It seems like just yesterday that we entered the second decade of the 21st century and were beset by a bevy of predictions from gurus about what will come in 2011. As a digital strategist myself, I am often called on by our clients to interpret the tea leaves of change in our space—after all, many decisions will be made and money will be moved among the new-new things. Ironically, I have found that the more time I spend thinking about new digital media and start-ups, the more I am drawn to old lessons that I learned in working on new products as a brand manager at Procter & Gamble.
Way back in the ‘90s and early ‘00s, I worked in marketing on brands such as Tide and Mr. Clean, and led a dozen product initiatives—including a few major successes (Mr. Clean Magic Eraser) and some spectacular failures (Fit Fruit & Vegetable Wash). I saw patterns in these launches and learned recurring marketing lessons. Interestingly, these lessons seem to hold true in the world of digital start-ups—as entrepreneurs and their investors travel through the same world of 4Ps, 3Cs, and WHO/WHAT/HOW.
I believe that we can make smarter investment decisions about how to use digital tools in our marketing by applying our brand-building frameworks to these start-ups. Here are five trends that my brand marketer intuition suggests will play out in 2011 and beyond:
1. Sales of Smartphones Will Beat Nearly Every Analyst Prediction
Nielsen predicts U.S. smartphone penetration at more than 50% in 2011. Pricewaterhouse Coopers forecasts global smartphone penetration will be 17% by 2014 (55% in developed nations). Verizon began this year by taking its earnings up due to rising smartphone revenues, and just predicted that its percentage of customers with smartphones will rise to 50% in 2011, up from 26% in 2010 and 15% in 2009. Predictions of new technology adoption traditionally get ahead of reality, but I believe several basic consumer and market forces will drive Web- and app-enabled smartphones to beat what most analysts and industry players dare imagine.
First, people already have a habit of upgrading their mobile phones relatively frequently. Unlike the laptop market where people prefer to delay upgrades due to high costs and the complexity of moving software and files, we find it easy to upgrade our phones annually. Contracts are always churning, and smartphones are the only devices that the large pool of manufacturers and service providers are advertising—because they are more profitable than other, older product lines. Just yesterday I saw an advertisement for a $9.99 Android-equipped smartphone.
Another driver of the habit is the social nature of mobile devices. Smartphone owners barely hesitate to show off vacation photos or update their Facebook status. They have become visible markers of the status of access—and no one wants to have the oldest phone in the club.
The product benefits are also very clear. Smartphones unlock access to thousands of value-added apps, ranging from time-killing games to productivity-building tools. It is rare to have a product category that provides access to so much more value—perhaps the only comparison is broadband Internet access, which also beat many expectations in its rollout.
Marketers must focus their attention on smartphones, mobile Web access, and app development in the year ahead. With the rapid rise of these devices we will see a corresponding explosion in tools such as promotion-seeking and price-checking apps in-store.
(Final note: In case you think it’s impossible to find a technology that beats predictions, no one predicted the huge numbers that Apple’s iPad hit this week, either.)
2. Build and Bet on Apps with a Clear, Focused User Benefit
In large part due to the growth of smartphones, an increasing number of brands have become interested in developing apps or partnering with mobile app makers. In either case it is important to think of apps as new products, and evaluate them based on the classic core concept questions: What is it? How does it work? And when should I use it?
Through this classic concept lens, start-ups such as Foursquare begin to look questionable. The service allows people to “check into” locations, yet offers no single, focused benefit aside from the novelty factor. No wonder that only 4% of those in the U.S. have ever used a location-based service, and Foursquare is now promising to add some real, tangible benefits in the months ahead.
On the other hand, some apps and brands will struggle because they offer too many benefits. Google, for example, keeps adding so many services to its broad audience that its users cannot keep track of what’s next. Google has a mobile app that just added a photo-based search capability. But its early visual searches are too broad—so that specific images are hard to find and results are generic. Instead, look for a rise of more focused search apps, such as Snooth, a wine review guide that also uses image search for the specific purpose of scanning wine bottle labels and pulling up focused information.
In the year ahead I would bet on apps that similarly focus on a single benefit to a focused target audience. For example, AisleBuyer brings grocery store self-scanning to your mobile device. This is a clear, focused benefit for both shoppers and retail stores—and by hooking users with this benefit, it can gradually add access to reviews, coupons, and loyalty programs.
3. Groupon Will Lose Its Luster Unless It Becomes a Consumer Habit
Groupon raised eyebrows in our industry at the end of 2010 when it reportedly turned down a $6 billion buyout offer from Google, and then made plans to raise $1 billion in VC funding. There is some justification for the excitement—Groupon has more than 35 million members worldwide, and its revenue is on a $500 million annual pace. The company has tapped into a clear consumer benefit—saving money—and it has unlocked marketing budgets of local businesses.
These dynamics have helped Groupon win with awareness and trial, but I worry that habit formation is a risk in its business model. Those like me who have experimented with Groupon as a user might agree that while the initial excitement of a great deal is there, the honeymoon soon wears off. The company’s daily email becomes an annoyance over time, and its offers vary wildly—recently ranging from a nursery painting service to an anti-LeBron James T-shirt. And because it depends on a group of people to act, there is often disappointment when not enough savers sign up. I believe this will mirror some of the initial hype and gradual decline of interest around online auctions. (For another smart user+marketer take on Groupon that is consistent with mine see the Experience Matters blog).
I believe Groupon-like features will pop up in existing online and physical stores in the year ahead as retailers experiment and build off the publicity around Groupon. Walmart, for example, launched a program called CrowdSaver, which first offered an 18% discount on plasma TVs when 5,000 people “Liked” the offer on Facebook. And focused interest businesses such as Restaurant.com are offering $100 dining credits for $40.
4. 3D TV Does Not Provide Enough Consumer Value to Take Off
All too often, the breathless desire and combined forces of consumer electronics manufacturers and retailers attempt to ignite a new wave of home entertainment technology but fail to win in the marketplace. Many have pegged their hopes on 3D television and filled their shelves with related equipment in hopes of a happy holiday buying season. Alas it didn’t take off this year and I believe prospects are low in 2011 and beyond. A Nielsen survey shows that only 3% of people in North America said they Definitely Would Buy a 3-D TV in the next year.
The first problem for 3D peripherals and programming is the significant purchase barriers that exist. Consumers loathe wearing special glasses and replacing the lovely flat-screen LCDs that they just brought home one or two years ago. More importantly, the value of a 3D home experience seems small. There will be few home movies and cable channels in 3D for some time, and a 3D picture is not significantly better than a high-quality HDTV at a fraction of the price. Analysts even say that 3D movie production will scale back as consumer interest wanes.
This follows the path of Blu-ray players and movies, which have also failed to connect with consumers on a large-scale basis. Blu-ray offers an improved picture quality, but most consumers have not seen enough of a difference to make it worth replacing their old DVD players and movie collections. Meanwhile, consumers are aggressively buying up services such as Netflix and Amazon, which allow movie downloading to their laptops, iPads, Xbox, and TiVo. Ironically, the quality of on-demand movies is usually significantly worse than even basic DVD quality—proving that the innovation consumers value today lies in access, not pixels.
5. Augmented Reality Fails the User Experience Test
I have to end my list by pouring a bucket of cold, harsh reality over the head of Augmented Reality, or “AR.” You may have encountered this buzz-builder in 2010—AR essentially is the use of a digital device to overlay physical objects with information or entertainment. This most often consists of a mobile app that uses image recognition and GPS. Examples are starting to pop up in app stores—such as an ATM locator that recognizes nearby buildings, a tool that guides you back to where you parked your car, and the Pocket Universe Virtual Astronomy app that really is a blast with kids in the backyard on a starry night.
The concept of such AR apps is exciting, but the use test is where it all falls apart. Put simply, it is far too difficult to hold your mobile device in front of you to enjoy the core benefits of AR. If you thought driving while texting was bad, imagine driving while holding an iPhone and peering through the tiny screen to look for a virtual ATM sign or coffee discount. It’s just not happening.
AR technology and its range of imaginative apps will not hit the mainstream until we have a better way to overlay digital information before our physical lives. For example, within a few years I believe we will be able to buy smart sunglasses that act as video screens, or even beam information directly onto our retinas. I predict that such devices will be commonplace by the year 2020, and of course come first from Apple (iFrame, anyone?).
Of course, I cannot guarantee that my predictions are accurate—if I could, my stock returns last year would have looked a lot better. But I can guarantee that you will make better decisions about which digital innovations are worthy of your investment in time and money by analyzing them through the lens of the great consumer marketer that you are. Digital may seem confusing and overhyped at times, but you cannot go wrong by centering yourself in consumer and concept understanding.