Harvard Business School Working Knowledg e Archive

Contextual Marketing: The Real Business of the Internet

3/26/2001
Companies of the not-too-distant future will be able to reach out and touch their customers any time, anywhere: in a mall, in a car, in a plane, standing in a queue. It's all thanks to Internet capabilities that are coming to a multitude of wireless devices. This excerpt from the Harvard Business Review explains how a few savvy companies are already getting a head start by creating smart marketing opportunities.

by David Kenny and John F. Marshall

Contextual Marketing

As the Internet becomes ubiquitous, companies will gain many new ways to connect with customers. This explosion of access will open up enormous marketing opportunities, but it will also pose big challenges. Designing a compelling Web site may be hard, and using personalization software to customize what individual consumers see may be tougher still. But these tasks pale in comparison to managing a pervasive electronic presence that senses and responds not only to who the customer is but where she is and what she's doing.

Think about airlines — they need Web sites so their customers can make reservations and check schedules online. But the airlines will also need much more. When a traveler needs to change plans midjourney, an airline must be able to provide for him an Internet-enabled mobile device while he's still in the air or a computer terminal while he's in the departure lounge or airline club. The passenger may also require related services — hotel reservations and ground transportation, for instance — that change as his plans change.

Quotation
Mobilemediaries might serve up your spouse's wish list when you're in a mall shopping for a birthday present. They might enable you to trade stocks when the market is plunging and your commuter train is stalled.
Quotation

For their part, retailers may use kiosks, Internet-enabled point-of-sale (POS) terminals, or mobile devices to digitally recognize loyal customers while they're in a store. Then, before the customer has even reached the checkout counter, the retailer can devise special offers based on the customer's purchase history and preferences.

The companies that master the complexity of the ubiquitous Internet will gain significant advantages: greater intimacy with customers and more efficient targeting of market segments. And by offering customers a more valuable, more timely product, they'll be able to charge a premium price. The crucial step is to recognize that the ubiquitous Internet will further reconfigure value chains that have already been shattered by the Internet's first wave. As the ubiquitous Internet becomes a reality, a new kind of intermediary role emerges — we call it the mobilemediary.

The mobilemediary will be able to break into the value chain at any point, bringing information and transaction capabilities to customers whenever and wherever they're ready to buy a product or avail themselves of a service. Mobilemediaries might serve up your spouse's wish list when you're in the mall shopping for a birthday present. They might enable you to trade stocks when the market is plunging and your commuter train is stalled. When you're with your family at a theme park, they might let you know that it's your turn to ride the roller coaster. But whatever form these intermediaries take, they'll be less about content and more about context.

The Rise of Contextual Marketing
Contextual marketing opens up opportunities for companies that, for various reasons, can't form the ongoing digital relationships that are the lifeblood of a successful destination Web site — for example, makers of consumer packaged goods, single-product companies, and infrequent service providers.

The most innovative of these companies are already adapting their marketing strategies to take advantage of the ubiquitous Internet. Take Mobil's Speedpass: the digital wand can be attached to a keychain and lets customers pay for gas and other purchases by waving it in front of an electronic reader at the gas pump or at the checkout counter. It has proved so convenient that some drivers go miles out of their way to find a filling station that accepts Speedpass. In Japan, wireless carrier NTT DoCoMo has signed up a staggering 10 million consumers for its i-mode service over the past 12 months. I-mode offers subscribers wireless access to restaurant locators, ski-condition reports, hotel reservations systems, online auctions, and thousands of other services. Some of this information is already available on the World Wide Web, but with i-mode, consumers can tee up the information they want when they want it, not just when they're sitting at their PCs. Japanese consumer marketers are taking advantage of this situation — there are now almost 10,000 i-mode sites.

As these examples suggest, the ubiquitous Internet will vastly expand marketers' opportunities to reach customers. At the same time, it will destabilize the "four Ps" of traditional marketing: price, product, placement, and promotion will all be thrown into constant flux, depending on the customer and the context. The marketing goal will be the same as ever: deliver the right product to the right customer at the right time. Companies will still have to form a deep understanding of their customers' needs and desires. But in many cases, instead of owning customer data or individual customer relationships, successful contextual marketers will borrow them.

Recent initiatives by Johnson & Johnson demonstrate this kind of contextual marketing in action. Accepting that it was unlikely to develop a meaningful dialogue with most consumers about headache remedies, skin care products, and the like, the health-care-product manufacturer has chosen not to focus its strategies and investments on a Web site alone. Instead, it places its products in the most fruitful digital context possible. Banner ads for J&J's Tylenol headache reliever unfurl on e-brokers' sites whenever the stock market falls by more than 100 points. The brokerage firms own the customer relationships, but J&J breaks into the dialogue at the moment when the marketing opportunity is greatest.

Or consider J&J's campaign for Clean & Clear, a skin care product line for teenage girls. Resisting the temptation to create yet another ill-fated destination site, such as the definitive online source for all things acne-related, J&J establishes a presence within preexisting online teen communities. The company gives teenage girls, many of whom spend their free time chatting online, the chance to send one another electronic postcards that offer a free skin analysis and a sample of Clean & Clear. The campaign's viral component — friend-to-friend referrals that multiply exponentially — significantly increases the product's exposure at little additional cost. The result: a response rate that's several times higher than standard Web levels, without any significant site investments. Once again, J&J inserts itself into a preexisting relationship at the optimal moment.

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Excerpted from the Harvard Business Review, November-December 2000.

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David Kenny is chairman and CEO of Digitas, an Internet services firm headquartered in Boston.

John F. Marshall is a senior vice president and group director of Digitas. He leads the company's global wireless practice.

Before and After

In three to five years, the ubiquitous Internet will begin to unfold. Consumers will be constantly enveloped in  a digital environment, and marketing strategies will have to change radically. Web sites, the centerpieces of most of today's strategies, will only be one piece of a much larger and more complex puzzle.
  Today's Internet Ubiquitous Internet
Intermediary The destination Web site The mobilemediary
Access Points PC equipped with Web browser PDA
e-wallet
wireless phone
interactive TV
always-on broadband
kiosks
Internet-enabled POS terminal
Customers Can Be Reached Only when they're sitting at their PC's browsing the Web 24 hours a day, seven days a week, anywhere on the planet — in their cars, at the mall, on an airplane, at a sports arena
Customer Focus Price-conscious comparison shoppers anyone with an immediate need, who will spend money to save time.
Strategic Mandate Focus on content
Build destination Web site
Personalize Web pages
Wait (and wait) for customers to show up
Focus on context
Build ubiquitous agent that travels alongside your customer
Master technology that lets you know when you're needed
Be there when and where your customer is ready to buy