Letter to Marketers: Managing the Shift to Social Marketing

Dear Marketer:

This is not an easy time for you. You are well-aware of the transformation in your marketing and media mix. Quantity is being replaced by quality. Mass communications is being replaced by social connectivity. Emotional connections are replacing ratings. Cost-per-action is replacing cost-per-thousand. Effectiveness is replacing efficiency. These shifts have long been the mantra of marketing books, trade press articles and the "come-to-Jesus" exhortations of marketing gurus. And yes, legacy advertising and promotional tactics will absorb a majority of your marketing and media budgets into the foreseeable future. But the underlying foundation of your strategies is being rebuilt on new pillars of direct, active and interactive relationships with your consumers.

This requires that every aspect of your touch-points with consumers, retailers, distributors, media and agencies be broken down and rebuilt with digital media at the foundation. You are challenged to be a "change agent" when what your management and Wall Street demands is corporate stability and certainty. You're required to integrate your advertising and promotional initiatives, two budgets that have historically been separated and typically independent. You know it's smart to cross-pollinate your agencies across digital and legacy media, but most agency businesses are built upon separation and specialization. You want to partner with media suppliers, but what's realistic when media value remains focused on cost efficiency? You recognize new research metrics are available, but can you depend on them for business decisions? You want to communicate actively with your consumers but the internal resources to manage this are expensive and what do you do when consumers are more interested in attacking you than engaging with you? In every aspect of your business you are being required to manage a transformation from a mass, one-way, disconnected, impersonal information economy to an interactive, social and personalized Relationship Economy.

The role of your advertising budgets for the past five to six decades has been to deliver messages to mass audiences, achieving message awareness and product recognition. Mass media was built on a foundation of reach and frequency, and you have accepted that only a small percentage of your media investment would deliver the majority of advertising results. John Wanamaker's point that only half his advertising worked but he didn't know which half wasn't the problem -- it was the accepted reality and throughout the 20th Century it worked out OK for media, agencies and especially for you.

While most of you will acknowledge that digital media changes that equation, it represented only 8.0% of your total marketing communications budgets in 2010. The instability of digital and the reality of established marketing silos made it appropriate that you continue to invest a large share of your marketing budget to implement traditional, legacy strategies using legacy media and metrics. While digital opens new avenues, the tried and true remain the most trusted.

But by 2020, digital marketing investments will grow to 42% of your marketing budget, according to exclusive Myers projections. Online originated video (not including commercials in the digital extensions of traditional media) will increase from a $350 million business last year to a $14 billion business in 2020. Mobile marketing will grow from less than one billion dollars in 2010 to more than $17 billion in 2020. Hyper-local sites and apps will be the connecting link among national marketers, local merchants and consumers. Today, a small but growing budget is going to Facebook, Groupon and Living Social. Are these companies worth $70 billion, $6 billion and $3 billion respectively? Arguable, but we're projecting that social marketing and commerce will increase from a $1.2 billion business last year to almost $50 billion in 2020.

Slowly but very surely, you and your colleagues are shifting from a mass media psychology to a social marketing focus. You are creating your own content for websites and mobile apps. Procter & Gamble alone has more than 1,000 sites and apps. You're distributing a growing number of your coupons and special offers via digital media. While you continue to depend on mass, one-size-fits-all advertising with a goal of assuring product awareness, your marketing is evolving to a highly targeted process of communicating relevant messages to interested consumers and asking them to take an action.

The good news is you have a warehouse full of options available to you to achieve your legacy media requirements more efficiently and to build your new platforms with maximum effectiveness. Venture-funded technology companies are cluttering the media and advertising landscape. Spawned out of the primordial digital ooze, vertical ad networks, demand side platforms, real time bidding models, exchanges, online video distributors, mobile apps -- thousands of companies are competing to serve your basic advertising needs. They are evolving from digital only to television, print, out-of-home; and cross-pollinating to integrate with your sales promotion, trade promotion, PR, CRM, event and other below-the-line marketing goals.

Media supply will continue to expand, assuring that you are able to maintain advertising cost stability. While this year's network television Upfront market will see double digit pricing increases, overall media costs are stable and declining. Search marketing is assuring consumers find your content, offers, retail locations and services. Display ads are ubiquitous and cheap; video distribution options are expanding; smart phones and sophisticated mobile technologies are becoming the norm; TV Everywhere is becoming a reality; out-of-home and point-of-influence/GPS options are increasing; and marketers are exploiting their own packaging, digital and retail real estate for mass reach and awareness building. The costs for delivering on, administering and measuring traditional ad message reach/frequency and awareness goals will steadily decline for the next decade at least. The tools and resources available to support these goals are ubiquitous and cheap.

We have a clear vision of the marketing path that lies ahead. The "next big thing" is already here. In next week's Jack Myers Media Business Report, I will outline the Five New Rules for Successfully Navigating Social Marketing.

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