Demand-Side Innovation: Where IT Meets Marketing
The Web has transformed how consumers interact with brands, look for products, and relate to one another. How companies market their offerings both online and off is just as important as the products themselves. Rather than simply build a better mousetrap, CIOs must understand and embrace a variety of forces, social media, online connectivity, broadband, and virtual communities.
If only it were true! As marketers know, a better product without a marketing plan is like a tree falling in a forest that no one can see or hear.
Recent history suggests that this marketing lesson is as apt as ever in today's business world. Just ask the nearly 200 other video-sharing sites on the Web why YouTube sold for $2 billion, and they didn't; or the dozen other makers of hard-drive-based MP3 players why Apple's iPod has 70% global market share, and they don't. Ask Apple itself about the crushing dominance of Windows over Mac OS.
Maybe these are better products. But one thing is certain: How companies market their offeringsonline and offlinehas as much to do with their success as the products themselves. In this age of social media, we're experiencing the most profound instance yet of the Better Mousetrap fallacy. Unless consumers can find our brands, share them with one another, and make our brands their own, we may wind up with the wrong markets, the wrong buzz, and the wrong mousetrap.
What's more, technology, not marketing, has created this new realityso it's technology executives, in conjunction with their marketing counterparts, who can effectively address the new market requirements.
Consider the dramatic impact that technology has had on media and consumer behavior in the past few years. In what seems like record time, the Web has gone from a focused, if galvanizing, revolution limited largely to activities performed online to a force that's transforming how consumers interact with brands, search for products, and relate to one another. A variety of forces are afoot, including pervasive social media, online connectivity, broadband, and virtual communities. Here's how each is rocking IT and marketing:
Of course, consumers have always talked to one another over the proverbial backyard fence, but spreading the word that way occurred one fence and one conversation at a time. Online CGM are scalable in a way that face-to-face interactions aren't. Nor does this online content ever go away. Therefore, what was once an ephemeral, if powerful, marketing medium now vies with the most expensive brand campaigns for consumer attentionand consumers are quickly becoming preferred sources for perspectives on major brands.
That might sound like a recipe for redundancywhy meet someone online when you can get together in the dining hall? But experience has proved otherwise with today's digital youth. Some 85% of currently enrolled college students in the United States have profile pages on Facebook, and they spend an average of 20 minutes checking it twice a day. That means marketers focused on reaching consumers 18 to 24 years of age can't afford to ignore the siteor sites like it.
That influence is growing. Recent data indicates that while online transactions may account for only 10% of U.S. sales, they shape the preferences and behavior of consumers in nearly 40% of offline sales. Integration of the two channels has clearly become an imperative for most businesses.
It's no wonder that Procter & Gamble could quickly amass a circulation of more than 4 million for its Home Made Simple E-newsletter by appealing to young moms and homemakersdwarfing the reach of most women's books and the nation's premier magazines. Similarly, Coca-Cola drives online consumer engagement by letting consumers create online ads and share them with one another.
Put simply, video is rapidly becoming the new lingua franca of online media. As a result, the most powerful medium ever invented is now in the hands of consumers to create as well as distribute content and much of it comments on the world's leading brands. Just ask Diet Coke's brand-management team how it liked the online video created by consumers to show how the product interacted with Mentos.
Or take a platform like Second Life from Linden Lab, with its 2 million "residents" and alternative economy based on a floating FX rate relative to the U.S. dollar. Second Life has become a locus of commercial activity, including a pavilion created by Sony BMG for its recording artists, a Toyota Scion dealership, and a Reuters News Bureauall open for business in very real ways.
Taken together, these trends mean that CIOs in every consumer-facing industry, and most B2B sectors, too, must become more engaged in a new competitive business arena that brings IT into lockstep with marketing and customer-relationship activities. They need to fully grasp the changing nature of the interactions and relationships that their brands can orchestrate with customers and help provide the means both to promote and to benefit from these interactions.
That's the lesson of Apple's success with iPod. You could argue that iPod harnessed just about every one of these trends. Apple drove online sales (iTunes) with an offline device (iPod); it turned the usage of a consumer-electronics device into a form of self-expression (the distinctive white earphones); it created a platform for consumers to create their own media (playlists) and share their creations with one another; it allowed consumers to complete the product by stocking it with their own music; and it jumped on the appeal of video (the video iPod) as soon as broadband access became a reality for two-thirds of U.S. online users.
And more is on the way: Last month, the company announced plans to release its iPhone in June. Once the phone debuts, the peer-to-peer dynamics among Apple users that are already vibrant online will likely amplify dramatically in the wireless realm.
It's never been more important for CIOs and chief marketing officersnot to mention others in the executive suiteto reorient their definition of innovation from what a company sells to how it interacts. Put differently, it's not just innovation on the supply side that matters; it's what we call demand-side innovation that's rapidly becoming an imperative for any company seeking to own its strategic future. For those providing customer-facing IT tools and services, the imperative to adapt and change is greater than ever.