All That Glitters Is Not Gold: Separating Real Value From ‘Shiny New Things’ in Local

We have a lot of conversations about providing value in local digital marketing — because ultimately our businesses are built on the premise that we can actually help SMBs and brands get local customers walking through their doors. Mark Sullivan’s and Andrew Shotland’s articles in Street Fight, along with Sharon Rowlands’ interview provide high-level insights into the problems.

Alignable has also weighed in on the issue, with the creation of their Net Promoter Score (NPS) and SMB Trust Index. It’s clear at this point is that the industry has yet to produce a breakout success in terms of providing value for its customers. Perhaps the good news is that the subject of providing value is “out there” — and it can and should be discussed openly.

While customer churn, customer acquisition cost (CAC) and long-term value (LTV) are often cited and relentlessly examined as the usual suspects in discussions and conference presentations, these metrics simply underline the problem — they are not the actual problem. Marketing research suggests that high rates of churn and expensive CAC (perhaps the two largest sources of low LTV), are due to low “perceived value.” If a customer cannot see the value in a product or service, they are unlikely to buy. And if they are “convinced” to buy but are still not convinced of the value, they will quickly churn unless something radical happens to change that experience or perception.

Value can be a difficult thing to communicate to local businesses; limited adoption, new and changing terminology, attribution issues and, previous unsatisfactory experiences alone prove to be formidable barriers. Additionally, there are many digital marketers pitching similar products. It’s a crowded and fragmented sector full of point solutions, and more than 2,000 new martech companies were spawned in just the past 5 years.

All of this makes it difficult get the necessary attention to demonstrate “perceived value.” And so in order to get that attention, local marketing companies have a tendency to glom onto whatever brand new products or technology are emerging and “hot.” There is some appeal in doing this:

• Marketers can differentiate by having something their competition may not.
• Being a first mover drives a brand and “forward facing” products keeps constituents engaged
• Some companies need to generate IP to increase their value

Another approach is to bundle products or services proven to be of low value with interesting and potentially “high value” (but still immature) digital products. Many legacy business models use digital “bling” like this to spice up their tired offerings. These approaches are intended to move potential customers over the “perceived value” buying barriers.

Meanwhile, startups in this space exacerbate the problem because their existence and potential depend on moving new products or technologies into the marketplace with more hope than proof of their actual value. The combination of difficulty in proving real value to local businesses, having limited offerings and being opportunistic with a technological breakthrough perpetuates a culture where lots of companies are pushing bling without regard to customer value.

These techniques have been used pervasively since the beginning of martech and repeat themselves with each new “implementable” yet, unproven product or technology. Digital marketers just cannot seem to resist themselves as they engage prospective customers. More often than not, they both fall into a trap of unpredictable value with the potential of high churn. It takes time for new products to mature to the point of providing consistent recognizable value. Sure, some will make it but many won’t — or they’ll just limp along without the hype they initially garnered (think Google Glass, daily deals, et cetera).

Daily deals are now a solid part of the industry, but earlier iterations had significant value issues during their rapid growth between 2010-2012. Some of these issues still remain:

• Low rates of spending and low rates of repeat customers
• Low prices didn’t make for a lot of brand loyalty or even brand awareness
• Very low margins for the local businesses

Meanwhile, this year beacons are the “shiny new thing” and are filled with expectation. But they are also perhaps an example of a new and pre-commercial marketing technology. There are simply a lot of practical issues needing resolution before the infrastructure and implementations will provide consistent recognizable value:

• Apps need to be on a BLE phone (iOS 7+ and some newer Android models)
• Consumers will need to adapt to the privacy interactions
• Asset management of beacons is untested
• There are precision issues
• Assumes Bluetooth is always on (battery drain)

Remember, these same problems have existed in this space since it began over a decade ago, so why are digital marketers still utilizing these methods knowing it could ruin their LTV, hurt their brand and degrade SMBs’ overall trust in the industry?

Perhaps there is an industry epidemic of insecurity around the value provided to local businesses given the large market opportunity. Or, perhaps some organizations still think there is business in obfuscating value long enough to make some profit regardless of the damage. In either case, the page has turned as local businesses continue to demonstrate ever-increasing digital marketing adoption levels.

Those companies that offer a limited product set and unsubstantial service levels will no longer have discernible perceived value and will stall or worse. However, as the market continues to grow, those companies that can provide complete product sets and appropriate service levels will be able to prove value and grow.

“Bling” has been fool’s gold and we are overdue for that breakout success.

Chris Black is CEO of Updopt, a company focused on giving digital marketers who service local businesses the means to increase retention, margin & revenue and sales efficiency.  He can be reached via Twitter.