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Marketing Services: Adverts are just the start

_Whilst many telcos focus on creating inventory for adverts (e.g. via IPTV), or optimizing advert insertion (e.g. BT’s trial with Phorm), there is a potentially much bigger opportunity lurking in the background. A few weeks ago we presented a Use Case demonstrating a rich advertising opportunity. Here we look beyond advertising towards the bright future of telco-powered marketing services._

Sitting on the London Underground a few weeks ago, your analyst correspondent was struck by one of the adverts opposite. Travelling on the tube is never the most pleasant of experiences. A claustrophobic train crammed with sickly commuters is a potential hazard to both your physical and mental well being. The marketing men know it, and are more than happy to play on your fears.

Where does advertising end and a relationship begin?

The product in question was a herbal concoction designed to immediately cure your paranoia of winter illness. The only action required on you is the simple application of money to the nearest vendor of these life-giving pills.

Send your germs to them, not to me

Note the instructions. Send a codeword, your name and address to the SMS short code, and get a free product sample. The problem is the amount of friction in this system. How many people are going to be bothered to triple-tap this all in? And what will the error rate be? And the rate of fraud or mischief?

Here lies an opportunity for a telco to use its knowledge of the customer to improve the business process of a third party. What this example highlights is the difference between advertising and marketing services, and hints at the much broader role that telcos can stake out in the future digital economy.

Grow by taking friction out of everyday business processes

In order to grow telcos must continue to attract and retain retail customers. Additionally, they must provide platform-based services that support businesses in becoming more efficient in their everyday interactions between with customers. One key area of opportunity is to support the marketing industry in making their processes more efficient. (This could be worth $34bn to telcos in 10 year’s time in mature markets alone - see Telco 2.0 analysis in our report The 2-sided Business Model Opportunity).

As you might remember, there are seven core Telco 2.0 business-to-business value-added services:

  1. Identity, authentication and security
  2. Advertising, marketing services, and business intelligence
  3. E-Commerce sales
  4. Order fulfilment, offline
  5. Order fulfilment, online
  6. Billing and payments
  7. Care and support

The biggest opportunity is in the second item. However, contrary to received wisdom, we believe that the biggest part of making marketing more efficient is not advertising, but other marketing-related activities.

Defining the role of marketing

Marketing is much more than advertising of course. The best definition is from Philip Kotler:

“Marketing is the business function that identifies needs and wants, defines and measures their magnitude and potential profitability, determines which target markets the organization can best serve, decides on appropriate products, services and programs to serve those chosen markets, and calls upon everyone in the organization to think and serve the customer.”

“In short, marketing’s job is to convert people’s changing needs into profitable opportunities. Marketing’s aim is to create value by offering superior solutions, saving buyer search and transaction time and effort, and delivering to the whole society a higher standard of living.”

“The marketers role is to build a mutually profitable long-term relationship with its customers, not just sell a product. This calls for knowing your customers well enough to deliver relevant and timely offers, services and messages that meet their individual needs.”

Clearly, traditional brand awareness advertising isn’t going away. However, interactive marketing is going to replace badly-targeted sales campaigns. A good example of mastery of this skill is BMW. Specifically, knowledge of the customer’s desires is the key to turning a profit. This “personalised market intelligence” is very valuable. Consider how well Google has monetised the expression of desire through search.

Understanding what the customer wants, and helping to fulfil that need

Critically, business intelligence services will help match digital propositions from partners to consumer markets in an agile manner. “Market pull” will draw resources into supply chains, rather than “product push” of inventories piled high. This is similar to how, for example, clothing manufacturers like American Apparel or fashion retailer Zara work - turning market intelligence into products faster than the competition can react. In many ways it mimics the military’s OODA loop: Observe - Orient - Decide - Act, where the winner is the one with the tightest loop, or who can disrupt the loop of their adversaries.

Thus enlightened companies have ‘Strategy & Marketing’ aligned as a single function, splitting off into Planning type functions and Marketing Services functions. This re-thinking of the role of marketing needs to be accompanied by a supply chain of intelligence about the customer, and a suite of capabilities to help the marketer interact with that customer more efficiently and effectively. Isn’t this precisely what a communications services provider is in business for?

The future role of marketing

The CEO of marketing agency OgilvyOne expressed it well at the Mobile World Congress CMO Forum in February 2008:

  • From Product to Experience: It is no longer sufficient to focus on product features, instead marketers need to focus on the full brand experience associated with a product or service. The digital age with its greater interactivity enables marketers to achieve this in ways that have not been possible in the old static mediums.
  • From Place to Everyplace: Mobility has enabled consumers to experience products and services anywhere, anytime. No longer is the consumer confined to store locations or other static locations when buying or using products - they can be anywhere.
  • From Price to Exchange: The digital world is increasingly about consumer control and intervention. End users don’t just pay for things with cash; they may offer value in the form of attention, participation or information. Thus the digital age can lead to more complex exchanges of value which the marketer needs to consider in product and service development and promotion. And talking of promotion….
  • From Promotion to Evangelism: There is a need to unite people around what Ogilvy term ‘The Big Ideal’ - something which inspires people and causes them to evangelise a brand. Brian noted the success Dove has had with its concept of women feeling good about themselves for what they are rather than aspiring to model-like proportions.

The opportunity for telcos is to reconsider their market offering in the light of each of these. For example, if you receive a push advert via MMS, shouldn’t it come with a little message at the bottom: “Forwarding this message to your friends is free!”. Evangelism in action — that requires new telco wholesale products and platform services.

Rethinking the interactive marketing experience

Going back to our example of pills for sneezy Londoners, how could it be different with a telco-powered marketing platform? The opportunity lies in solving problems like this. How to enable people to quickly and easily get hold of product samples?

The kind of experience we would imagine users having might be more like the following. The advert would say: “Text ‘germs’ to 60066”, with the following text given prominence: “Privacy notice - your network operator will share your address with our postal provider.” (Note how we don’t even need to send the address to the advertiser, just the postal service.) For postpaid users (or prepaid users who have registered their address with the operator) the correct address would automatically be passed on to the mailing service. (Potentially they would be sent an SMS with the address, and told to text an alternative one back if it is not the right one.) For all other users, they would receive one or more text messages asking them to pass on an appropriate address. This would be retained by the operator, so it would not need to be entered again.

Just as with emergency service calls, where you have a different expectation of privacy, users would come to expect that short code interactions don’t come with the same privacy level as messages sent, for example, to standard mobile number ranges. The human and social factors of the system need to be considered from the outset.

Rather than charging for the business process input of bulk SMS, the operator would instead charge for the uplift to the business process output - correctly delivered samples.

The service could be considerably more sophisticated than the above. For instance, the operator could try to match the product to be mailed to the demographics of the customer. Hypochondriac males could be sent a different marketing message to sniffling females. Ultimately, this is a battle about what you know about the customer, and your ability to integrate that knowledge with your own and third party business processes. And nobody is better placed to perform that function in the digital economy that the telco that gets you online in the first place.

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I'm not sure the tube is the ideal place for this, given the lack of signal over the core of the network :-)

Its also worth noting that in the USA this effectively already happens with 800 numbers to pizza houses (where the recipient _always_ gets the callers number, and a lookup against the Targus CNAM database.

Two thoughts:
1. Telcos everywhere have the opportunity to take this to a whole new level -- much more data, much higher data quality.
2. The CNAM database is somewhat peculiar to the USA because of the historical rules on copyright and directories.

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