Marketing Across the Digital Divide

In the Hutong
Why is my office so cold?
1159 hrs

While I remain an avowed skeptic about the advertising as it is currently practiced, I am increasingly convinced that it has a future only if it can evolve beyond a mass-media based craft. I suspect that will mean that advertising (or whatever it becomes) will be as intertwined with the Internet over the coming decades as it has been with television over the past half century.

I have talked about how the largest barrier to that taking place is our own attitudes. But it is by no means the only major issue that confronts the digital vanguard of the ad industry.

In China, for example, investments in digital advertising are still hampered by the limited penetration of the Internet in China. Yes, it is hard to keep a straight face while saying that, when we have over 350 million people online here in Fair Cathay. But as with most such numbers, it is what they hide that is important.

The Underside of the Iceberg

Even if you accept the 350 million user statistic, that means that some 1.05 billion people, or around 3/4 of China’s population, has no regular access to online services. Now, while it is tempting to dismiss this mass of people as “the bottom of the pyramid,” statistics belie that approach. CNNIC’s own demographics note that most of the people who spend their time online and those who get buying information online remain under 30, and the majority of those under 22.

So the Internet in China is not “skimming the top demographic,” but instead – for the time being at least – is taking a big bite out of the middle, missing out not only on the unconnected masses, but most of China’s affluent older adults as well. With digital marketing, we are only touching a fraction of the higher-income market.

How Many Users, Really?

As near as I can tell, there are probably only 150 million installed computers in China with Internet access. That means that at least between 50% and 60% of China’s online users gain access through a shared computer, i.e., they’re not full-time-access users like most are in the U.S.

As marketers (or honest statisticians) we should really be measuring Internet users not in number of accounts, but by using a multiplier that takes into account actual time spent online per week versus a global average. Even the TV guys agree – you don’t measure number of people who watch TV: you measure people watching times time spent watching which programs.

What’s Your Line

We can all think of companies who would be happy to have an in with China’s online population. But for an awful lot of firms, that market is simply not enough.

Many companies – not only those making soap, fizzy drinks, and popularly priced foods, but also companies like Dell, HP, and Samsung – are focused on expanding their business beyond their current markets, often in the more developed coastal regions. Emblematic of this effort is the widespread push into third-, fourth-, fifth-, and sixth-tier cities, and even into China’s villages.

Other companies are seeking to broaden the population that can buy their products, or “total addressable market (TAM)” in the trade vernacular, diving deeper into the geographic markets where they already have presence and some acceptance.

For those challenges, digital media have yet to craft an acceptable solution in China. Until they do so – and until the issues of penetration and greater access to terminals are addressed, traditional media will continue to dominate the thinking of most of China’s marketers, and rightly so.

If You’re Past the Billion Customer Thing…

Where the Internet remains attractive, though, is for those companies who want to start cultivating relationships with these young people in advance of their prosperity, or who want to start experimenting with online tools in the hopes of building proficiency. And naturally, if you are specifically targeting the kinds of people who are already online, pushing even a disproportionate spend over to digital makes sense.

Caveat Advertisor

All of this comes down to some core principles when dealing with media in China:

•    We need to use care before tossing Chinese newspapers into the same cauldron as US or European broadsheets. They may be down, but they’re still critically important.

•    We need to recognize that the importance of Digital is going to vary heavily from company to company, sector to sector, and that this will be the case for a few years yet.

•    We need to recognize that the Digital Divide is a marketing problem, and that digital inclusion redounds to the benefit of marketers, not just computer manufacturers.

•    We need to recognize that the desktop and the laptop will not be the primary nexus of digital marketing in China: it will be the mobile Internet that really helps China bridge the digital divide and will turn digital into a powerful medium for marketing.

The Most Conservative Guys in the Room

Starbucks Lido Beijing
Trying the Dark Cherry Mocha
1617 hrs.

In November I was invited to join a panel with CIC‘s Sam Flemming and Cohn & Wolfe‘s Jake Drake to talk about social media and marketing at a combined European Union Chamber of Commerce/American Chamber of Commerce event in Beijing. With Sam giving his (frequently funny) insights on the online life of Chinese consumers, and Jake providing some convincing cases on how to utilize the Internet in a marketing program, I was cast in the role of the Friendly Skeptic. (“Hey, I’m no Luddite, but…”)

Given that the hype factor in social media marketing is huge, I had plenty to talk about, and even Sam and Jake spent much of their talks providing reality checks. But of all of the barriers to success in digital marketing (of any flavor), the biggest remains marketers ourselves.

We Have Met the Suits, and They Are Us

Sir Martin Sorrell, speaking at ad:tech New York last month, told the audience that agencies don’t get digital because they are basically led by Old Guys. He’s partly right. To be more accurate, marketers remain innately conservative.

Oh, we’re creative all right, and some of us even get away with dress codes that border on the eccentric. Have a little crawl around our insecure psyches, on the other hand, and you will find that we are so risk-averse that we make accountants look like cowboys.

Part of this is ingrained habit. Fifty years of mixing our marketing plans out of the same media ingredients have not helped. (Gender issues and outdated fashion aside, the world of Mad Men still looks eerily familiar, doesn’t it?)

But the problem goes deeper than that. Or, maybe I should say higher than that. Chief Marketing Officers (CMOs) and their bosses, especially here in China, remain more afraid of losing money than losing a marketing opportunity. That mindset percolates downward very quickly. This makes for conservative young corporate marketers who then grow up to become conservative CMOs.

Things on the agency side are not much better. Terrified of losing that key client and laboring under the iron financial discipline of the agency conglomerates, account teams become reluctant to experiment, hewing closer and closer to the “sure bets” from tools to strategy and yes, to creative.

Innovate or Die

This would be worrying enough if the marketing crafts were operating in a relatively stable environment. In the face of financial crisis, the growing challenges of globalization, and the accelerated continental drift taking place in the media industry, failure to experiment constantly – and thus to innovate consistently – is foolhardy.

When I ask any marketer if they think we need to innovate more, to a person they all agree that it is essential. But when I ask whether they, their organizations, or their clients are prepared to put up with the occasional spectacular failure in the quest for innovation, they all shake their heads vigorously.

And there’s the rub. In order to have the kind of ongoing innovation our industry needs, you must have a high tolerance for failure both generally and financially. Industries that depend on innovation do not expect all of those innovations to materialize out of day-to-day business operations, and so they allocate funds and resources to research and development.

When was the last time your company or agency allocated 20%, or 10%, or even 5% of its marketing budget to activities for which there was no obligation to show ROI beyond discovering new tools and tactics? And even if you wanted to, would the nice folks in procurement stand for it?

Don’t Shoot the Old Horses Yet

If ever there was a time for us to purge some of the stuffy conservatism from our industry, this is it. If we are to believe Sir Martin, the matter is as simple as sacking every marketer over a certain age and replacing them with a legion of young (and presumably more digital) turks.

But even if you accepted that as a solution, to shackle the new blood with business practices and financial targets designed to smother any but the most serendipitous innovations would serve only to transform the upstarts into alter kackers overnight.

For us to slip the bonds of the conservatism that has restrained our response to a digital world, we marketers must first attack the very conceptual framework that has grown around our industry over the last fifty years. That is not going to happen quickly – it will only be the result of a long and concerted effort across all of the crafts.

But it is without question the direction we must take. In the face of almost constant innovation in media, constant change in audiences we want to reach, and the growing need to link our work ever more closely with business results, Madison Avenue needs to be as driven by innovation as Silicon Valley.

Now, where to begin?

“Client, Measure Thyself,” or “BYO Metrics”

In the Hutong

Upgrading the Windows machine

1126 hrs.

The pitch seems to be going well. There is good chemistry between the prospective client and the agency. The ideas are great, the concept clear, the tactics doable, the team qualified.

And then comes that moment where everyone sits back, and someone on the client side folds their arms, looks the agency leader in the eye, and asks “so how are you going to measure the effectiveness of your campaign?”

Usually the agency will have some sort of answer, and occasionally it will be enough to satisfy even the  procurement person sitting in on the pitch. But as someone who has sat through countless pitches on both sides of the table and have made more than my share, I have yet to hear an agency give the correct answer:

“I am sorry, but isn’t that your problem?”

You Want Us To Do What?

The idea of holding an agency accountable is a great one. Far too much money has been hurled at marketing (not just television advertising) based on little more than the assumption that the only bad marketing is none at all, with the primary beneficiaries being media and agencies. But accountability goes bad when the agency is handed the task of measurement.

The first problem with asking an agency to be responsible for monitoring the efficacy of their own campaign should be self-evident: it is like asking the fox to guard the hen-house. The agency has an implicit conflict of interest.

When asked to provide measurement, most agencies will endeavor to use the metrics that best validate their own approach. What is more, by giving the agency (under pressure from both client and upper management to perform and retain the client) the responsibility to handle measurement, you give them  both the motive and opportunity to “game” the results. This is not a condemnation of agencies: it is merely an acknowledgment of human nature.

One Yardstick to Rule Them All?

The second problem is that measurement, particularly in this day and age, is not (or should not) be the same for every company and in every situation. The use of standardized metrics like gross impressions, page views, ratings, ad-value equivalencies and click-throughs is helpful when comparing one marketing program to another. Yet they all suffer the same shortcoming: they are weak measures of how close a company is getting to reaching its specific business goals.

In any market, but especially in a place like China, goals are constantly changing as a company evolves and targets shift, and I would argue that different markets (geographic or product based) need different metrics. The way you would measure the marketing campaign for a “hero” product in a developed country is different than the way you would measure a campaign for a very-low-margin product in a developing one.

For these reasons, agencies should not be in the business of designing marketing metrics for companies. That responsibility belongs with each company, deciding what its business goals are, understanding how a marketing campaign can get the company to that goal, and then devising the way the agency (and the marketing team as a whole) will be measured in its performance.

Chief Measurement Officer

This means that the first and most important challenge of a new Chief Marketing Officer (CMO) – is not to call an agency pitch. Rather, it is to create a measurement system that all of a company’s leaders agree is tightly aligned with the firm’s business goals. The second challenge, in that case, is update and evolve that system as goals change, as tools change, and as more accurate means of measurement become available.

When, and only when, that system is in place is it time to seek agency help. Yet even when that time comes, the only measurement responsibility an agency should be given is to perform against the metrics set by the client on the basis of the client’s own business goals. Those metrics should be made clear in the pitch, and should be the focus of regular update meetings. Ideally, the measurement system should be real-time, so both agency and client can respond to critical data quickly.

Revolution is No Cocktail Party

If you think all of this is designed to go easy on the agency, you miss the point. This approach would require an agency to perform against different metrics for each client, and for that reason I suspect many agencies would be dead-set against it. (Many in-house marketers will be as well, because it places a greater burden on them, too.)

But before we dismiss this approach out-of-hand, consider the future. The marketing craft is going through a time of profound crisis. A deep vein of skepticism, disbelief, and distrust of traditional marketing tools is coming to the surface, exposed by the erosion caused by the financial crisis, a general movement for greater fiscal accountability, and what can best be characterized as Advertising Budget Growth Fatigue.

If we want to have the credibility that entitles us to influence at the highest levels of our companies, it is incumbent on us to do everything possible to demonstrate the value of what we practice, and to guide our practices toward strategies and tactics that deliver greater value. That means a creating and building a toolkit of metrics unique to each company that ties every marketing dollar to sales, to repeat business, and to individual customer relationships.