Hype Cycle for Emerging Technologies in Digital Marketing

Businesses today have been extensively integrated with digitization, promising convergence of people and businesses, while disrupting existing business models. A new age of digital marketing has arrived where extensive campaigns are pushing new products through platforms such as websites, e-mails, apps and social networks. With over seven billion people and businesses, and a millions of technologies bringing a new world together, digital marketing plays a major role in empowering businesses with the much-needed edge to thrive with the competition.

Digital Business Development Path

 Rapid change is fueling digital marketing. Within the last decade we have seen technology giants driving businesses such as Facebook and Twitter. Mobile marketing and advertising marketers have begun focusing on consistent and contextual without being interruptive.  Change is the one thing that is constant, with changes being made faster than ever before. However, impact due to the change is highly dependent on it’s temporal context. For example, wearable technology like Google glass has gained a lot of news coverage when in fact, Steve Mann had already developed a similar device, ‘EyeTap digital Eye Glass’ in 1999. This is a prime example showcasing the importance of analyzing the visibility of a product with time for organizations to capitalize its technological and business resources to make the best marketing sense.

Hype Cycle

 The Hype Cycle is a branded graphical tool developed and used by IT research and advisory firm Gartner for representing the maturity, adoption and social application of specific technologies (See Figure 1). The hype cycle map how technologies move through different phases of hype and indicate whether certain technologies and products are good for the company in short term and long term. Marketers need to understand how and when to derive value from a product and also when to dispose of it when new things come along.

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Fig 1: Five Phases of the Hype Cycle (source: Gartner)

What’s new in 2014?

Marketing Talent Communities: Marketplaces have come up that support organizations and marketers to find and hire qualified freelance talent on-demand. A lot of time is saved in the process of recruitment of a variety of qualified writers, designers, strategists, data-analysts etc. Bloomberg Institute is one such example which financial employers approach to hire talented college students through a normalized screening test called the Bloomberg Aptitude Test.

Marketing Technology Integrators: The scope of digital marketing has expanded broadly. Digital marketers can’t claim to address the digital marketing needs solely through offering new Web Content and Experience Management or Portal platforms. As a marketer, the time and attention required to solving technological solutions takes time away from their focus on target customer. Thus, marketing organizations are hiring services and products that design and implement software and increasingly integration-oriented implementation data solutions.

Transactional Ads: This is an example trying to connect marketing with productivity and conversion. Online ad units that are activated by gestures, present a secure transaction or coupon. This reduces the time consumption of the viewer by enabling a person to request information or to buy the advertised product without leaving the webpage on which the ad appears. If old companies can figure out a way to associate more with transactions, they can boost their chance of surviving in the online market. [3]

Quantified self: It is a movement to incorporate technology into data acquisition aspects of a person’s daily life in terms of inputs, states and performance. Applications or services on mobiles and wearable technology that provide self-tracking analytics contribute to self-knowledge through self-tracking with technology. Biometrics have been identified that people never knew existed making data collection cheaper and more convenient than ever before. Recently, companies like Google and Zomato have begun to use location data of a user’s phone to recommend suggestions to buy things based on the proximity to various shopping outlets.

Social co-browsing: Collaboratively sharing of the web space with one or more parties from a social network, regardless of the physical locations of the partners. In real-time, multi-user experience isn’t just slapped on top of an application, it’s directly built into the core experience. Companies would have to redesign their user experience to support social co-browsing so as to provide a natural extension of for users to communicate and interact to enrich their real-time, collaborative experience. [4]

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Future Implications

Most of the technologies at the peak of their hype cycles today, will plateau in terms of productivity within the next two years. The window to gain competitive advantage in this fast-paced environment is limited. Thus companies must adapt themselves for speed, agility and rapid customer response.

Content marketing can be very resource intensive. Organization should use marketing talent communities and agencies as an escape valve for demand as a way to scale elastically as demand comes online.  The in-source and outsourced roles must be carefully mixed together in order to optimize productivity. Organizations should appoint strong leadership to ensure the success of their elaborate content marketing strategy.

Common view of digital-savvy customers should be kept in focus to ensure tight coordination of marketing activities in sync with the changing customer needs and reactions. Emerging architectures of digital marketing hubs should be carefully reviewed periodically to best utilize resources for most productive outcome.

With increase in social-marketing hype, the social marketing objects should be tied to the corporate vision of the companies. Analysis of how each social marketing activity will support that goal and provide a high return of investment. Gain from adapting to emergent technologies can lead to savings on media from improved efficiency or lift in sales from improved effectiveness of a company’s budget.

B2B management investments should be made into multi-channel, taking advantage of accessible areas in data mining, segmentation and behavioral analytics. Useful analytic results should be incorporated to the marketing strategy to further boost performance.

Criticism about Hype Cycle

Several disadvantages of Hype Cycle have been brought to light. Firstly, it is very difficult to objectively estimate the current location of a technology in its hype cycle. Secondly, terms such as ‘disillusionment’ and ‘enlightenment’ are misleading for people as they give a wrong idea about how exactly and to what extent a technology can be used for an organization. Also, there is no mention of how a technology transitions between phases and what all factors influence the shift. Lastly, several technologies are heavily correlated in terms of advancement through the different phases. The hype cycle does explain the cause-effect relationships between technologies and their impact on acceleration of technology progress and generation of excessive hype for a product.

References:

http://www.gartner.com/newsroom/id/2819918

http://www.theregister.co.uk/2013/03/02/steve_mann_on_google_glass/

http://techcrunch.com/2010/03/07/the-rise-of-transactional-advertising/

https://goinstant.com/blog/collaborative-customer-interfaces-and-social-cobrowsing

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Mobile Number Portability: The Hype and the Impact

Mobile Number Portability (MNP) equips customers to switch over to an alternative network service provider without having to change their numbers. MNP was tipped to be the game changer and turn around the competitive landscape of the Indian Telecom Sector. It was launched with much enthusiasm in January, 2011 by TRAI (Telecom Regulatory Authority of India), after a successful model test in Haryana . However the actual customer switch-over rate has remained far below 1% per month compared to  a monthly average of 3-5% in more developed nations notching up only around 109 million MNP applications in the past 3 years. This is a little over 10% of total customer accounts switched in 36 months and is far below the expected pre-launch predictions.

Despite 55% customers expressing satisfaction with their current network provider and 48% over the network quality, there were strong supporting reasons for introducing MNP in the first place.  A Nielsen survey done at the stroke of the launch of MNP in India had revealed high customer interest (~1 out of every 5 customers) in using this facility (refer Chart 1). There were evident customer advantages meant to be seen with this new introduction, namely :

  • Major reduction in switching barrier, especially for customers owning a particularly ‘good’ number which they did not want to change
  • Inducing fair competition among the Network Service Providers (NSPs)
  • Better tariff and promotional plans
  • Improved quality of service

These were supposed to be the new rules of the game for Service providers if they had to retain their customers and poach new ones from other competitors.

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 Chart 1: Source – Nielsen Survey, 2010

Yet the actual impact was far less than originally predicted by TRAI. The reasons for the unexpected low impact are numerous. Researchers claim that higher %age of MNP is an indication of the level of maturity of the market and there is evidence to infer that Indian customers are not very ‘number’ conscious. Pre-paid account users, which form ~97% of all Indian wireless accounts, still exhibit a trend of buying fresh SIM cards (getting a new number) instead of necessarily using MNP. Even though post-paid account users show a better trend in this regard, the number of post-paid accounts is only 3% of the total. Also, data shows that for most of the experienced service providers, the parameters like tariff charges, network quality, value added services, etc. are more or less similar to each other, hence, there is no major value proposition for the customer to make use of MNP extensively. At times, even the network providers are not keen on poaching accounts which are historically low revenue generating.

Telecom Sector Impact Analysis:

Despite the Indian Telecom sector being a primarily pre-paid market, i.e., ~97% share in terms of user accounts, the remaining 3% of Post-paid accounts are extremely important for NSPs as they drive the overall profitability. The advent of MNP has meant that new entrants can capture adequate number of customers by poaching from the incumbent market leaders through offering higher value for price. Hence, customer service, quality of the network, value added services and customized tariff plans are the key to long-term leadership.

The Average revenue per user (ARPU) is much higher for Post-paid customers, hence, the profitability too (refer tables 1 & 2).

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Table 1: TRAI official report, 2013

Table 3

Table 2: TRAI official report, 2013

The Telecom sector in terms of its user account base is declining post the advent of MNP (chart 2), yet the overall revenues and correspondingly ARPU are on the rise (chart 3). This has been a positive for the NSPs as now the cost of issuing more accounts and blocking more numbers has gone down, adding to their profits.

The Telecom sector in terms of its user account base is declining post the advent of MNP (chart 2), yet the overall revenues and correspondingly ARPU are on the rise (chart 3). This has been a positive for the NSPs as now the cost of issuing more accounts and blocking more numbers has gone down, adding to their profits.

Chart 1

Chart 2: TRAI official report, 2013

Chart 2

Chart 3: TRAI official report, 2013

 

 IDEA: a clear winner

The impact of MNP has been best tapped by Idea Cellular and Vodafone, amongst all private and public sector players. Idea Cellular had a net 3.32 million influx of customers while Vodafone registered 2.89 million, in over a year of the introduction of MNP. Customer feedback suggested that it was the network quality and clarity of voice which led them to choose Idea over other NSPs. During the past fiscal (2012-13), Idea has registered the highest growth in revenues, on a percentage year-on-year basis (Exhibit 1). The contribution of MNP can be estimated as (assuming constant trends over last 2 years) = 3.32 * 10^6 * 105 (ARPU) *12 = 418 Crores, in terms of Gross Revenues. This amounts to nearly 229.9 crores (55%), in terms of Adjusted revenues, which is huge.

Attributing to the same benefits, consumer surveys have shown that customers have rewarded NSPs for good customer service and high network quality with competitive tariff plans. The reasons for not switching over to a competitor were dominated by customer satisfaction and brand loyalty (Table 3).

Table 3

Table 3: Paper by Rajesh Yadav and Nishant Dabhade

Similarly, as expected the main reasons for customers who made use of MNP were led by better features offered by competitors and lack of up-gradation schemes for the current service provider. (Table 4)

Table 7

Table 4: Paper by Rajesh Yadav and Nishant Dabhade

Looking ahead:

The next step in this direction from the Government is to provide National level Mobile Number Portability. This will enable customers to retain their mobile numbers as they move from one circle to another when they change states. Thus, not having to be on roaming and yet be able to retain the old numbers could be highly advantageous for such clients. This is targeted for an April, 2014 launch. But the impact seems to be primarily restricted to those people who usually get frequently relocated, which constitutes less than 1% of User accounts per month. Thus, expecting a major overhaul by this next leg of development in the Telecom space is highly unlikely. Hence, despite minor positives for both- customers and NSPs, Indian telecom sector still waits for its real game changer.

Table 4 (Source: TRAI report, 2013)

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Udit Kejriwal is a PGP-2 student at IIM Ahmedabad. An Aditya Birla Scholar and a runner-up at the ‘Dewang Mehta Best Student in Management’ competition nationally, Udit interned with McKinsey and Company for his summers. A former General Secretary Technology at IIT Kharagpur, Udit worked for 2 years as Quality Assurance Manager with Procter & Gamble on completion of his Bachelors in Mechanical Engineering. He is a passionate dancer, a long distance runner and a die-hard sports enthusiast.

Will m-Commerce lead the way for e-Commerce in India?

As of now, India has 10 % population penetration in internet usage. This is in stark contrast to the global average of 35%, and much below the average of the developed world at 78%. Though the population base is big enough for a thriving e-commerce industry, India’s e-commerce potential at the moment is limited by a number of factors:

  • Infrastructure system – India still is a cash driven economy with very low availability of the credit systems. This is a bottleneck for many of the consumers willing to purchase goods online, and is the primary reason for India’s unique jugaad of payment via Cash on Delivery. However, many large players are wary of such a system that is manpower intensive, and requires time to collect the cash from the consumer’s doorstep.
  • Slow internet speed – India still has less than 5% broadband penetration among its internet users, compared to 30% globally. The slow net speed results in several payment gateways rejecting transactions because of the time lag in connecting to the server and getting confirmation. This results in poor user experience and discourages further attempts at shopping online.
  • Poor logistics infrastructure – For most of the e-commerce companies selling merchandise, the delivery of the good to the end mile is still critical. This requires excellent logistics and transportation infrastructure which has been a glaring concern in India.

To address such concerns, the government recently launched the ambitious National Broadband Plan with an outlay of USD 12 billion, which aims to bring 160 million households under broadband connection by 2016. This would take broadband penetration to that of the developed countries, opening up significant opportunities in sectors like education, business, entertainment and e-governance. However, it is feared that if we miss out on the intervening years, the Internet revolution could just bypass India.

This opens up an excellent platform for the private sector to contribute by pitching in and leveraging the strong telecom infrastructure already in place. With more than 67 million smartphones in the country and a ubiquitous 3G connectivity, high-speed mobile internet penetration far outpaces the broadband penetration. Though high speed fiber network is still important for organizations and institutions, mobile internet speed is sufficient for individual consumers – the main segment of customers in e-commerce.

Just as mobile telephony overtook the Indian wired telephone network thus revolutionizing voice-communication and sms, jugaad innovations in m-commerce are paving the way for a similar transformation in e-commerce. Mobile payments such as Airtel money and mobile to mobile transfer can circumvent the need for a credit card payment which has been so far unavailable to the mass public. Mobile e-commerce or m-commerce can really help capture the Fortune at the bottom of the pyramid. Already 45 % of the online users in India access so using only their mobile and contribute close to 3% of the e-commerce revenues. M-commerce is well established and trusted for small payments such as downloading ringtone and music. This suggests some trust is already established in the virtual mobile payment system.

Critics of m-commerce point to the small screen size of the handsets and suggest it would fail to gain momentum. However this argument fails to stand ground. Myntra is a leading online fashion portal and earlier had only 4% of its revenue coming in from mobile. However, they realized the advantage m-commerce offered in capturing the demand of Tier 2 cities and small town India, and after they redesigned their website to suit mobile screens they witnessed explosive growth in revenues generated from mobile purchases – they were able to garner 20% of their revenue from m-commerce last year. Additionally, 70 % of Indian e-commerce is for travel bookings and classifieds, which can be easily transferred to a small screen. The travel bus ticketing giant RedBus, attributes their success to presence in the mobile segment via apps that consumers quoted were its differentiating factors offering ease and convenience.

The m-commerce also offers other benefits such as geo-contextual shopping experience which is unmatched by any other media. Zomato and Justdial have shown leaps and bounds in their growth since they launched apps that use a consumer’s GPS position for better targeting of services.

To sum up, m-commerce is ready to take India’s e-commerce success to new heights. However it needs government and public support. The government should offer significant incentives such as promotion of FDI in e-commerce and telecom. High pricing of the 3G spectrum, and the failure to share 3G spectrum across competitors will only hamper India’s e-commerce growth story, and is bad for the consumer. Nonetheless, with year-on-year growth of 57%, m-commerce stares ahead for an exciting run.


Satvik Dudeja is a PGP1 student at IIM Ahmedabad, and a member of the Consult Club. 

Strategy Digest Vol 1 (Jan)

BMW and Affordability

An affordable BMW sounds like a classic oxymoron. Surprisingly, BMW has gone ahead with a well thought out strategic move to launch the entry level SUV – BMW X1 – in India. The X1’s price tag at INR 22 to INR 29 lakhs puts it in direct competition with the Honda CRVs and Toyota Fortuners of the extremely fast growing SUV segment in India.
The high end luxury car market in India is growing at an astonishing 74%. The playground offers attractive rewards with ever growing sales figures and BMW seems to have played the card just right. The BMW brand tag offers much more value to the Indian customer than a Toyota or a Honda and that is exactly where the BMW X1 scores over the competition.
However, if BMW really wants to conquer the Indian market even more convincingly it needs to capture the depth of the market that extends beyond the metros of India today. It needs to establish a robust after sales service network to make sure that models like X1 realize the sales potential they seem to possess. The X1 is a great launch and it’ll be interesting to see how Toyota, Honda and Hyundai face the new found competition from the grand daddy of automobiles.

The Mobile Store: Ready to evolve

With over 1200 stores and a 45% share of the organized cell phone retail market in India, The Mobile Store has been going great even with a strong pressure on margins. With a drastic shift in consumer preferences towards smart phones and falling price tags, The Mobile Store plans to change the phone shopping experience for its customers.
The Mobile Store plans to develop 300 of its stores across 50 cities into experience stores. These stores will allow users to get a feel of the phone, utilities, apps and new technology. It plans to do away with the cheap plastic dummy phones that we get to see presently. With trained Mobile Store personnel who will help the consumers choose apps and phones according to their needs, it plans to make it interactive for its consumers to make a wise choice while they buy a phone.
This plan undertaken by The Mobile Store is capital intensive and will surely put heavy pressure on the already squeezed margins in cell phone retail. Currently a retailer earns anywhere between 5-8% on the price. Moreover, the market is heavily price conscious and people make it point to get the cheapest deal even after they try out phones at outlets such as The Mobile Store. The implementation of the plan on a massive scale is also an issue with aggressive retailing tactics being employed by a growing number of competitors. 

Bypassing investment bankers in valuations

The selling of Honda’s stake in Hero Honda, Ranbaxy’s sale to Daiichi, Fortis-Wockhardt deal and the $3.7 bn Abbott-Piramal deal among many have a strikingly common story: There were no bankers involved in the valuations. It is a recent trend that has emerged lately when a lot of corporates strongly feel that “No Banker can ever know their business better that them”.
To add to it, more than 80 percent of the banker-madated deals in India are conducted completely by the promoters themselves and the bankers are left to pure mathematical execution. This trend seems to be fully justified and also enhances the confidentiality aspect of the deals. Information leaks have been a major cause of mammoth deals being brought down in a matter of days and bypassing the bankers seems to be a way of avoiding that. Other major examples include the TATA-JLR deal where the valuation was done by Tata’s close team and not bankers advising or executing the deal.
The bankers on the other hands are not losing out on the dealbook business but their profile of work is shifting more towards the financing, fund raising and implementation phases of the deals. It will be interesting none the less to follow the role of bankers in the deals to come in 2011.