Wednesday, January 23, 2008

The Role of Social Media in Retail Part 1

Will Beresford of Beyond Analysis wrote an article on Wise Marketer about key trends in advertising that will be driven by social media. I don’t disagree with a lot of them, but there are two that I take particular exception to: first, that social sites like MySpace and Facebook are fads, and second, that many agents or middle-men will find it more difficult to do business because people will rely more and more on their networks. I’m writing about this only because I think social media will play a hugely important role in retail – a topic I’ll probably take some time to explore more fully in the future.

So let’s tackle the first one: social networking sites are fads. Disclaimer on my part: while I have vowed to set up profiles on both MySpace and Facebook, I somehow have managed to avoid doing so so far. Yes, it’s true. You won’t find me on MySpace. But you will find me on LinkedIn, and Plaxo really does provide a critical service for me, because I’m horrible about keeping my address book up to date. And I’m probably responsible for getting a lot of the word out on Spock simply because I was a tad indiscriminate in sending invites out for that one when I signed up to try it out myself (sorry about that, for those of you who are still wondering what the heck Spock actually is. I’m still wondering that myself). While I have found utility in using these sites for business connections, I see no need for something like MySpace to manage my personal connections – I use other tools to do that, like IM and the old-fashioned but ever-useful phone. However, there are a few trends developing around sites like these that makes me think they are here to stay:

Openness. A funny thing happened to my Plaxo account the other day. It got eaten up by a “Comcast Universal Address Book”, and Plaxo now offers ways to tap into address books stored across a wide variety of sites – truly becoming a universal address book. And news pops up every day about how IM services are integrating into Facebook, or other social media-type sites are using API’s provided by MySpace and Facebook to automatically update profiles there. So if I post a blog, it automatically updates my MySpace page, or if I digg something, same thing happens. The more a user hooks things back into a profile space, the more valuable that space becomes. These high-profile companies are very much aware of the network effect – and are creating these API’s for that exact reason – to keep their relevance to users very high. There might be something that comes along that is “way cooler” than Facebook, but only because it takes the concept to another level, not because the concept loses its cachet.
Evolution. Part of the reason Beresford thinks these sites will lose favor is because people will realize that it’s not actually such a good thing to bare all to the world. But I see evolution happening with both Plaxo and LinkedIn, and I have to think it won’t be long before other social networking sites figure this out too: we all have many faces. In Plaxo, it’s overly simplified, but I have two spheres I can use to manage my contacts – personal, and business (and both). I can restrict business contacts from seeing my personal info, and I can restrict personal contacts from seeing my business info, if I really want to. In LinkedIn, you can designate the type of relationship you have with a person in your network – a colleague, a business partner, etc. Sampa, a personal website builder, lets you build a site that is available to everyone, or just to people you invite. So if you don’t want recruiters to see pictures of you getting trashed at a bar, you can restrict access to those pics so that only your closest friends see them (and then, of course, they will send them around to everyone they know in order to embarrass you).

Now, on to the second point: agents will become disintermediated thanks to the power of personal networks. While I agree that the travel agent is pretty much going the way of the dodo, it’s wrong to think that forums aren’t serving an agent role. Even MySpace serves something of that role – there is too much information out there, and we all need filters to help us sort through it all. MySpace becomes the moderated, filtered, value-added collection of stuff about “me”. TripAdvisor is the portal to all things vacation-related. We’re not getting rid of agents and middle-men, we’re in an age where new sites are cropping up in order to take on that role by providing context and moderated, filtered content based on that context – thus increasing the value of information that honestly is already out there – if you can find it.

I’m not sure that Facebook, with Beacon, will become any kind of advertising powerhouse that has the ability to bring life or death to brands. But I do know that retailers should definitely pay attention to how this space evolves. As I’ve said before, as soon as consumers adopt a new technology, one of the first places they take it is shopping. How will social media impact shopping behavior? What a juicy topic! You’ll definitely hear more from me on that one.

Wednesday, January 9, 2008

Advertising is Dead

Ok, I finally know what “they” mean when they say that advertising is dead. It isn’t, of course – there will always be a need to inform and generate awareness, and to do it to a broad, rather than narrow, audience. But the idea of advertising as the dominant form of communication to customers is certainly dead. Those for whom it is their living may not know it yet, but it is.

I’m late to the game because I don’t really focus on consumer marketing or advertising – talk to me about retail, and retail technology. But I keep finding myself sucked into this realm, despite efforts to stay out of it – for two reasons.

First, as online commerce evolved, we saw that technology capabilities in the hands of consumers changed the way they shopped. It’s still changing the way they shop. And we’re only at the very smallest beginning of the learning curve. Ubiquitous WiFi, persistent mobile connections, home servers and networked homes, smaller and more powerful computers that you can carry around in your pocket, and more intuitive user interfaces to help you make the most of all this stuff show that technology penetration in daily life still has a long way to go.

We’re social creatures, and at least in the US, consummate consumers. Which means that as soon as a technology penetrates our lives, we’re going to go shopping with it. I really appreciate the irony of this. In 1994, I was still convincing my boss that we needed barcode scanners at our POS. She was convinced that it would ruin the “hands-on” experience that our staff provided – that it would equate our “boutique” image to a grocery store. Oh yeah, and it would require shelling out capital that was pretty hard to come by. Retailers are technology laggards, so it is the height of irony that they now find themselves on the forefront of consumer technology adoption.

So even though my focus is primarily on retail operations, these pesky consumers keep bringing technology into the equation – and I find myself at places like the Consumer Electronics Show, trying to stay enough ahead of the curve to see what consumers will be bringing to their shopping trip next year, so that I can figure out what this will mean to retailers trying to create a great customer experience.

Second, as part of my coverage of in-store technology, I started writing about digital signage – what I now call Retail Media Networks, thanks to Laura Davis-Taylor’s definition. In its first incarnation, it was all about bringing advertising into the store – dynamic advertising that could change by time of day or even depending on where the screen is in the store. This dumped me – all unwilling, believe me – into the world of advertising. Media buyers, advertising agencies, producers, content creators of all kinds… A world I don’t understand and don’t really want to. I like retail – I like writing about shopping. Heck, I like shopping! When I first started writing about CPM’s, I had to look up what it meant.

But when I started going to advertising-heavy conferences that focused on in-store, I got scared, because they were talking about in-store advertising for the first time ever, but they didn’t get it – many still don’t. The store is different. It’s not a home, it’s not a billboard, it’s not the internet, and it’s not even like a mobile phone. It’s different and you have to treat it differently. I remember, I was at a conference last year where a guy from an advertising agency asked plaintively, “How do we get retailers to standardize on a rate card [for in-store advertising]?” Uh, I hate to tell you this, but… Never! Are you kidding me? Retailers don’t even want to share the kind of information that goes into a rate card, like demographics, like dwell time, with their suppliers – people who they are ultimately dependent on to sell stuff – let alone to media-types, and most especially NOT to other retailers.

But I digress. The point is, like it or not, in order to stay on top of the impact of technology on retail, I have to keep a finger on the pulse of both the future of consumer electronics, and the future of advertising. From what I’ve seen at CES, here’s what my humble little take is – from an outsider, late to the game, but nonetheless.

It used to be that advertising was the king of the hill. And for a lot of people it still is. But I think we will see – possibly even before the end of this decade – a switch. When advertising was on top, there was beneath it a little exotic bunch who specialized in “immersion” – building holistic experiences around brand messages. They were the weirdoes who staged guerilla marketing campaigns, who built up campaigns slowly over time, building to a crescendo of hype and awareness – and most importantly, ENGAGEMENT. But they were stepchildren in advertising. Kinda cool, but not sexy, like TV advertising.

Those Immersive people are going to have their day. Out of necessity, they will have to become the king of the hill, with advertising only playing a role in an immersive experience. Why do I say this? Look at the role of marketing in the store. It used to be at best, shelf talkers and maybe in-store demos. At worst, it was basically coupons that you hoped consumers brought into the store. You priced those coupons with the understanding that the redemption rate of those coupons would be low. So you could afford to plaster newspapers with 50-cent off offers, knowing that say, 2% of the people who got them would actually go to the trouble of cutting them out and bringing them into the store. But technology has changed this paradigm. Instead of plastering the world with coupons, you offer a select few people – the ones you know who actually want the offer – a select few offers, and you get 75%+ redemption rates, along with some tidbits of information about who these people actually are, so that you can keep providing them with relevant offers and learn from them in ways that will help your brand.

Because technology enables consumer access to so many new avenues of information, and because of the fragmentation of audience that this creates, you have to get more targeted. And if you’re more targeted, you have to be very consistent in your communication to that audience because these are your most valuable customers – if you screw it up, it will hurt you a LOT more than if you screw up a coupon offer that only 2% of the audience redeems. How do you avoid screwing up? You build immersive experiences. You might use a TV ad to find the people that you want, but between web, phone, store, print, you build an experience that draws people deeper into a relationship with you, providing a conversation that yields so much more than just a bump in sales.

And when advertising people, who barely understand what the store experience is about as it is, are speaking with enthusiasm about the coming “integration” that will be created when we add mobile phones to the in-store mix, then I know that advertising’s reign is over. And at a panel session I attended at CES on in-store advertising, that is EXACTLY what they did. Advertising is dead, long live immersion!

Monday, January 7, 2008

A Mobile Shopping Scenario

I attended two sessions on Mobility on Sunday at CES. They were both geared more towards content providers and the future of that medium on phones – not really oriented on shopping. But one of the speakers – Shane Lennon of Gypsii, a mobile-based social networking service – gave an example of how someone might use their service, and it has a lot of serious implications for retail. He spoke of how someone could upload a video of a drunk friend, potentially straight to something like MySpace or YouTube and alert other friends to the revelry, complete with directions. Andrew Perlman of Vringo picked up on the story and noted that with his service you could then set that video as your video ring tone – on other people’s phones. So if you call your buddy, he or she is greeted with the video evidence of their drunken revelry. I must lack the social networking gene, because I fail to see how that’s cool, but that’s another story.

What I started thinking about was what that means in the store. The sleeping Comcast guy is already beyond infamous, but what happens when a customer records a video of employees behaving badly in a store on their cell phone, and zaps it straight to YouTube? How long before we see the nightmare Home Depot help, or the Best Buy employee blithely getting the technology explanation completely wrong? According to Douglas Craig from Discovery Communications, we’re only 1-2 phone iterations away from turning every consumer into a broadcaster (at least in the US).

How do you combat this? With our most recent research on workforce management and loss prevention, Paula and I have been circling this issue, trying to find a way to break what really becomes a vicious cycle – employees are not engaged, so customers get mad, so corporate cracks down, and employees, caught between corporate and customers, disengage further. And everybody loses.

We're still working on that, but a place to start would be Jack Mitchell, of Hug Your Customers fame - he's got a new book coming out, called Hug Your People. If the retail industry could pull that off, what a wonderful world it would be.