Computational Advertising and the Sledgehammer to Crack Nuts
When I was doing my MBA and we were at the Strategic Marketing class, one day, we were asked by our professor: “what is the key in Marketing ?” We initially were rather confused and then a little later an avalanche of responses came loudly : 4P’s, Porter-5 forces, competitive advantage…! And David Allen, the professor, smiled and shouted: Segmentation!
Without any doubt Internet, smartphones, the Web and the Social Media has brought a transformed landscape in the Marketing world. No marketers that values his or her job is not looking at them as instrumental in their marketing plans. But, aren’t they using sledgehammers to crack nuts?in other words, is still segmentation being observed?
Another way of looking to this. We have to make a proper targeting of the segment or niche our company is striving for and its financial opportunities is the cornerstone and a key ingredient of a business model (Laudon and Traver, 2004).
As per the Global Ad Spend Report, Internet Ad spend will overtake traditional TV by 2020 (Marvin and Marvin, 2015). That has already happened in seven developed countries. So, there is no doubt, it must be considered!
But before anything, we would need to understand what is the structure of the market of the online advertisements and the revenues interchange between the agents participating on it. let’s review what the Economic Modeling of Web Goods is. As per (Vafopoulos, 2012), there are several models that explain the behaviour of such markets, and what are the mechanisms that convert the attracted users clicks traffic to generate revenues, most possibly in the Ecommerce space.
The Stegeman model, for example, stresses that companies rely too much in advertisements and they pay little attention in using their budgets to improve the quality of their products. And, in addition, the interchange users-firms is more at commodity level rather than at value-add level, where the premium sales margin are typically located. This is precisely a symptom that the market segmentation is poorly done and it brings a lot of market and marketing inefficiencies.
Another model that is discussed in (Vafopoulos, 2012) is the KKPS model. It captures in greater detail the interactions of Users with the Search Engines. In line with this, marketers are starting to become aware of implementing targeted marketing campaigns in the web. For example, Google AdWords play a pivotal role in such endeavour. Targeting customersfor users that are searching the product type the firm sales; in fact you just pay when user clicks on your ad and lands to your web page(PPC- Pay Per Click) (Google, 2015).
The Katona-Sarvary modelstates that in the (commercial) Web, the primary objective of the firm’s commercial efforts is to attract and increase traffic and revenues, and not to inform about the products or services themselves or to build a loyal users community, i.e. promoters. Which, in turn, I think is a profound mistake.
Not long ago, I was using the so called Net Promoter Score (NPS)(Net Promoter Network, 2015) to evaluate customer satisfaction with our firm’s services. It is basically a very simple score that tell us if our customers are mostly promoters of our services or detractors. Knowing that when you have a happy customer, he/she use to tell good stuff about your products to couple of other potential customers, but, if you had an unhappy customer that was shouted out to more than 10 other people. And just imagine the “power” of a detracting opinion over the social networks! Which is precisely what is argued by the Dellarocas-Katona-Rand model, setting the crowdsourcing web services such as Wikipedia, YouTube or Facebook, among others, as the prefered sources of gathering breaking news in contrast to traditional mass media.
The Economic Modeling of Web Goods, throughout their different brands manages to explain the behaviour of web goods market interchange by the different actors. Each of them give us useful insights that must be kept in mind by nowadays marketers.
Segmentation is key in reaching your target market. The explosion of Internet (greatly driven by mobiles) can be widely leveraged to achieve that goal. But, there are many sources of inefficiencies that must kept in mind.
Other sources of risk is the unhappy customers. Net Promoter Score can help the firm to address this, gaining a promoters critical mass. This requires an alignment with an appropriate social media strategy.
Google, G. (2015). Welcome to Google AdWords Essential Training 2015 for Beginner and Expert. [online] YouTube. Available at: https://www.youtube.com/watch?v=uhBCmC2FTO0&feature=youtu.be [Accessed 2 Dec. 2015].
Laudon, K. and Traver, C. (2004). E-commerce.
Marvin, G. and Marvin, G. (2015). Report: Global Internet Ad Spend To Overtake Traditional TV By 2020. [online] Marketing Land. Available at: http://marketingland.com/report-global-internet-ad-spend-to-overtake-traditional-tv-by-2020-132913 [Accessed 2 Dec. 2015].
Net Promoter Network, N. (2015). The Net Promoter Score. [online] Net Promoter Network. Available at: https://www.netpromoter.com/know/ [Accessed 2 Dec. 2015].
Vafopoulos, M. (2012). The Web Economy: Goods, Users, Models, and Policies. [online] Papers.ssrn.com. Available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2117855 [Accessed 16 Nov. 2015].