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Direct Response Marketing

The Digital Boomtown

1 Feb, 2017 By: Pat Cauley Response

From entertainment to services, the digital goods space is booming. What are the opportunities? And what can everyone learn from these marketers’ successes?


What could movies, gambling, eCards, meditation, books, Wi-Fi, web design, music, and dating all possibly have in common? When it comes to Netflix, FanDuel, JibJab, Headspace, Audible, Boingo, Wix, iTunes, and Match, they’re all pioneers in the digital goods category. Techopedia defines digital goods as any goods that are sold, delivered, and transferred in digital form.

And these intangible goods are becoming more commonplace everyday, in part because of their expanded multichannel marketing campaigns and the wider audiences they pull in tow. Response spoke with some leading marketers in the digital goods category to get their insights on this rapidly growing gold mine.

It’s a Gold Rush

“Consumer willingness to pay for digital goods has skyrocketed during the past 10 years. With in-app purchases on our mobile phones, on-demand movies, and television via Apple TV and Roku, digital goods are now a part of most consumers’ lives,” says Gregg Spiridellis, co-founder and CEO of digital media and entertainment company JibJab Bros. Studios, based in Marina del Rey, Calif.  “At JibJab, we are going after the market for digital expressions. As we have seen in our traditional eCard product, consumers will pay for the utility of a greeting card and for content that makes them look good in their digital lives. With the explosion of messaging platforms, we think consumers will pay for content that helps them express themselves in richer, more fun ways than a plain vanilla emoji.”

The dynamic shifts in content creation, consumption, and distribution have left consumers with an insatiable appetite for high-quality digital goods. “One big change has been immersive content. We are visual creatures, and the way audiences interact with and consume video content has become extremely important within the digital goods space,” says Vivian Hernandez, San Francisco-based head of communications and public relations for Wix.com, a cloud-based web development platform based in Tel Aviv, Israel. “While some of us may think of wearable technology, another way of thinking about this is: How can brands integrate purchase opportunities through video and via social channels, and provide added-value content that will make your audience?”

With the prevalence of always-connected devices, purchasing digital goods has never been easier, thanks in part to companies like Boingo Wireless, says Julie Vargo, its vice president of consumer marketing. The Los Angeles-based company is a global leader in enhancing wireless access for consumers.

She adds, “Boingo has been around since 2001, and we’ve sold everything online right from the beginning, so digital has always been in our DNA. We connect customers to more than a million hotspots worldwide. We serve the airport space primarily, so most people know us through buying Wi-Fi access in the airport. When a customer gets to a location, we alert them that there’s Wi-Fi available, and the whole process is happening on a mobile device now.”

Increased wireless access has helped blow the industry wide open in terms of digital goods and services being sold. “We have sold digital goods in the past and they are far easier to manage than physical goods, primarily because the product you ship is the product the user receives — no damage, etc. And the cost of goods sold is near zero. This means you can be very forgiving and generous with your customers when things go wrong — with replacements, free subscriptions — and the cost is negligible,” says Spiridellis.

The purchase path seems to be the ultimate gatekeeper of success in the digital goods arena. “It’s been so interesting to watch e-commerce in the digital space changing constantly. I think that the biggest thing for us as marketers is making purchases easier and easier to go through. So, things like Apple Pay, for example, you can quickly take out your phone, put a thumbprint on something, and make a purchase. It’s going to change everything,” says Vargo.

Moreover, much like the evolving role of content, Boingo strives to make the overall transaction a more pleasant experience. “As marketers, the other thing we’re looking at is not only making it easy, but also making it an enjoyable process. When you’re looking at things like Alexa, for example, and other consumer electronic (CE) personal assistants that are helping digital transactions happen, I think that’s going to be revolutionary in the way people purchase,” says Vargo.

Offline Drilling and Data Mining

Digital goods innovators use a mix of direct, digital, and data-driven marketing to reach consumers.

“All of JibJab’s products are direct-to-consumer digital goods. That means we have data on everyone who enters our funnels and all of their behavior that happens before a purchase. We leverage that data to optimize everything from programming the content users see when they visit our products to follow-up marketing efforts via email and push notifications,” says Spiridellis.

Consequently, mainstay DR marketing tactics still hold water when strategizing the digital goods pitch. “With digital marketing we really have to be aggressive in social media and retargeting and making sure that the customer really understands what the proposition is at a glance. Not having wordy copy in the funnel, but making sure that it’s visually interesting and clear what their options are, and how to move forward in the funnel,” says Vargo.

Still, even though most digital goods companies originated online, many have found additional success increasing their customer bases by stepping outside of digital marketing.

“TV is the best medium for general audience awareness. It works really well for us around the holidays, when a large percentage of people in the audience are all thinking about holiday cards at the same time,” says Spiridellis. “During the past three years, we have invested heavily in TV in the fourth quarter, and in each year, it’s delivered great ROI. We hold TV accountable to the same cost-per-subscriber that we expect from our digital channels. While we do see lift in other channels — like search and direct traffic — when we run TV, we do not allocate value to that lift when determining our acceptable cost-per-subscriber.”

For Wix, DRTV advertising is an integral part of its marketing mix. In fact, Wix enjoyed so much success from DRTV, it eventually decided to take a stab at the mecca of TV advertising: the Super Bowl. After a successful debut in 2015, Wix incorporated a daring digital twist for its 2016 campaign.

In January 2016, Google announced a new online ad format, Real-Time Ads, to help marketers take advantage of “micro-moments” — buzzworthy events that everyone talks about. According to a Marketing Land report for Real-Time Ads, AdWords’ online tools allow a pre-created ad to have a component — such as a photo or overlaid text — that can be updated immediately to reflect some event that is generating chatter. It points to the day when ad elements may be automatically generated from trends detected on social media.

“With Real-Time Ads, brands will be able to instantly run an ad across YouTube, hundreds of thousands of apps, and more than 2 million sites in our Google Display Network with a message that ties directly to the big moment consumers just experienced,” Google said in a statement at the time. Less than a month later on Feb. 7, 2016, during the Super Bowl 50 broadcast, Wix.com employed Real-Time Ads on the web in concert with its TV ad.

“As a data-driven company, we believe in numbers and trends to better understand how to market toward our consumer-base and adapt in real-time,” Hernandez says. “With our 2016 Super Bowl campaign, we built out a cross-company campaign and became one of the first companies to trial new tools, such as YouTube Real-Time Ads, to amplify our television commercial. Unafraid to be pioneers, we make sure to understand where our customers are or will be, and connect with them through multiple touch points.” says Hernandez.

It turns out Wix’s pioneering strategy was a big win. “We have been in the Super Bowl twice and are returning for Super Bowl LI in 2017,” says Hernandez. “In each case, we have produced campaigns to extend far beyond the 30-second airtime. For the 2016 Super Bowl ad with ‘Kung Fu Panda,’ we had 12 different teams come together to build out a multi-touch point campaign that earned us the spot of No. 1 online campaign in the world.”

The Super Bowl aside, Wix has also taken some creative risks in international markets. “One of our more successful campaigns was a German ad campaign, ‘I am a Wixer,’ in which we owned up to the double meaning of ‘Wix’ in German and made a riff on ourselves,” says Hernandez (For anyone unfamiliar with German slang, Wix is term for masturbation). “Taking risks, localizing a campaign, and working with key influencers led to an extremely successful online campaign.”

And while Wix may have struck gold with these campaigns, they’re not all winners. “Other campaigns that were more lackluster taught us how to course correct, as well as learn from those mistakes to improve future campaigns,” says Hernandez.

Fools’ Gold

Given the category is constantly evolving, digital goods marketers often take failed campaigns and try to adapt the learning as quickly as possible. “For campaigns that have missed the mark, the culprit is always one of three things: friction in the funnel from ad to conversion; too broad an audience to generate messaging that resonates; or too small an opportunity to begin with,” says Spiridellis.

Similarly, Boingo tries to reduce the funnel friction epidemic with consistent A/B testing. “The biggest learning for us has always been reducing the number of steps. The faster you can get a person through the funnel, the better it is,” Vargo says. “So, we are constantly testing that by trying to reduce as many pain points as possible, reducing any confusion, and taking out any kind of unnecessary steps. We’re constantly looking at whether the page is loading quickly and also thinking about how we can reduce page-load times, making sign-up super simple and very clear about what they’re purchasing, and what the value proposition is.”

And like most skillful marketers understand, testing and optimizing campaigns is paramount. “What I think is interesting about A/B testing is just that your intuition about what will win is not always the case, so I think being really data focused is another important takeaway,” says Vargo.

Personal Growth

Among the marketers we spoke with, a resounding anecdote for digital goods success always comes back to personalization. The personalization factor in JibJab’s campaigns is certainly notable.

“The key lesson we have learned over the years is that relevance and personalization drive success. When we get the targeting right on Facebook, our numbers skyrocket. When we put the faces of friends and family into the emails we send individual audience members, our click-throughs and conversions soar,” says Spiridellis.

Vargo also insists that personalization is an essential factor. “It’s definitely key to bridge that gap because the convenience factor is so huge. Being able to purchase immediately and not have to go to a retail space is helpful, but if you can make it seem enjoyable and personalized, that’s really the differentiator,” she says. “As more time goes by, I think Alexa and the like are going to get more and more personalized. And as digital marketers, companies have to be more and more personalized. At Boingo, we’ve invested in lots of different data-mining tools and interface with our website to make sure that we understand our customer better and serve personalized content.”

For its part, Wix has successfully coupled personalization with retargeting. “Another area where we see growth is with personalized retargeting, which grew exponentially in 2016. From sending email reminders about online shopping cart abandonment, to more personalized messages, we are seeing marketers localize and customize their marketing efforts,” says Hernandez.

However, with increased personalization often comes regulatory concerns. “There are privacy concerns because to deliver the goods online, depending on the nature of the service, it’s necessarily going to involve collection of personal information,” says Linda Goldstein, New York-based partner and chair of advertising, marketing, and digital media at Manatt Phelps & Phillips LLP and a member of the Response Advisory Board. “So those will always raise more privacy concerns than you would have in a traditional hard goods arena where you don’t really come across those issues.”

Digital goods marketers can combat these concerns by staying compliant with industry rules and standards. Goldstein stresses that marketers should make sure that they have a robust privacy policy that adequately addresses consumer concerns. “I’m seeing a lot of lead-generation activity to reach potential customers, and to the extent that the industry is doing forms of retargeting, marketers need to be sure they’re complying with the Digital Advertising Alliance (DAA) guidelines for disclosure of their targeted advertising policies,” she says.

Digital Ditches

Nimble marketers must be transparent to stay in customers’ good graces.

“What makes the digital goods offering a little more vulnerable is that, unlike hard goods, you don’t have something arriving at the consumer’s door every month. So, particularly in the case with many offers that are preceded with a free-trial offer, there is often a high level of complaint from consumers that they haven’t seen the disclosures and that they didn’t really understand that they were signing up for,” says Goldstein.

Aside from the inherent regulatory issues, there are other challenges that arise with digital goods as opposed to hard goods.

“As it relates to digital vs. something physical, you really have to meet the customer’s perception of their experience,” Vargo says. “When you think about Wi-Fi in the general market — people’s expectations of Wi-Fi — it’s an extreme variance between newbies, like when I think about my mother-in-law, versus a power user whose been getting online since Windows started. So how do you meet the expectations of those different types of users?”

Keeping up with constant innovation is another issue digital goods marketers routinely face. “A challenge for us is the technology changing so fast. If you think about iPhones coming out, that was only 10 years ago. When we first launched, mobile was an afterthought and it was all about the laptop as the driver of usage,” Vargo says. “We’ve seen that completely flip on its head, and mobile now absolutely drives our usage. And if everyone has a mobile device, that’s fine, but the mobile devices are getting better and better every couple of months and data consumption is going through the roof. So, really trying to stay in front of the technology has been one of Boingo’s biggest challenges — making sure that the sales funnel works well on all the different devices and that we’re testing, not only on the most popular devices, but also on what will be the most popular device six months from now.”

Breaking Barriers

For marketers looking to roll out a new product in the digital goods space, there are definitely some best practices to consider. Having created JibJab with his brother out of a garage in Brooklyn, Spiridellis has first hand experience starting from the ground up.

“I would advise to start small with a minimum viable product and test. I would also make sure that you have a plan for scaling distribution. Having a 10-percent free-to-paid conversion rate is awesome — unless you have 10 customers and no way of scaling the number of people you get in the funnel,” he says.

Boingo’s mantra is to always bring it back to the customer: How is the customer being underserved, and how can you personalize the experience for them and communicate that to them?

“We want to make sure that we’re always thinking about what they’re doing, what their habits are, and that we have the right data channels set up so that we can understand those behaviors,” Vargo says. “Our customers, for example, are sitting at an airport; they don’t have a lot of time to get online and they don’t want to ponder five different plans. They want one or two options and they want to get on quickly and painlessly. So we have to think about that experience and make a customer funnel that is quick and easy to complete.”

Goldstein notes that many recent enforcement actions have had an increased focus on customer service and the cancellation process. “I would also advise marketers to pay attention to that part of the business. We’ve had a number of investigations that have actually been prompted not as much by the advertising per se, but by the inability of consumers to cancel, which has generated complaints,” she says.

With the digital goods marketplace progressing a rapid speed, Wix makes sure to keep customer service at its forefront. “The space is evolving so much, and with increased social engagement, marketers and companies are witnessing customers becoming increasingly vocal and inevitably impacting the way we connect with them,” says Hernandez. “At Wix, we make our customers our priority and have increased investment in our customer support and service, and enhanced our communities. From providing in-language support, to special Wix Pro channels, and availability across time zones, we make sure that, as a cloud-based service, we are engaging at all times. This will inevitably continue as our audiences expand across territories, sectors, and demand that we have the channels necessary to service them.”

If JibJab’s success is any indication, the future growth of digital goods looks very optimistic. “As cable channels get unbundled and users get more used to paying for their entertainment experiences — be it an over-the-top television subscription or an app — I expect consumer willingness to buy digital goods to keep climbing,” Spiridellis says. “If you can create a product that people love in the digital goods space, the economics are great. That should attract more developers and programmers to the market over time, giving consumers an even broader range of great products to choose from in the space.” ■
 


About the Author: Pat Cauley

Pat Cauley

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