Editor’s Note: Welcome to our Monday feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry. In the coming weeks look for columns from Jupiter Research’s Julie Ask, Current Analysis’ Avi Greengart and iGR’s Iain Gillott.
Despite its ubiquity in modern life, I’m still surprised how tenaciously the Internet clings to its circa 1999 image as the playground of teenagers and technophiles in the minds of many marketing professionals.
In fact, 75 percent of the U.S. population is now connected and 36 percent of all U.S. media time is spent there, more than any other medium, including TV. Still, only 11 percent of marketing dollars are currently spent online, and I’d wager to say it takes an even smaller percentage of the mental energy of most CMOs.
Over the past decade, the Internet has matured into a truly mass-market medium. It deserves even more than its fair share of dollars and mental energy because of both the marketing opportunity it represents and unique consumer insights it provides. In the wireless industry in particular, observing shopping online allows marketers to fill some of the traditional blind spots of carriers and device manufacturers in the United States.
While online sales make up 4 to 6 percent of gross adds for the tier-one carriers, the true value of the Internet for consumers and marketers is as the front-line shopping and research destination. With detailed information on nearly every product and service from every manufacturer and carrier a few clicks way, 84 percent of wireless shoppers say they plan to use the Internet as part of the research process for their next wireless purchase.
For a sense of magnitude, in 2006 an average of 21 million customers visited their current service provider’s Web site each month. An additional 12 million evaluated products and services at a competitor to their current carrier.
Nearly every consumer industry, including wireless, has realized that placing brands in the path of these consumers is now an essential part of marketing. Less recognized, however, is the ability of the online channel to serve as the eyes and ears of marketers into the whole market, even for products that consumers traditionally purchase offline.
In the wireless industry, observing online behavior allows carriers and device manufacturers to go beyond purchase to get a detailed view of consumers’ research processes. Imagine having a camera on the shoulder of millions of shoppers as they pick up and consider products and services (or more precisely view Web pages for those products). These shoppers provide a picture of not just how many devices are being sold, but how many shoppers considered those devices and chose not to purchase. For marketers, this provides the opportunity to gather powerful insights around what motivates a consumer to choose a particular brand, product or service.
They include to ability to:
–Measure marketing effectiveness. In the carrier-dominated U.S. market, purchase depends on many factors outside the control of handset makers and other companies dependant on carriers to distribute their products. By observing shoppers researching specific products and services in response to online and offline marketing, carriers’ partners can better understand how effectively their own marketing spending drives interest in their products, even when that interest does not translate directly into sales. A successful campaign could drive a substantial number of new shoppers to consider a product, but still appear to be a failure if other factors limit the number of shoppers who purchase.
–Calculate conversion rates. In order to drive sales, marketing must be combined with the right pricing and purchase process. By knowing how many shoppers considered a product, marketers can combine this data with sell-through to calculate a conversion rate. Products with low sales but high conversion rates are prime candidates for increased marketing at the same price. Because they so effectively convert interested shoppers into buyers, high-conversion-rate products can most benefit from exposure to more shoppers and may not need additional discounts.
–Understanding the impact of pricing changes. Armed with conversion rates on individual products, companies can better understand the sales impact of price changes separately from the impact of marketing campaigns that may be going on simultaneously. Companies can understand whether sales of one handset increased because more people considered the device (due to marketing), or because more of the shoppers who considered the product opted to buy it (due to the lower price).
–Hone messaging through cross-shopping patterns. In the device arena, manufacturers and carriers increasingly segment their products beyond simple price tiers. The marketing that supports these products is only effective if shoppers actually evaluate devices along the same segmentation lines. By sampling online behavior, marketers can see exactly which devices (or other products) consumers compare against each other. If a high-end music phone is primarily compared with smartphones, the carrier and manufacture may need to re-examine the messaging surrounding that phone to highlight the benefits it has over smartphones.
An example from another industry
The automotive industry has been effectively using these types of metrics to optimize sales. Automotive OEMs collect extensive data from in-market shoppers online beyond which models they purchase to also include which models they considered.
Automakers, like wireless companies, are constantly balancing the allocation of dollars between advertising and subsidies across broad product sets. With an understanding of sales and conversion rates, automakers constantly tweak their spending. They boost marketing when conversion rates are high, but few shoppers are considering the vehicle, in order to drive more shoppers to consider that car. When conversion rates are low but interest is high, they shift funds to subsidize the car’s price and entice more shoppers considering that product to buy. These decisions affect more than $60 billion a year that automakers spent on advertising and subsides in the United States.
Cars, like wireless products, are complicated purchases with many features and options involved. Understanding what other vehicles shoppers consider is crucial to determining the right marketing message. Perhaps a light truck is actually competing against SUVs rather than the traditional members of its category. If so, an entirely new pitch may be in order.
In the wireless industry, one well publicized test of conversion effectiveness looms large on the horizon. AT&T has already announced that one million people have signed up to receive information about the release of the iPhone. With the interest there, AT&T and Apple are in the enviable position of knowing their starting point and facing the challenge of making a very public launch successful. With the massive interest that device has already attracted, AT&T and Apple’s ability to convert shoppers into buyer will be a key determinate of the iPhone’s success.
Compete, Inc is marketing services company that helps companies better use the Internet to understand consumer behavior. For more information, sign-up for the Wireless Vantage, Compete’s free newsletter at http://www.competeinc.com/signUp/, read Compete’s general interest blog at http://blog.compete.com/, or e-mail Miro at wirelesspractice@compete.com. E-mail RCR Wireless News at rcrwebhelp@crain.com.
