Discussion Questions
Critical Thinking Exercises
17-6 Choose a product or service that is unique to your own country or region. Design and deliver a DRTV short sales piece to promote it and create sales. (AACSB: Commu- nication; Reflective Thinking)
17-7 Review the FTC’s guidelines on disclosure in online, social media, and mobile advertisements at www.ftc .gov/os/2013/03/130312dotcomdisclosures.pdf. Will the FTC’s requirements regarding ads and endorsers
make Twitter less effective as an advertising medium?
(AACSB: Communication; Use of IT; Reflective Thinking) 17-8 Investigate the spread of Internet-based fraud in your
country or region. Have there been instances of Inter- net fraud by marketers in your country? Discuss two such instances of fraud you have come across in recent times. (AACSB: Communication; Use of IT; Reflective Thinking)
MINICASES AND APPLICATIONS
Online, Mobile, and Social Media Marketing On the Move
17-1 List and briefly describe the various forms of traditional direct marketing approaches. (AACSB: Communication) 17-2 Compare and contrast a marketing Web site and a
branded community Web site. (AACSB: Communication) 17-3 How can companies make effective use of blogs?
(AACSB: Communication)
17-4 Discuss the advantages and challenges of social media marketing. (AACSB: Communication)
17-5 What types of direct marketing are used in your coun- try? (AACSB: Communication)
By 2016, the value of mobile advertising in the Middle East will have grown at a rate of 37 percent to $2.8 billion. This is just a part of the spectacular growth rates in digital marketing across the whole region. Still ahead of the rest of the region is Saudi Arabia, with 36 percent of mobile Internet users taking notice of
mobile advertising. UAE and Egypt are in a tie for second place with 32 percent. Across the region, around 60 percent of all mo- bile Internet users read mobile advertising sent to them; this com- pares very favorably with just 10 percent stating that they either never read it or do not get sent any advertising. The opportunities
560 PART 3| Designing a Customer Value-Driven Strategy and Mix for businesses, big and small, local and multinational, are enor- mous. Mobile advertising budgets for tablets and smartphones are set to increase at a rate of at least 40 to 50 percent; this is the biggest segment of the digital market. Since 2013, over 57percent of all companies across the region have upped the amount of money they splurge on digital advertising. These fig- ures are set against a very promising backdrop of global growth in mobile marketing. This rests on the fact that of the 4.55 billion people who own a mobile phone, over 1.75 billion of them have smartphones. In many countries, smartphones are far more com- mon than older basic models. Inevitably, this means a new focus for marketers.
17-9 What local businesses in your community are using on- line, social media, and/or mobile marketing? Interview the owner or manager of one of the businesses to learn how he or she uses these marketing activities and how satisfied he or she is with the activities. (AACSB: Com- munication; Reflective Thinking)
17-10 Mobile marketing can be confusing for a small busi- ness owner. Develop a presentation to present to small business owners that describes mobile marketing, its advantages and disadvantages, and examples of how small businesses are using mobile marketing. (AACSB:
Communication; Reflective Thinking)
Marketing Ethics Tracking in “Meat Space”
By now, you know about behavioral targeting—marketers track- ing consumers’ online behavior in cyberspace to send them tar- geted advertising. Krux Digital reports that the average visit to a Web page generated 56 instances of data collection, a five- fold increase in just one year. An investigation by the Wall Street Journal found that the 50 most popular U.S. Web sites installed more than 3,000 tracking files on the computer used in the study.
The total was even higher—4,123 tracking files—for the top 50 sites that are popular with children and teens. Many sites in- stalled more than 100 tracking tools each during the tests. Track- ing tools include files placed on users’ computers and on Web sites. Marketers use this information to target online advertise- ments. But now, wearable and mobile devices allow marketers to track consumer movements in the physical world. The term meat space refers to the physical world in which our bodies move and do things, and marketers are using information obtained from
wearable and mobile devices to personalize offers while consum- ers move around their space. For example, Disney’s Magic Bands and mobile app allow users to unlock hotel room doors, enter parks, use FastPasses, and reserve, order, and pay for food. But the real magic for Disney is the ability to track everything the user does as he or she moves around the “meat space.” Since us- ers willingly give their names and birthdates when ordering Magic Bands, Goofy just might walk up to your child to say, “Happy birthday, Billy!”
17-11 Debate whether or not it is ethical to track consumers’
physical movements, especially children’s. (AACSB:
Communication; Ethical Reasoning)
17-12 Discuss other ways marketers can track consumers in meat space. (AACSB: Communication; Reflective Thinking)
Marketing by the Numbers Mobile Advertising
Consumers spend a quarter of their media-viewing time on mobile, but advertisers devote 1 percent of their media budgets to mobile devices. Although mobile advertising makes up a small percentage of online advertising, it is one of the fastest- growing advertising channels. One source reported more than 100 per- cent growth in mobile advertising between 2012 and 2013. But one obstacle is measuring return on investment in mobile. A study of chief marketing officers by eMarketer found that 41 percent of those investing in mobile advertising indicated that success of their mobile ad spending was “inconsistent” or “not sure.”
17-13 How much is spent on mobile marketing and what is the growth rate of expenditures in this medium? Compare those expenditures to spending in other advertising media. (AACSB: Communication; Analytical Reasoning;
Reflective Thinking)
17-14 How are marketers measuring the return on investment in mobile advertising? Develop a presentation suggest- ing metrics that marketers should use to measure the effectiveness of mobile advertising. (AACSB: Communi- cation; Use of IT; Reflective Thinking)
Video Case Home Shopping Network
Long ago, television shopping was associated with low-quality commercials broadcast in the wee hours of the morning selling obscure merchandise. But Home Shopping Network (HSN) has played an instrumental role in making television shopping a legiti- mate outlet. Around-the-clock top-quality programming featuring name-brand merchandise is now the norm.
But just like any retailer, HSN has had its share of challenges.
This video illustrates how HSN has focused on the principles of direct marketing in order to overcome challenges and form strong customer relationships. As market conditions continue to shift, HSN explores new ways to form and strengthen direct relation- ships with customers.
After viewing the video featuring HSN, answer the following questions:
17-15 Explain the different ways that HSN engages in direct marketing.
17-16 What advantages does HSN have, specifically over brick-and-mortar retailers?
17-17 Make recommendations for how HSN could make better use of its role as a direct marketer.
CHAPTER 17 | Direct, Online, Social Media, and Mobile Marketing 561
Company Case Pinterest: Revolutionizing the Web—Again
Ben Silbermann runs ragged. And it isn’t because the 31-year- old husband is up before dawn every morning with his infant son.
It has a lot more to do with the fact that he is the founder and CEO of Pinterest, the latest “hottest Web site on the planet.” In less than two years, Pinterest reached the milestone of 10 million unique monthly visitors—faster than any other online site in his- tory. At that time, it was driving more traffic than Google+, You- Tube, and LinkedIn combined. A year later, it reached 50 million unique monthly visitors. So far, 70 million members have created 750 million Pinterest boards and have pinned 30 billion items.
Pinterest is growing so fast that trying to quantify its success with such numbers seems pointless.
Rather, the impact of this brash young start-up can be ob- served in more substantial ways. In fact, Pinterest seems to have accomplished the unlikely achievement of revolutionizing the Web—something that seems to happen only every few years.
Like Amazon, Google, Facebook, and others before it, Pinterest has put businesses and other online sites everywhere on notice that they’d better orient themselves around its platform or be left behind. And like other Internet revolutionists before it, Pinterest’s impact has caused even the online giants to stop and take no- tice. Indeed, Pinterest is changing Web design. It is also changing e-commerce. And it looks as though Pinterest has solved one of the Internet’s biggest problems—discovery.
The Discovery Problem
At first blush, Pinterest may seem like any other social media site, full of people sharing images and commenting on them. Silber- mann’s big idea for Pinterest came as he and college buddy Paul Sciarra struggled to make a business out of their first product, a shopping app called Tote. Although Tote failed to take off, it revealed a pent-up need among Internet users. Tote users didn’t buy things (kind of a necessity for a shopping app). But they did e-mail themselves pictures of products to view later.
Silbermann—a lifetime collector of “stuff”—could identify with that. As a boy, he had a particular fascination with collecting bugs. “I really liked insects,” he says. “All kinds: flies, grasshoppers, weevils.”
He spent his youth collecting, pinning, drying, tagging—creating his own private museum of natural history. So when Silbermann and Sciarra met Pinterest’s third co-founder, Evan Sharp, the idea of digi- tal collections—of books, clothes, or even insects—as a powerful medium for self-expression began to take shape.
As the three began working on developing Pinterest, some- thing about all-things-Internet bothered Silbermann. Despite the seemingly infinite possibilities for exploration, expression, and creation, he felt that the Internet was organized in a way that boxed people in. For starters, the nature of “search” in any online context may seem to promote discovery, but it actually stunts it.
For example, Google depends on finely tuned queries in order to yield useful results. Try to find something when you’re not quite sure what you want—say, “nice Father’s Day gift” or even “very special Father’s Day gift”—and Google isn’t really much help. The bottom line is, if you try talking to Google as you would talk to a friend or a department store clerk, it won’t know where to begin.
The belief that discovery is a problem on the Internet isn’t original to Silbermann. In fact, it’s an issue that many digital de- signers have struggled with since the launch of the Web but no one has been able to solve fully. Take Amazon, for example. As successful as Amazon is, its entire structure mirrors every other e-commerce site—a detailed system of menus and categories.
To browse for something, users must work within this structure
while at the same time being pulled in dozens of different direc- tions by suggested items and competing products.
“You spend three hours buying a $20 toaster,” says Barry Schwartz, psychology professor and author of The Paradox of Choice. “Amazon and Google pretty much stink at browsing,”
echoes Leland Rechis, director of product experience at Etsy. But Amazon and Google are not alone. The entire Internet is structured as a series of ever-more-specific menus, inconsistent with how the human mind works. Such structure inhibits the types of free- associative leaps that happen naturally as people walk through shopping malls, meander through a museum, or even drive down the street.
As Silbermann and his co-founders worked to sketch out Pin- terest, the three were also intent on eliminating another limiting characteristic of online design. Other social networks are orga- nized around “feeds”—lines of text or images organized by time.
This setup lets users browse multiple images at once. The Pinter- est team wanted to change this. “We were really excited about bringing something that wasn’t immediate and real time, some- thing that wasn’t a chronological feed,” says Sharp. They pic- tured a grid of images, rather than the directories, time stamps, and pagination commonly imposed by the Web. The goal for Pin- terest was to create an interface that would feel more like visiting a store or a museum.
As Pinterest took shape, its creators never questioned that it was to be a social network at its core. What set Pinterest apart in yet another way was Silbermann’s ability to look outside the tunnel-vision of other social media entrepreneurship. Although the current social Web is frequented by millions, most users are observers, not creators. Thus, they take part on only one level.
Not everyone is a photographer, a filmmaker, or a broadcaster.
“Most people don’t have anything witty to say on Twitter or any- thing gripping to put on Facebook, but a lot of them are really in- teresting people,” Silbermann says. “They have awesome taste in books or furniture or design, but there was no way to share that.”
Something Completely Different
The Pinterest team’s focus on solving some of the most limiting characteristics of the Internet bore fruit. When Pinterest launched in March 2010, it was widely hailed as one of the most visually stunning online sites ever. Silbermann, Sciarra, and Sharp worked through 50 versions of the site, painstakingly tweaking and per- fecting column widths, layouts, and ways of presenting pictures.
“From the beginning, we were aware that if we were going to get somebody to spend all this time putting together a collection, at the very least, the collection had to be beautiful,” Silbermann says. Pinterest’s grid is a key element of its design—interlocking images of fixed width and varying heights that rearrange every time a new image is pinned, meaning users rarely see the same home page twice.
Pinterest also bucked conventional online design in other ways. At a time when “gamification” was hot, Pinterest displayed no elements of competition. There is no leader board or any other means of identifying the most popular pinners. Pinterest also did away with page views—the predominate metric for illustrating growth and momentum. Rather, Pinterest’s “infinite scroll” auto- matically loads more images as the user expands the browser or scrolls downward. With almost no time spent clicking or waiting for pages to load, this feature has proven addictive for many.
“When you open up Pinterest,” Silbermann says, “you should feel like you’ve walked into a building full of stuff that only you
562 PART 3| Designing a Customer Value-Driven Strategy and Mix are interested in. Everything should feel handpicked for you.” Sil- bermann and his cohorts have obviously succeeded. Page after page, Pinterest gives the feel of a collection designed by an indi- vidual to reflect her or his needs, ambitions, and desires. It’s as if each person is saying, “Here are the beautiful things that make me who I am—or who I want to be.” There is no single theme to a pinboard. Pinterest is a place where young women plan their weddings, individuals create the ultimate wish list of food dishes, and couples assemble furniture sets for their new homes. Un- like other social networks, every Pinterest home page is an ever- changing collage that reflects the sum of each user’s choices.
Because Pinterest’s design has departed from Internet con- vention in so many ways, it’s only natural that its growth dynamics would also break from previous trends. Most successful social services spread through early adopters on the nation’s coasts, then break through to the masses. But Pinterest’s growth has been scattered throughout the heartland, driven by such unlikely cohorts as the “bloggernacle” of tech-savvy young Mormons.
Additionally, nearly 83 percent of Pinterest’s users are women, most between the ages of 25 and 54—another demographic not normally associated with fast-growing social media sites.
Hope for Monetization
But perhaps the biggest splash that Pinterest has made in the on- line pool is its huge influence on consumer purchasing. Although many dot-coms have made profits by online sales, the digital world in general still struggles with turning eyeballs into dollars.
Even Facebook, although it turns a profit, prompts relatively few of its one-billion-plus members to open their wallets.
But something about the combination of Pinterest’s elegant de- sign and smart social dynamics has users shopping like mad. A Pinterest user following an image back to its source and then buying an item spends an average of $180. For Facebook users, it’s only
$80. And for Twitter, it’s only $70. But Pinterest is having a much greater impact than those numbers indicate. Although Pinterest is still far from the top in terms of members and unique visits, when it comes to e-commerce referrals, Pinterest is the market leader, driving 40 percent of traffic and edging out social media domina- tor Facebook by 1 percent. Even more impressive, Pinterest traffic converts to a sale 22 percent more often than Facebook traffic.
Companies are jumping on this opportunity. Initially, brands could drive traffic to their own Pinterest or external sites by pay- ing opinion leaders to pin images of their products. For example, companies pay 31-year-old Satsuki Shibuya, a designer with more than a million followers, between $150 and $1,200 per image.
This method works well because, with Pinterest’s authentic feel, it’s almost impossible to tell the difference between paid pins and unpaid pins—something that can’t be said of other online sites.
But recently, Pinterest has entered the world of advertising with promoted pins and is poised to make a big online advertising push.
More than a dozen marketers have signed up with a $1 million to
$2 million commitment, including Kraft, General Mills, Nestle, Gap, and Expedia. “Our target is 25- to 54-year-old women, and Pinter- est is a perfect fit,” says Deanie Elsner, chief marketing officer for Kraft Foods. For Kraft, Pinterest has already been an effective way to connect with the younger half of that demographic that is typi- cally harder to reach. “It lets them be the hero,” she said, referring to Kraft’s practice of publishing recipes on its Pinterest site.
It’s little wonder then that so many other social media sites have taken note of Pinterest. Numerous copycat sites (such as Fancy and Polyvore) have mimicked Pinterest’s look and feel, right down to the font selections. The influence of Pinterest’s de- sign is also notable on sites such as Lady Gaga’s social network LittleMonsters.com and the question-and-answer site Quora.
Even Facebook’s move to its current Timeline format is notably Pinterest-like.
Despite all the ways that Pinterest has departed from the typi- cal path of social media development, it has largely stayed the course in terms of making money. That is, it spent the first few years building its network and honing its site. This year, the com- pany will begin generating revenue. Silbermann and friends are still tossing other ideas around. In addition to advertising, Pinter- est could also adopt a referral fee model, retaining a percentage of the sale of every item sold as the result of a pin. Pinterest has been valued at $5 billion and has had no trouble raising all the venture capital that it needs, despite having yet to earn any money. “There was never a doubt in our minds that we could make a s**tload of money,” says a former Pinterest employee.
Apparently, investors feel the same way.
Questions for Discussion
17-18 Analyze the forces in the marketing environment that have contributed to Pinterest’s explosion in popularity.
17-19 Why has Pinterest demonstrated such a high influence on consumers’ decisions to purchase products?
17-20 Discuss ways that companies can use Pinterest to build their own brands and generate sales.
17-21 What threats does Pinterest face in the future? Give rec- ommendations for dealing with those threats.
Sources: Based on information from Jillian D’Onfro, “Here’s Exactly Why Pinterest Is Worth Its $5 Billion Valuation,” Businessinsider, May 17, 2014, www.businessinsider.com/why-pinterest-is-worth-5-billion-2014-5; Cotton Delo, “Pinterest Launches First Paid Ads with Kraft, Gap and Others,”
Advertising Age, May 12, 2014, www.adage.com/print/293142; Max Chafkin, “Can Ben Silbermann Turn Pinterest into the World’s Greatest Shopfront?”, Fast Company, October 2012, pp. 90–96; and Kimberly Warner-Cohen, “Pinterest Beats Facebook, Twitter in Online Shopping,” Wall St. Cheat Sheet, April 9, 2014, http://wallstcheatsheet.com/technology/
pinterest-beats-facebook-twitter-in-online-shopping.html/?a=viewall.
MyMarketingLab
Go to mymktlab.com for the following Assisted-graded writing questions:
17-22 What public policy issues are related to direct and digital marketing?
(AACSB: Communication; Reflective Thinking)
17-23 What mobile applications currently exist and what’s on the horizon? How many of these applications do you or someone you know use? In the increasingly cluttered mobile apps market, what distinguishes successful apps from less successful ones? (AACSB: Communication; Reflective Thinking)