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The post war period saw a huge surge in the use of mass market techniques. Commercial radio and TV, colourful magazines and street posters, and of course "junk" mail. For nearly 50 years it seems to have worked but for how much longer can advertisers continue to use these media?
Recently my son, who has just left university, received (at my address) promotional material for home insurance from a niche broker. Using a form of his name that he doesn't like (a good start!), the letter opened by referring to high net worth homeowners (he is neither), and gave example quotations for homes with sums insured of £250,000 to £1 million. Even I don't live in a £250,000 house! I retrieved the mailshot from the bin and kept it as an example of poorly targeted promotions.
Major financial players for one have certainly been embracing mass marketing techniques. But just for how much longer can even they continue to increase their promotional spend? One major bancassurer told me they spent £20 million last year and will spend £25 million in this year, all just to maintain parity with their competitors. It's like a huge poker game, but I believe one where there may be no winner, for the market place is about to change. The rise of the direct lines is not an end game, but merely a stepping to a completely different world. A world of interactivity, of personalised and customised products, all at a mass produced price.
As individuals we are leading more complex, more fragmented and unpredictable lives. Combined with individualism, with a growing confidence in financial services, and a number of highly visible scandals (e.g. pensions misselling), we are increasingly sceptical of one size fits all. Further, mass market techniques depend on mass market mediums, but all this is about to change.
This autumn will see a major new delivery medium: Digital TV, with programme and information content delivered via satellite, cable, and terrestrial transmitters. BSkyB will offer 200 channels via satellite, with many being used for near video on demand. It will also offer many more special interest channels, for example, 7 from Disney. British Digital Broadcasting (BDB) - now renamed as ON Digital - will be the major terrestrial player, of which Carlton owns 50%. On Digital will be dedicating some of its 30 channels to programmes based on famous printed magazines issued by IPC and Haymarket.
Cable and Wireless Communications (C&WC), the UK's biggest cable operator, goes a step further. It has acquired 50% stake in Two Way TV and can thus offer its subscribers interactive TV. To begin with, Two Way TV will emphasise game shows, with people at home completing against the studio contestants and against each other. Then there will be home catalogue shopping and home banking, and later maybe even armchair gambling. In a 3,000 home trial in the Midlands, subscribers used the interactive facility on average 10 hours a week at a cost of under £10 a month. They are forecasting much lower costs for the national launch.
Not to be out done, BSkyB has joined with BT and Matsushita and Midland Bank to create British Interactive Broadcasting (BIB). Using its set-top boxes they will also offer home shopping and banking as well as internet surfing.
Very recently, the BBC joined forces with BT and Microsoft (whom last year purchased the WebTV company), to trial a combined TV-Internet service. Viewers will be able to jump straight from a URL displayed in a programme to the actual web site, simply by using the remote control. TV-Internet devices and services are very popular in the US where WebTV already has 400,000 subscribers. They are easy to set up (plug in and go - no software installation or drivers!) and do nifty things like go off-line when there are incoming voice calls and then automatically reconnect when the call finishes.
Watch out for LineOne, owned by the Murdoch Empire. I predict they will also make a move into web-TV. Media barons, drawing on their huge information banks, can offer vetted and safe surfing, all packaged with an easy to use and consistent interface. It's ideal for family viewing and for the less technologically adept. AOL is also looking at using web-TV for delivering its services. These services will in-turn attract major suppliers of goods and services who will pay access fees and commission on sales. We could see companies sponsoring the programmes and then having the opportunity to include their products in the programme. So, if you like the outfit the host is wearing, then click on it and you too can buy one, then and there. At a touch of a button, customer service staff will be able to interact with the customer in order to answer questions, demonstrate the product and to highlight features.
Advertisers will have to adapt to these new mediums. They need to think about making more interactive adverts, as well as turning to micro marketing in order to select the most appropriate channel for the adverts. However, over time the delivery companies will amass social and demographic information on their customers as well as their viewing habits. Advertisers can then, for a price, specify the profile of the viewer, and the advert will be delivered at the appropriate time. This technique, combined with variable pricing, could also be used for delivering targeted and personalised offers and products. American Airlines already does this via the Internet to its loyalty group of customers participating in its Advantage programme.
The rise of the direct lines is partly a response to consumer demands in the time of day and place they can communicate with companies. In the future customers will extend this choice to the mediums used. Use and familiarity with interactive TV will, I believe, encourage consumers to use other new interactive mediums: PCs, kiosk systems, and the more sophisticated mobile 'phones, pagers, and PDAs. Companies in turn will need to be able to receive and consolidate and integrate customer messages from all these mediums. For example, a consumer may make see an advert in their morning newspaper, make an initial enquiry via their PDA, and later in the day get a query back by mobile phone. Then, on returning home in the evening, find a personalised proposal sent by email to their PC or Internet-TV.
These more sophisticated mediums will also allow consumers themselves to personalise and customise products, including services such as financial services. Already in the US consumers can specify their own personal credit card, defining such properties as the statement and payment dates, the protection insurance, and the loyalty scheme. They can also negotiate the charges. In turn, suppliers of financial services will use the customer's preferred medium to deliver target infoadverts and promotional offers. It will be the marketers and/or the customer that define the triggering rules, not IT. For example, a customer could purchase additional unit trusts when the price falls to a certain threshold. The marketer could offer a 10% discount when a prospect visits a web page for the third time but has yet to make a purchase. Software from BroadVision already offers this capability.
To exploit these new opportunities, companies will need to know each customer's individual acquisition and use of these new technologies, as well as understand individual consumer needs, values and behaviours. Then, using underlying technologies such as object technology, they will assemble the requisite components to build a unique product or offer, and then deliver it through the appropriate mediums. Above all, this needs a marketing approach with technology very much as an enabler.
For many the traditional broker or door to door salesman, with their intimate knowledge of the customer, may seem to belong to a bygone age. But for larger insurers there is now an opportunity to exploit these new technologies and new mediums so as to break free from the product driven mass market approach. It's an opportunity once again to provide consumers with their unique personal financial needs. But it's a changing consumer, with different and individual needs, more financially articulate, and with high demands, so it requires an approach driven by the customer and not by IT.
The author Alan Cooper is a business analyst at Managing Change, a consultancy that specialises in Interactive Marketing, particularly within Financial Services. He can be contacted via e-mail at alanc-at-managingchange.com
Internet Business is a recommended monthly UK publication edited by Tim Wilson. It is available from newsagents at £2.95 an issue or via postal subscription at a reduced rate.
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