SociaLight Media Blog

It’s prediction time.

Ever since Napster went mainstream in 1999 (wow, a whole decade ago), the music industry - both artists and record labels - have been unable to escape the vicious tailspin caused by P2P software. Not since the incandescent light bulb left wax makers in the dark has a new technology so swiftly decimated an entire industry. P2P has changed the playing field that the RIAA built by allowing users to “share” songs and software - mostly illegally - with other users, enabling them to acquire copyrighted material without paying for it.

Even with all of the lawsuits the RIAA has thrown at P2P users over the past decade, and after the millions of dollars of fines people have had to pay for illegally downloading music, P2P is still posing a huge threat to the existance of the record industry. Is there a common ground that the RIAA and its consumers can agree on? Is there a solution that will revive the record industry?

How about this? With the release of RockBand 2 and Guitar Hero 4: World Tour (there are eight total games: two RockBands, four Guitar Heros, and two Guitar Hero expansion games - 80’s Edition and Aerosmith) it’s obvious that the trend of music-inspired video games isn’t a flash in the pan; it’ll be here for a while. Even with the recent release of these two games, there are three more on the way - one is all Beatles songs, another is all Metallica, and the other is all ACDC. Why not leverage it? The systems that these games are played on have internet connections. Why not offer ALL songs owned by the record companies available online for download? At a slightly higher price per song than you could find at the iTunes Store, you could actually be playing your favorite songs. Technology has reached a point were virtually anyone (my friend’s kid-sister is 13 and has been downloading music for years) can download a song - they don’t need to buy it from a store. What they still have to buy from a store is music to play in their RockBand or Guitar Hero games (until it becomes mainstream for people to program their own songs, which may not be too far off).

Yes, some extra songs are offered online through various sources, including the online portals of the games themselves, but I’m talking about everything. Standardize it. Make the songs available for playing through my game, listening to through my console, downloadable to my computer, uploadable to my mp3 player - hell, send them to my phone as a ringtone! I’ll pay for that! If you’re offering real value to the consumer, they will pay for it. Just don’t expect your consumers, who can very easily download a single song that they like to their computer, to purchase an entire album - with two good songs and thirteen terrible ones - from you for $20. Especially in this economy.

It’s everywhere - investors, co-workers, family, and friends yelling “Recession!” from the rooftops.  Yes, America is in a recession.  By definition a recession is two consecutive quarters of decreasing GDP, and we’ve had nine of them since World War II (not including the Great Depression).  If we’re experiencing these troubled times roughly once every six years, shouldn’t we be used to them by now? Shouldn’t we know how to handle them?  Some businesses do - those who realize that growth occurs during recessions, and, if they capitalize on that fact, they come out much better than they were at the onset.

It’s true that the proverbial corporate belt buckle needs tightening during harsh economic times, but to look immediately at cutting your advertising and marketing budget would be a big mistake.  Consider boosting efficiency, adjusting operating hours, reducing overhead, and streamlining production and operation, which are all much more beneficial for most companies than biting the hand that feeds you: your ad spending (the thing that drives all of your sales…).  In this economic climate, online ad spending is especially important because it’s so targeted and efficient, and competition is less fierce than in conventional media.

In a basic marketing class, you learn that your advertising budget gets you a piece of the pie in the consumer environment - there are many companies putting a lot of money into grabbing a hold of the customer’s attention.  During a recession, when many companies pull back their advertising, this increases your voice and the effect of your ad money; and if you increase your ad budget, it gives you an even more powerful voice.

“History also reveals that businesses that recognized the fact that growth does occur during recessions and took advantage of it, were able to make gains in their market share despite economic hard times. With media rates softening and competitors sitting tight and cutting their marketing budgets, an aggressive business can experience great strides in a recession.” -Articles in the Spokane Journal of Business

Additionally, the National Retail Federation projects that overall retail sales are expected to grow 2.2% as the holidays approach, as compared to the 12% projected for online growth.  Mr. Silverman, of Deliotte’s annual holiday survey, advises that “Retailers should be viewing [online investments] as a way to capture lost sales and prevent them from going to a competitor.  I’m not going to say the growth in online is all additive — a lot of it is shift. However, if you haven’t been investing in your online store, that shift may not go to you, it may go to a competitor.”

I’ve added a couple additional notes to Ed Clark’s basic tips for small- to medium-sized businesses during recessionary times:

1. Don’t cut your ad budget; increase it. Let your competitors cut ad spending (and their market share).
2. Shift some ad spending from conventional to online - especially approaching the holiday season.
3. Your customers are nervous about spending; adjust your marketing campaign to assuage them.
4. Develop your web presence quickly - if you sell a product online, try to offer free shipping.
5. Lower rates and ad promos from hurting conventional media companies provide great opportunity.
6. Build brand awareness by sponsoring events - this is relatively cheap and definitely effective.
7. Promote online; sponsored events (above) are extremely easy to promote online through social media.
8. Know who your loyal customers are and let them know what you have to offer.
9. Step up public relations efforts. Developing your offline presence is still just as important.
10. Don’t “cheapen” your advertising by trying to save on creative or production costs. Your customers will notice and worry about quality. This is a time to stress quality and value.

What are some steps the company you own or work for is taking during this difficult economic climate? What are some steps you are taking as a consumer?

Here’s an article from last week’s Wall Street Journal called The Ad Changes With the Shopper In Front of It. Very cool. It’s about how some companies, including Procter & Gamble and Dunkin’ Donuts are using new technology to increase the effectiveness of their in-store advertising. DD is using digital screen ads that change based on the customer’s purchase. For example, if you stop in for breakfast and purchase a coffee and bagel, the screen at the register will remind you about their new flavor of iced tea and personal pizzas as a lunch idea. Great stuff. P&G is working with Metro Extra in Germany with radio frequency tags which causes a screen at the customer’s eye level to display an ad based on the product that was picked up off the shelf! You pick up a certain brand or type of shampoo and the ad displayed changes to a complimentary conditioner.

This shift in advertising comes at a time when television spots are almost worthless due to the amount of noise viewers have to deal with, popular technology like TiVo and On-Demand, and the fact that the results of the ad are virtually untrackable. Businesses are trying to get their ads closer to the consumer purchase, which is one of two places: in-store or online. With an in-store ad, companies can rest assured that people are seeing, and not blocking, the ads (yet) because there isn’t as much competition for the consumer’s attention as there is on television. It is also much cheaper than a television spot and more trackable with automatic promotion and coupon codes.

Online advertising and social networks are also becoming the new battlegrounds for consumer attention. Every click is trackable; companies can see exactly where their customers are coming from, where they leave, how long they stay, and what they click on. Try to do that on television, or even in-store! Additionally, for many small-medium businesses, they benefit from the small price-tag of developing an online presence and the fact that they may have very little competition in their market. What’s even more appealing about developing an online presence is that they are providing consumers with information at the exact time when consumers are LOOKING FOR IT! In-store advertising and shifting display ads may be great for impulse-buys, but when it’s a more involved purchase, people research it first. 78% of internet users say that they research a product or service online before they purchase it (Pew Internet and American Life Project). That’s where you, as a business, want to be!

Here’s an article for the business owner. A couple weeks ago, The New York Times posted this article, To Save Gas, Shoppers Stay Home and Click. It features a number of huge companies and has a great chart comparing Gap’s first quarter sales in stores and online.

A great example of outside influences of consumer behavior - the poor economy, the exorbitant price of gas. Consumers are shopping much more online this year rather than going to the gas pump then hitting the mall. What does that mean for businesses, large and small? The online customer experience is now more important than ever - from the ease of finding your website, to being able to see your products and services, to reading reviews of those products and services written by real people, to being able to swiftly make a purchase, or to receiving more information from you. Online customers need the same service treatment that they receive in-store. Your website has to exude your business - I like Anthropologie’s site, for example. Gives you a sense of their brick-and-mortar store, and is extremely simple; I can make a purchase in only four clicks from their homepage.

But back to the article - gas prices and online shoppers are causing a lot of big companies to take notice. Target, Macy’s, Bloomingdale’s, and half a dozen other huge companies are offering limited-time free shipping online; both embracing the surge of online buyers and attempting to cushion the blow that the in-store sales have received.

These online customers aren’t just the computer-savvy either.

“I’m a computer illiterate person,” said one of the people interviewed in the article. “But I’m becoming much more literate as a result of gas prices.” Virtually everyone industry’s customers are opting to stay at home, research your product online, and make purchases from home. These customers need to be able to find you quickly and easily, or they’ll simply look elsewhere online for the product or service. The hard times of the economy and the high gas prices coupled with the ease of the internet and shopping online are making this environment extremely competitive.

Online sales are expected to surpass $200 billion this year, the article states, and all industries are taking note.

“To encourage the trend, retailers are investing in online operations and experimenting with new marketing techniques. Even retailers that are scaling back in their physical stores are expanding or enhancing online operations, which are by and large the fastest growing parts of their company. The shopping Web sites themselves are becoming speedier, easier to navigate and filled with more products.”

I’m really looking forward to this year because of all of this. More and more, people are beginning to see how important their business’s online image is, and as a web-ophile, that makes me smile. Read the article and tell me what you think!