Online's growth has us engaged in a balancing act
The biggest single challenge facing marketers today is understanding the shifting importance to consumers of the various channels we reach them through, writes Richard Campbell, marketing director of Nectar.
The latest statistics from the Interactive Advertising Bureau show a 62% year-on-year growth in online advertising, which is now almost 6% of total advertising spend, outstripping outdoor or radio. Internet usage continues to grow at a tremendous rate, while UK online advertising spend is now around £1bn annually.
This all points to traditional media under attack. Whatever the advertising agencies may tell you, Sky+ and its like are the biggest threat to TV advertising since ITV launched in 1955.
If you run a TV ad today, you'd better make sure it's well-written, entertaining, stylish, oh and very commercial too, please. Otherwise, consumers are increasingly going to de-select you, and your carefully crafted message simply won't get through.
So, on the face of it, marketers should all make a digital dash online, because, after all, it is a ruthlessly efficient channel that offers maximum cost benefit. You can track what your consumers read, what they do, what they buy, and all this at a fraction of the cost of traditional media. It sounds like a formula designed to appeal to both finance and marketing people.
So online it is then? Well, yes, but only up to a point.
There is no doubt that an ever-increasing amount of marketing money will be going to online, but prudent marketers will consider very carefully the medium to long-term effects of switching consumers to online channels only. We simply do not yet fully understand how consumers interact with the online medium. A case in point would be the challenge we face here at Nectar.
We sit on the largest consumer database in the UK, with over 50% of UK households actively participating in the programme. We send out well more than 100m pieces of fully personalised 1:1 communication to our collectors each year, and the email proportion of our 1:1 programme rises every month.
Our challenge now is to establish the right balance of spend, and get just the right mix of "paper" 1:1, email 1:1, web initiatives designed to drive traffic, as well as spending our money wisely on "traditional" media, including retail point-of-sale presence at our 17 sponsors.
Getting the right balance is critical as we look to maximise our marketing spend to achieve optimum collector performance in the Nectar programme.
We have a lot to build on; our direct mail response rates are rising every quarter, with recent mailings nudging the 30% mark (that's overall response rate, not just high-performing segments, by the way). We know we can improve on this performance, by refining our targeting even further, and by getting just the right mix of communications channels.
Consumers will increasingly tell us how they want their information, whether via email, web, post or their mobiles. It is, however, the marketers who are most skillful in interpreting these consumer demands, and in assessing the best communications mix, who will achieve the most efficient means of contacting, and influencing, consumers. Now that is a formula that might just appeal to the accountant and the marketer.
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