Liberal political views Extrovert Loves comedy films We know she likes Drives a Ford Focus By understanding Passionate environmentalist to be sociable but Annie’s passions we mustn’t assume we know where we ‘Annie loves her family first and keeping fit might find her and she’s a party animal either. second. She works to live and pursues what she would happiness and health much more than money.’ engage with. The foundations of digital marketing 25 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 different 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 creation in a busi- ness by maximizing high-potential areas and minimizing poor performers. FIGURE 1.4 The Boston Consulting Group matrix QUESTION MARKET GROWTH RATE STARS MARKS CASH DOGS COWS MARKET SHARE 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 26 Digital marketing strategy 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 impor- tant strategy. 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 intricacies of it and how to apply it (and indeed when to apply it) is crucial. The foundations of digital marketing 27 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 substan- tiate 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 8 to 14. Customer and market insight In order to apply each of these six models to your business, you will need to draw upon a wide range of customer and market insights. Some of these insights might come from market studies, from consumer research, compet- itor intelligence, customer analytics or by joining the dots across a variety of these and other sources. The Insight Management Academy (IMA) defines insights as: Contextualized observations about consumer value, behaviour, habits, circumstances, attitudes, market or environment that have the potential to change how an organization acts and achieves success. It also draws a distinction between insights (these individual, contextualized observations) and insight (the accumulated knowledge developed over time from many insights). We will need both fresh insights and accumulated insight to populate these key marketing models. If you work for a large organization, there may be a whole department called ‘insight’ that specializes in accumulating knowledge about customers and markets and then applying that knowledge to business problems. Smaller organizations may not have invested in a whole department to do this but may instead spend money on individual pieces of market research and conduct customer analysis in different departments. Whether Insight is centralized and co-ordinated in your business, or fragmented – and possibly neglected – it is important to recognize the foundation that customer and market knowledge can provide to overall corporate strategy, marketing strategy and, of course, to our digital marketing strategy. 28 Digital marketing strategy The IMA recommends that all organizations treat customer and market insight as a strategic asset and devise a top-down plan for how they will develop it and deploy it to improve business performance. What does this mean for digital marketing? Before you read any further, ask yourself the following four questions: 1 How exactly does your organization generate revenue and incur costs through its interaction with customers? 2 Which key customer behaviours have the biggest impact on revenue and costs? 3 Which consumer decisions drive those key behaviours? 4 What is the shape of the market within which consumers are making those decisions? TABLE 1.2 Applying insight to marketing models Model Insight required will include… The 4 Ps What needs do your products address? How much are customers prepared to pay? What influences the time and place of purchase? How does marketing promotion influence purchasing behaviour? Porter’s five forces Who is your competition today? Where might it come from in future? How unique is your product or service? How easily could customers switch? Brand positioning mapping Which are the key factors driving product choice in your market? What role does brand play in consumers’ decisions? Customer lifetime value What level of repeat purchase does your company expect? Does this vary by customer segment? How engrained are these behaviours? Segmentation, targeting and What are the most important things that you know positioning about your customers and your market, and how precise is your knowledge at an individual customer level? Which aspects of this knowledge would provide the most useful dimensions for segmentation? Do you need one segmentation or multiple segmentations for different business purposes? Boston Consulting Group matrix What market share does your company enjoy for each of its main products? Is the market for each growing or declining? The foundations of digital marketing 29 You will probably feel like you know the answers to at least some of those questions already, but as you go through this book you will identify the need to learn more about each aspect. Some of that learning may be available from your company’s insight team if it has one. However, developing a robust digital marketing strategy requires us to extend our learning about each aspect so that we can base every decision on the best evidence available and not on superficial assumptions about how and why customers do business with us. Summary Many marketers agree that marketing has changed more since 2015 than it did in the 30 years before. The above models, however, have remained consistently true and relevant so whilst it is vital to stay close to the chang- ing landscape and consumer behaviours, it is also critical to understand these models and build them into your strategy. CHAPTER CHECKLIST The 4 Ps of marketing Porter’s five forces Brand or perceptual positioning map Customer lifetime value Segmentation Boston Consulting Group matrix Customer and market insight 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. 30 Digital marketing strategy 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 On insight Wycherley, J (2020) Transforming Insight: the 42 secrets of successful corporate Insight teams Insight Management Academy Ltd. This book is based on 16 years of discussions amongst senior business leaders at the London Insight forums as well as the author’s own experience as Customer Insight and Analytics Director at Barclays. References Henderson, B (1970) The Product Portfolio www.bcgperspectives.com/content/ classics/strategy_the_product_portfolio/ (archived at https://perma.cc/TF64- 3GRM) Porter, M (1985) Competitive Advantage, Free Press, New York Statista (2021) www.statista.com/statistics/617136/digital-population-worldwide/ (archived at https://perma.cc/BZ9Y-9KH6) 31 PART ONE Knowing your business objectives and your customer 32 THIS PAGE IS INTENTIONALLY LEFT BLANK 33 02 Understanding the digital ecosystem What we will cover in this chapter This chapter will provide you with a view of how the digital marketing ecosystem fits together and how the individual elements interact. Every element affects at least one other and understanding this from the start is crucial so that your strategy takes this into account when building the plans for each of the constituent parts. We will touch on just some of these areas briefly in the context of the ecosystem but you can find more on each topic later in the book. The key considerations here are: Paid and organic search interaction Social signals for SEO The broad reach of content strategy Display advertising and data strategy Brand and proposition effect The halo effect Attribution and omni-channel The full ecosystem CHAPTER GOALS By the end of this chapter you should understand how the digital marketing channels interact and therefore how to build a strategy that is truly integrated and highly effective. 34 Knowing your business objectives and your customer Paid and organic search interaction Paid search and organic search can be made to work together. Although the channels are very different in many ways, there is much you can learn from one and apply to the other. Let’s start by looking at how each can benefit the other. Using SEO data to shape PPC strategy Many companies will start with SEO if they need to prove the search model or have limited budgets. As you move on to building your PPC strategy you can see which keywords are likely to be expensive due to competition and volume. In that scenario it can be worth focusing your SEO here. It will take longer to achieve results but for a significantly smaller investment over time. You should also review your SEO analytics at least monthly to understand whether there are any learnings you can apply to your PPC accounts and vice versa. This could be trends in topics, time of day, day of week, device type, location or many other factors. Using PPC data to shape SEO strategy One of the most frustrating factors with SEO was the move in 2011 by Google to show ‘not provided’ for organic keyword data. However, some organic keyword data is now available within Google Search Console (formerly known as Webmaster Tools) and can be connected with a variety of techniques. There is also an API from Google to provide more of these ‘not provided’ keywords than you can access in the web interface. One of the most widely known interactions therefore between PPC and SEO is to use PPC keyword data and, in particular, keyword data that arrives at conversions to help inform SEO strategy. The other key learning is that you can quickly learn effective copy trends for ads in PPC and then apply those to your site and other marketing activities to increase click- through and conversion rates. Social signals for SEO This area has been much debated or many years but we can assume that social media plays a part in SEO. There has been confirmation that Google uses Understanding the digital ecosystem 35 social links for URL discovery and it is possible that social engagement is another longer term factor. Second order impacts are very real. If content does well on social media, that resource is likely to be well linked to as a result and this is a direct signal. Metrics such as the number of followers are unlikely to have any significant impact – as it should be because follower numbers are purely a vanity metric. We will talk about this more in Chapter 11. At the moment, social signals correlate highly with improved rankings but do not equal causation of those rankings. However, we should consider how regularly and broadly we post, how much engagement we achieve, the links we gain and sentiment we achieve (Search Engine Roundtable). The broad reach of content strategy Your content strategy, as we will see in Chapter 15, should be very sophisti- cated. You should be building proactive plans for what you know is a future content opportunity, reviewing historic performance to improve and develop your strategy and ensuring you have robust reactive processes in place to be able to produce content quickly when an opportunity arises. Your content is then distributed across various channels according to relevance. Perhaps the same content in different formats (infographics, video, quotes, facts, pure advertising messages). For this you may use Facebook, Twitter, Snapchat, your own website, PPC, display advertising, email. The list is long. From that you must be reviewing your data and the impact of this content by channel as well as by type and topic. For example, SEO content writing skills should be fused into your content and this can in turn not only affect SEO but also your PPC Quality Score as your conversion and engagement rates improve. Content strategy, as we will discuss later in the book, is central to any marketing strategy now. Display advertising and data strategy Display advertising has moved a long way from the simplistic banner ads of the early 21st century. Display in the form of programmatic and real-time buying is now a sophisticated and highly targeted channel utilizing complex data platforms. We will explain this in more detail in Chapter 10 but we can 36 Knowing your business objectives and your customer for now appreciate that, without a clear data strategy that ensures your customer and enquiry data is as complete, accurate and current as possible, it risks targeting the wrong people with the wrong message at the right time. Your data strategy also affects your digital communications. For exam- ple, if we consider email marketing, holding data that is incorrect, does not have accurate marketing permissions or is incomplete, could mean not only sending out poor performing communications but could even result in a regulatory breach. Brand and proposition effect Your brand and proposition(s) should of course be reflected in everything you do. No area of marketing is doing its job effectively if it doesn’t reinforce or strengthen the brand and key messaging in its external communications. It should also be acknowledged therefore that this will have an impact on your performance. We will talk more about branding in the next chapter but as part of the ecosystem it should be considered as a key influencing factor. This is not, however, under the direct influence of the digital marketer. Your brand can be affected by company performance, positive or negative PR, growth or downsizing decisions, customer service performance, pricing and many more factors, some of which we have already touched on in the previous chapter. The halo effect The halo effect is a term often used to describe the uplift you see across your channels as a result of above-the-line advertising. For example, if your marketing department runs a broad campaign across TV, radio, outdoor and press, reaching many millions of consumers, you are likely to see this reflected in numerous metrics across your strategy. You would likely see an increase in brand searches on SEO and PPC, increased click-through rate on your brand terms on PPC, improved perfor- mance of display, higher conversion rates, more app downloads, stronger email open rates and higher social media engagement. There is also often a halo from non-branded organic search into branded organic search. Understanding the digital ecosystem 37 Attribution and omni-channel Finally, we need to understand that we can track all of these channels together and how they interact through attribution modelling and omni- channel management. We will look at this more later but, in the meantime, it is vital that we appreciate that understanding the picture of the data set together rather than in silos is what will really enable us to gain full o versight and therefore to apply the optimal improvements to our strategy. The full ecosystem FIGURE 2.1 The digital marketing ecosystem Affecting every metric Customer Brand Satisfaction Content strategy Social Email Affiliate Display PPC SEO media Owned platforms Convert Analytics (websites, apps) 38 Knowing your business objectives and your customer Summary No marketing channel has ever worked truly independently of the others, but now the effect is highly scientific. We will look at attribution modelling in Chapter 20 to understand this further but, for the most impact we cannot simply understand the interaction, we must also plan for it. This means using the channels to effectively amplify each other. The most effective digital marketing strategies use this technique. CHAPTER CHECKLIST Paid and organic search interaction Social signals for SEO The broad reach of content strategy Display advertising and data strategy Brand and proposition effect The halo effect Attribution and omni-channel The full ecosystem Reference Search Engine Roundtable www.seroundtable.com/google-social-signals- ranking-20803.html (archived at https://perma.cc/86C7-KZHD)

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