In 2011, when Street Fight launched to cover the transformation of the local marketing industry, the logic was relatively straightforward: as local eyeballs continued to move from newspapers to screens, so would the marketers’ budgets. The internet and mobile had meant new technology, new companies and sudden instability in a once-sleepy local industry — all good characteristics for a new media company.
Fast forward four years, and the thesis has largely borne out. Digital media now accounts for about a quarter of the industry, and most consumers now make a majority of their buying decisions using digital services. Yet, the evolution of the industry has not been linear. Two trends — mobility and cloud computing — have rapidly expanded the reach of Internet services from shaping the way we find and discover businesses to underpinning the way we, as both buyers and sellers, interact and transact with people in the real world. In the local marketing industry these days, developments in commerce seem more pressing than those in media.
I’ve come to believe that the initial media narrative — the one about eyeballs simply moving online — actually impedes an effective analysis of the local marketing industry. Once we see local marketing as a function of commerce (and not media) we start to find a more dramatic shift than previously thought.
Deep changes in commerce as a whole have implications for marketing
“Marketing is becoming commerce and commerce is becoming marketing” feels worn and simplistic, but it does offer some foundation for the argument. The most important point is that the way we sell goods and services locally is changing, and the marketer’s role needs to reflect that change. Here’s what I wrote in a report we published on the subject last year:
“Thanks to the interactive capabilities of the Internet, the role of the marketer has evolved from messenger, focused on distributing information about a business to consumers; to facilitator, responsible for bringing together a business’s supply with consumer demand.“
To an extent, marketers have always played the role of facilitators. In the television age, where audiences were sold wholesale, marketers needed to reduce demand to its lowest common denominator. Often, that meant playing on very basic desires felt by people regardless of class or creed or preference. A brand marketer would identify a consumer’s desire, say “to be sophisticated,” and match that with the identity of a brand in the form of a James Bond-themed TV spot.
Obviously, a lot has changed with the web. The media landscape has fragmented dramatically, leaving brands to chase consumers across a wide array of sites and mobile applications. Meanwhile, social media and crowdsourcing communities have allowed consumers to share experiences with each others and take control of a narrative that once was dictated through media buys. The takeaway here is that with better information and more options, consumers now play a far more active role in the purchasing experience than ever before.
In exchange for that control, we have surrendered a deluge of information about our lives. Data about the articles we read, where we go, and what we buy is all recorded. And that knowledge — the ability to understand not only the consumer, but consumers individually — creates a unique opportunity for marketers to build businesses that conform to consumer demand rather than shape it.
In many ways, this final piece has just set. Businesses have started to move their infrastructure — from payroll and inventory to logistics — to web-based, or cloud, software, putting the 90% of commerce that still occurs offline within reach of the Internet. For brands, the line between the ecommerce and brick-and-mortar divisions is blurring; and for small businesses, software companies such as Square are allowing them to use the web to run their business — even if they don’t sell online at all.
That has effectively created a closed commercial circuit online. The consumer web exposed the media and advertising industries to the dynamics of digital networks; now, the commercial industries, everything from retail to food service, will undergo a similar change. And if the marketer’s job is to facilitate commerce, their role will change as well.
Start with the consumer, and move backwards.
Consequently, the information dynamics in local markets are shifting. In analogue days, information flowed from businesses to consumers — from supply to demand. A store would open in a neighborhood, and marketers would inform local consumers about the products it sold and expect the demand to form around that supply. The marketer’s goal was to inform and manipulate demand to fit the products sold by the business.
Today, the model is flipped — or at least, flipping. Consumers can now pass information about things we want to businesses. We can tell businesses, both explicitly and implicitly, that we’re looking for a contractor or that we want a cab, and expect the supply-side to adjust accordingly. The job of the marketer is to identify these requests, and adjust supply to better fit the demand.
In industries selling digital products, the shift is already well underway. Consider a partnership between Microsoft and Godaddy to bring the software company’s 365 Office suite to the domain giant’s customer base of very small business. Microsoft, which traditionally eschewed very small businesses, analyzed the buying behavior of GoDaddy customers and created two separate product sets exclusively for those customers. Six months into the program, the firms were selling over 15,000 items a week, according to Blake Irving, chief executive at GoDaddy.
This demand-driven approach has started to succeed in physical businesses as well. Tesla, for instance, decided to build each car on a custom basis, allowing customers to pick and chose the various specs and receive the vehicle weeks later. Without inventory to manage, the company can reduce liability, avoid discounting and build dealerships in more high traffic areas.
In the retail industry, pop-up stores afford brick-and-mortar retailers a similar flexibility. Sellers from art to apparel have started to rethink a half-century-long love affair with permanent, and often sprawling, store fronts as they struggle to confront a new normal where consumers simply shop less in stores. Instead, companies have turned to smaller, more specialized, locations that that can adapt to declining store revenues while addressing some new opportunities in selling to a connected consumer.
A new version of the purchase funnel
In December, CB Insights, a data research firm, published a report that pegged the total venture capital investment in on-demand mobile services somewhere north of $1.3 billion last year. The startups, which the study defined as those pitching an “Uber for X” model, offer an early look into the dynamics of a demand-driven markets and provide marketers with insights in using demand-driven tactics in their businesses.
It’s unclear whether the vertically-integrated marketplace will yield to a more decentralized model, but either way they help us identify some of the basics tenets of demand-driven markets. The most important tenet is that marketing starts with a demand and works backwards. Can you, as a business, a) identify a person who wants a product or service which you could provide, b) tailor your product or service to fit their demand, and c) deliver that product at the place and time of the customers choosing?
- Listen: First and foremost, the job of the marketer is to identify demand for a product or service. Sometimes, that demand is explicit: we call a business or walk into a store. Other times, it’s implicit: we visit a competitor’s store or search for a product online. In both cases, marketers need to develop systems that identify and nurture these signals. If you cannot identify your market, there’s no point in showing up.
- Adapt: Personalization is a hallmark of digital commerce. Brands selling physical products need to begin thinking about the ways in which they can personalize their products to each consumer. In the travel industry, airlines use dynamic pricing to drive demand and optimize profit. If you cannot compete within your market, there’s no point in showing up.
- Fulfill: Unlike digital goods, physical products and services still face the constraints of space and time. A business’ total addressable market is defined by its ability to deliver a product or service in the manner and time frame required by the consumer. New fulfillment models such as local delivery, in-home service and in-store pickup can allow a business expand its reach by offering immediacy, convenience and control over the fulfillment process.
Local spending is by far the largest segment of commercial activity in the U.S. and abroad. The rise of demand-driven dynamics in these industries, which traditionally have been isolated from the web, has implications for everything from labor markets and commercial real estate to local media and marketing shops.
Steven Jacobs is Street Fight’s deputy editor.