Alphabet's Earnings Emphasize A Skewed Value On Monopolies

I was speaking with my colleague Fatemeh Khatibloo about the strong Q1 2017 earnings that Alphabet just announced this week (I mean Alphabet the parent company of Google here, not the soup or anything to do with Letter People).  Alphabet revenues are up 29%, due largely to growth in mobile search and video ad sales. And she made a profound observation: that today the success mindset isn't about thriving in a market with a set of worthy competitors.  It is about domination so extreme that you and you alone dictate market trends and there simply is no platform for innovative upstarts.

James Wang of ARK Funding Administration agrees.  He says, Alphabet's Q1 earnings underscore "a macro theme we are seeing in the internet space, which is that the bigger players are getting bigger and the smaller players are treading water or shrinking."

I don't like this.  I don't like this one bit because I'm always a fan of the underdog.  But also because it seems way too risky to tie so much market health to a small number of firms.  And because it creates a socialogical mis-perception of how much is enough.  I'll let you economists out there weigh in here; I'm interested.

And I will simply say that I don't expect Alphabet's advertising growth to continue in a similar habit because:

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Is Email Marketing As Good As It Is Ever Going To Get?

Many of you may know that at the beginning of March my colleague Rebecca McAdams who had been leading Forrester's email marketing research for the previous 18 months moved into an Advisor position with Forrester's customer experience leadership board.  With this change, I'm proud to reclaim email marketing as my very own.  Some of you may be thinking, "This feels a little back to the future..."  You are right!  I've been studying email since 1999 (yikes!).  And am looking forward to continuing our great research agenda on the workhorse of the digital marketer's toolkit. 

Rebecca launched some "future of email" research before her move.  As I go through the notes from the smart conversations she had trying to find the answer to: What is next for email marketing?  This question pops into my mind instead: Has email marketing already come as far as it can?  What I learned from the research is that:

Marketers already know what best practices will make email marketing better, they just don't apply them.

Because doing so:

  • Costs more.  Making email better, through analytics, improved segmentation, dynamic content or offer optimization drives up email CPMs (from basically free to not quite free).
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How To Launch Customer Obsession

Since 2010, you've heard Forrester beating our customer obsessed drum.  It is our idea that in The Age of the Customer, your relationship with your customers are your primary competitive differentiator.  We've written a lot about how to put the customer at the center of your total operating model.  But a total customer-obsessed transformation can be daunting because of the completeness it requires.  So many companies we talk to get overwhelmed at the idea of having to change every single part of their business, so they do nothing instead.  How could we offer a wedge into the customer obsessed transformation?  Could companies start toward customer obsession more easily if they understood where they are starting from?

We believed yes.  So we created The Customer Obsession Assessment, a large quantitiative survey, which included myriad statements related to customer service, customer experience, customer relationships, supporting technologies and sent it out to just over 1000 global executives.  Then we applied factor analysis and regression analysis to determine which statements most closely correlated with customer obsession.  From this effort we created: 1) An assessment that companies could take to determine their customer obsession maturity; 2) A segmentation of the execs who took our study so that we could identify best practices and pitfalls common at each stage in maturity. 

A few findings from the research:

*Most companies are still immature.  Overall, our sample distributed into a bell curve, with 62% landing in the bottom least mature segments. 

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US Digital Marketing Spend Will Near $120 Billion By 2021

Hot off the press: Forrester’s US Digital Marketing Forecast 2016 To 2021.  I’m proud to say that Forrester has been sizing spend on online and digital media for nearly twenty years.  My colleague Jim Nail launched this research in 1998, and I have been authoring our forecast reports since 2004.  Good thing neither Jim nor I has aged a day!  This time, the key finding from our research is that over the next five years, marketers will invest in quality over quantity.  What does this mean specifically for digital marketing budgets?

  • US digital marketing spend will near $120 billion by 2021.  Investment in paid search, display advertising, social media advertising, online video advertising and email marketing will pace to 46% of all advertising in five years. 
  • Working budgets will give ground to non-working ones.  Overall, digital marketing is pacing at a healthy 11% compound annual growth rate between now and 2021.  But this is not the experimental “spend on anything to see what works” investment that we saw between 2008-2012.  Marketers are more mature now with capable measurement practices. This means they will spend judiciously on just what works for their goals.  And many are dialing back pure digital advertising investment, prioritizing instead non-working investments in data, technology and customer experience.
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Brace Yourself. 2017 Is Coming.

Check out our Predictions 2017: The Post-Digital CMO Appears piece that just went live this morning.

We can’t help but think CMOs feel a great deal of empathy for the characters in, Game of Thrones.  Westeros is a cutthroat environment riddled with cunning strategy, but also a profound amount of character turnover, shall we say. Marketing is no less strategic, what with digital disruption, an evolving customer base, and brand strategy calculus also creating drama and departures.

So in 2017,  what will smart  CMOs do to survive until  2018? CMOs must demonstrate their  brands’ promises everywhere.  Specifically:  evolve their brand and CX strategies to close the distance between brands.  We expect that:

Brands will go Post Digital. To customers, there are no longer boundaries between the digital and the physical worlds.  CMOs who get this will work to connect with customers emotionally, create one-to-moment, personalized interactions, and  stress a human, helpful, and handy charter as the guiding principles of their marketing efforts.  

Organizations will update talent and structure. The scramble to do the right thing by empowered customers next year will finally force CMOs to consider the skills shortage ever-present on their teams.  This will lead to much needed training of existing talent and realigning teams with brand visions and customer needs.

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A Verizon/Yahoo! Deal Could Usher In Customer-Obsessed Omnichannel Experiences

Yahoo!'s assets are on the sales block. And of the several potentials in the final stages of the bidding process, Verizon is getting a lot of speculation, perhaps because many consider it unlikely that Verizon will/should take Yahoo! too after picking up that other Web fossil, AOL, one year ago.  

Here are my thoughts:

 

  • Verizon wants Yahoo to fill out its omni channel content and advertising play.  The more access to customer data it has (online through Yahoo and AOL, in home via cable boxes, on mobile via smart devices) the more targeted it can be with advertising and sponsored content or product placements across those same devices.  This allows Verizon to create better ad products which is competitive against primarily online giants (Google) and creates a better user experience which is competitive against other cable and telecom providers.
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Post-Digital Marketers Use Customer Experience To Demonstrate Their Brand Promises

Customer experience is critical to business success.  But customer experience simply for customer experience sake can leave businesses chasing customer whims that don't align with operational goals or brand identity. (See Figure 5 in Thriving In A Post Digital World).  Forrester Senior Analyst Joana van den Brink-Quintanilha tackled this difficulty of balancing customer experience and brand experience in her after-lunch presentation at Marketing Europe 2016. 

Her research identifies four ways to avoid brand and customer experience dissonance:

1) Paint a vivid picture -- This is not about building a 60 page static brand strategy, but rather determining the key emotional moments a customer goes through and identifying how to meet those needs with on brand experiences.  AirBNB storyboarded critical moments for both their hosts and guests and uses these storyboards to focus the efforts of marketing, customer service and employee training.

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Marketing Leaders Will Provoke Customer Obsession By Developing Post-Digital Strategies

And Forrester's Marketing 2016 Europe forum is under way!

Forum host Melissa Parrish just kicked off our two days in London by acknowledging that ideas related to customer obsession aren't new per se.  John Spedan Lewis, originated the John Lewis Partnership in 1929 which distributed profits from the John Lewis department stores to employees, specifically so that employees would be invested in delivering exceptional customer service.  What is new today is that the post-digital climate has raised customer expectations from brand experiences and introduced new, faster ways for businesses to get customers what they want in their moment of need.

So how can you -- as a marketing leader at your organization -- drive customer obsession and post-digital strategies?

James McQuivey presented the answer to this question based on his most recent research Leadership In The Age of The Customer.

How leaders act has more influence on business culture and transformation than who they are or what they say.  Customer obsessed leaders specifically:

  • Measure customer obsessed behavior
  • Reward people for performing against those metrics
  • Unblock performance inhibitors by removing obstacles
  • Model customer obsessed behaviors that they want employees to demonstrate
  • Provide resources

In my morning keynote tomorrow, I will be addressing how demonstrating the actions James highlighted will help your brand be more Human, Helpful and Handy -- the key characteristics of post-digital marketers.  Can't wait!

Has Technology Changed How We Think?

I've just started work on a report tentatively titled "How People Choose." I'm interested in studying how technology is influencing user decision processes. My hypothesis is that technology is fundamentally rewiring us so we actually rely more heavily on gut-based decisions than on well-rationalized ones. If you buy Daniel Kahneman's notions of fast and slow thinking (others have called it irrational and reasonable, or emotional vs rational thought), then my theory is that people are outsourcing more and more of their rational decisions to technology. This means, that what is left for most of us is a heavier reliance on our fast thinking, our impulses, and our gut-based response, when making decisions.
 
If this hypothesis is true, then marketers should actually focus on influencing impulse, rather than all of the linear, direct-response types of marketing sequences they prioritize today.
 
I'm just kicking off my research, so my overall hypothesis may evolve as I get some research under my belt. But my end goal is to write a report for marketing execs that would help them think through HOW to influence user decisions in a future where the fundamentals of how we make decisions have changed.
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US Digital Marketing Will Pass TV In Two Years, Topping $100B By 2019

I am happy to announce the latest release of Forrester's five-year digital marketing forecast, a data-rich tool for budgeting, benchmarking, and identifying key trends to watch as you set your 2015 strategic plan. What you need to know:

  • US Digital marketing spend will top $100 billion in five years. Just think about how big that is. By 2019 in the United States, digital will be almost twice as large as it is now. It will be about $13 billion more than television advertising, and it will count for 35% of all advertising spend.
  • Growth is healthy but not runaway. We expect a 12% CAGR between now and 2019, which is a healthy slope, especially when considering numbers of this magnitude. But it is worth noting that this growth isn't skyrocketing. Marketers 15 year look-back window allows them the experience and performance data they need to know when to invest in digital, but also when not to overspend.
  • Mobile marketing represents 66% of growth. This year, we included mobile as a deployment option (akin to desktop) for search, display, or social ad impressions. So you won't see it as its own line item in the forecast. But rest assured, increased use of mobile by consumers, growing familiarity with mobile advertising by marketers, improvements to ad formats, metrics and buying practices, and increasing mobile ad costs will make mobile count for $46 billion of our $100 billion bogie by 2019.
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