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.

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. 

The progressive development

If there is only one take away from working at MUJI, it must be the understanding of what I call “the progressive development”, or growth at different stage.

An organisation often develops from few individuals to a team, to a set of teams, to departments, and eventually to a set of firms, or what’s called corporations. The size of resources and change of organisation is in direct correlation with the growth of the company. Under an organisation, using the BCG framework, it is not difficult to identify the golden flower. Without the existence of the golden flower, an organisation would be nearly impossible to become a corporation. Naturally and logically, when a corporation wishes to replicate the golden flower business to a different market, researches done, resources allocated, partners found, and paperworks filed prior to the entry. Even with 120% preparations efforts, often things just don’t go as smoothly as it would in the home market.

Many hypothesis or past cases suggest different market approaches, labours, or product/service perceptions are the contributing factors to the unsuccessful market entry cases. Marketing is only half of the story to an unsuccessful market development in a new environment, the other half of the story is the lack of flexibility and progressive development. Flexibility is the easier part to fix. When an foreign offering is having difficulty to be accepted in the new market, it is critical to change up the marketing story ever so slightly to let the local customers be interested. Local insights and speed of changes are required. In most cases, getting approval from HQ for changing the marketing story is not too difficult as long as numbers show success. The progressive development is, on the other hand, difficult to be grasped, or more correctly speaking, difficult to be reproduced.

Any successful business grew from a small scale of organisation to large corporations. SOPs, rules and policies often evolve in reflection of the organisation size, growth, and past experiences. Any company is likely to have only one set of policies at any given time. When entering a new market, the entry team is likely to be small and required to run the general affair side of business while running the core business at the same time. Therefore the abide rules should also be modified accordingly.  Applying the policies of an corporation unto a small firm is doing more harm than good. For any large corporation to go back in time and remember how to be a small firm is impossibly difficult without proper knowledge management. Disposing existing system or having dual standards is also out of question, but the market entry team requires loose rules and less paperworks to grant them flexibility for them to run the core business more efficiently.

While the ultimate goal is to adapt the home market core business operations and rules in the newly entered market, initially, an HQ-support model is absolutely required. The progressive development requires the HQ to readily pick up bulk of the core-business operations from the entry team. As the entry team grows, HQ will be able to propagate some of the taken tasks back to the subsidiary. As aforementioned, the new entry team will spend a portion of the time dealing with non-core business functions, in order to achieve high efficiency using the less than optimal amount of time. Before making the market entry, HQ shall develop the following functions for the entry team: simplified process, localisation support, and common backend IT system.

Simplified processes

Paper works exist to record and clarify things throughout each step of the processes. Without altering the existing processes or intermediate KPI due to market entry, less critical steps should be handled by HQ, where the resources are assumed the most abundant, thus, entry team could spend more time and acquiring new customers. Exceptions may occur if cheaper labor costs exist in the new market, where the same processes may be duplicated with cheaper costs. With timezone and multiple market entries in mind, it is a tricky balance to consolidate the work in one market for cost saving and keep local staff for immediate support due to time zone differences. 

Localisation support

The localisation support by no means is a must for any new market entry. This only means that the HQ should only prepare its processes and systems for multilingual standards. HQ should never pick up the translation work. I personally believe that only the local branch office staff can best understand and translate official materials.

Common backend IT support

Keeping inline with the ultimate goal of adapting the same processes and rules as HQ, common backend IT systems are required. Market specific exceptions may occur, the main processes and KPI should still be kept equal regardless. 

Any company no matter new or old, when entering a new market, it is seemingly to start itself all over again. There is no need for the new entry firm to walk the same path as HQ did in the home market, but becoming the same scale as HQ will also take some time, as well as the rules applied. Companies should understand the different needs and required support for subsidiaries of different sizes. Growing a company requires knowledge of both past and local. More importantly, support from HQ will shorten the time needed for the progressive development, increasing the entry team's efficiencies and chances of success for the new market entries.