What does the annual Thanksgiving Day parade that Macy's has been holding for the past 85 years in New York City have to do with the newfangled world of online marketing? More than many people think, according to Joe Feczko, the company's senior vice president of innovation, integration and marketing. Just as the department store chain had to adapt the parade's marketing for television some 40 years ago, it is now learning to use social networking and an array of other new media to reach millions of customers. "It's just a different canvas we're communicating on," Feczko told participants in a recent conference sponsored by Wharton'sJay H. Baker Retailing Center and the SEI Center for Advanced Studies in Management titled, "The Future of Brand Building and Brand Experience: The Blurring Boundaries between Advertising and Retailing."
The key, Feczko said, is for companies' marketing campaigns to blend entertainment and information. During the last holiday season, for example, Macy's rolled out an animated website with an online tool enabling customers to send letters to Santa Claus. The site, which received more than one million letters, was combined with a fundraising drive for a children's charity and a mail order guide. Before that, during New York Fashion Week in the fall, the retailer provided customers with a "magic fitting booth," which allowed them to "try on" virtual outfits and post images of themselves in their new duds on Facebook. And all year round, shoppers can use their phones to watch videos for fashion tips from designers and makeup artists.
Macy's high-tech marketing is, of course, far from unique. The new "canvas" that now includes digital technology and social media is revolutionizing how traditional retailers hawk their wares and the ways that consumers shop around the world. A comprehensive strategy requires leveraging traditional and new media, while reaching all the points of contact with shoppers, from product design to store layout. "There is a whole new way of thinking about these interrelated forces," Wharton marketing professor Jerry (Yoram) Wind noted at the conference.
The current wave of change began just over 10 years ago, according to Barbara E. Kahn, Wharton marketing professor and director of the Baker Retailing Center. Since the arrival of the Internet in the late 1990s, consumers have had increasing control over how retailers' marketing messages are disseminated.
Facebook, for example, accounts for 38% of social media page referrals online, said Bob Kantor, chief marketing and business development officer at MDC Partners, a New York-based marketing and communications consulting firm. Shoppers also value online reviews and often spend more money online after reading product recommendations by other consumers. Such reviews are trusted some 12 times more than messages produced by advertisers, Kantor pointed out. The implication for marketers is a "dramatic shift" from company-sponsored sites to social media.
The upshot is that when shoppers think about a brand, they now consider their entire shopping "experience," Kantor added. Successful advertising campaigns encompass all of the touch points of a company's relationship with a consumer, including the first moment of contact when a product search begins, the sale, and the product's eventual disposal and replacement. But while consumers have far greater control over marketing messages than they ever have, retailers still have plenty of leeway in guiding opinions about their products, Kahn noted.
Message in a Bottle
When launching the fragrance "My Life" for pop star Mary J. Blige last year, for example, Home Shopping Network (HSN) drew from a wide mix of online and offline tools. The aim was to build on fans' affinity for the star while marketing the product two months before its first appearance on the television shopping channel, said Kurt Kostur, HSN's senior vice president of marketing. "We really believe the way to crack the code is to create a highly targeted branding experience," he added.
In the case of "My Life," HSN set up a two-story "sensorium" at the Essence Music Festival in New Orleans, which was filled with the flowers and sesame seeds used in the fragrance. Visitors to the sensorium received bracelets infused with the scent and could send well wishes to Blige via laptops at the event. Blige herself made an appearance, signing autographs and posing for photos with fans. HSN also ran video clips about Blige's life on YouTube for viral consumption. The result?
According to Kostur, the fragrance sold 60,000 units in the first six hours on air -- an HSN record for a new category.
While reaching consumers through a growing number of channels can make marketing easier, getting a handle on the return on investment is as elusive as ever, experts noted at the Wharton conference. "When it comes to advertising effectiveness, the biggest challenge in measurement is separating the hype and excitement and buzz from what is business-transformative," noted Anne Hunter, project manager of ad effectiveness at comScore, a digital research firm.
But insight into consumers' online and offline spending habits is growing. According to Joel Rubinson, New York City-based president of the consulting firm bearing his name and former chief research officer of the Advertising Research Foundation, in the mid-1990s, about 70% of grocery purchasing decisions were made at a store. Now, it is less than 50%, because consumers research products online and decide what they will buy before going to a store, or they forgo a trip to the store altogether and make purchases via the Internet.
Either way, Rubinson suggested that retailers have a lot of scope for brand building and influencing purchasing decisions at the point-of-sale, even among unlikely customers. He cited research that used sales data of a brand of bottled water to analyze customer segments, ranging from consumers who were very loyal to and "engaged" with the brand, to consumers who typically bought other bottled water brands. Loyal customers -- those who purchased the brand at least 75% of the time -- accounted for only half of the brand's overall sales. The rest came from "less-engaged" customers who sometimes bought the brand. "That means you are fighting for every purchase," he said.
For Rubinson, the research speaks volumes about the need to reach out to all customer segments. While loyal consumers might be more likely to log on to a brand's Facebook page or check out its new digital campaign, the other consumer segments can be reached through different, and sometimes more traditional, channels. "A fully integrated marketing program realizes it is not all about engagement, but more about a complete strategy," he noted.
According to Rob Goulding, Google's head of channel solutions, the company has been researching the impact of digital media on in-store sales. It has learned that 41% of media consumption in the U.S. today is online -- more than three times the amount five years ago. While that sounds promising for online advertisers, a challenge arises when trying to understand how, or whether, that growing activity translates into sales. Part of the reason why it is so difficult, he said, is that the online purchasing process is "non-linear," with information reaching consumers from a multitude of sources, such as Google or comparison-shopping sites, as well as from friends, television and magazines. Home improvement items, dresses, shoes and even some over-the-counter medications are among the product categories that consumers are most likely to purchase as a result of a combination of online and in-store marketing.
By 2019, Goulding predicted, pure online sales will increase from around 7% to 15%. So-called online-to-store (O2S) sales will account for 64% of all sales, according to Google's calculations. "Online is growing, but not exponentially," he added. "People still want to touch and feel the merchandise and experience the store and associates."
Wharton marketing professor Jonah Berger agreed that marketing strategies still need to blend the old and the new. He pointed out that television is still critical in the marketing mix, but is now more of a backup medium. Ads on TV today are "not so much about special people or the message, but about how to get normal, everyday people to talk about stuff." While television can reach a lot of people quickly, Berger has found that online word-of-mouth is more persuasive over time, regardless of whether enticing products like a trip to Disney World or, say, a mundane breakfast cereal are being sold. Critical for marketing any product -- regardless of the technology used -- is creativity, combined with a solid understanding of consumers. "A Facebook page is not a social media strategy," he stated.
That is an important consideration for retailers like Bloomingdale's, which is part of the Macy's chain of 850 department stores across the U.S. As online sales at Macy's and Bloomingdale's have grown at least 20% annually for the last three years -- according to Macy's investor relations information -- the company needs to ensure that its online business complements, rather than cannibalizes, what is going on in its stores, according to Tony Spring, president and chief operating officer of Bloomingdale's.
Whether customers are enticed by online or offline marketing, the human contact they receive at the stores is also critical. Playing an important role in that regard are Bloomingdale's 8,000 in-store "associates," who have responsibilities, including building databases of customer information that is then used for marketing programs such as birthday alerts or shopping recommendations based on previous purchases. "We're excited about the potential for algorithmic tools to recommend products," said Spring. "What we don't want to lose is the assurance and authenticity of human contact: the touch, the feel, the laugh, the personal knowledge. Hopefully, technology doesn't get in the way of that and only makes it more potent."
Carol Reindel, senior director of marketing at Daymon Worldwide, a private label manufacturer that primarily serves supermarkets, cited findings from a survey the firm did with female consumers aged 30 to 55, which suggested that shopping is no longer a simple, transaction-oriented task. When shoppers were asked to describe their mindset while shopping, Reindel said the respondents used words like "treasure hunter," "explorer" and "researcher." Shoppers not only want to feel connected to their grocery store, they also want to be able "talk" to the store about what is in stock and even get advice on what to purchase. "They are saying ... 'I want my retailer to make me feel valued,'" she noted.
Internal Touch Points
What does all this mean for retailers? "If you have all these 'touch points,' the big question is how you bridge the silos internally between digital, PR, product design, packaging and the stores," said Wharton's Wind.
All the interconnections between new technologies have added much more complexity to marketing relationships within a company, added Sean Sondreal, vice president of strategic marketing at Kohl's, a retailer with nearly 2,000 department stores across the U.S. and an e-commerce business that is on target to generate $1 billion of revenue this year, according to comments made by Kohl's CEO Kevin Mansell during an analyst call on May 12. While volatile weather patterns, a shaky economic recovery and ultra-cutthroat promotions are challenging enough, "more than anything else, sleep is lost over new technologies," Sondreal noted.