The future of…

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The future of marketing

Ian Pearson, BT Adastral Park, August 2000

Introduction

Business news is dominated daily by the impact of the internet, and rightly so. By the end of the next decade, many of today's companies will have been eliminated, and many of the organisations that will replace them don't even exist yet. The companies on the verge of extinction are aware of the internet. They just believe it is over-hyped and not as serious a threat as is made out. It certainly is hyped, but reality consistently exceeds expectations. Few people expected it to take off as quickly as it has in the last decade. To dismiss its potential impact is both foolhardy and negligent. Over time, it will have at least as much impact as the industrial revolution. But to narrow the scope to a manageable level, this paper will consider how it will impact on marketing. Since there is always the danger of outsiders using different definitions than those within the field, let me explain how I see it. I consider marketing to be a multiplicity of functions including identifying potential markets, creating or manipulating them, and generally encouraging people to steer their buying power in a particular direction. Unlike sales, marketing is an ongoing function that continues long after the sale.

Cyberspace community sites

The building of virtual cities and virtual communities on the net is an indication of the attraction of cyberspace as a place where people can socialise and satisfy the urge to create. There are already over two million homesteaders in geocities.com. These people are there because they enjoy being part of the net community, and they want other people to see things that they have created. Many virtual communities such as those at Geocities.com exist, but only some make virtual buildings. Others are simple chat rooms, but still instil a sense of community among the regulars. The hosts generally spend a lot of money, giving free space to these homesteaders and providing them with tools and materials for their construction. However, they make even more by advertising. Since many community residents visit regularly and many others come to explore the many sites available, advertising rates are high. Adverts reach every visitor to the front pages and to the resident's pages. Each resident's page automatically includes banner ads issued by the hosts, and most residents don't mind 'paying' for their 'free' space by allowing these adverts. Of course, advertisers are very willing to pay handsomely to target audiences who are generally well educated and affluent. There are many such sites.

Creating the product image

Ultimately, only so much of a product price can be spent on blatant 'banner' advertising. Net advertising can absorb some revenue from sales, since other sales overheads should be lower, potentially allowing a greater advertising budget to be used in more subtle ways. While in-your-face advertising budgets may be limited, we may speculate that there is no real limit to the budget for other less invasive forms of marketing. Creating a product image that makes a customer want to buy is much easier in cyberspace, where things are visual and interactive, and can be shown in a favourable light. People will often interact in immersive three dimensional environments with other people, objects, and computer programs. These environments can obviously be tailored to show off products. As we move into the 'storyteller economy', there will be an increasingly fuzzy boundary between the story (the street image being pushed) and the advert. This storytelling is incorporated into the overall buying experience, dictating the theme of the area of the shop, web site, or immersive cyberspace environment where the product is sold for example. In some products, most of the production cost could be in creating the product image so that it sells well. In others, only a small fraction of the sales price could be spent in this way.

This means that for some appropriate products, creating an appropriate image in virtual environments could cost in if it translates into the real world sales. Cyberspace advertising could be much more subtle, much less in your face, utilising techniques rather like product placement in films. However, in films, the viewer has no direct interaction with the products. In cyberspace, as people wander through a visual immersive environment, some products will be an active part of their environment and their operation may exactly mimic the real world operation. People using them in cyberspace and finding them suitable may be more likely to buy in real life. Other products may be used by other inhabitants of the environment.

Of course, today, many of the adverts that we see on TV are more fun to watch than the programmes that they interrupt. Manufacturers who produce well designed web sites are already proving that a similar trend exists on the web. By providing attractive or useful sites, often with services, games or chat areas (possibly but not necessarily related to the product), manufacturers can gain a few short term sales, but more importantly, change the user's longer term perception in their favour.

Sometimes, the cyberspace is purpose made to allow shoppers to find what they need. Already, people can buy furnishings after seeing over the internet how their living room will look with the products, with obvious opportunities for automatic interior design services too. Although the shopper may be looking for one particular item, the opportunity exists to show many others in a favourable light, encouraging the shopper to buy more. This need not only apply in the same room; the environment or computer may remember the other things the user has bought over a period and may sometimes allow product suppliers to illustrate or demonstrate their products in suitable situations, having held the 'advert' in memory until then. This is in line with the notion of advertising on demand rather than pushing advertising at the user. Sometimes people want to see particular adverts. The key here is that the user stays firmly in control.

Lifestyle marketing

Of course, we already have lifestyle marketing. In the future, your computer will get to know you, what you do, who you talk to, what you buy, in fact it will build up such a good picture of your everyday activities that we are already speculating about agents that can substitute for you when you are away. With this level of knowledge digitised and potentially available to the outside world in certain situations, advertising again can make good use of this. Again, it will probably be pulled rather than pushed but this time the computer is the initial target, even though the human is the ultimate target. The computer may thus be able to suggest potential purchases to the human operator. Eventually, when a high degree of trust exists between the human and his machine, it may even have a budget to buy some things automatically.

The notion of brands in such a world will take a severe beating and there will be substantial changes in market structure. We will certainly see the growth of lifetsyle brands. In a net dominated world, people will have many more products to choose from and this extra choice would be a source of stress, making purchases more difficult. There is a strong need for someone or something that tells us which product would suit us best for our particular lifestyle and budget. Designers with a particular flavour of approach across a wide spectrum of products will do well. Just as we have vegetarian logos on many food products, we may well see lifestyle badges on various products. Strong vertical brands will also survive too. We must however challenge the wisdom of pinning brand identity on just logos. Fans of 'the artist formerly known as Prince' can't search by his logo, and have to search for 'the artist formerly known as Prince'. Nike fans have to remember the name Nike as well as recognise their logo, or they too would be stuck. How do you ask for a product if it doesn’t have a pronounceable or writeable name?

Time flexible marketing

Because of the dumb broadcast nature of conventional media, advertising misses out on a key market, time-flexible purchasing. Suppose you are thinking of buying another home PC, but are under no time pressure. All the adverts in the papers tell you what is available now and try to pressurise you into a quick decision with 'offer expires soon' notices. But you weren't born yesterday, and know that the next offer will be even better, with a faster chip, more memory, superior sound card or a better printer or something, for the same price. It will always be better next month but you don't want to wait for ever. What you really need to know is what can you get, when, for what price? Then you could make up my mind and buy. There is currently no means of doing this. The adverts won't say and the staff won't even admit that they will have a better offer next month, let alone give the details. They may think they are forcing customers to buy the current offer and thus gaining earlier sales. In fact, they often manage to postpone purchases through this fear, uncertainty and doubt that is so prevalent in the PC industry. But imagine if you could make a bid, e.g. £1500 some time in the next 3 months - what can you offer me? Advertising on the web could easily cope with this, executing algorithms or using look up tables. Why doesn't it? Perhaps the web site designers don't understand the customer's needs, or perhaps they are stuck in the same mental trap that has caught out most of the people deploying IT. They just take yesterday's paper systems and make an electronic equivalent, instead of thinking through from scratch how the problem should be tackled using the available new technology. If they would use a little more imagination, they could be a lot richer.

Community marketing

The various technology capabilities above imply a more customer driven, inverse marketing, customer pull rather than seller push. This is even more the case when it comes to community buying. Letsbuyit.com brings people together to buy something so as to achieve economies of scale and the leverage of the bulk buy. In the future, people will belong not only to geographically resident communities, but will also affiliate to network based communities, hanging out with people of like mind, or with a single specific common interest. These communities are often well focussed and of course are a marketing dream come true. People self select into a particular community that determines their appropriate marketing vulnerability. Clumsy attempts to mailstorm such groups attract instant criticism and often retaliation by members, but suppliers can market to these groups through word of mouth (or keyboard) very effectively indeed. Simply creating a chat room to discuss a product will attract people interested in it. Of course, this is two sided. If people have negative experiences, these will be shared even faster than good experiences. In this world, the best form of marketing is thus to have a good product, and good support throughout the lifetime of the customer relationship, from pre-sales right up to the point of replacement.

Smart cash, vouchers etc

Finally, marketing can extend into the nature of payment too. Vouchers and coupons are an effective marketing tool today, but when they become electronic, they gain a great deal of flexibility. Electronic cash can be based on smart cards, store loyalty cards, web site cookies, or on database records held behind on a server somewhere. Whichever method is used, marketers can use any of the properties available to electronic cash. Coupons can be made to be worth more at certain times than others, they may expire gradually over time, they may be used for a range of products or just one, or for specific groupings of purchases. Some may have other media associated with them - when they are used, the customer might be given some software or access privileges. In fact, the whole range of applications on the net can be associated in almost any way with any sort of market function.

This is the future of marketing. The future allows everything to be much more flexible. Many new things are possible, the main limit is imagination. Versatility is an advantage to those with abundant imagination, a threat to those without. More than ever before, the good marketing executive will be a critical factor in a company's success. From an outsider's point of view, it will be fun to watch what marketing comes up with next.