As E-Commerce Transforms Business, Agencies Must Follow
Chris Peterson, Managing Partner
E-Commerce represents only 8% of total retail sales today, yet it feels like it’s everywhere. Soon drones will drop packages out of the sky on my doorstep within minutes of placing an order on my phone. If it’s only 8% now, I can’t imagine what it will be like when it’s 25% or 50%.
Estimates by Internet Retailer peg annual e-Commerce growth at 9.32% over the next five years, putting total U.S. online sales at $523 billion. Even more important is the dramatic rise in shoppers browsing on mobile devices to buy online or offline. Forrester forecasts 270 million people using mobile devices to shop by the end of the decade. When you combine growth rates of online purchasers and online shopping, you see the continued transformation of the consumer landscape.
This explosive growth of online shopping is quickly driving a more direct relationship between brands and their consumers no matter where the consumer makes a purchase. Direct consumer data is now cutting across all distribution models, providing a wealth of potential intelligence that did not exist before.
Helping fuel this growth in data is the fact that a majority of consumers now sit in front of their TVs completely connected to anything they want. With a mobile phone in one hand and a drink in the other, the American consumer is now an online shopping machine. Behavioral data from mobile devices is now streaming daily and is correlated directly to TV advertising. Device graphs are emerging that map people to TVs, phones, tablets and computers at the household level.
Now that data is at the center of almost all consumer devices that deliver advertising, we are entering a new period where data-driven, deterministic omnichannel advertising is quickly becoming a reality. It’s still early days, but the future is rapidly becoming more clear.
Brands rely on their agency partners to keep them a step ahead and in tune with this fast-evolving landscape. The question is whether today’s agencies are able to transform along with their clients. Brands now find themselves at the center of a data storm created by the consumer on many devices at different stages of buying. Internal teams are built to deal with it. Will some agencies be left behind?
Becoming more data oriented is not a simple matter. Data is not something you add on. Data is not a department or division. It’s not a person you hire or a technology you buy. It’s a culture and a mindset. When it comes to creating a more real-time, data-driven culture, there are a few themes that can be consistently reinforced.
Stop Speculation. Advertising is an industry that has been rife with speculation. Too often decisions are made based on personal or anecdotal experience. Driving a data-driven culture means identifying speculation and calling it out. Millennials do what? Show me the data. Spare me the broad generalizations.
Prioritize Behavior Over Attitude. For decades, survey data about consumer intent has driven research and insights. Now we have access to e-Commerce, web site, and other digital media data, as well as data sets from set top boxes and connected TVs. All of this is far more valuable because it represents what someone does vs. what they say they will do. Anyone who has spent time in database marketing knows behavior trumps intent any day of the week for predicting success.
Explore the Unknown and Measure. The landscape is changing fast and there are a lot of claims by various vendors that they have a magic data wand for solving a specific problem. Unfortunately, strong sales pitches are often linked to black boxes of technology. Moving advertising forward today means exploring where there can be a lot of imperfection. Measurement reveals what is valuable and what is hype.
Push for Why, Not Just What. It’s easy to report on results — it’s far more difficult to understand why results are the way they are. When you understand the “why,” you have a far clearer path forward. Insights drive scale, not a bar chart.
Drive Decisions with 95% Confidence. Being data-driven today requires both bottom-up and top-down analysis. It’s a combination of measuring direct daily behavior combined with various forms of regression on aggregate KPI data. Top-down often gets you the bigger picture that you need to substantiate total results. In some cases it can contradict what you might be seeing with partial short-term behavioral data. Top-down can be set to achieve 95% confidence, providing a powerful tool for overall advertising optimization.
Edgar Schein, author of the classic work, Organizational Culture and Leadership, points out that culture is driven primarily by what leaders pay attention to, the allocation of resources, role modeling, rewards and status, and how people are recruited, promoted and excommunicated, among other things. If a culture change is required, it has to happen from within vs. being acquired and tacked on. That’s not easy when you’ve spent decades focused on something else, like relationships.
It’s not hard to determine which organizations have data in their DNA and which don’t. If data looks like a department or something you bring in when you have to, there’s a problem. If automated internal systems bring every aspect of consumer behavior together into a central nervous system of the organization, well then you have something. Are agencies ready for that? Some are. The ones that aren’t will wither and die on the vine.