Web 2.0 challenges traditional marketing approaches

The traditional four P’s of marketing championed by Phil Kotler of Kellogg have been a cornerstone for many years. Product, Pricing, Placement, Promotion. At least TWO and maybe three of the P’s are much more difficult to manage given the changes driven by the internet and specifically Search Engine Optimization and Search Engine Marketing.

Pricing is not as straightforward and direct as it is for traditional bricks and mortar (and even web 1.0) businesses. There are multiple levels to get to the paying customer. The revenue is much more indirect than in any other business. For example, if a web 2.0 site is dependent on advertising revenue how do you control the ‘P – Price’? Yes, once you get to a certain size you can demand higher CPA or CPC rates, but you are still dependent on generating traffic to show the ads and even then your ability to drive the conversion rates necessary to recognize the revenue is semi-passive at best. And this is AFTER you have reached a traffic level where you can even set a price at all. Is this truly ‘Pricing’ in the traditional sense? Instead of focusing on the traditional levers of COGS (cost of goods sold), Gross Margin targets, and variable sales and marketing costs the web 2.0 marketeer has to focus on traffic, eCPC (effective CPC) rates, Click through rates, and ad priorities. And where the site actually generates direct revenue (such as subscriptions or premium features) there are additional metrics and drivers that the marketeer needs to focus on that are far outside the realm of traditional marketing.

Placement also has a very different meaning in the web 2.0 world. There is no shelf space (relatively) with the exception of search engine rankings and banner advertising locations. Banner ad locations also present a challenging difference. Does Banner Ad location represent Placement or Promotion? A/B testing is so critical in web 2.0 marketing! Unlike traditional advertising A/B testing where the marketing professional is testing both creative and media in the web 2.0 world the marketeer is testing location (placement) on page, media, specific site results, and creative. All of this with very questionable and inconsistent metrics between different sites and tools.

So, what does this mean? In my mind we’re beginning to see a new paradigm develop. Marketing will be much more dependent on analysis of metrics such as click through rates, exit rates, and time on site. Rather than being able to run focus groups to find out what customers ‘want’ the web 2.0 marketeer is going to have to be able to do in-depth statistical analysis to understand how the customer ‘want’ is translated into actions and web development.

Deepak Jain, the Dean of Kellogg’s School of Management, has a Masters in Mathematics and Statistics and is a top professor of marketing. I had a class with him early on and he spoke about the increasing integration of math and statistics into the marketing process. I didn’t get it at the time because I was in a traditional business. Now I do. He’s right and it’s moving faster than even he suggested.

Are others finding similar things? I’d be interested in hearing your thoughts. We’re beginning to look for more quant-friendly marketing interns here. Are you? Mail me at daltounian@itaggit.com.

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