Strategic Thought as It Relates to Digital Marketing
With this background behind us, it is perhaps best to start thinking about the process of digital marketing management from the managerial point of view by beginning with some traditional ideas of strategic thought. In fact, it is these strategic ideas which should form the foundation of any credible search engine marketing program, and indeed, any integrated marketing communications campaign. The basic ideas of strategic thought are those of core competencies, creating value and positioning.
The notion of core competencies comes from the resource-based view of the firm, which states that resources a firm has form the basis of it inimitable advantage. These theories were developed by Edith Penrose,16 Jay Barney,17 and others. The notion of inimitable resources as a firm’s core competencies, upon which firm strategy should be based, is linked to the learning organization. The learning organization theory suggests that the only true resource that a firm possesses that cannot be implemented is the ability to learn (Figure 2.1).18
It is precisely this notion of core competencies and the learning organization which is the first place to start in developing a search engine marketing approach within the organization. The two processes are closely related. We need to understand how we are being looked for in search and we need to convey our uniqueness to the customer so they can find us through the search process. Before we can discuss how search and strategy are more closely related, we need to introduce another basic strategic framework, the value chain.
Figure 2.1 The role of learning in creating competitive advantage
In my consulting practice, I often come across clients who think they need a new website or brochure or want help with search engine marketing but have no idea how they are thought about in the marketplace by the customer. In addition, the search engine marketing process itself can become a way for companies to learn about the marketplace and customers. Search rankings themselves are becoming a source of competitive advantage as the firm learns from the process. Therefore, the first step in any digital marketing campaign should be to ask the questions: What is my firm all about? What makes us unique? (Figure 2.2)
Figure 2.2 Activities leading to the creation of value for and by customers adapted from Michael Porter
Figure 2.3 Digital marketing technologies enhance firm sensing capabilities
The concept of core competency is then related to the value chain as popularized by Michael Porter,19 with the idea what makes the firm unique is conveyed along the value chain as the firm produces its product or service. The internal systems of the firm, such as supply chain management and operations planning, help develop the firm’s value. These ideas of what makes the firm unique and the exploration of how it delivers value can then be directly tied to the firm’s positioning statement. Companies that distinguish themselves on service, such as Nordstrom in the retailing space, compete on the right side of the value chain. Companies that compete upon operational efficiencies that allow them to pass along lower cost savings to their customers, like Wal-Mart, compete on the left side of the value chain. Along the value chain information is disseminated and used to create value. An example of information passed along the chain to create value might be simple order processing systems. These systems help us understand who the customer is and then to deliver information to the customer along the chain. The information helps us to serve the customer and then further creates value by contributing to a complete picture of the customer that can be used to target more effectively in marketing and selling to the customer. The customer increasingly takes a role in the the process of co-creation of value in the value chain. The processes of customer relationship management, supply chain management, and product development and management add value in different ways to the firm’s customers.20 These principles are the same whether we are talking about an online or offline marketer, or, as is most often the case now, a multi-channel marketer.21
Finally, the firm interfaces with its environment in another way. As Figure 2.3 shows, firms take in information in from suppliers/partners, competitors, customers, and employees and then use that information to learn and continue to create value. Digital marketing technologies help to create that value. Each time a search or e-mail marketing campaign is executed and analyzed, the firm learns more about itself and its customers to create the next customer interaction. This is an iterative process that is facilitated by digital marketing technology. With the emphasis on one-to-one marketing and highly personalized communications, one could argue that traditional positioning, while still useful in helping to create a general messaging strategy, is somewhat irrelevant as each customer will expect messaging that demonstrates a particular product’s or service’s value to them as an individual. However, positioning is still a useful approach today in terms of helping understand and define uniqueness and strengths.
For today’s marketer, a useful tool in developing positioning strategies can be Google Trends. This tool is important because it allows an insight into the world of the Internet on a real time basis. Using this tool, we can type in key terms and see what is happening now and also how terms have evolved from the past. For example, when I started teaching in this area the term e-commerce marketing represented what I did and I taught in an e-commerce marketing program. Later, I moved to a university where I created an interactive marketing program and then I spearheaded the development of a digital marketing minor for undergraduates and a digital marketing master’s degree at another university. In the process, I wrote a textbook on Internet marketing. Which term is correct for what we are discussing here?
Google Trends helped me to understand the way people think about what I have been teaching and researching has changed over the years. I suggested the use of digital marketing for the program where I teach now and for this book. First, I wanted to see how users look at these terms so I consulted Google Trends for search. The search indicated the product category as defined by terminology has evolved from e-commerce, which is a rather narrow term emphasizing the direct sales of products over the Internet, to interactive marketing, which focused on the conversational nature of marketing to digital marketing, which acknowledges the increasing role played by various forms of technology in marketing and the need to foster customer engagement.
Google Trends for search indicated that interactive and Internet marketing as terms for which people search peaked in about 2004/5, e-commerce marketing in 2001, and that digital marketing is on the upswing. Therefore, if the university were to try to market the program as an e-commerce marketing program, the term would not only be narrow and not as encompassing as either interactive or digital marketing, the term would not have as high a traffic volume as terms that are trending upward. Google Trends also gives an idea of the volume of searches, whether the term is trending upward or downward, the areas of the globe where people search for particular terms, and terms that are trending upward.
This is our first, simple case where digital marketing technology is important to managerial decisions. The recommendation here is to not make any strategic decisions in terms of our positioning statement without first consulting the world of search for one way of seeing how consumers view the world, a digital marketing technique. Although insights into our customer might once have been the exclusive province of marketing research, we now can gain insight by analyzing search trends and social media interactions, which can often be less expensive than traditional market research. Remember that value creation is still the core of business. However, technology has facilitated value creation over the value chain and also should be used to discover how best to position our product.
There have been traditional ways of understanding the target market such as market research surveys and focus groups. These continue to be valuable ways of looking at the market. In the digital age, we can start by looking online, through searches, to what is being said about the product or service in social media, the major platforms, specialty platforms, and blog posts. The understanding of the target market can also involve digital marketing techniques such as analyzing internal and external databases and web logs to see how individuals are interacting with our website.
Using these insights and others, we can decide how our firm is unique and how it can add value to its customers. The next step in the process is usually to develop a positioning statement which we can then use to communicate our firm’s value internally. For this statement, we must know (1) the target market, (2) the selection set from which the customers make their decision (product category), and (3) the firms’ unique contribution to the marketplace (core competencies and value created). The format of a positioning statement can be follows:
To the (target market), our product is the (product category) that (firm’s uniqueness). There are other approaches to strategy formation, but this approach will also tie in to the search engine marketing process quite nicely in the next chapter. It is from this positioning statement that the firm communicates its ad agency and within the company. The outside world sees the firm positioning statement in the form of a tag line such as “Like a good neighbor, State Farm is there.” Or For SNICKERS® the current tag line is “You’re Not You When You’re Hungry” and for Target it is “Expect More. Pay Less.” The positioning statement would be more formal, such as “To those needing a mid-afternoon pick-me-up, Snickers is the snack food that satisfies hunger most quickly.” Remember that we are always trying to understand how the customer views our product or service. Any combination of chocolate, nougat, caramel, and 250 to 300 calories will temporarily, at least, satisfy hunger. Snickers wants us to think of their product first when we are hungry, and this approach is the source of their marketing campaign.
So the first step in the process for applying strategic principles to digital marketing is to understand that the firm itself is really an entity that takes in information from a variety of sources to learn about the customer and how best to operate in a particular competitive environment. This information needs to be constantly analyzed and updated, and digital marketing technologies provide a good source of information that can be readily analyzed and used for competitive advantage. Therefore, digital marketing information and its processing and analysis should be central to the development of firm positioning strategy. Some examples are simple. The job search site “Indeed.com” positions itself as collecting all the information on open jobs that a job seeker might wish to have in one place and uses information along the value chain to create its product and communicate that value to its customers, who are both job seekers and job posters. Most examples are more complex, so understanding how information is used to create value and developing a strong positioning based on the strengths and uniqueness of the firm can help lay a firm foundation for the digital marketing efforts that we will discuss throughout the rest of this book and especially for website design, our next topic.
What to Do Next after Chapter 2:
1. Develop a list of what makes your company unique.
2. Write down how you deliver value on the value chain.
3. Put it all together: Develop a positioning statement that reflects your product categories and uniqueness and your benefit to the customer.
Chapter 2 Discussion Questions:
Discussion 2.1: Discuss the value chain elements for a specific industry or company of your choosing. How does the company compete? What value-added processes are used? How does the customer help create value.
Discussion 2.2: Some firms choose to generate revenue by selling or licensing their proprietary software. Others choose an open systems approach and distribute it free of charge. What do you think drives the decision and which, if any, business approach is superior?
Chapter 2 Glossary:
Co-creation: How both the customer and the firm create value in the marketplace.
Value chain: Activities which lead to the creation of customer value.
Positioning: What makes a business unique in the mind of the customer.
16 E. Penrose. 1959. The Theory of the Growth of the Firm (New York: John Wiley & Sons).
17 J. Barney. 1980. “Firm Resources and Sustained Competitive Advantage.” Journal of Management 17, no. 1, pp. 99–120.
18 G.S. Day. 1994. “Continuous Learning about Markets.” California Management Review, Summer, pp. 9–31.
19 M. Porter. 1985. Competitive Advantage: Creating and Sustaining Superior Performance (New York: The Free Press), pp. 33–52.
20 D.L. Zahay and R. Handfield. (2004). “The Role of Learning in Adoption of B2B Technologies.” Industrial Marketing Management 33, pp. 627–641.
21 Blake. 2014. “State Farm Dumps Pitchman Rob Schneider over Anti-Vaccine Views.” Los Angeles Times Arts & Entertainment Show Tracker. http://www.latimes.com/entertainment/tv/showtracker/la-et-st-rob-schneider-state-farm-antivaccine-views-20140925-story.html (10/13/2014).