Frictionless? Dr. Catarina Sismeiro. Imperial College London Business School

Transcription

1 Frictionless? Dr. Catarina Sismeiro Imperial College London Business School

2 Black Swan The rise of the internet as a classic Black Swan Highly improbable and rare events that severely affect the world The Internet and the connected mobile world we live in today has changed dramatically the way we Interact with others, exchange information and communicate, search for information, share experiences, buy, and even consume

3 39% 16% 11% say they are increasing the digital marketing budgets without increasing overall marketing spend (reallocating existing budget into digital) say they are increasing the digital marketing budgets and increasing the overall marketing spend say they will be decreasing digital marketing budget What Do Managers Say? Also say they are confused and anxious

4 Insight Offline sales are affected by Online competition and the other way around too! Type of product is highly influential: It Depends (example bookstore; long-tail phenomenon)

5 E-commerce corresponds to a small portion of the business ( and these were the most positive numbers I could find!) Significant differences in B2B and B2C

6 Case

7 Founded in 2010 The Storyline Warby Parker was founded with a rebellious spirit and a lofty objective: to create boutique-quality, classically crafted eyewear at a revolutionary price point. Can you see any difficulties for WP?

8 Insight New businesses are often about disrupting the value chain Think about what is not working when you go about your daily life Difficulty discover how to make it work and find a big enough market

9 Insight Online transactions are not frictionless although the internet has helped deal with some offline market frictions Delay of gratification for physical goods (delivery time) Difficulty of inspection and returns (specially experiential goods that are also physical in nature) For some services today it is impossible to serve online (cannot separate consumption from production)

10 Insight The value of what the Internet can offer is very different for big versus small cities To deal with the problems WP has opened some physical locations in major cities? (NY, LA ) Why big and not small? (think differences between products and local information)

11 Learning omni not multiple In selling and in building brands, in communicating offline and online all come together

12 Flash Mob Partners & Spade New York Public Library September 2011

13 The flash mob is just an example Offline and online world working together But relying greatly on going viral and on the creation of Word of Mouth Communicate online and offline Warby Parker Invests heavily in digital marketing (e.g., SEO, Google Adwords, display advertising) Continues to invest in other more traditional forms of communication (e.g., editorial placements in traditional media)

14 Insight Exploiting the effects of serendipity and amplification WP s Flash Mob aimed at gain significant attention in the online and offline world to generate awareness, interest and even change attitudes and perhaps trigger action Often a low cost campaign can achieve these goals by exploiting serendipity and amplification ( JetBlue Cheeps )

15 Campaign promoted via twitter few years ago AYCJ for $599 fly anywhere in the US for a month Example JetBlue Cheeps Drew Lawrence took advantage of this promotion for his cause campaign ( and it was picked up by news outline, media, blogs Generated a tremendous lift for the campaign for jet blue Sold out in a week, 10m blog references, 31m search queries, 700% lift in traffic

16 What works? Lets do Some Analysis Google Trends Search for Warby Parker

17 Visitor Traffic to Website Source: Annual Report 2011 Google Trends Searches for Warby Parker in 2011

18 Learning

19 Learning it is about social connections

20 2011 Annual Report

21 Insight Information asymmetries and search costs One of the big advantages brought by the online world is that it reduced search costs Firms and/or experts post information online, consumers post about their stories and experiences, provide their opinions Some of these are integrated within e- commerce websites (ratings; reviews)

22 Typical Questions Is it trusted? How much of it is fake? Does it have an impact on what and how people think and feel? Does it have an impact on company sales? Can companies do anything about it? Blogs Referrals Reviews Ratings WOM

23 It turns out all those fake-sounding reviews on Amazon.com probably are Bing Liu, a data-mining expert tells the New York Times that about one in three online reviews are fake The reason: there is a lot of money in fake reviews (Mr. Rutherford s Example: Expedia vs. TripAdvisor Read more: exposé by the New York Times's David Streitfield (

24 Insight Online WOM, reviews, product ratings, posts in blogs they work Impact sales in a variety of product categories even if part is fake and fabricated Firms can help engage in WOM and this promotional chat impacts sales Surprisingly, in some product categories, the greatest impact on sales comes from chat diffused by less loyal customers (demonstrates the importance of weak ties and the need to reconsider CLV)

25 Once the domain of the entertainment industry Used for movies, CDs, books and shows Now has spread to many other industries who actively engage in promotional chat Online Buzz

26 diapers.com decided to give a credit for each customer referred and allowed customers to print coupons (traceable to them) Example Objective: engage customers to attract new customers They might know better whom to target Coupons another example of how weak ties

27 Online and Offline final remarks

28 Online and offline each one with its Frictions Frictions It is about omni not multiple E-commerce Communication It is all about harnessing the power of being connected Serendipity Amplification

29 Social Commerce: reviews, blogs, networks, and the strength of weak ties Digital Marketing Digital Advertising and Behavioural Targeting: big data and micro-level targeting Experimentation and Testing: More data customer data collected in 2012 than all prior years

30 Democratization of access (Khan Academy) Value chain disruption ( Four Significant Trends Collaborative consumption (Zip car; bike sharing) Matching of Supply and Demand (HailO)

31 And that is all thank you

32 Other Slides

33 Organic Celebrities Ree Drummond runs one of the largest blogs in the US 23 M monthly page views; 4.4M unique monthly visitors (rivaling The Daily Beast) Est $3.5M in annual ad revenue Book deals, TV show, Sony Pictures movie based on Ree s book (Reese Witherspoon starring) Endorsing Land O Lakes butter, among other brands Source: New Yorker, Wikipedia, Federated Media, Technorati

34 For content/digital goods it is the opposite as there is no delay of gratification if you think of online distribution with broadband diffusion (NETFLIX and On Demand TV) Technology Changing the Game These are also experiential goods but in these case the nature of the good gives (now) an advantage to the digital world (Easier to search and collect information online and select the alternatives to download and enjoy on the spot)

35 The vast majority says also they are confused and anxious about the digital marketing strategy and what they should be doing online What Do Managers Say? The Internet and the online world have transformed markets How can companies harness the power of the internet? How can they manage the limitations? Market frictions and what is the role of digital marketing