Lawrence BergenfieldBergenfield & Associates

February 2010

Digital Bridges into The Physical World‘enabling two-way interactive solutions’

Understanding Your Customer TodayUnderstanding Your Customer Today

Consumption: Whatever, Whenever, and HoweverConsumption: Whatever, Whenever, and However

Consider Marketplace ExamplesConsider Marketplace Examples

CLOUD CLOUD computing done at its best eReader - Kindle by Amazon - in less than 12 computing done at its best eReader - Kindle by Amazon - in less than 12

months has become a billion dollar industry.months has become a billion dollar industry. This past Christmas eReader books surpassed physical books on AmazonThis past Christmas eReader books surpassed physical books on Amazon

PLATFORMPLATFORM Android- Google’s New Mobile Phone Operating SystemAndroid- Google’s New Mobile Phone Operating System +30 different styles from many manufacturers will launch this year. +30 different styles from many manufacturers will launch this year. New game changing applications like Visual Search will drive new consumer New game changing applications like Visual Search will drive new consumer

behavior.behavior.

JOURNEYJOURNEY Apple - from the iPod/ iTunes evolution to Apple TV, iPhone, and iPad. Apple - from the iPod/ iTunes evolution to Apple TV, iPhone, and iPad. And, just when you thought it was over, came mobile applications. And, just when you thought it was over, came mobile applications. The new wave of cutting edge Applications focused on location-based The new wave of cutting edge Applications focused on location-based

services (LBS), Video, and Intelligence will morph into Networked services (LBS), Video, and Intelligence will morph into Networked Augmented Realities.Augmented Realities.

Television

Internet

Print

Consumers say they spend as much time online as they spend watching TV, while consumers under the age of 35 spend more time online than on TV.

Where People Spend Their Time…

Where People Spend Their Time…

Television

Internet

Print

But, they spend over 10 times as much time with TV and the Internet as they do with print media like magazines and newspapers.

Consumers say they spend as much time online as they spend watching TV, while consumers under the age of 35 spend more time online than on TV.

But Advertising Spend Doesn’t Match

Television

Internet

Print

But Advertising Spend Doesn’t Match.

Newspapers garner nearly three times the expenditure of online, and advertisers spend four times as much on TV advertising as all online advertising.

Television

Internet

Print

The Triumvirate of Marketing Today..

Television

Internet

Print

Direct Email Opt-in

Banner AdsSearch EnginesPortals

Short CodesWeb Sites

StoreInformational

NewspaperRegionalLocalWeekly Inserts

MagazinesDirect Mail

NationwideBroadcast NetworksCable Networks

RegionalBroadcast NetworksCable Networks

LocalizedCable Networks

Average Costs: Direct Mail $0.25; Sunday Circular $0.12; Email $0.004

Digital Migration of Advertising

Television Internet Print

WebsiteShort Codes

“Interactive TV”

Incented Video

WebsiteText MessagesEmail MessagesIncented Video

Coupons

Digital Loyalty

2D BarcodesShort CodesWeb addresses

Coded Ads

“Crossing the Channel and Enabling the Two-Way Street”

Advertising, for the first time, can truly become a two-way (‘push/ pull’) communication between seller and buyer

Digital Green is the new commodity that allows advertisers to connect offers & rewards directly to the point of purchase

From our Youth….One Third Of U.S. 10-Year-Olds Have Mobile Phones

Last year, more than 35% of U.S. children 10 to 11 years old had mobile phones,

•Almost double the amount in 2005, according to Mediamark data

http://www.businessinsider.com/chart-of-the-day-us-children-who-own-mobile-phones-2010-1?utm_source=Triggermail&utm_medium=email&utm_campaign=SAI_COTD_011910

To America’s Most Important Demographic… MomsSocially Viral & Value Conscious

Yes, Boomers Have Found Social Media andover the age of 55 is the fastest growing segment

The main reason is the same as every other generation has adopted social networking:

•They want to be connected to friends, family and most importantly, grandchildren

•In fact, boomers are more open to meeting new people through social networks than any other generation

Social Virality Now Accounts for 1/3 of all Internet Traffic

Twitter is processing more than 1B tweets per month and is expected to have 100m users by years end;

Twitter has become the MOST real-time news source and now Tweets can be found when conducting search queries;

Facebook has passed Yahoo and is now the number 2 most frequently visited website, second only to Google;

The Average Facebook User Spends 7 hours per month on the website vs. Google at one and half hours per month AND now reports 100+ Million Active Mobile Users

SHARE------ Social Virality!

Share This Post:Share This Post:

The iPhone has redefined consumer experience

Edged out the Mac business ($4.5B) and iPod ($3.4B) for second quarter in a row and the third time ever.

During 4Q09, Apple reported $5.6B of iPhone-related revenue, up 90% year-over-year.

First time iPhone has beat Mac and iPod by >$1B each.

And this despite Apple missing Wall Street's expectations for iPhone sales, thanks to increased competition from Google Android and other smartphones.

What’s a Mobile Phone For Anyway?

Voice

Enterprise Mobility

Social Networks & Internet

Location Based Services

Financial Relationship, Presence & Identity

Video on Demand

Smoke & Mirrors or was the Applications and Screens

Digital Advertising +11% YTD, 2010 estimated spend $65 billion *

http://www.adweek.com/aw/content_display/news/digital/e3i87c96b4228796e1d5aa19258f0fb5703* WPP's GroupM September 2009**GroupM said, citing comScore data from March 2009. As usage grows, marketers will likely spend more in the sector.

Accounting for 15% of all measured media

In the U.S., digital advertising is expected to climb 7% next year to $24.4 billion, grabbing a 17% share of total spending, compared to 15.4% in 2009

Much of the U.S. growth will be fueled by sharp declines in traditional print advertising, particularly newspapers

Mobile advertising will rise 19% next year to $3.3 billion, accounting for 6% of all digital spending.

What are Companies Paying for Digital Exposure?

21

22

Perceived Benefits:Why big & small companies are becoming more & more digitally inclined

The 360 Degree Center Cross Channel View…

Website

Mobile

Social Networks

Print Media

E-Mail

Rich Media

What Problems are We Solving?

Decreasing customer acquisition costs

Increasing basket size, spend and store visits;

Streamlined checkout process;

Reduction in inventory hold time;

Increasing turnover;

Quantify relationship between offer & redemption and spend & loyalty;

Making loyalty personal!

A.R.M.I.

Acquisition

Register

Measure

Index

Video Values/ Rewards Closed Loop Case Study

Dramatically Decreased Customer Acquisition CostsIncreased Average Basket Size and Spend by close to 100%Increased Average Customer Trip Frequency by close to 300%Identified Top Segment of CustomersAverage Redemption Rates close to 30%Year over year participating vendors experienced approximately 20% unit increases and 25% sales increasesDrove millions into in store salesGarnered hundreds of thousands of fully viewed videos per monthApproximately 80% of customers come virally or from sources outside of the retailer’s websiteOver 100 leading brands have participated

Metrics Determine Future Performance and Direction

Site & AdPerformance

Web OptimisationAction Items

Web AnalyticsCustomer Insights

SitePersonalisation

CustomerAnalytics

Customer RetentionCustomer Acquisition

Increased Basket Size & SpendMeasurable Return on Investment

‘Food Chain Theory’ Five Rules to Unlock the Digital World

By: Lawrence BergenfieldFebruary 2010; Revisited

Originally Authored Summer 2008

Digital Advertising Search YTD Volume +19.2% vs. 15.5%; Measuring What?

$21.95 B Market Cap** $7.21B Gross RevenueMarketshare 17.0%

* Source: AFP February 10, 2010 ** as of February 18, 2010

$251.80 B Market Cap** $61.9B Gross RevMarketshare 11.3% *

$171.2 B Market Cap** $21.8B Gross RevenueMarketshare 65.4%*

Rule #1- Pay Attention to the ‘Tranquil Obviousness’ Peter Drucker

Digital Advertising Time & Resources are primarily focused on ‘Push’ (one-way communications) advertisements.

Fundamentally, today, monetization is derived via costs associated from pay per clicks, conversions, impressions, time and actions.

Physical World Business Operators (such as Retailers) will enable clear measurement of Digital Advertising expenditures at point of consumption/ point of purchase. This will establish a game-changing paradigm (‘food chain’) shift.

Physical World Business Operators Deployment of closed-loop ‘opt in’ solutions are the key to enabling measurement, segmenting, indexing and remarketing.

Rule #2- Recognize Substantive and Sustainable ‘Controlling Forces’ in the Value Chain

Who has the greatest clout to impact the value chain?

Are eyeballs, click or view through rates, and time spent more important than measureable outcomes or purchases at the electronic point of sale?

The future will illustrate that Physical World Business Operators will use their purchasing clout to exploit these very same digital advertising budgets;

Many of the largest physically located businesses operators (such as retailers) are also the largest buyers of there vendors products and services;

These same vendors also happen to have some of the largest global digital advertising budgets;

The choice is clear: Digital Advertising Dollars captured/ measured at the point of outcome/ electronic point of sale OR continue with yesteryears push style advertisements via Google, Yahoo, or Bing?

Is it more important for P & G to advertise on Google. Yahoo, Bing OR through a Retailers Digital Solution like CVS… who happens to be a top 5 global outlet for the sale of P & G’s products and could enable measurability at point of sale?

Rule # 3- Influence ‘The Pawn’s’ Next Move

Digital Advertising Agencies may appear as the supporting actors to Physical World Business Operators who endeavor to optimize digital advertising monies & exposure;

However, traditional Digital Agency roles and responsibilities will be forced into managed service (SaaS) business models for survival.

This will also include aggregation of technology solution providers that enable a focus and measurable means to decrease customer acquisition costs while providing rich data around: registrations, push/ pull feature functionalities, and superior segment and indexation capabilities;.

The Digital Advertising Agencies that adopt SaaS models will have a strategic and tactical edge in leveraging enormous value.

Accelerating and extending 360-degree consumer facing solution adoption will benefit the entire value chain, provoke these agencies to have new, more robust and comprehensive value propositions.

Rule # 4- ‘Practicality’ in 360 degrees

Today, the world wide web still highly values search, click, see through and conversion rates, email marketing, number of (unique) visitors/ traffic and time spent.However, Physical Operators have begun to deploy digital solutions with significant successes.

Consumer focused ‘push’ solutions offering coupons have seen redemptions significantly greater than traditional print coupons. Interactive ‘push/ pull’ solutions like video rewards; offer an inducement for participation and provide a means that the consumer earns coupons with each video viewed. This platform has experienced similarly high redemptions, drove incremental sales and extends and enhances loyalty. The high success rates validate rapid consumer adoption of and for Interconnected Digital Solutions that extend and enhance value;

The end effect will provide a greater benefit to all parties as coop dollars extend/ convert into digital dimensions.

Digital Solution features and functionalities that capture, connect & optimize traditional data to individual such as localizing data will create a new set of efficiencies around merchandising, loyalty, faster segmenting, indexing, and more targeted re-marketing opportunities.

Rule # 5- ‘It’s a Journey’ evolution does create revolution

NEAR: Physical World Business Operators Implementation of Consumer Facing Hyperlocalization will enable personalized content offers, plus significantly provide a superior means to measure trends, and effectively manage and market inventory;

CORE: Through Digital Solutions New Efficiencies and Associated Return on Investments will establish a path towards extending, enhancing, and interconnecting the enterprise marketing and advertising platforms with interconnected metrics.

INSIGHT: Ongoing successes and rapid consumer adoption will accelerate ‘TIPPING POINTS’ for all the below layered with “predictive analytics”:• Loyalty Shift (from Household to Individual)

• Mobile payments

• Digital Signage

• Convergence

“Get your ducks in line…”

Digital Bridges into a Physical World“Today, the consumer is the final arbiter and thus, today’s tipping point for

whatever, whenever, and however; communication and or content is consumed. The consumer is adopting new technology platforms at annual speeds in just 90 days compared to the last decade.

Marketing, advertising, and promotion can no longer be passive one-way conversations. Interactive digital-advertising will provide the consumer valuable, relevant, and hyper-localized content based on established preferences and future predictive analytics.

Ultimately, the entire value chain will monetize these communications through decreasing customer acquisition costs, while increasing basket sizes, spends, & trip frequencies. However, the ability to capture incremental sales will define the inflectionary growth point(s).”

Lawrence Bergenfield

Don’t Get Lost in Space

Executive Engagement

Needs Assessment/Analytics and the Science of ROI

IT Collaboration and Balance

Marketing

Operational Execution/Employee Engagement

Customer Care and Centricity

Strategic Digital Bridges