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Innovate, don't advertise

BY KARL havard, PA CONSUMER EXPERT

You have more consumer data and insight than ever before. And you’re probably using that insight to develop ever-more sophisticated online advertising. But are you missing the smarter play: why not use that data to drive innovation?

Global expenditure on digital advertising may well exceed a quarter of a trillion dollars by 20181, and spending last year reached £8.6 billion2 in the UK alone. There are good reasons for this investment. As consumers, we spend more and more of our time online, glued to our devices – it makes sense to put your adverts where we’re most likely to see them. And you have some incredibly clever tools at your disposal. You can harvest data about what we’re searching for, what we’re looking at (or more accurately what content has been displayed) and what we’re adding to basket and buying online. You use that to target us with carefully positioned messages. 

But there are some big clues that consumers don’t like digital ads. They think behavioural targeting is ‘stalkerish’ and ‘creepy’,3 and many download software to block online adverts. Three in five millennials now use adblockers on their computers4, and research suggests that 27% of all UK internet users will have them by 20175

You could fight back and develop technology that overrides adblocking software. But that misses the point. Your consumers are telling you they don’t want ads, they interfere with people’s online experience, and could impact their perception of your brand.  We think you’d get much better results by using the data to drive innovation. 

Give your innovation teams a hotline to your customers

Our research suggests companies are most likely to get their new ideas from customers and the market6. It’s possible to do this very effectively if you get your technology set up right.

By building the infrastructure to analyse data and share it in real time with your innovation teams – not just marketing and advertising – you could massively enrich and speed up their ongoing product and service development. In a process that’s far faster than traditional focus groups, you can rapidly rethink and refine things that aren’t selling as hoped. It can justify the decision to ‘fast-fail’ disappointing products or services, so you can move on quickly to something new. Take Amazon – they’ve used consumer data to dramatically improve delivery times for Amazon Prime customers and expanded their services, introducing Amazon Fresh, to use this enhanced supply-chain to deliver groceries.

Marks and Spencer’s online ‘Tuesday’ service connects customers to stylists who give them advice about what to wear. The idea came from its ‘Venture Lab’ . The public has since been spending more money through the website, but the real value – as M&S sees it – is that the experience leaves a positive impression about the brand. M&S Venture Labs is now working closely with their marketing department to see if there are customer problems they can solve together7

Using data to enrich innovation in this way is not limited to consumer goods companies and retailers. We recently helped a household-name pension fund use data and analytics to identify what was causing their customers to go elsewhere. This will give it the opportunity to save tens of millions of pounds from customer retention by making a product that better suits its customers. The same logic can be applied to long-term mobile, broadband or TV contracts.

If you’re selling a physical product, there are other tools to help you stay ahead of competitors. It’s getting cheaper and easier to  integrate ‘intelligence’ – like sensors – into the product, that make it easier for consumers to re-order at the right time and the right place Product consumption data can show what’s being used, where and how much. Auto-replenishment or ‘no click’ purchase is not far away. Research firm Gartner expects there to be more than 20 billion connected things in the world by 20208 .

Take a maker of backpacks. By embedding a microchip in their products, the company will learn where and how customers make use of them. Apart from highlighting opportunities to cross-sell, this opens up opportunities for real innovation.

‘Servitisation’ strengthens your brand

Following your customers’ every move for advertising purposes does feel  ‘stalkerish’ and ‘creepy’, but using data they’ve given you permission to use to enhance products  will offer marketable benefits for them as well. 

In fact, it’s these innovative added benefits that are the real point. Having proved people mostly use their backpacks while hiking, say, our manufacturer could develop an app giving weather reports or route-finding applications. These services don’t just bring in revenue – they tell you even more about your customers. The back-pack could even vibrate to let the wearer know rain is on the way, or if they’re steering off the planned route.

You could even create a business by selling the sensor and a service to go with it. We worked with Drayson Industries to develop CleanSpace. Over 50,000 members carry sensors that use a cloud-based platform to provide the world’s most accurate real-time map of air pollution. That data could bring ideas for new products or services – for example, members might want to subscribe to a service that keeps them up-to-date with things that might affect air quality, like roadworks. 

It’s the same thinking that’s behind the activity trackers and wearable technology from Fitbit, Strava and Garmin for example. If our backpack could tell its owner where it’s been, and how much it weighs, it could tell them how far they ran or walked or cycled carrying the backpack weighing so many kilos, which means they burned an extra 400 calories, say. Or when their pack could do with renewing, which opens up a new replenishment revenue stream.

As well as bringing revenue through paid-for subscriptions, these services arguably make a much stronger impression on customers than could be achieved by digital advertising alone. 

So, it could be time to rethink your advertising spend. Given the huge audiences that are within reach online, it would be short-sighted to move away from digital advertising altogether. But it would show real vision to divert some investment to help you innovate. You could invade – or invent – a completely new market.

1  http://www.statista.com/statistics/237974/online-advertising-spending-worldwide/ 
2  http://www.iabuk.net/research/library/2015-full-year-digital-adspend-results 
3  http://www.ithaca.edu/news/releases/online-creep:-targeted-ads-may-have-opposite-effect-of-marketers-intent-39546/#.Vyycpo-cHSe 
4  http://www.retale.com/corporate/white-papers/survey-nearly-60-now-using-ad-blockers/ 
5  http://www.emarketer.com/Article/Ad-Blocking-Moves-Mainstream-UK/1013842 
6  PA Consulting Group (2015) ‘Innovation as unusual’ [http://www.paconsulting.com/our-thinking/innovation-research]
7  http://www.thedrum.com/news/2016/03/24/ms-reveals-digital-stylist-quadrupling-average-order-values-it-experiments-rental
8  http://www.gartner.com/newsroom/id/3165317 


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Anita Chandraker

Anita Chandraker
PA innovation expert

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