Using Interactive Marketing to Compete in a Down Economy

Yesterday, Cydni Tetro, the CMO of FamilyLink.com shared that a VC she met with said, "flat is the new up" when referring to revenue trends. It seems that everyone I've been talking with lately has a company that falls into one of three camps:

1. Well positioned in a declining market.
2. Maintaining sales at a higher cost than the past.
3. Experiencing growth because of their position in a growing market.

In healthier times, I would expect to see more companies in a fourth category: companies aggressively growing within an expanding market; however, I'm not aware of these firms today. One of the challenges of a down economy is that the rate of innovation tends to slow. Instead of adopting "reinvent or die" as a mantra, companies are hunkering down for survival and trying to maintain their current revenue and market share positions with as little investment as possible. Since the "entire economy" is down, they believe that maintaining their revenue position and market share is an adequate goal. And for the most part, they are right.

But, whenever there are challenges in the market there are also corresponding opportunities. Why? Because each company will react to those challenges differently. The variables by which success has been measured and through which success has been achieved will start to move unpredictably, and companies can see success turn to failure overnight if they are not vigilant and adept at adapting to these fluctuations.

This was certainly the case for Ancestry.com after the Internet bubble burst in 2000 and 2001. Ancestry.com could have easily become another casualty and gone the way of pets.com, but we were always looking at our bottom line and were able to use interactive marketing to continue to improve the position the brand and service. We had visibility into what was happening in the market and with our online marketing. We were thus able to implement programs and tactical changes to maintain market share at the same time the online economy was in rapid decline. The big difference then was that online activity and purchases were actually increasing at the same time businesses were failing, causing an overabundance of cheap ad inventory. Ancestry.com was able to increase their "interactive dragnet" at the same or lower cost than before. This is one of the key reasons the company is in the position it is in today. But today, the challenge is that online spending is flat or in decline at the same time competitive pressure is increasing. The remedy today is a little different.

Interactive Marketing in Red and Blue Oceans

Here is a sample scenario in terms of interactive marketing, but the same applies elsewhere (in a cause and effect sequence):

In this scenario, the economic pressure creates an increasingly bloody "red ocean."

1. Fewer consumers are looking for your product that is clearly an unnecessary purchase.
   
2. You chase these customers with more advertising dollars to maintain revenue and market share.
3. Your advertising rates increase.
4. Your cost per acquisition increases.
5. Your competitors increase their advertising spends.
6. Everyone starts getting "cute" to exploit perceived gaps, creating wide swings in cost and performance.
7. Soon, you or your competitors decide the increased cost isn't worth the return and decrease spending levels.
8. Costs temporarily come back down below previous levels.
9. You or competitors jump back in with more money because costs are now lower.
10. The cycle continues . . .

This is the issue with advertising dollars in the "bloody ocean." (If you haven't heard about red and blue oceans by now, where have you been hiding?) The challenge is that when consumer demand goes down, it actually costs more to reach potential customers because of increased competition for scarce or effective advertising inventory. Economic theory would state that, overall, when the economy declines advertising rates should also also decline because fewer companies can afford the same ad rates. Demand for advertising inventories should decrease, leaving an excess supply, which should drive down costs. However, as outlined in the above scenario, this is not the case in a very competitive market . . . until competitors in the bloody ocean simply can't afford to pay existing rates. So, how can you compete effectively when you and your competitors are tempted to act irrationally? What should happen is the following: Pursue a "blue ocean" marketing strategy:

1. Fewer consumers are looking for your product that is clearly an unnecessary purchase.
2. You take the time to identify advertising strategies over which you have the most control and the least exposure to competitive pressures.
3. You maintain or decrease your red ocean spending strategies, such as PPC search ads, sponsorships, and display advertising. You don't want to just turn these off, but you don't want to focus on these strategies to maintain market share at the same time your competitors are becoming more desperate and may drive up marketing costs for these programs. Give these strategies time rather than money, and you will likely see your advertising rates decrease.
4. Advertising rates maintain or decline based on your decision not to escalate spending.
5. Now, you focus on creating a "blue ocean" marketing strategy. You should always be doing this anyway, but this is more important than ever in a declining market or in a weak overall economy.

Swim into the Blue Ocean

The following are five strategies to creating some "blue ocean" from an interactive marketing perspective:

1. Engage in joint marketing initiatives. Join with companies with related products to share marketing dollars through product bundles, barter advertising, value added free trials, or other joint efforts. You are now increasing visibility of your product or service without incremental cost. You are also focusing on strengthening your market position through strong partner relationships. This is a great long-term strategy.
2. Go after the long tail. Instead of concentrating on current interactive marketing, where competition has been fiercest, expand your advertising efforts to include a longer tail or into a market that is less competitive.
3. Focus on relationship programs. Affiliate programs, friend referral programs, and social marketing are extremely low risk. All of these programs are free or straight pay for performance based on actual customer acquisition (rather than impressions, clicks, or other metrics). If you can't motivate your customers to share your product with their like-minded friends, your problem may be much deeper than your interactive marketing strategy. Similar to joint-marketing initiatives, these programs provide you with a long-term strategic advantage. A customer who invests time and effort to share your product with someone else far more likely to become "bonded" to your brand than someone who doesn't. The same goes for those who invest time optimizing affiliate links or talking about your service on Facebook or Twitter.
4. Focus on business model innovation for thought leadership. Can you make your business model more attractive or implement a marketing strategy that generates buzz? Similar to engaging with partners, any strategy that leads OTHERS to talk about your product and participating in your marketing strategy stretches your advertising dollars. If you have a CD-ROM product, consider an online offering. If you have an online offering, consider making more of your service available for free.
   
   Don't just make a change (i.e. providing your service for free for a limited time or implementing an ongoing customer competition with weekly winners), but tell everyone about it. Bloggers, analysts, and even the press are likely to pay attention to anything that is novel related to business model innovation. In mature markets, this is one of the BEST strategies to create a strategic barrier. Ask yourself: "How many of my competitors can afford to change their business model right now?"
5. Think guerrilla warfare. Consider using Compete.com, Keyword Spy, Spyfu.com, or another service to gain insight to your market segment and gain an idea of how your competitors are reacting to the economy. Competitive insight and careful analysis of data and trends are important activities that can give you a competitive advantage during difficult times for your market or the economy at large. See how you can improve your online presence using free and low-cost services, such as free download services, social media, participating (thoughtfully) in forums and message boards, etc.

As with any economic disturbance, you also need to be able to separate the effects of the economic downturn from other factors that may also be hurting your sales. I'll write another blog entry about how this is done, but it begins and ends with having excellent business analytics.

Taking the time today to invest in interactive marketing relationships and experiment with blue ocean strategies will ensure you are properly positioned to get the biggest gains when the market rebounds.

Brandishing Credentials and Unique Competency

Degrees, certifications, licenses, and credentials are required for several professions because they demonstrate a certain level of knowledge, competency, or experience. Sometimes a credential is required to protect potential customers from incompetence and fraud. Sometimes a credential simply establishes a threshold of expected performance.

When it comes to business, organizations and individuals earn credentials over time, but most of these credentials are never framed and hung on a wall. And what's more, the company or individual with this credential isn't really in control of which credential they earn. Sometimes a company will seek and attain a certain strategic advantage or unique competency because of brilliant strategy and careful planning; however, a more likely scenario is that a unique competency will emerge over time that qualifies the company to provide a service or product that other organizations aren't capable of providing. When that happens you have achieved a market credential. Congratulations!

Brand Credentials Are Granted Not Earned

That works for companies, but what about brands? What credentials does a brand have? The answer isn't typically found in what a company or brand line pursues but rather in what consumers accept and embrace coming from the brand. In the case of a brand, a credential is both a unique qualification and also a limitation. Earning a credential as a great athletic shoe brand, for example, may not qualify you to start manufacturing footballs under that brand.

An example would be consumers embracing Nike as an athletic clothing brand (beyond shoes) but rejecting Converse or another shoe brand in its efforts to expand its brand beyond footwear. Surely both companies can create good product designs and engage labor to manufacture inexpensive products. But that is where the parallel ends. The real question isn't so much what the company can produce but what customers expect them to produce and whether those customers will allow a brand to succeed with any given product or service.

Great Products and Services Establish Credentials

Again, the brand credential isn't so much a competency a company can earn but more a unique mind space that is granted to the brand by the market. Historically it has been the job of marketing and advertising to convince the consumers and clients that a brand had "street cred," but recently that job has shifted increasingly to product managers and designers. With the proliferation of information and increased accessibility to that information, products themselves carry more of the marketing responsibility than ever before.

This is the ultimate example of "actions speak louder than words." You can say all you want about a service or product, but gone are the days where clever marketing can overcome the weaknesses a poor product or user experience.

One of the most important questions to ask yourself when bringing a new product or service to market is: "Do we have the credentials to bring this thing to market?"

Thinking about it just for a moment provides a simple explanation for some of the biggest product failures in history: Levi's moving into men's suits, Polaroid expanding into digital photography, Pond's toothpaste, Frito-Lay Lemonade, among others.

The Dangers of Playing the Field

Many companies--especially those that are young, hungry, and entrepreneurial--try to be amenable and amoeba-like, changing shape (or stripes) with each new opportunity they encounter. While keeping options open can be a laudable objective, it is a hurdle when it comes to establish brand credentials.

Finding Your Brand Credentials

Here are a few questions to ask when trying to uncover your unique brand competencies or credentials:

• Who are your current customers or clients? (size, industry, geography, etc.)
• What do your customers hire you to do?
• What substitute products did your customers consider? (Learning about your cusotmers' consideration set is one of the best ways to discover your brand credentials.)
• Why have you lost sales to your competition?
• Do any of your current activities worry your existing clients or customers?
  

Answering these questions will help you start understanding your current brand credentials and also the areas where you can expand your "street cred" to other areas.

Blue Ocean Strategy

The concept of "blue ocean strategy" or moving to the open sea that is unbloodied from intense competition is one of the most misunderstood concepts I have been confronted with in the last few years. The concept isn't to disavow your current customers and find a new Shangri-La where the waters are peaceful. The concept is to build off of your strength and find adjacent or analogous markets where your product may be preferred in the consideration set. This requires your credentials with one market to extend to to an adjoining market (not too big of a stretch for most brands).

The biggest risk in pursuing any branding or marketing strategy is offending current customers. They think they know you. They also think you are providing products or services for them. Stray too far and they may feel betrayed or at least concerned that your efforts aren't going to provide them with any additional benefit.

Remembering Your "Love Group" -- A Bird in the Hand

Here are a couple of worn out idioms that are marketing truisms. The first is a temptation to be fought, and the second is a saying to be embraced:

"The grass is always greener on the other side."
"A bird in the hand is worth two in the bush."

Another way of saying this is to never turn your back on those who love you. You have a group of people who love you. They like the benefits you provide and are willing ot put up with your quirks and shortcomings to receive those benefits. One of the biggest temptations marketers (typically driven by CEOs or CFOs looking at the numbers) will have is to enter a more lucrative market.

Just by the sound of it, it makes sense. Why settle for peanuts when you could own the plantation? But guess what? Nine times out of ten moving into a new market is a risky gamble that doesn't pay off. Why? Because someone else is already servicing those customers or clients and you don't have the credentials to compete. If you did, those potential customers would have already come knocking on your door.

Typically your best course of action is to get closer to your existing customers and then find more people just like them.

Your Personal Brand

I'll expand on this concept in the future, but you should also consider your personal brand. What do YOU have the credentials to do and provide to an organization, client, or partner? How are you going to compete?

In reality, there aren't too many options. You have to work on your credentials every day. Here are the three unique ways I have found to compete in my personal career:

• Knowledge (demonstrating decision making and strategic skills and benefiting from the asymmetric nature of information)
  
• Talent (delivering higher quality, craftsmanship, or competency)
• Speed (executing faster)

Beyond these, I can't think of too many actual advantages from a value perspective. Talent would include most "soft skills" or "people skills." If you find yourself mediocre in all three areas, you had better make the effort of earning some credentials.

Brandishing your personal credentials or those of your brand at every opportunity is the best way to let others know who you are and the benefits you deliver.

What works for a company or brand will also work for you as an individual.