Christian Schulze
Associate Professor of Marketing
Christian Schulze is Associate Professor of Marketing at the Frankfurt School of Finance & Manag...
Management

Digital Marketing

February 29, 2016
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The Past: Offline Marketing

For half a century, consumers’ media consumption was dominated by offline media—primarily television, radio, and print. To reach their target audiences, marketing executives dreamed up elaborate advertising campaigns, spent big bucks to get them out to consumers, and then patiently waited for positive responses in the weeks and months to come. Measuring the success of such campaigns was often impossible to do—earning marketing notoriety for being a waste of money.

The Future: Digital Marketing

At the turn of the century, however, things began change. The internet took over consumers’ daily lives like no other technology before. Today, more than half of all the media we consume comes through digital channels. As smartphones, tablets, and laptops become ubiquitous, YouTube and Netflix are replacing television, Spotify and audio streaming are replacing FM radio, and websites and e-papers render print newspapers and magazines a thing of the past.

Advantages of Digital Marketing

As consumers’ media consumption habits change, so does firms’ ability to reach them. Reaching consumers through digital channels—“Digital Marketing”, as we call it—offers several advantages over traditional offline marketing.

First, firms’ ability to target specific consumers has increased greatly. Today, an online retailer can decide to advertise only to those consumers that have visited its online store in the last 48 hours. Even more, if the potential customer has looked at a specific product during that visit—say a red shoe—the retailer can use that exact red shoe in its advertising message. Not surprisingly, targeting individual consumers and even customizing the advertising message for each of them is much more effective than traditional offline marketing, where uniform advertising messages delivered to broad consumer segments have firms waste the majority of their marketing budgets on the wrong people.

The second big advantage of digital marketing is measurement. In offline marketing, it was often impossible to tell, whether a customer had actually seen an advertisement and if so, whether that advertisement had any influence on the purchase decision. Online, it is possible to track individual consumers across time and even across devices. Advertisers can see that a customer first saw a Facebook ad on their smartphone, then searched Google on their laptop, and ultimately clicked on a video ad on their tablet before making the purchase. Suddenly, advertisers don’t have to guess, whether their ads have an effect—they can measure it!

With measurement comes the ability to optimize. Testing two different advertising campaigns—so-called A/B testing—is easy in digital marketing. In fact, advertising platforms such as Google have even built-in functionalities for A/B tests, to help advertisers optimize their marketing spending.

Digital marketing allows firms to target and even re-target specific consumers, measure the success of their campaigns, and provides ample tools for optimization. All of this makes digital marketing highly attractive. Yet, many firms struggle to fully embrace digital marketing. Why?

The Challenge for Firms in Using Digital Marketing Instruments

One inhibitor for whole-hearted digital marketing acceptance certainly is novelty. Even though the internet started becoming a main-stream phenomenon 15 years ago, digital marketing instruments are still in flux and come and go quickly. 5 years ago, mobile advertising was a niche phenomenon. Today, many consumers cannot imagine a life without their smartphones.

Moreover, understanding and integrating the various digital marketing instruments—from display and search engine advertising to viral marketing and social media—is not an easy task. Not only because many digital marketing instruments require substantial technical expertise, but also because their relative newness means that surefire ways for using them don’t exist yet, potentially exposing advertisers to risks of failure.

The most important challenge for firms to successfully adopt digital marketing, however, is neither novelty nor risk. It is mindset. For 50 years, marketing executives based their decisions on intuition, experience, and gut feelings. With digital marketing, firms don’t have to guess. They can—and should—test, measure, and optimize on a continuous basis. Today, marketing executives need analytical skills at least as much as they need intuition.

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