1. The State of Digital Business
How brands used digital in 2012 to grow their business
December 26, 2012
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2. The state of digital
business 2012. The problem.
The opportunity.
The task.
The tool.
Addition. Design.
Mixing Content, Community and Adapting to Humans........................................16
Commerce......................................................................8 Creating Context................................................. 17
Brands as Curators, Tastemakers Solving a Need...................................................... 17
and Publishers............................................................9
Utility as Ads..............................................................10 Disruption.
Reinventing the Value Chain....................20
Systems. Creating new value.............................................21
Evolving Behaviors.............................................13..
Loyalty Beyond Points...................................14.. The state of digital
Meaningful Extensions........................ ....... .14
business 2012.
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3. The Problem.
Brands don’t often use digital beyond a
communication channel.
And even when they do ...
They invariably think of digital only as a value-add
to their existing business.
three little pigs/youtube video
any youtube channel
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4. The Problem.
This approach creates a disconnect between brands’ and
agencies’ expectations from digital and their understanding of it.
They expect a groundbreaking, disruptive solution to come out
of mass media-like communication inputs.
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5. The Opportunity.
Digital is a new source of value for your company.
Digital is a new revenue stream for your business.
Digital can transform your value chain.
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6. See which brands seized the opportunity in 2012 to use digital
The Task.
to grow their business.
Call out those who broke out of the mold.
Detect ways to use digital for business grow through creatively
adding value to consumers’ lives.
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7. Transformative
Value
Systems Disruption
Connecting products
Creating a new
and services to create
value chain
The Tool.
new value
Incremental
Value
Addition
Design
Making legacy
Human-centered
business more
business solutions
valuable
Market Focus User Focus
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8. Addition.
Approach where brands’
legacy business is made more
valuable through adding digital
as sales and marketing
channel to brands’ existing
marketing and sales
operations.
Digital is a value-add in the
company’s traditional value
chain.
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9. Mixing content, community
and commerce.
How brands use content and community to
turn digital into a new direct sales and
communication channel.
Lucky Mag’s My Lucky offers a curated mix of
products shoppable at the spot. Think the e-
commerce Flipboard. Online magazines are
becoming another direct sales channel in addition to
its regular browsing experience,
Zappos’ PinPointing is a product discovery and
recommendation tool that uses pins to filter the variety
of Zappos’ product offerings. By adding a layer of
social information around its products, Zappos makes
browsing easier (with the effect of increasing
conversions).
Flexible content formats, built-in community and social
activity tools make Facebook a go-to destination for
luxury fashion brands when it comes to live-streaming
their shows. It’s another content distribution channel,
too.
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10. Brands as curators,
tastemakers and publishers.
How brands use the formats and flows of
digital culture as a value-add.
Coca Cola’s “Happiness is...” Tumblr brings this
brand’s core promise to life through diversity of
curated and original content types and formats.
Target forayed into everyday style through its curated
“On the Dot” Tumblr offering ideas, advice and
inspiration.
Virgin Mobile went as far as to create “culture hub” in
the form of a newsroom targeted to young audience.
The newsroom features videos, memes, lists,
photos, playlists and more. Think branded Buzzfeed.
Gap successfully used Tumblr to create its Styld.by
destination, which brings in fashion editors,
tastemakers and bloggers to contextualize GAP
products.
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11. Utility as ads.
Ads don’t have to come in the form of
banners. They can also be digital products.
Uniqlo’s GIFs, Calendar and Alarm Clock are
examples of utility-as-ads: small digital products that
bring the brand to life through interactive
entertainment and service that also serve as the
effective CRM tools.
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12. What did 2012
teach us?
Invest in content that will bring your brand to life. Develop a
content strategy that sets the parameters for creating,
aggregating and filtering content relevant for your audience.
Add a layer of social information over all your products and
services. Money isn’t the only currency around.
Become part of cultural conversation by involving online
tastemakers and influencers. Everyone’s a curator these days,
employ them.
Be where your customers are.
Think beyond banners: use a big chunk of your media budget
to create small, fun things that people would want to use.
Distribute them through social channels.
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13. Systems.
In a systems approach,
brands bundle their existing
offerings together via digital
technology. Here, products
and services are connected to
create new value.
Digital creates value
outside businesses’
traditional value chain and
counts as a new revenue
source.
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14. Evolving Behaviors.
“The designer of the future will be the
personal coach, the fitness trainer, the
nutritionist.” - Phillippe Starck
American Express unveiled three initiatives this year:
My Offers. Twitter Advertising for Small Businesses,
and Travel Insider, all of which transform American
Express from banking into a service that evolves its
customers’ behaviors. Case in point: rather than
just cheering on their small business customers via
advertising messages, Amex is using Twitter as a
small business solution that actually helps business
owners to grow and evolve their customer base. It
effectively builds a system between the card, its
owner and the owners’ customers. With My Offers,
Amex is using the wealth of data it has about each
of Amex’s cardmembers to create tailored
recommendations on deals and discounts. Amex
is effectively giving personal data back to its card
users by translating information into actionable
items. It creates system that unites individual
behavior, data and the card. Travel Insiders uses a
similar system dynamics: it offers custom itineraries
developed by experts and tailored to interests and
passions by each individual cardmember - all within
14 their designated budget.
15. Loyalty Beyond Points.
Lufthansa is breaking the mold of the airline
rewards programs. Instead of diligently
accumulating medallions and moving between
ever-multiplying tiers, Lufthansa tried something
much simpler. It created an alarm clock app that
uses sounds of different cities and rewards users
that made a correct guess with airfare discounts.
Lufthansa is using two behavioral drivers to
achieve desired customer action: a) utility to
integrate itself into an already existing behavior and
b) rewards to create a habit. The system unites
utility, reward and brand.
Kroger supermarket came up with a flexible
coupon solution as a way of investing in customer
loyalty. Based on each customers’ purchase
patterns, Kroger comes up with individual prices.
This means that there are no two customers who
would pay the same price on selected items.The
system integrates individual data, rewards, and a
loyalty card.
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16. Meaningful Extensions.
Instead of seemingly random and erratic brand
extensions (think Richard Branson’s ice cubes,
water purifier and space travel), IKEA invested in a
new product that extends its brand promise and
is part of the same core positioning pattern.
Uppleva is a television set, but everything else
about it is uniquely IKEA: assembly-at-home,
customization, and variety of colors. Through
behavioral and contextual integration, IKEA
managed to venture into a new product line and
make sure it contributes to its existing core
business. Because it already fits into an existing
system of brand and behavior, new product is
easy to assimilate in and adopt.
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17. What did 2012
teach us?
Use data on consumers’ behavior, preferences and
purchases as a powerful connective tissue between your
brand, products and customers. Give customers their data
back by translating it into utility and service.
Think of loyalty as a new monetization opportunity for your
brand, not as a marketing tactic. Focus on making the
existing brand offerings more valuable to its customers. Better
brand experience is key for positive acquisition utility.
Treat each customer as an individual. Be flexible and selective
in offering rewards and discounts.
Think of possible brand extensions not through the product
lens, but through the lens of the customer context. Ask: what
can I add to this system to make it better?
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18. Design.
In a design approach, brands
start from the end-user in
making their existing products
and services better. Here,
brands focus on customer-led
business solutions to create
incremental value-add.
Digital is aimed at serving the
existing customers better and/
or overcoming the current
consumer barriers in the
category.
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19. Adapting to Humans.
“Above all else, align with customers. Win
when they win. Win only when they win.” -
Amazon Doctrine
Art Series Hotels and Starwood Hotels & Resorts
uncovered their customer pain point out and used it to
streamline their guest service process. Instead of
yielding to the rigid check-in and check-out times,
guests can now can arrive and depart in a flexible
manner, depending only on when the next visitor is
scheduled to arrive. Through laser focus on the needs
of their guests, these hotels came up with ways to
adaptively manage their unsold inventory (rooms) and
to direct resulting gains toward customer satisfaction.
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20. Creating Context.
“Always design a thing by considering it in its
next larger context - a chair in a room, a
room in a house, a house in an environment,
an environment in a city plan.” - Eliel Saarinen
What are brands doing with all the consumer data
they have? As it turns out, some of them are using it in
smart ways. Hellman’s is taking information on all the
groceries from consumer’s shopping cart and
assembling recipes on the fly, printing them on the
back of their receipt. While this works especially well
for low-consideration items (like mayo, salt, flour,
granola, etc), it also opens up the entire new area of
immediate data processing. Its purpose is grouping
isolated items into meaningful assemblies that are
useful in the wider context of consumers‘ lives. This
can especially well work on e-commerce sites.
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21. Solving a Need.
“If there’s a simple, easy design principle
that binds everything together, it’s probably
starting with people” - Bill Moggridge
Great product and service solutions solve a need, but
best solutions solve a need at the very moment it
arises. Finding a parking spot when you need it,
hailing a cab when you have to quickly get to a
meeting or finding a nearby loo are all examples of
perfect solutions for immediate needs. Now this
need/solution mechanics is coming to the CPG
industry. Evian’s Smart Drop is a digital product
attached to the fridge door that allows users to quickly
and easily order their new supply of Evian’s natural
mineral water. Evian’s winning on two counts here: a)
there isn’t a better time to order more water than
when you realize you’re running out and b) incredibly
simplified ordering process (“you press the button, we
do the rest”) makes a seamless user experience. Not
to mention the repeated sales impact.
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22. What did 2012
teach us?
Explore customer pain points in the service you offer. What
problems are they grappling with? What are the sources of
their dissatisfaction. Use your marketing to address these pain
points.
Look for gaps between customers’ needs and market
offerings. Use them to differentiate your brand in the market.
Don’t think value chain. Think customer experience flow.
Break it down into separate stages. Ask what new revenue
opportunities are possible at each stage. Make each stage of
the experience meet user needs better.
Focus on building a digital experience strategy. Navigation,
user flow, defaults, and choice structure influence have a big
effect on customer behavior. Good experience is good
business.
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23. Disruption.
In a disruptive approach,
brands come up with
solutions that create a
completely new value in
their industry.
Digital introduces a new
value chain, different
from the one a particular
industry’s built around.
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24. Reinventing the value chain.
“Innovation is the specific instrument of
entrepreneurship. The act that endows
resources with capacity to create wealth.” -
Peter Drucker
In an amazingly smart move, Tesla eliminated the
weakest - and the most painful - link of the car buying
process from its value chain. Yes, the car dealers are
gone. Consumers who find themselves in a Tesla
store are directed to Tesla website to fill out forms.
The next step is for them to wait for their car to get
built and delivered at their doorstep. This is just-in-
time manufacturing at its best: supply reflects
demand and there are no unsold vehicles sitting
around and generating massive overhead costs in
inventory. Best yet, Tesla gets to control the entire car
ownership experience for its customers, effectively
transforming what car purchasing process looks like.
The key part of it is staying close to its customers.
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25. Creating new value.
“The best way to predict the future is
to create it.” - Peter Drucker
Pepsi made a splash couple of years ago with its
Refresh project. Now it unveiled an idea that again
makes people’s lives better, albeit on a much smaller
scale. Pepsi’s “Extra Hour” initiative, part of the “Drink
It to Believe It” promotional effort for the new Pepsi
Next drink, gives away 50 tasks a week to random
winners as a curtesy of TaskRabbit. Instead of getting
a tangible, material reward to its lucky winners, Pepsi
is giving them the gift of time (and someone else’s
labor). Product promotion or not, Pepsi is providing a
new form of value for its audience.
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26. What did 2012
teach us?
The solution comes first, product/service is secondary.
Switch from a “what digital thing should I build” question to
“why is this a problem and how can I use digital to solve it?”
approach.
Explore macro-trends that are happening because of digital
(e.g.sharing economy, redistribution markets, sustainability,
social consumption). Ask why those trends are happening.
Ask what they mean for your industry.
Focus on what’s going on at the edges of your industry. Look
at the emerging economies to detect new value. What are
the startups doing? Which extreme behaviors are you seeing?
Who are your most extreme users? Learn from them.
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27. The State of Digital
Transformative
Value
Business 2012.
Incremental
Value
Market Focus User Focus
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28. In 2012, market focus is still dominant among brands when it comes to digital.
Digital is still mostly regarded as a direct sales and communication channel,
Lessons from 2012.
and most brands use it to expand their sales and marketing footprint. They still
haven’t unlocked the full potential of digital as a new market for their products
and services. Some are moving in this direction, however, through their
initiatives to create value through content, communities, utility and data.
Competitive strategy of choice is using these value-adds to make the existing
offerings more attractive to consumers. Overall focus is still on preserving the
existing, pre-digital value chain, instead of transforming the business through
exploring emerging monetization opportunities in digital space.
Very few brands in 2012 assumed a laser user-focus as a starting point in
their growth strategies. Human-led, socially-driven and sustainability-oriented
corporate behavior is an exception rather than a rule. Adapting existing
offerings to consumers’ actual usage patterns, behaviors and values is still rare
in business growth. Digital still hasn’t been widely recognized as a unique
value-generating system, transformative to businesses and industries. Those
few brands who adhere to digital values and business models are clearly
willing to experiment with their value chains. They are also willing to infuse their
marketing efforts with a broader business thinking.
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