1. ReportThe CMOs Imperative Tackling New Digital Realities

2. The Boston Consulting Group (BCG) is a global manage-ment consulting firm and the worlds leading advisor onbusiness strategy. We partner with clients in all sectorsand regions to identify their highest-value opportunities,address their most critical challenges, and transform theirbusinesses. Our customized approach combines deepinsight into the dynamics of companies and markets withclose collaboration at all levels of the client organization.This ensures that our clients achieve sustainable compet-itive advantage, build more capable organizations, andsecure lasting results. Founded in 1963, BCG is a privatecompany with 71 offices in 41 countries. For more infor-mation, please visit www.bcg.com. 3. The CMOs Imperative Tackling New Digital RealitiesEd BusbyDominic FieldPatrick ForthJens Harsaae John Rose Henri Salha November 2010 bcg.com 4. The Boston Consulting Group, Inc. 2010. All rights reserved.For information or permission to reprint, please contact BCG at:E-mail: bcg-info@bcg.comFax: +1 617 850 3901, attention BCG/PermissionsMail: BCG/Permissions The Boston Consulting Group, Inc. One Beacon Street Boston, MA 02108 USA 5. ContentsExecutive Summary4Back to the Future 7An Inflection Point: Why Now?10Change on Every Front12Social Media 12Mobile Advertising 14Television and Online Video16Print Media and the Promise of the Tablet18Measured Internet Media19The Marketers Response21Planning and Budgeting 22Internal Capabilities24Outsourcing Decisions25Agency Navigation26Launch Your Mission28For Further Reading32Note to the Reader 33The CMOs Imperative3 6. Executive SummaryN ew digital mediaincluding online video, The balance of investment is shifting as companies social media, and mobile advertisingarespend less on media purchases and more on labor-in- transforming the marketing landscape. The tensive tasks such as managing digital content. Boston Consulting Group has spoken to doz- ens of chief marketing officers (CMOs) andAs the list of digital-marketing options grows, compa-other leaders who realize that 50 years of marketing-man-nies are reshaping their media expenditures.agement approaches must change dramatically. These mar-keters dont need a call to action. Rather, they are actively Newer digital media are finally meeting marketersseeking to build a twenty-first-century marketing capability main criteria for investment: scale, audience targeting,that can navigate whatever comes next. standards, a common marketplace (for the buying and selling of ads), and measurement.In this report, BCG offers new insight derived from The BCGFuture of Marketing and Advertising Study, 2010, which en- Dollars are actively shifting to digital media: aroundcompasses a quantitative survey of marketing executives, one-90 percent of our survey respondents expect to spendon-one industry interviews, and benchmarking research. Thismore on Internet, social-media, and mobile advertis-report is a follow-up to our 2009 White Paper, The CMOs Di- ing over the next three years.lemma: Can You Reach the Masses Without Mass Media? Itis also the second release in our new Marketing in the Digital However, traditional mediain particular, televisionEconomy publication series. Over time, this series will exam-still garner the majority of spending and will for yearsine a variety of digital-marketing topics: word-of-mouth ad- to come.vocacy, digital listening, organizational capabilities, multi-channel implications, and more.Making the right tradeoffs across digital- and tradi- tional-marketing vehicles today depends on under-After years of evolutionary change, emerging digital standing how each media category will evolve.media have brought marketing communications to abreakpoint. Companies have been surprisingly quick to adopt so- cial-media vehicles such as Facebook, Twitter, and You- The new watchwords for marketers are transparency, Tube as part of their media mix. But there are real risksauthenticity, and engagementa significant changeif companies execute poorly in these areas. Companiesfrom centrally created, custom-crafted broadcast mes-are starting to build better internal capabilities to dealsages. with the specific challenges of social-media marketing. The sheer complexity of marketing vehicles and Mobile advertising, long a fixture of advanced marketsthe rapid pace of changes in the field are overwhelm-such as Japan, is finally beginning to realize its poten-ing the traditional approaches to marketing man- tial in Western countries. More than 80 percent of sur-agement. vey respondents plan to increase their spending on4 The Boston Consulting Group 7. mobile advertising, albeit from a very small base. Driv- Although all marketing activities tend to be decentral-ers of growth include the proliferation of smartphones,ized today, marketers shared sincere ambivalencethe development of advertising marketplaces, and a about the best organizational home for digital activ-host of new start-ups. Now is the time to take these ities.media seriously. No one has yet developed the winning formulabut Television still remains one of the few mass-marketing some patterns are emerging that suggest how compa-vehicles that can reach millions of consumers at once. nies could build their digital capabilities.But the shift from traditional television viewing to on-line video viewing will happen more quickly than The executives in our survey who were most commit-many observers expect, as Internet-connected televi- ted to digital marketing share several traits in com-sions roll out over the next few years. Marketers must mon. Their companies establish minimum levels forrethink their approaches to traditional televisionand digital investment firmwide and possess the tools re-experiment actively with online video. quired to make tradeoffs across media vehicles. And they believe that digital marketing is important to Print media stand at a crossroads. While print has losttheir personal success.a massive share of ad spending to the Internet, tabletsand e-readers offer some hope for the futureat least To lower barriers to digital investment, brand-buildingfor magazines. As the ecosystem of tablet advertisingbusinesses (such as those in the food and beveragebegins to form, marketers and the publishing industrysector) may need to rethink their emphasis on metricsmust work together to help shape the future. that track short-term increases in volume sales. They will also need to look at return on investment (ROI), Measured Internet media, such as search and displaycustomer engagement, and word-of-mouth referrals.advertising, is among the more stable categories now.True, online targeting technologies have improved A good rule of thumb is to develop digital-marketingsomewhat ahead of marketers abilities to utilizestrategies as closely as possible to the business unit.themand they raise some privacy concerns. But lead- The center, however, should own standards of excel-ing companies are increasing their allocation to meas- lence, best-practice sharing, and the basics of techni-ured Internet ads and cautiously taking advantage of cal execution (such as the coordination of e-mailthe new opportunities to target consumers. blasts).Marketers understand the urgency to adopt digitalInstead of trying to guess the perfect marketing mod-mediabut need answers on many issues includingel in a fluid landscape, companies need to think aboutoptimizing spending, budgeting, organizing, and nav- maintaining maximum flexibility and adaptability.igating agencies. A more dynamic approach to strategyone that em- Only 46 percent of our respondents said they havephasizes iterative experimentation in order to keepthe tools required to make tradeoffs across media ve-pace with incessant changedelivers what BCG callshicles.adaptive advantage. Respondents were comfortable with their companies To determine what works, companies should start byplanning approaches for most media vehicles, but theypiloting a 360-degree digital-marketing plan for aranked planning processes for social-media and mo- brand or category in a single region. Experimentation,bile advertising at or near the bottom.at this point, is preferable to inaction. Only about one-third of our survey respondents said Over the next five years, we anticipate a significantthey felt their advertising agencies were helpful in skills-based battle to define the next generation ofmaking the right tradeoffs between digital and tradi-marketing leadership. Your company cant stay on thetional media.sidelines.The CMOs Imperative5 8. About the Authors managing director in the firms Copenhagen office andEd Busby is a partner and managing director in the Newglobal leader of BCGs marketing topic. You may contactYork office of The Boston Consulting Group and leader ofhim by e-mail at harsaae.jens@bcg.com. John Rose is aThe BCG Future of Marketing and Advertising Study,senior partner and managing director in the firms New2010. You may contact him by e-mail at busby.ed@bcg.York office, global leader of the Media sector for BCGscom. Dominic Field is a partner and managing director Technology, Media & Telecommunications practice, andin the firms Los Angeles office and U.S. leader of the Me- global leader of the firms special iniative on conver-dia sector for BCGs Technology, Media & Telecommuni- gence. You may contact him by e-mail at rose.john@bcg.cations practice. You may contact him by e-mail at field. com. Henri Salha is a partner and managing director indominic@bcg.com. Patrick Forth is a senior partner andthe firms Paris office and global leader of BCGs Internetmanaging director in BCGs Sydney office and leader ofAdvantage topic. You may contact him by e-mail at salha.the firms Technology, Media & Telecommunications henri@bcg.com.practice in Asia-Pacific. You may contact him by e-mail atforth.patrick@bcg.com. Jens Harsaae is a partner and6 The Boston Consulting Group 9. Back to the FutureI magine the year is 1960. In the United States, the early days of television, is that no one yet has the for- there are only three television networks: NBC, mula for success. In addition, the challenge now is even CBS, and ABC. Most programs are still broadcasttougher than it was then. live and sponsored by advertisers. The now-ubiq- uitous 30-second spot has yet to be standard-To develop a snapshot of current changes and futureized as an ad unit. Radio is still a powerful force.plans, The Boston Consulting Group launched The BCGFuture of Marketing and Advertising Study, 2010. WeMarketing in this era seems simple and straightforwardtapped into the views of almost 100 industry experts,to us today, but for consumer marketing companies and leaders at advertising agencies, and marketing executivesfor Madison Avenues ad agencies then (currently show-across industry sectors. We conducted a quantitativecased in the popular Mad Men series on cable television), survey, one-on-one interviews, and research on best prac-it was not. Television was an emerging medium, not yettices.1found in every home. No one knew how television wouldevolve, or which advertising formats would break through. While our participants were based primarily in the Unit-Marketers had limited syndicated datafrom The Niels- ed States, the study has relevance for all global compa-en Company or elsewhereto guide decision making. nies, and our work includes many examples from otherHowever, some companies, such as Procter & Gamble,regions. The findings help to scope the current mediaworked closely with their ad agencies and took bold steps landscape, anticipate whats coming next, and under-to invest in new and untested brand building via televi-stand how companies are reallocating budgets and build-sion. Even amid massive uncertainty, they shifted marketing capabilities to prepare for the future.share and created powerful brand positions, setting thefoundation for 50 years of competitive advantage. After 50 years of evolutionary change, BCGs analysisshows, we are at a breakpoint in marketing communica-Today, some companies are shifting their spending fromtions.television and traditional media to Facebook, blogs, andtheir own purpose-built websites. They are experiment-The watchwords of the new marketing environmenting with advertising on computer tablets and with loca- are transparency, authenticity, and engagement. Thistion-specific mobile targeting. Whats more, consumersshift represents a significant change over centrally creat-are having real-time online conversations with one an-ed, custom-crafted broadcast messages. Digital-marketingother about marketers products and messaging.vehicles enable interactive communication: betweenmarketers and consumers (sending messages down theIn short, we believe that it is 1960 all over again. Thosemarketers that figure out not only how to use the new 1. We had 56 survey respondents and interviewed 45 experts fromtools but also how to integrate them with traditional me- various types of companies including advertisers, venture capitalfirms, media firms, and ad networks. Most of the respondents anddia will build brands and shift market share just as in the experts worked in the United States; however, many representeddays of the gurus of Madison Avenue. The problem, as in multinational companies with global experience.The CMOs Imperative 7 10. historic one-way path); between consumers and advertis-or externally. Advertisers are struggling to integrate func-ers (engaging in a dialogue); and among consumers (com-tional capabilities within brand teams; agencies and spe-menting on and calibrating the messages being received). cialty third-party service providers are struggling to pro-Such interaction is changing the nature of marketing vide integrated advice and services.communications from crafting one-to-many brand mes-sages to curating conversations about the brand amongCompanies are shifting the balance between internalconsumers. and external spending on marketing. Managing an ef- fective communications program in a real-time, interac-The sheer complexity of marketing vehicles and the tive way requires extensive company- and brand-specificrapid pace of new communication opportunities areinformation. With traditional advertising, the require-overwhelming chief marketing officers. (See Exhibitments for internal staff and spending are low since most1.) This is true whether marketing is managed internally activity is outsourced to agencies and most cost is gener-Exhibit 1. CMOs Face an Increasingly Complex Set of Options Car parking lotGigantic National FreeUrba Loca formong-NeLpres lnat a wsilin sed M papg sd madres agin ted az erSy ail ge Ading nd m -tar e e g icaCa on tin oOutdoor Ge bl Ph pecte RadioCin ed Ne ospr e em twtlinPr orkHoint aailBaTeailnne Mrle visE-mion ePop onite-up Phebs Traditionalnd wet/BraPaid media ern lcation s earch Internet Int -mai Geoloile ad e Customer mob erelationship SMS liniveDigitalthe marketingDigitalInteract on Mobile televisi ove ? ? ? (CRM) EditorialAb ? ??insertPublic relations ?Loyalty VIP cardCMO ? ? programProduct of Awards Public? Personal the year ?trelations/ ? ? ?line One reward ementhe-shority/Endors virallowt SamMaga Celeb ertrship Be ple exp nso samp zine Spont ling Retce me In-th even latport PlaOer same-streeion S ofplin tMaterial g ed ord h al Imipt howW out PomScr ion s cou ediat in ev m g s t o enevi pon esinDe telf d ts ferdi ispgredan BloIn- visog Prla adch oginy od Point sto rsdser er ons ucM c ka ienre td FrNeemPromotiPa o tw enos f salestoan Br t en rerman evlaPe Re daunch ure uct ck a ltaidv ch unStorepa ysicWindag isoersla pict prod LaBrand webs dvi rsPh e deack oow dis Discountine sor Gis signOnl sOn-p play siteMarketing categoriesMarketing vehiclesMarketing tacticsSource: BCG analysis.Note: We defined measured media expenditures as above the line marketing categories; all other marketing categories were defined as belowthe line.8The Boston Consulting Group 11. ated by the purchasing of media. In the new world, com- formance. The mission control center allows Gatorade topanies invest less in media purchasing and more in devel- identify conversations in progress and proactively engageoping content and maintaining customer dialogueand in discussions with consumers.the cost of managing and updating digital content can behigh, whether companies outsource it or manage it them- Companies outside traditional consumer goods are alsoselves. For example, while some companies assign theirbuilding their social-marketing capabilities. Even main-public relations firms or digital agencies responsibility for stream banking firms such as Wells Fargo and Bank ofmaintaining a brands Facebook presence, others viewAmerica actively leverage social media with activitiesthis as a critical brand touchpoint to be controlled inter- that include soliciting user-generated product reviews on-nally.line, providing customer service on Twitter, and develop-ing online communities for small business owners.Take the example of the beverage brand Gatorade, whichhas made significant investments in social media and dig- Chief marketing officers (CMOs) are tackling a criticalital listening (monitoring consumers online comments). mission: transition from the marketing organization thatGatorade maintains an actual mission control center inworked in 1960 to a twenty-first-century marketing capa-its Chicago headquarters, featuring a panel of screensbility that can navigate the future. To pursue this goal,reminiscent of NASA. Relying on five full-time marketingcompanies are taking widely different approaches, evenemployees, the company tracks a wide variety of conver- within the same industries. Some best practices, however,sations through blogs and Twitter conversations, online-are starting to emerge.media performance, sports trends, and social-media per-The CMOs Imperative9 12. An Inflection PointWhy Now?As digital-marketing options expand, com- Scale. Digital vehicles are finally reaching the point atpanies are reshaping their media expen-which they deliver sufficient reach with targeted audi-dituresand reshaping them so pro- ences. Before CMOs in most major corporations are will-foundly that we can no longer accurately ing to invest heavily in a medium, they need to be ableproject spending trends based on the pastto reach 40 to 60 percent of the target population throughfive decades of experience.that medium. They can accomplish their goals today through most online display advertising and throughWe expect that traditional spending on above-the-linesome social media, such as Facebook, with its 500 mil-(mass-market) measured media will not continue its lion global members. In order to experiment with newpast pattern of rising and falling in sync with the econo- media, however, CMOs may require a minimum reach ofmy. Instead, as developed markets continue their slow re-only 1 million to 5 million adultsas long as there is acovery, we believe overall ad spending will anchor nearvisible path to broader reach in the near future. Mobilecurrent levels and grow at a lower rate than it historically advertising and other social media are beginning to hit,has. Companies will permanently replace big-dollar adand in some cases vastly exceed, these thresholds.purchases in television and print media with less-expen-sive, unmeasured investments in digital media. And theyTargeting. The clear advantage in audience targetingwill reallocate marketing budgets from media spendinggoes to online and mobile media, since, compared withto spending on the head count and technology needed to traditional media, they offer marketers access to more so-support digital marketing in-house.phisticated, context-driven, and location-driven targeting. Traditional media such as television and print have got-The marketing executives we surveyed cited decisiveten by for a long time with targeting that is based on sim-plans to increase spending in social-media, measured In- ple demographics linked to the type of content, but mar-ternet, and mobile advertising over the next three years.2 keters are starting to see the advantages of trading broadThe move to these categories will come at the expense of reach for deeper relevance.print newspaper and magazine advertising, and, to someextent, traditional television advertising. (See Exhibit 2.) Standards. As technologies, formats, and ad-servingFew of the executives we surveyed are ignoring socialmechanisms in mobile advertising mature, the barriers tomedia: at least 80 percentand as much as 90 percentmarketer commitment will fall. The lack of standards forof our survey respondents told us they are using, experi-ad units and creative formats, such as standard sizes formenting with, or planning to try social-network and viralbanner-ad displays, has hindered the development of mo-marketing. bile advertising. However, a few smartphone winners areWhy has this shift become more pronounced? Whats re-ally changed? In fact, a number of marketers criteria for 2. Measured Internet advertising refers to traditional online-adver- tising spending that is tracked by third-party research firms. It in-investing in emerging marketing vehiclessuch as socialcludes online search advertisements and display adssuch as ban-media and mobilehave finally been reached:ners, videos in static webpages, and pop-up ads.10The Boston Consulting Group 13. Exhibit 2. Nearly All Respondents Plan to Accelerate Spending on Digital MediaHow do you think your companys allocation will change over the next three years? Percentage of respondents at companies that will increase spending in the categoryMeasured Internet 95Social media94Mobile85 Direct marketing 51 Public relations 42 Cable network television 34 Sponsorships 30 Promotions 27Magazines 25 Outdoor21National broadcast television 17Radio 13Newspaper4010 2030 40 50 60 70 8090 100Percentage of respondents Increase signicantlyIncrease somewhatStay the sameDecrease somewhat Decrease signicantly or stopSource: The BCG Future of Marketing and Advertising Study, 2010.Note: The data reflect 53 responses.now emerging, reducing market fragmentation and es-vestment (ROMI), and we expect this practice to becometablishing greater certainty around standards. more widespread. However, marketers simply dont have the same wealth of historical benchmarks to project theMarketplace. Another coming-of-age sign for digital me-revenue impact of digital-advertising efforts that theydia has been the emergence of well-defined places forpossess for traditional media such as television or radio.marketers to access aggregated advertising inventory.Only time and experience can fill this gap, and companiesMeasured Internet advertising offers ad exchanges andmust be willing to experiment in order to learn.networks that perform this service; similar models arenow emerging in mobile advertising as well. Digital me-The ongoing progress within these five investment crite-dia are also benefiting as marketers embrace and adopt ria suggests that an inflection point is at hand. Yet it istheir unique pricing models: performance-based metrics important to keep in mind that, while much is changing,such as cost per click, cost per visitor, and cost per actionmuch also stays the same. Traditional vehicles such as(lead, order, or engagement) support a more general em-television still comprise the majority of total global spend-phasis on return on investment (ROI).ing on measured media. While some companies are mov- ing aggressively into digital marketing, others are takingMeasurement. CMOs still struggle to holistically meas- a much more cautious approach. And traditional mediaure results from integrated campaigns across traditional are not disappearing; vehicles such as radio, outdoor, andand digital media. We see a few companies starting to ad-television still work for specific marketing objectives.dress this issue by incorporating newer marketing vehi-They will continue to command the largest expenditurescles into their efforts to model return on marketing in- for years to come.The CMOs Imperative11 14. Change on Every FrontM aking the right tradeoffs across market-years. A few pioneering companies, such The LEGO ing vehicles today depends on under-Group in Europe, can point to social-marketing efforts as standing how each media category will a cornerstone of recent successes. (See the sidebar Trans- evolve tomorrow. Does measured In-forming Marketing Brick by Brick.) ternet advertising still have the capac-ity to grow? Is mobile advertising finally poised to takeAcross the social-media and marketing landscape, a fewoff? Can tablets rescue print media? Is television dead? social-media sites have emerged as the current front- runners.We hear very little agreement within the marketing com-munity on these issues, even among the most successful Facebook. Almost all the respondents in our survey saidbusiness leaders. Few executives have a holistic and de- that their companies have built a presence on Facebook.tailed view of how the media landscape is changing inThe site now boasts 500 million users and extensive glob-every key category, how various media are converging,al reach. The social-networking site is translated into 60and how the entire media ecosystem is likely to evolve inlanguages and draws 70 percent of its users from outsidethe future.the United States. Given its draw, advertisers feel unable to sit on the sidelines, and CMOs are working FacebookSome of the following findings may seem old hat to someactivities into integrated media campaigns. Facebook isCMOs, but when considered collectively, they suggest the now developing applications, games, and commerce en-contours of the new world. We hope that many leaders gines (such as Deals for Facebook Places) that expand op-will want to engage broadly on the integrated perspec- portunities for marketers.tives that followand in such an uncertain space, wehope that many different opinions will abound. Twitter. Another ubiquitous social-network-marketing opportunity is Twitter, which boasts more than 100 mil- lion user accounts. Limited to 140-character messagingSocial Media bursts, Twitter is ideally suited for promotional activity such as announcing new-product introductions and spe-Companies have been surprisingly quick to begin experi-cial events, driving word of mouth, and responding tomenting with and, in some cases, adopting as part of their consumer complaints. Humphry Slocombe, a 14-seat ice-media mix such social-media vehicles as social network-cream shop in San Francisco, announces its new flavorsing, viral videos on YouTube, blogs, and branded web-in edgy and entertaining Tweets (one printable example:sites. In our survey, 61 percent of the marketing execu- Oh Carrot Mango, I thought love was only true in fairytives we interviewed said that they were already tales, meant for someone else but not for me). Theseexperimenting with social media, and 27 percent had ad-have gained the store more than 300,000 followers onopted the vehicle as a core part of their media mix. MoreTwitter, compared with fewer than 25,000 followers forthan 90 percent of executives in our survey planned to national chains Dairy Queen and Baskin-Robbins com-increase spending on these activities in the next fewbined.12 The Boston Consulting Group 15. Transforming Marketing Brick by BrickThe LEGO Group is the owner of an iconic brand, a recipi- The next stage of the journey features the launch ofent of multiple awards for marketing excellence. Yet, asLEGO Universe, a multiplayer online world created torecently as 2004, the company was struggling. Since then, offer fans from all over the globe opportunities to safe-under a dynamic, young leadership team, the company ly build, play, and socialize together online.has accelerated out of the downturn stronger than ever.Transformation of marketing has been a key contributorAlthough some of these initiatives may sound sophisticat-to its success. ed, the company is acutely aware that digital integrationmust not become a barrier to experiencing the brand. ToTraditional marketing to children will continue to play a succeed, it must balance aggressive expansion of digitalcrucial role, but The LEGO Group has increasingly mademedia with continued exploitation of traditional media.social media, viral media, and networks an integral part ofthe mix. The purpose of the evolving approach is notThe LEGO Group considers internal capabilities a criticalmerely to add another medium but also to enhance theasset on this continuing journey. The company seeks bothexperience of physical play and build brand loyalty. Creat- to work with external partners and to develop internal re-ing platforms for communities also builds customer advo-sources. Standard technical platforms are also critical.cacy for the brand. Management of digital marketing has been fairly central-ized until now, but it will increasingly become a distribut- Online mini-movies, featuring properties such as Star ed capability.Wars and Indiana Jones, provide inspiration for play.This experience illustrates how the new digital reality re- Design byME enables online users to design unique quires a companywide perspective that fosters workingproducts and ship them directly to their homes. across functional silos to encompass traditional market-ing strategy, product development, and supply chain ca- LEGO Club, with more than 3 million members, offers pabilities.even very young aficionados access to the brand. Legoclick.com is an online community platform withposts, Tweets, and a link to an iPhone application.YouTube. YouTube is one of the most popular websites Groupon. Groupon became the most-visited coupon des-in the world, with more than 2 billion views a day. Of tination online in August 2010, with more than 6 millionthe top 100 advertisers (as measured by Advertising Age),unique visitors. The site combines elements of traditional94 have run a campaign on the site. YouTube offers bothpromotions, digital media, and social networking by en-an advertising platform andincreasinglya social- couraging users to bring their friends on board. Grouponnetworking opportunity through the active comments has been embraced by major retail chains such as Gap,section and extensive links with other social sites andalong with smaller local businesses. The number of on-blogs. In September 2010, YouTubes number-one spon- line visits and redemption rates at Groupon are high, insor (measured by page views) was the skin care brand part because consumers commit by purchasing couponsOld Spice. The reason? The brand posted more thanup front.100 customized video responses to individual user com-ments taken from Facebook, Twitter, and blogs; each re-In the emerging category of social media, weve observedsponse was personally delivered by the actor playing the a few best practices.Old Spice Guy in television commercials. The cam-paign has gained wide recognition as a best-practice Listen to what consumers are saying. Companies haveillustration of social-network marketing: it deploys shown they can gain valuable consumer input from on-humor, rapid response, and personalized customer en- line communities to drive innovation, customer service,gagement and taps the viral nature of Internet commu-and other critical operations. There is an increasing num-nities.ber of tools to help companies monitor consumers con-The CMOs Imperative 13 16. versations on blogs, social networks, and other places ontial marketing and ethical issues, companies that engagethe Internet.with customers via social media and blogs may face a real and increasing threat of legal action. Last year, theBegin to (cautiously) curate conversations with con- Federal Trade Commission issued guidelines that requiresumers. To take advantage of blogs and use them as a companies to disclose material connections to bloggers,marketing vehicle, marketers must adopt a new role in aand the agency began initiating investigations againstdialogue, becoming the curators of consumers conversa-companies that crossed into gray areas, such as offeringtionsparticipating, sparking discussion, and shapingbloggers the opportunity to win prizes for their postingspositive word of mouth. Maintaining dialogues with and without providing sufficient instructions about the needamong consumers is often a very resource-intensive activ-for disclosure.ity. These dialogues can also entail a degree of risk if theyare not monitored properly. Mobile AdvertisingIntegrate social media online with your offline strat-egy. Both social media and blog conversations presentMobile advertising is a fixture in some advanced markets,excellent ways to amplify a brand, but it is quite difficult such as Japan and South Korea. (See the sidebar Mobileto scale up efforts in these areas. Therefore, the most suc- in Japan.) However in the United States and Europe, mo-cessful strategies integrate social-media initiatives with bile telecommunications has long been known by mostother, more traditional media strategies to extend the marketers as the medium whose future is always aroundbrand. Examples include using targeted television cam- the corner yet never quite arrives. Mobile advertising en-paigns to drive users to Facebook pages or linking spon- compasses several categories of ad vehicles, includingsored events to social-media outlets.SMS/text messaging, mobile display and in-application advertising, promotional applications, and sponsored ap-Ensure that conversations are authentic and trans- plications.parent. Consumers demand honesty. In fact, in a surveyof 5,000 consumers that BCG conducted across five coun-For most Western companies, mobile advertising has ac-tries earlier this year, respondents selected transparency counted for a very small percentage of the marketing(from a list of 12 options) as the top priority for online budget (typically less than 2 percent for our survey re-advertising. In addition to exposing themselves to poten-spondents) and often has been the first victim of budgetMobile in JapanThroughout much of the world, the mobile medium has their food orders. McDonalds can even push targetedbeenup to now at leastan insignificant piece of the coupons to the users based on their purchasing patterns.advertising puzzle. Not so in Japan, where mobile pay-ments have been used for about five years and have been Another DoCoMo innovation is its i-concier offering, a mo-adopted by more than 20 percent of consumers. These bile personal-assistant service that provides weather,payment technologies have several implications for ad-transportation, sports, and, of course, coupons to morevertisers: they provide a wealth of targeting data; allow for than 5 million users. With i-concier, users can customizepoint-of-purchase promotions and next-generation loyaltytheir services and manage their loyalty programs in a wayprograms; and enable much better measurement of ROI that minimizes unwanted spam. The service incorporateson mobile campaigns.data from a variety of sources including user preferencesand GPS location-based data to ensure that the right of-NTT DoCoMo has been one of the leaders in this space. Infers are targeted to the right people.2007, the company created a joint venture with McDon-alds to manage McDonalds mobile communications toits loyalty club, including e-coupons and mobile cam-paigns. Consumers can download coupons to their phoneswhile waiting in line, and then use them when they place14 The Boston Consulting Group 17. cuts. Globally in 2009, the tracking service TNS reportedalty program that allows users to check into locations inonly $1.7 billion in expenditures on mobile advertising, return for special promotions. Another example, Shop-including both SMS and mobile display ads, comparedkick, launched its application earlier this year, enablingwith $182 billion spent on television advertising. its users to receive special promotions depending on where they are in its retail partners stores. Most of theseWe believe, however, that mobile media appear at longapplications are still in the very early stages of develop-last to be coming of age, even in the United States. In fact,ment, and it still is not clear who the winners and losersmore than 70 percent of survey respondents said they will be. Even the success of Foursquare has been calledplan to increase their allocation to mobile advertisinginto question after the launch of Facebook Places, the so-over the next three years. As one participant explained, cial-media giants competing platform.Mobile is a small area of our overall inventory, but it isa big investment area.Some companies are even designing or sponsoring mo- bile applications of their own to appeal to consumers.Growth in mobile advertising has been boosted by the The most successful applications manage simultaneouslyproliferation of smartphones. Now that there are moreto offer value to the consumer and closely reinforce brandthan 50 million smartphones in use in the United States, equity. For example, Procter & Gambles Charmin part-marketers are getting excited about mobile display, such ners with Sit or Squat, an application that provides user-as mobile banner ads, and in-application advertisements. generated listings of public restrooms, complete withThese advertisements allow companies to deliver an in- hours of operation and user ratings.credibly rich media experience to consumers using veryspecific targeting at the individual level, including geo- Given this type of news-catching sizzle in the mobile-specific, demographic, and even behavioral targeting.advertising market, many marketers are still asking,One major driver behind growth in mobile display adver-Wheres the steak? Admittedly, the large-scale effective-tising has been iAdApples mobile advertising network.ness of mobile advertising is still largely unproven. But(See the sidebar, The $60 Million Experiment.) given the recent developments, companies should con- sider a few critical steps:Now, a host of new start-ups are taking advantage of theuniquely mobile nature of the mobile device. The biggest Revisit your segmentation. Mobile phones offer an in-star has been Foursquare, the mobile application and loy-credibly rich set of targeting options, including not onlyThe $60 Million ExperimentEarlier this year, Apple completed the acquisition (and natural fit for coupons, promotions, and location-basedsubsequent closure) of Quattro Wireless, one of the larg- services. However, it remains an open question whetherest mobile ad networks in the United States. The compa- the new displays and formats will be effective media forny soon after announced the creation of iAd, an effort to brand advertising. Progress has been cautious, as Apple,create more-effective mobile advertising to drive revenue advertisers, and creative agencies learn to work togetherto its application developers.effectively on developing appropriate mobile campaigns.The new ad units would enable users to view ads without If the results of this $60 million experiment are positive,leaving the applications and would feature very rich me-several developments could finally take mobile advertis-dia. Apple attracted more than $60 million from premium ing off the sidelines. First, advertisers experimenting nowadvertisers, each of which pledged a minimum of $1 mil- have expressed a willingness to increase their commit-lion, for the second half of 2010essentially doubling thements. Moreover, other advertisers will likely begin tosize of the mobile display market.make greater use of these mobile ad vehicles. And wewould expect other ad-based platforms, such as GooglesThe early demos have been visually impressive, but ques-AdMob, to follow in iAds tracks to develop new types oftions remain about the relative effectiveness of these newinnovative ad inventory as well.ad vehicles. The mobile medium is widely perceived as aThe CMOs Imperative15 18. traditional demographics but also, in some cases, behav-lions of consumers at once, making it ideal for awareness-ioral and geographic targeting. Understanding how the building campaigns.primary target segments line up against your mobile-tar-geting capabilities could have a dramatic impact on the Several key challenges are emerging, however, to the pre-effectiveness of your marketing programs. eminence of television media.Begin a program of planned experimentation.Ad-skipping behavior by consumers is on the rise. Ac-Because these are the early days of mobile cording to Nielsens Three Screen Report formedia, it is not clear which programs will the first quarter of 2010, 37 percent of U.S.workand which wont. CMOs should be- Mobile advertisinghouseholds now own digital video record-gin investing to understand which pro-may not be vital today,ers (DVRs), representing an increase ingrams really move the needle. The firstadoption of 6 percent per year over the but the learning curvetargets should be mobile-advertising vehi- last two years. Media and reporting agen-cles that take advantage of the unique na-is steepand it will cies have tried to downplay this develop-ture of the mobile phone: individual-level take time to get right. ment. For example, Nielsens numberstargeting and GPS- and location-based pro- claim that the time-shifted viewing of com-motions such as coupons. mercials has remained steady, with about 45 percent of commercials watchedeven on DVRs.Hire an expert. In the field of mobile advertising, solidexecution is both vital and very difficult. For example, anThe consumer audience is fragmenting. Of course,advertisement may be rendered differently on different consumers are dividing their time across a wider array ofdevices. Messaging in mobile advertising is extremely im-mediaoften viewing several media simultaneously. Butportantlimited space means that simple messages workeven within the array of television offerings in the Unitedbest. Find an agency or hire someone internally who hasStates, we see a trifurcation of the broadcast and cableexperience with these nuances. world. (See Exhibit 3.) At one extreme, popular content is becoming even more popular, thanks in part to the abil-Actively monitor developments in the market. The ity of consumers to time-shift viewing (although of course,world of mobile advertising is very dynamic. New en- this raises questions about whether ads placed in thesetrants, new experiments, and new competitive moves media are actually being watched). At the other extreme,emerge almost every day, and many of these develop-the explosion of niche content with high viewer engage-ments could provide incredible opportunities for yourment has helped attract those viewers at the long end ofmarketing programs.the tail. This will mean decreased viewing for the remain- ing middle of the road content; for example, far fewerWinners and losers in the mobile-advertising market will viewers will watch dated reruns of The Golden Girls.begin shaking out over the next couple of years. Andwhile mobile advertising may not be vital today, the Advertisers desire flexibility in spending. Televisionlearning curve is quite steepand it will take time to get upfrontsthe annual ritual in which networks pitchright. So now really is the time to begin these experi-their lineup of new programs to advertisers in hopes ofments if you hope to get a jump on your competitors. selling ad inventory in advanceare becoming increas- ingly challenging to maintain. With audiences fragment- ing and new alternatives both on and off television aris-Television and Online Videoing practically on a daily basis, most marketers are not looking to make annual commitments many months out.Televisionthe epitome of mass mediais under pres-In fact, quite the opposite: savvy marketers expect tosure, but it continues to offer many advantages for tradi- evaluate their television ad campaigns in real time andtional marketers. Television still accounts for more thanreallocate expenditures that are not achieving impact.50 percent of global spending on measured media, mak-ing it by far the largest media vehicle. It remains one of Taking all the challenges into account, we expect televi-the very few mass-marketing vehicles that can reach mil- sion to undergo massive changes over the next five years.16 The Boston Consulting Group 19. Exhibit 3. Television Viewing Will Shift to Top-Rated and Niche ContentFuture viewing patternsNumber of consumers reached Consumerengagement withthe content Future viewers Niche sportingevents LifestyleCurrent viewerschannels Cable reruns Foreign-languageBig three channelstelevisionnetworksHeadliner eventsExclusive andBroad, nonexclusive Unique long-tailtop-rated content market oeringscontentSource: BCG analysis.Underlying all these changes is the ongoing shi from tra-form and oen user-generated content. Companies mustditional television to online video. Already, almost 50 per-ensure that their advertising appears only on brand-ap-cent of the U.S. population watches video on the Inter- propriate sites and that the video advertisement formatsnetalthough the time spent viewing still averages only themselves are of a brand-enhancing quality. Over thearound three hours per month per viewer. We expect this near-to-medium term, the combination of marketer pres-measure to rise, particularly as the proliferation of con-sure, the likely consolidation of video ad networks, andsumer electronics enable consumers (even nonengineers industry eortssuch as those by the Interactive Adver-and those over the age of 21) to easily access Internet tising Bureau in the United Stateswill likely help allevi-content directly through their televisions. ate these concerns.Right now, marketers are struggling with two extremes In online video advertising, marketers will continue towith regard to online video. At one extreme, premiumstruggle with measuring performance and, in particular,content is scarce in online video, as many premium net- creating the predictive models that link online ad spend-works have held back inventory to keep the cost per 1,000 ing to overall sales. As one marketing executive in a con-impressions or ad views (known as CPM) high. We sus-sumer-packaged-goods company explained to us, Click-pect that this scarcity is likely to abate over the next cou- through rates arent really meaningful to my business.ple of years as premium cable-network content prolifer- With television advertising, I can clearly track the link be-ates on the Internetparticularly if the cable operators tween my media spending and sales volume li in a giv-TV Anywhere and TV Everywhere initiatives gainen week.tractionand as television networks gradually increasethe amount of inventory available online. As a result, marketers are not yet ready to move signi-cant dollars away from television. In fact, overall televi-At the other extreme, marketers are overwhelmed by thesion expenditures are still high, although they continue toincredible amount of long-tail video oeringsthat is,shi from broadcast to cable. The networks are still criti-the high volume of unique online videos, each one viewedcal for their ability to deliver a major number of eyeballsby relatively few consumersmany of which are short-in the mass market, as demonstrated by continued adver-T CMO I 20. tiser support for large-scale audience events such as thely crippled by the loss of classified advertising to InternetWorld Cup. applications.In response to these dramatic changes, we recommendIf the past is any indication of the future, print advertis-that companies take the following actions: ing (in its traditional format) will continue to struggle over the next five years. In our survey, about 44 percentMove to a zero-based-budgeting approach for tele-of respondents said they planned to decrease spendingvision advertising. Companies needon print magazine advertising in the nextto understand what the real return on three years, while 62 percent said theytelevision expenditures is. Building mar-Can tablets andplanned to decrease spending on newspa-keting budgets from scratchrather than e-readers rescueper advertising. Industry veterans also re-continuing to add annual increases to ex- ported seeing massive changes on the ho-isting advertising allocationswill helpprint magazines and rizon. In a recent interview with BCG, onethem discover and reflect the new digital newspapers? senior executive from a leading fashionrealities. Television will continue to have magazine predicted, We believe thatits place in the marketing mix, but too there will be no such thing as a magazinemany of our clients have become overly reliant on tele-in five years.vision over the years. Can tablets and e-readers rescue print magazines andExperiment with over-the-top video advertising. Mar- newspapers? For newspapers, the answer is maybe. Forketers should try both long-form and targeted short-form magazines, however, tablets hold clear potential, givenadvertisements in online video. However, be careful to their ability to make rich content completely accessibleensure that your messages are associated only with video anywhere.content that is consistent with your brand. Tablets like the iPad, in particular, are strong vehicles forWork with cable multiservice operators and content magazine publishing, since they allow more creative fea-aggregators to create ad formats that work. The basistures and color imagery to gain prominence. In addition,for the next generation of television advertising is being a tablet has the potential to deliver an inventory of ad-laid now. New technologies can help avoid ad-skippingvertising that combines the best of video, high-qualityand create new ad formats that are more effective. Al- still graphics, and interactivity.ready, we have begun to see some experimentation, par-ticularly in some areas of Europeand some of it is more These are still the very earliest days of the tablet, howev-successful than others. To ensure that their voices areer, and the ecosystem for tablet advertising has yet toheard, marketers need to participate in the industry con-form. Through our analysis, BCG predicts that the in-versations that are now taking place.stalled base of tablet devices will reach approximately 100 million in the United States alone by 2014and could rise substantially higher if corporations transitionPrint Media and the Promisebusiness-use laptops to tablets. (For more on this topic,of the Tabletplease see BCGs 2010 White Paper Tablets and E-Readers: The Last, Best Chance for Digital Content?)Even a quick glance at the facts makes it clear that printmedia are in trouble. According to the tracking firm TNS,Once the installed base exists, both marketers and theprint media fell from 41 percent of global advertising publishing industry will need to address several questionsspending in 2003 to 33 percent in 2009, and almost all over the coming years, chief among them:the share lost shifted to the Internet. What are the standards for creative formats?Print magazines were slow to exploit their depth of con-tent online, fearing cannibalization of subscription and How will all these creative formats be rendered on thenewsstand sales. Meanwhile, newspapers were financial- individual devices?18The Boston Consulting Group 21. How should ad effectiveness be measured? For exam-It is also important to remember that not all traffic isple, should CPMs with and without pass-along viewer-good and profitable traffic. One client we worked withship be used? was buying very expensive advertising links to key-words in order to attract consumersbut these online How can the industry take advantage of targeting andvisits never actually converted to sales. The company dynamic ad placement while remaining compliant therefore decided to cut the SEM budget by 80 percent with the guidelines issued by the Audit Bureau of Cir- and reallocate the spending to more productive offline culations (ABC)? channels and vehicles, thereby dramatical-ly increasing online sales. In this dynamicAdvertisers will need to take an active role It is important to environment, companies must monitorin shaping these ecosystems. Many groupsremember that not all consumer searches, competitor spending,are already trying to put their own stamp offline marketing expenditures, andon how the advertising markets for print online traffic is good Google search criteria on an ongoingpublications on tablets and e-readers will and profitable traffic.basis.evolve. Device manufacturers, and theirassociated ad networks, are trying to shape When it comes to online display advertis-the ad landscape. Publishers are working to create a seting, many marketers we interviewed voiced concernsof industry norms. More traditional industry associations about these vehicles. Premium inventory that offerssuch as ABC and IAB are also trying to create a set ofbroad reachas ad placements on MSN and Facebooknorms. Ultimately, however, the large marketers that aredoremains scarce. Marketers say that it is difficult tomaking early investments will have the most influence inidentify effective, brand-enhancing inventory among theshaping this ecosystem: their marketing dollars will fund long, long tail of literally millions of content websites of-the content that appears on this new medium.fering advertising space. Meanwhile, consumers are be-coming more difficult to reach, as they shift their time tosocial-networking activities and respond less frequentlyMeasured Internet Media to online advertisements.At this point in time, measured Internettraditional on- Despite these obstacles, several opportunities remain forline-advertising spending that is tracked by third-party marketers to further take advantage of measured Inter-research firmsis actually one of the more stable medianet media.categories. While, as we describe in the chapter on televi-sion advertising, online video advertising is still evolving,Increase the overall allocation to measured Internetsearch advertisements and display adssuch as banners, advertising. CPMs for Internet display advertising re-videos in static webpages, and pop-up adsare well es- main well below the average CPMs for television adver-tablished. In fact, we refer to these as traditional digital tising. In our survey, measured Internet advertising wasor tra-digital media.considered to be more effective than advertising in other media by 80 percent of respondents. Similarly, 95 percentSearch engine marketing (SEM), and in particular main- of our survey respondents expect to increase their budgettaining a presence on Google, continues to be a vitallyallocation in this category over the next three years.important component of the marketing mix for mostcompanies. However, companies must understand theAdopt new formats. Some marketers are experimentingreal cost and impact of SEM activity, assess the resulting with engaging custom formats that go well beyond theprofitability of the customers they acquire through this traditional banner ad, often taking advantage of rich me-means, and optimize spending accordingly. It is notdia animation and video. Apple, for example, has beenenough to simply pay for sponsored listings (known asvery innovative over the past few years with its Mac vs.paid search-engine advertising, or SEA). Best-in-class PC ads. In one example, the Mac and PC rivals spoke tocompanies drive performance both through paid SEAeach other across banner ads on the website. Althoughand search engine optimization (SEO); the latter utilizesthese advertising campaigns are often very difficult tothe natural order in which search results appear.scale up beyond the most premium of sites, they catchThe CMOs Imperative19 22. eyeballs and generate tremendous media buzz in tech- There is a great deal of excitement about the future ofnology blogs.targeting databut also some caveats. All playersad- vertising platform owners such as Google, content provid-Take advantage of improved targeting. Targeting tech-ers such as magazine publishers, and device manufactur-nologies have advanced rapidly, in most cases well ahead ers such as Appleare trying to harness their ownof marketers abilities to utilize them. Most marketers we consumer-usage data, in many cases across platforms.have spoken to are still relying primarily on demograph- Over the coming years, however, the industry will wrestleics and location (at the country level) to reach specificwith three main issues raised by targeting:end users online. However, marketers that use the follow-ing, newer targeting capabilities can increase click- Digital technology will likely continue to outpace mar-through rates by more than five times: keters abilities, generating more data than they actu- ally can use. Behavioral Targeting. Leverage the wealth of new userinformationsuch as preferred activities, interests, We expect increasing legal and public scrutiny aroundtelevision programs, and musicoffered by websites privacy issues, particularly after recent attentionsuch as Facebook. Use cookies to gather informationto Googles collection of data. (The Wall Street Journalabout other websites that users have visited, and incor- this summer created an entire webpage, titled Whatporate those insights into marketing strategies. They Know, dedicated to the collection of online mar- keting data). Retargeting (or Remarketing). Target online ads to con-sumers who have previously visited your website or There is the creep factorconsumers are increas-clicked on another related ad in order to recaptureingly demanding a higher degree of transparency.their interest.They want to know why the pair of Donna Karan boots they viewed at Zappos.com three days ago keeps fol- Data Sharing. Exchange data with other websites that lowing them around the Internet.may target consumers who have similar or comple-mentary profiles. Use of Data Exchanges. Leverage data exchanges, suchas BlueKai, that enable advertisers to access a broaderset of information than ever before, including psycho-graphic, behavioral, and occupational data.20 The Boston Consulting Group 23. The Marketers ResponseOver the last six months, weve held dozens been tackling a steep learning curve in digital marketingof conversations with CMOs and other ex- largely through trial and error. But we are already start-ecutives who realize that 50 years of his- ing to see the emergence of some patterns that can pro-tory in marketing organization and man-vide better answers to the questions above.agement approaches must changedramatically. Most marketers understand the urgency. We distilled some specific insights on best-practice ap-They do not need a call to action. Rather, they need a proaches by segmenting our survey respondents into twoclear answer on the new solution.groups: marketers who were more deeply committed to digital marketing, our Digitals; and those marketers whoExecutives we spoke with raised four types of questionswere still taking a wait-and-see approach, our Tradition-most frequently: alists. We segmented our sample by defining Digitals as respondents from companies that had above-average Planning and Budgeting. Given limited marketing re-rankings on three dimensions:sources, how do we evaluate the relative effectivenessof our marketing options and make tradeoffs accord- Budget allocations to social media, Internet, and mo-ingly? How do we ensure that our internal process forbile advertisingbudget allocation supports rather than hinders invest-ments that advance our digital-marketing goals? Intention to increase spending on social-media and mobile advertising Internal Capabilities. How should we strengthen ourown organization and processesfor each ad vehicle Perceived ability to make tradeoffs across mediaand each stage of the advertising value chain? In this way, we observed several characteristics common- Outsourcing Decisions. Which digital-marketing activi- ly demonstrated by the companies most actively en-ties should we manage internally and which should we gaged in digital marketing. (See Exhibit 4.) We foundoutsource to our agencies? that Digitals were nearly twice as likely to be in a direct- response business with a high e-commerce presence Agency Navigation. How should we manage the full (such as retailers, financial service companies, telecomspectrum of ad agencies, digital-ad agencies, and PR companies, and airlines.) Traditionalists were more like-agencies?ly to be in a brand-building business selling products largely through third-party retailers (such as food andOur interviewees agreed that no company out there hasbeverage, health and beauty, and consumer durablesall the answers yet. Instead, most companies are taking acompanies).leap of faith when it comes to digital marketing. They areinvesting despite their lack of capabilities, measurementThrough their focus on e-commerce and driving onlinetools, and agency supports. Certainly, companies havetraffic over the past decade, direct-response companiesThe CMOs Imperative21 24. Exhibit 4. Companies with Higher Digital Engagement Have Stronger Internal Supports Lower digitalHigher digital engagement engagement Traditionalists DigitalsAverage company revenues$22.2 billion $30.8 billionPercentage of respondents in direct-response industries13868Percentage of respondents who agree or strongly agree with the statementWe have the tools to make tradeos eectively across media2952My agencies are helpful in making tradeos across media 2537My company mandates a minimum investment in digital marketing 1939Our KPIs provide incentives to invest in digital marketing1435Digital marketing is important to my personal success 4861 Source: The BCG Future of Marketing and Advertising Study, 2010. Note: We categorized 24 respondents as being from Traditionalist companies, and 27 respondents as from Digital companies. We defined Digitals as those respondents from companies that had above-average rankings on three dimensions: budget allocations to social-media, Internet, and mobile advertising; intention to increase spending on social-media and mobile advertising; and perceived ability to make tradeoffs across media. 1We defined direct-response industries as businesses with a high e-commerce presence, such as retailers, financial service companies, mobile telecom companies, and airlines.have embraced the realities of digital marketing. ForPlanning and Budgetingbrand-building companies, however, the value of invest-ments in Internet and social media seems hardest toMost marketers have seen their planning and budgetingprove. The biggest gap in digital media is the inability to approaches evolve greatly over the past decade.link our advertising spending to a high-confidence ROImetric, said one marketing executive. Traditionally, marketing budgets have been set by simply maintaining a consistent ratio to sales growth, despite ev-This gap is grounded in business realities. While direct-idence suggesting that this is a poor way to make spend-response companies see digital-marketing clicks drivinging decisions. (For more on the topic, please refer to ourconsumers to their e-commerce sites and can track each recent report, No Shortcuts: The Road Map to Smarter Mar-subsequent sale, brand-building companies are left withketing.) In our survey, however, only 25 percent of respon-a more tenuous connection between their online market- dents told us that their budgets were set this way. In fact,ing activity and a purchase in a physical store. In addi-45 percent of our respondents told us they are buildingtion, managers in large consumer-goods companies may marketing budgets from scratch.tend to focus on sales volume rather than ROI as the pri-mary metric for success, causing them to focus on activi-Most likely, the recent economic downturn, combinedties such as trade spending and television advertisingwith the realization that new marketing vehicles need towhich have greater audience reach. By contrast, forbe incorporated into the mix, have pushed CMOs tocertain consumer companies, online vehicles on average change to this zero-based budgeting approach. We foundtend to deliver higher ROI but lower increases in salesthis finding encouraging, as it avoids perpetuating subop-volume (marketing impact) than traditional media do. timal spending patterns simply through status quo bud-(See Exhibit 5.) geting.22The Boston Consulting Group 25. Exhibit 5. For a Sample of Consumer Companies, Online Media Provides a RelativelyHigher Return on Investment Marketing impact Marketing eciency Return on investmentSpending per percentage pointPercentage of unit sales1 volumeof unit sales volume attributed Incremental gross margin per $1attributed to marketing to marketing2 ($M)spent on marketing ($)20 19 5 3.0043.8152.00 1.853 2.4102 1.71.000.8450.90.62 410.391 00 0 0.00TradePrintTradePrint TradePrintTelevision Online Television OnlineTelevision Online Number of Number of Number of brands75 64 4329brands7564 4229 brands7564 4329 in sample:in sample:in sample:Source: 2010 ROMI modeling meta-analysis by The Boston Consulting Group and Marketing Analytics.Note: The models for the 75 brands were based on at least two years of marketing activity and weekly sales in the U.S. food channel between October2005 and July 2009.1 This percentage reflects the amount of sales volume that can be attributed specifically to the impact of marketing expenditures.2 This calculation reflects the marketing expenditures that can be linked specifically to an incremental increase in unit sales volume.In light of all the changes in the advertising landscape, nies are placing a strategic imperative on digital invest-marketers have mixed views on their own ability to allo-ment, and therefore adopting specific mandates to drivecate marketing resources. About two-thirds of the respon- the strategy. Over the past year, leading companies in-dents we surveyed said that overall they felt comfortable cluding Unilever, Procter & Gamble, and Ford publicly an-optimizing ad spending between new and traditional me-nounced setting minimum targets for investment in digi-dia. But only 46 percent said they possessed the toolstal media. In our survey, Digitals were about twice asneeded to make these tradeoffs. likely as Traditionalists to set minimum thresholds forspending on digital marketing and to have key perfor-An even lower percentage of our Traditionalist segmentmance indicators linked to incentives for investing in dig-reported confidence in this area. In interviews, marketersital media.described the importance of obtaining an integrated viewon ROI across marketing vehiclesbut seemed to view itAccording to one former executive at Procter & Gamble,more as an ideal than the reality.investment in digital marketing has historically beenhampered by a prevailing consensus among brand man-Across most traditional media typesincluding meas- agers that no one ever got fired for spending more onured Interneta majority of respondents felt that their television. It may be that this is no longer consistentlycurrent planning and budgeting process was effective. true. In our survey, 55 percent of our overall respon-But these same respondents ranked the process used fordentsand 61 percent of executives from Digitalssaidsocial-media and mobile advertising at or near the bot- that digital marketing was important to their personaltom. (See Exhibit 6.) Nevertheless, some leading compa- success as executives.The CMOs Imperative23 26. Exhibit 6. Few Respondents Find the Planning Process for Social and Mobile Media VeryEffective How eective is your companys planning and budgeting process forthe each of the following marketing and advertising vehicles you use? Point of sale/merchandising 41Cable network television33Direct marketing31National broadcast television 31Local and national spot television31 Public relations30Magazine 27Promotions 26 Radio 26 Outdoor 26Trade shows 24 Newspaper 13Measured Internet13Sponsorships12 Co-op spending in the channel 12Social media 9 Sales force marketing 8Mobile 50 20 406080100 Very ineectiveSomewhat ineectiveNeither eective nor ineective Somewhat eective Very eectiveSource: The BCG Future of Marketing and Advertising Study, 2010.Note: The data reflect 56 responses.Internal Capabilities The nature of digital marketing itself is more global than traditional marketing has been, since activities onWhen considering their internal capabilities for digital sites such as Facebook and Google can be viewed bymarketing, executives often want to establish where, with- Internet users in any country.in their organizations, digital activities should reside. Recognizing that every company is different, companiesToday we see that most marketing activitiesdigital as can use a good rule of thumb: keep the strategic digital-well as traditionaltend to be decentralized and per-marketing activities as close as possible to the businessformed at the division or brand level rather than central- unit and ensure that they reflect the specific marketingized across the company. (See Exhibit 7.)direction for the division, brand, or region. Where possi- ble, however, executionsuch as coordination of e-mailHowever, several issues make digital marketing moreblasts, the purchase of measured-Internet display adver-complex than traditional marketing:tisingshould be centralized. Strong talent in the digital space is scarce and often re- The center should also mandate specific quality stan-quires incentives that differ from those provided by a dards for execution at the edges of the organization.traditional corporate structure. These standards should be used to set a minimum floor for excellence across the company; the idea is not to There are very few established rules of the road inbring down high-performing groups, but rather to sharedigital marketingexperience matters.successful approaches with other brands and divisions.24 The Boston Consulting Group 27. Exhibit 7. Marketing Activities Are Not Often Centralized Campaign development87 13Promotional and event-marketing activities8416 Point-of-sale materials and activities7426 Demographic-specic marketing activities7426Inuencer marketing 74 26Samples and coupon activities 73 27Traditional mass-market creative content72 28Social-media management 6832 Direct marketing67 33Sales force management 65 35Traditional mass-media planning and buying 65 35Co-op activities59 41Public relations59 41Measured Internet planning and buying 5842CRM management 56 44Measured Internet creative content 55 45 Company website management 50 50Company website design 43 57 0 20 40 6080100 Percentage of respondents citingtype of marketing-activity managementManaged in brand or divisionCentralizedSource: The BCG Future of Marketing and Advertising Study, 2010.Note: The data reflect 49 responses.Outsourcing Decisions (See Exhibit 8.) Similarly, in our interviews, we found thateven high-performing companies can easily make sharp-One of the most frequently asked questions we hear from ly contrasting decisions when it comes to outsourcing dig-marketers is whether they should be insourcing or out-ital marketing.sourcing digital marketing and advertising activities. Intraditional media such as print, radio, and television, the An executive we interviewed from an education compa-value chain and the primary roles in each step are gener- ny shared his organizations decision to eliminate theally clear. Typically, internal marketing teams set the agency of record and bring all marketing activities in-strategy, advertising agencies develop the creative execu-house. The company now manages a substantial internaltion and copy, and media-buying organizations acquire staff that includes four employees dedicated to SEM, tenad pages in magazines or 30-second spots on prime-timededicated to website development and construction, eighttelevision. The digital world is much more complex, how-working with paid vendors, and the remainder handlingever, requiring new skill sets and interfaces with new sets marketing operations and other activities. The companyof playersad networks, device manufacturers, and blog- embraces the benefits of managing search engine optimi-gers, among them. zation in-house and developing face-to face-relationshipswith partners in the advertising value chain, such asThere is no single winning model. Our survey shows that Google.companies defined as Digitals were about as likely as ourTraditionalist segment to outsource online creative exe-By contrast, a leader from a midsize consumer-goodscution, online buying, and social-media management. company described a hybrid approach: this companyThe CMOs Imperative25 28. contracts with both a digital-advetising and traditional- sive activity, and it is difficult to attract digital talent intoadvertising agency and also manages some activities in- a traditional corporation. To determine the right path,ternally. A four-person brand team, plus one central em-CMOs should consider the sensitivity or risk level of anployee dedicated to digital initiatives, interacts with a activity, the availability of qualified third parties, and themuch larger team of people at the digital-media buyingdifficulty of building internal capabilities.and creative agencies. In this setup, the skills in agencynavigation become crucial; in order to produce integratedcampaigns, the company must force its agencies to Agency Navigationwork together once the creative message is defined.As most companies are likely to outsource all or someThe outsourcing decision must be made on a highly de- digital-marketing activities, the ability to navigate andaveraged basis, depending on the specific activity andmanage advertising agencies becomes more critical thanstep in the value chain. For example, who exactly shouldever. Unfortunately, working effectively with agencies isbe responsible for responding to Facebook fans? Such en-also more complicated than ever. Only 31 percent of ourgagement can be critical to brand reputation and custom-survey respondents said that they found their agencieser loyalty. Too often, however, companies entrust these helpful in making the right tradeoffs between digital andtasks to 20-year-old interns or to third-party PR firms ortraditional media.digital agencies that lack sufficient context. At the sametime, in-house approaches face several obstacles: engag-On the one hand, traditional holding-company agen-ing digital consumers is a very complex and labor-inten-cies, with their wide range of subsidiary businesses and Exhibit 8. No Single Model Exists for Outsourcing Decisions on Internet and Social-Media Marketing Creative execution Planning and buying Managing for measured Internet measured Internet social media advertisingadvertising Percentage of respondents in the category 100252880 43 3845 456022424030 38 43 3350203325 22 19 190Traditionalists Digitals Traditionalists Digitals TraditionalistsDigitalsOutsourced MixInsourced Source: The BCG Future of Marketing and Advertising Study, 2010. Note: The data reflect 51 responses24 Traditionalist companies and 27 Digitals.26 The Boston Consulting Group 29. service offerings, can promise one-stop shopping for mar- In an emerging approach, some companies are choosingketing support and integrated campaigns across media. to outsource social-media activities to PR agencies. Hav-However, few agencies are fully achieving that ideal to-ing yet another vendor in the mix on integrated cam-day. The agencies are hampered in many cases by organ-paigns certainly adds to the logistical challenges. Howev-izational silos (although these are improving), by an in- er, putting PR firms in charge of a brands Facebook pagecentive system weighted toward experience overmay be a good match in some cases: these agencies areexperimentation, and by simple inertia. Since they want skilled at crafting messages for public consumption, re-to optimize purchasing and to share scale across clients, sponding to outside inquiries, protecting a brands repu-they lean toward large-scale media purchases that dont tation, and avoiding legal risks.translate well in the digital world. They also may lackreal, bleeding-edge expertise in all aspects of digital mar-We expect more companies in the future to move towardketing. As a result, holding-company agencies often fail to working with a mix that includes a traditional holding-develop cross-campaigns that make the most of opportu-company, specialized digital agencies, and PR agencies.nities in different media.The most successful companies will ensure that these col-laborations result in truly integrated campaigns by brief-On the other hand, focused digital agencies come with ing all agencies together and providing the right mone-their own caveats. Most are relatively small; they still lack tary incentives for them to work with one another.scale and cant provide global coverage. Specialized bynature, they dont always bring a broader perspective ontraditional media. They can own only a small slice of acompanys marketing activitythe part that is purelydigital and does not require coordination across tradition-al and digital vehicles.The CMOs Imperative 27 30. Launch Your MissionEven todays top marketers havent begun toand may not meet your companys needs. Agenciesconverge around a single model for the mar- and industry groups are working to set standards, butketing organization of the future. In fact, wethe pace of these efforts is slow, the process is vertical-see examples of success in many companies ly oriented, and the result (which might not come fordespite their very different approaches.five years or more) could be output that still isnt anideal fit. Better to seize the initiative and define yourHowever, on the basis of our findings, we can offer a top-own metrics.ten list of recommendations for companies looking to im-prove their game in digital marketing:5. Set minimums for digital investment and incentives for ex- perimentation among marketing executives. Change the1. Start with an internal health check. (See the sidebar internal mandate from no one ever got fired for Start with a Digital Marketing Health Check.) An- spending more on television to you can get fired for swer the key questions that define a digital-ready mar- buying too much television time. keting organization. Your responses will reveal your strengths and weaknesses, as well as areas for immedi- 6. Reconsider your range of agency options. For each of ate improvement.your marketing vehicles, look beyond traditional-ad- vertising agencies and consider digital-advertising2. Articulate an integrated marketing strategy. The strategy agencies, digitally savvy PR agencies, and crowdsourc- should be based on an understanding of consumer ing from agencies or even online consumers. (Crowd- segments, their potential media-consumption habits, sourcing entails tapping into your customers and using and your specific objectives for marketing each brand their ideas and contributions in marketing and adver- or business. Dont be distracted by technology gim- tising campaigns.) micks or buzz; base your selection of the right mix of traditional and digital options on your strategy.7. Brief traditional and digital agencies together and create incentives for them to play together nicely. The standard3. Use an integrated model that assesses ROMI across the fullincentive model for agencies is not structured to sup- range of marketing vehicles. Dont simply rely on yourport seamless collaboration. However, one marketer ad agencies for guidance. Jettison outdated marketing-we spoke with has arranged to withhold up to 20 per- mix models that include only traditional-marketing ve-cent of agency compensation on the basis of a qualita- hicles. While we havent yet seen a fully integrated ap-tive assessment of how well the agencies collaborate. proach implemented consistently, the leading players are working aggressively on continuous improvement 8. Watch out forand embracethe emergence of new-style in this area. advertising agencies that support their relationships with integrated campaigns involving all vendors. We predict4. Design customized measures for digital. Many currentlythat the gap currently left by a fragmented array of available metrics are inconsistent with one another digital and traditional agencies may be filled by these28 The Boston Consulting Group 31. Start with a Digital Marketing Health CheckDrawing on our work and discussions with clients, weve developed a health check for assessing digital marketing.Commercial Goals and StrategyInternal Organization We understand how the targeted consumer segments We successfully attract the best digital-marketing talentbehave online. in the industry. We leverage online channels and social media effec- We have attractive career paths for staff in digital-mar-tively.keting roles. We understand our consumers needs. Our organization structure facilitates a core customer focus across traditional, online, and new media activ- We accelerate the innovation process.ities. We test and launch new campaigns. We effectively capture and communicate best practices in digital marketing. Our online brand communications are authentic andinteractive. Our incentive system reinforces priorities for digital- marketing investment.Marketing Budget Allocation We make effective tradeoffs between traditional meas-Agency Navigationured media and digital-marketing activities. Our agencies are helpful in determining tradeoffs between traditional media and digital-marketing activ- We combine traditional- and digital-media vehicles intoities.powerful integrated campaigns. Our digital-ad agencies create effective online and new We can accurately measure the effectiveness of our dig-media campaigns.ital and new media investments. When creating new campaigns, we brief all our agenciesConsumer Interactions(for example, digital, traditional, PR) at the same time. Our consumers are highly affiliated with our brand on-line (for example, we have fans and followers). Our agency-compensation system promotes good work- ing relationships across digital, traditional, and PR We monitor what our consumers say about us online. agencies. We analyze consumer data from online channels and We make use of consumer and agency crowdsourcing.social media and feed the results back into our process-es and systems, such as: Customer segmentation. Brand positioning. New-product development process.The CMOs Imperative 29 32. new players, which will take an open-architecture ap- el. The structures and approaches companies put in place proach and work on an advisory basis. today will need to change dynamically over timeand at a faster pace than has been historically the case.9. In most cases, push strategy to the edge but keep execu- tion at the center. How might this look? Brand manag- Instead of trying to guess at perfection, companies need ers would determine the most relevant marketing to think about managing uncertainty and maintaining messages while the central CRM function would de- the maximum flexibility to adapt. This flexibility is par- termine, for example, the most effective time of dayticularly crucial for companies executing digital-market- for the SMS-message campaign. Some successful ing strategies in emerging markets, such as China, Brazil, companies have created marketing specialists whoand Indiawhich have some unique characteristics and can apply a digital skill set across divisions. Otherseven more uncertainty in their futures. (See the sidebar have established a center of excellence that collects Digital Generations in BRICI.) and promotes digital best practices to share across the company.We recommend that companies consider a dynamic ap- proach to marketing strategyone that emphasizes iter-10. Ensure a balance between local and global views of yourative experimentation in order to keep pace with inces-digital-marketing efforts. This might mean, for exam-sant change. With such an approach, organizations gainple, maintaining a global brand image while also re- what we call adaptive advantage.alizing that users in the Philippines are sticking tothe social-media site Friendster, even though the rest What does that mean specifically? Its partly about antic-of the world has moved on to Facebook. ipating changes, having the foresight to figure out what is going to happen next. Its partly about resilience, beingWe expect that CMOs and other marketing executives robust in responding to unanticipated events and trends.may find the above list of actions inadequate and even Its partly about agility, being nimble enough to respondfrustrating. Unfortunately, it remains impossible in thisto competition as it moves off in another direction. Andfluid media landscape to design a perfect marketing mod- it is partly about learning how to apply these capabilities Digital Generations in BRICI In most emerging markets, digital media are still largelycountriesBrazil, Russia, India, China, and Indonesia in their infancy and social media face several challenges. will represent more than 1 billion Internet users by 2015. Internet penetration is still relatively low, there is not a vi- But with personal computers being relatively cost prohib- able supply of ad inventory, the measurement systems itive in these nations, many consumers will develop dis- are not yet well developed, and local traditional-mediatinctive Internet usage patterns, including a heavier reli- agencies dont yet understand social-media dynamics. ance on the mobile phone as their primary access point.Specific behaviors vary tremendously by country (due to For many of our global clients, investment in social media income levels, the cost of bandwidth, culture, and other at the country level has come primarily from the need to factors), and digital usage patterns tend to shift quickly. satisfy top-down, global mandates for stated minimum in- vestments in certain digital vehicles. Moreover, compa-We see several implications for marketers. First, they nies struggle with inconsistent talent in their local organi-need to monitor usage patterns among local consumers zations, whose mandates to date have been simply media both today and in the future. Second, they need to create buyingand potentially mild adaptationsfor global a long-term organization strategy to ensure that the talent campaigns. and processes are in place locally to support digital ef-forts. Third and finally, large marketers can put pressure Advertisers in these markets face tremendous opportuni-on the social-media-measurement companies and inven- ties. However, those opportunities will likely differ from tory suppliers to create more reliable tools to measure so- those in more developed markets. As described in BCGs cial-media usage and ROI for specific investments in local September 2010 report The Internets New Billion, BRICImarkets.30The Boston Consulting Group 33. consistently and more effectively over time. If companies panies risk ceding share to competitors that are bettercan anticipate plausible futures, buffer them, or respond equipped to leverage emerging media opportunities.to them faster and better, they can be advantaged in shift- Over the next five years, we anticipate a significant skills-ing environments. (For more detail, see BCGs Perspec-based battle to define the next generation of marketingtives series on Adaptive Advantage.)leadership: your company cant stay on the sidelines forthis one.Given the scope of the challenge, it may make sense tostart figuring out what works by piloting a 360-degreeThe best CMOs know that they can no longer survive bydigital-marketing plan for a brand or category in a singlerelying on their hip agency executives or their young col-region. The subsequent path can be very iterative, with lege interns for technical expertise. And they accept thecompanies rolling out digital initiatives and then testinglack of a single, silver-bullet answer for achieving success.and refining them to gain capabilities over time. Now, they must become digitally savvy across every partof the marketing organization, top to bottom. They needExperimentation, at this point, is preferable to inaction.foresight, courage, and a bias for action even amid uncer-Thats becausecontrary to received wisdominaction tainty. Only then can they successfully tackle the new dig-in digital marketing is not the safer option. In fact, it pres- ital realities.ents real downside risks.By failing to integrate digital campaigns effectively, com-panies risk wasting marketing dollars by the millions. Byfumbling conversations with digital consumers, compa-nies risk damaging a brands reputation and authenticity.By waiting too long to commit to digital leadership, com-The CMOs Imperative31 34. For Further ReadingThe Boston Consulting Group pub- The CMOs Dilemma: Can Youlishes other reports and articles that Reach the Masses without Mass Media?may be of interest to senior execu-A White Paper by The Boston Consultingtives. Recent examples include:Group, July 2009 No Shortcuts: The Road Map to Smarter Marketing A report by The Boston Consulting Group, September 2010 The Internets New Billion: Digital Consumers in Brazil, Russia, India, China, and Indonesia A report by The Boston Consulting Group, September 2010 Smarter Marketing for Tougher Times BCG Opportunities for Action in Consumer Goods, by The Boston Consulting Group, June 200732The Boston Consulting Group 35. Note to the ReaderAcknowledgments Neal RichHenri SalhaThe authors would like to thank Me- Project Leader Partner and Managing Directorgan Findley, Andrew Jiang, Harish BCG ChicagoBCG ParisSubramanian, Neal Rich, and Neal+1 312 715 2224+33 1 4017 1342Zuckerman