On driving successful O2O marketing

Doing a quick search using combination of “online” and “offline” does not yield any satisfactory definition nor acronym, thus for the purpose of this article, O2O will be referred as “online-to-offline”.

So what is O2O marketing and why does it matter?

Stop here if you are expecting a success formula to increase ROAS or ROI for your marketing spending.

O2O marketing is the new hot keyword around the block. It offers new ideas and chances to capture further conversions from both existing customers and new customers from offline to online or vice versa. In the beginning of online business, online business is often characterised with lower prices due to lower operating costs. Traditionally customers travel from online to offline to have physical experience of the actual products, as well, from offline to online in order to obtain cheaper prices, provided the transportation costs to the physical stores are minimal and does not outweigh the shipping costs. 

Historically, it has been shown that companies with purely online model has lower operating costs while brick-n-mortar companies show much bigger revenue generations. Since the early 90’s, online business has been grabbing exponential large shares from the traditional brick-n-mortar business model. In the recent years, we start seeing companies relying online business building offline stores, as well as the reversed direction.

From the organizational point of view, online business utilises new talents which are often brought in from outside and treat as separate group. Managers not fully grasping the macro picture will often put people on the same scale of sales KPI measurements, which often let the online business people shine like new born star in the organization.

Guess what? Jealousy is a human nature. Most people work on simple motivational factors which maximize their reward with lowest risks. When a new entrants endangers their reward, it is natural to go into defensive mode either by defending their territories or destroying new entrants entirely. In either case, it is not exactly healthy for the growth of organization. As a smart manager, you want the people sells via both offline and online channels to play nicely and work together.

The main question is how to drive long-term successful O2O marketing.

The same question can be reworded to “how to get online and offline people to play nicely?”

It doesn’t help when you, the smart manager who wants different groups to work together in order to achieve a unified goal while they are motivated and measured unequally. In the O2O paradigm, there is no universal formula due to the differences of revenue generation in different business models. You have to understand the entire channel driving mechanism, and work out fair motivational measurements in order to get people to play their parts.

Measuring the point of conversion is fundamental and understanding who comes from where is vital to every business. O2O by default generates fears of losing sales that should’ve been. To minimise such fear, lead generations to other channels should be evaluated as positive contribution and be rewarded. It should be considered more in the fashion of affiliate network. Without proper motivational factor, it is unlikely that one group would be voluntarily work for the other groups.

In the O2O paradigm, both conversions and lead generations should be evaluated, but not on the equal weight. Depending on the responsibilities of each player, the evaluation should be adjusted accordingly depending on the flexibility of HR. After all, if the entire group doesn't win, everyone in the group loses.

On mobile experience and advertising technology

2013 IDC report on smartphone shipments has been released.

The title:

Worldwide smartphone shipments top one billion units for the first time.

It is to no one's surprise that the growth of smart mobile devices continue to surge and replace the PC needs in certain applications. Yet, it feels like back in the early days of internet business when the industry tests out all things to find way to generate money via mobile commerce. Beyond the closed ecosystem of app and micro transactions, the existing PC-based model and technology is yet to find new light.

It is quite interesting to see the rate of technology breakthrough for the smartphone has been astounding, yet people are still scratching their heads on optimizing the web design, advertising, payment, and etc. Marketing activities and technologies associated with e-commerce have also been rapidly retrofitted for mobile devices. There are arguably numerous significant differences between PC and mobile user experiences. The single most critical difference is the canvas size. By reducing the canvas size, it is trivial to realize that we pad so many distractions onto a website.

"PC first (and mobile later)" has been the only development paradigm up till now due to the restriction of technology and economy model. Traditionally, PC-based design has existed, e.g. e-commerce site, when mobile user base is so small, optimizing for mobile devices means using the least costly option, often that means changing the CSS only while keeping the rest of the infrastructure the same. When the screen is so limited, you want every pixel to be used to display the most critical information, thus when optimizing for mobile experiences, advertisement or banner-based information is most likely the first ones to be cut. This is going to inevitably hurt advertising and search business going forward. Many ventures have been diving into the mobile only field, but only a handful is making profit.

"Mobile first" has been the focus in recent years. Even the search giant has been reversing its UX designs philosophy going from mobile to PC or rather, i.e. starting with smaller canvas and increase on-screen information based on canvas size. This approach conflicts with the traditional PC first approach in the sense that marketing technology has always been piggy backing on others for main contents generation. In the reduced canvas mobile world, these marketing contents are inevitably fighting for on-screen time and space which often reduces user experiences.

While our time with computing devices increase tremendously, the time on PC is steadily decreasing while the time on other devices are increasing. We are now at a tipping point of computing time share. The time we have on the devices are supposed to be helping us reaching our objectives more efficiently, be it work or just killing time. With the reduced canvas and direct-to point-use case on the mobile devices, displaying ads smartly is not as valuable as it used to be. The mobile advertising offering needs to offer value not only for the merchants but for the users at the same time. To offer valuable information to users require user information, and for now, the only ones who really own that information are the mobile OS providers. I can't shake the feeling that one day our mobile devices might become an advertising pocket monster in our pockets eating our wallets.

Hays, carrot, horse, and business.

"Work takes a large portion of your life therefore your should find something you love to do."

At least that is what everyone would like to think. However, not every work is considered fun or worthy of loving.

Every business starts out with a vision, a vision that creates work and sets things in motion to transform resources as efficiently as it can to maximise value. In any age, any work requires people to set things in motion but to get people to work or even maximise their ability to achieve requires the understanding of their motivations to work. Money is perhaps the most lucrative and basic motivational factor for the majority.

“The people are operating with one simple goal, albeit unstated: to minimise their risk and maximise their bonus.”

This is one of many famous quotes by former GE CEO, Jack Welch. People work for vastly different reasons. Until one is entirely financially independent, monetary incentive always plays a certain role in the incentive. This theory has been proven and disproven by various model depending on the spectrum of the needs model and samples. Put it very rudimentary and layman’s term, it is not much different than the carrot and horse game. To play the carrot and horse game well, we need to address these factors well:

Hays

For the horse to chase after the carrot, it must have the basic perpetual energy to keep running. The horse lives on hays, and in real world, that means the monthly salary to pay bills and expenses. The horse will eventually have diminishing returns on the hays. It is inevitable as we all age and become less productive as we used to be, but the burden on our backs will only increase over time. Every horse has different condition, and to expect every horse to run equally efficient with the same amount of hays is ridiculous. Winning horses should be awarded while the losing horses should be attended. More hays is not necessary better but hays should be spent on keeping and cultivating stronger horses. Personally, I believe that the horseman (i.e. the company) has the responsibility to understand and fine-tune the horses under its management. Without doing so, it may be difficult to expect the horse running healthy and efficient.

Carrot

Under the game, it is important to understand that when the carrot should be caught by the horse or when to change the carrot. The carrot is both the vision and the reward. It serves as the direction for the horse to run towards. The carrot is not the goal line that the horse crosses in races. In this game, there is no goal line. It is a finite chase after carrots. Every business exits for a purpose, and every leader has a vision for the organisation that deals the business. A faster horse is not the winning formula, a horse that chase after the carrot is. While the carrot serves as the vision for the horse to chase after, if the carrot is indefinitely reachable, the horse will eventually get tired and run reluctantly, leading to low efficiencies on hays spent.

Horse

It is critical to realise that not every horse would chase after the same carrot, and to find the horse that would chase the carrot that you put out. If your carrot is losing attractiveness for the horse, you should consider changing the carrot for the horse. Reiterating how tasty the carrot over and over again will not cut it for the long running horse. Without proper adjustment, the horse will focus less on the carrot and more on the hays.

Only horses that have tasted carrots or success will understand which carrot serves them the best. Horses that have never tasted carrots only understand the taste of hays. It is by no means saying latter kind is any less competitive than the former though it is always ideal to find the horses that would like to chase your carrot than the hays.

So what does it mean for business?

In this carrot and horse game, the horseman puts one carrot in front for a set of horses under the horseman's management. The whole game may be played against other horsemen. If at any time, the carrot becomes meaningless for the horses, the business ceases to exist. Therefore, all business should exist meaningfully. After all, it is the horse that move the horseman forward.

Feed the horse well and give them a meaningful carrot to chase.