December 2008

2009 Outlook
Here’s what I expect. By Jay Aber

It’s become something of a tradition for me to use my last column of the year to talk about the next year. With few exceptions, these columns typically paint a healthy outlook for the next twelve months. But as I sit here in mid-November writing this piece, about the rosiest prediction I can come up with is that the Internet marketing world in 2009 will be... uncertain.
I agree with the majority of pundits who feel that Canada will be hit with a somewhat milder form of economic downturn than much of the rest of the world is experiencing currently. The worldwide slowdown, record declines in the stock market and a spooked consumer all add up to a pessimistic economic view for 2009.

Budget cuts likely
Poor business forecasts and uncertain times usually mean budget cuts. One of the simplest, although not necessarily the smartest, ways to cut spending is to reduce marketing budgets. We are already hearing anecdotally that Canadian businesses are cutting 2009 marketing budgets substantially as Canadian subsidiaries of non Canadian corporations are looking to repatriate as much profit as they possibly can to make up for shortfalls worldwide; the manufacturing and auto sector face huge survival challenges; and Canadian, non-manufacturing businesses are cautious—waiting for the weak results to arrive.

So, if marketers have less money to spend on advertising and promotion in Canada in 2009, yet remain under pressure to deliver results, what will the major impact be?

Prediction
Marketing budgets will be reduced for branding and awareness campaigns, while those channels that deliver a quantifiable ROI or result— like Internet advertising, direct mail and other direct response channels— will see stable or even increased funding. Of all the channels, I believe 2009 will be a good year, at least comparatively, for Internet-based direct response marketing.

As Canada’s only Internet-based direct response agency, we see that most of our clients are bucking the trend. Instead of budget reductions, we are seeing increases for 2009 as the Internet continues to steal dollars and share from conventional direct response media.

The reason for the shift is simple. Many of our clients are now achieving their acquisition goals on the Internet. After several years of testing, many have developed a “Web Control Package” that delivers reliable, profitable and replicable results. When you overlay the Internet’s core marketing benefits of 80%+ monthly reach of Canadian adults, quantifiable and trackable results, relatively low cost, tight targeting, quick implementation speed and scalability – it is not a huge surprise that in an era of economic turmoil – direct marketing dollars are moving to the Internet. After all, acquisition-based spending is usually the last budget to be cut, and the Internet looks like a safe bet versus the increased cost and declining results for conventional direct response channels.
Now let’s see what some of the industry experts expect next year:

E-mail trends for 2009: Heightened focus on acquisition,
conversion tracking and personalization to increase response.
Once again, companies expanded their use of e-mail marketing in 2008. According to a leading Internet research firm, nearly 80% of marketers now use e-mail. Since they have embraced e-mail marketing as a key business tool – one that yields a strong return (according to the DMA) of up to $48 for every dollar spent – 2009 will likely see the following developments:

Expanded use of e-mail to customer acquisition. Marketers have largely focused on using e-mail as a tool for strengthening relationships with existing customers to increase ‘share of wallet’ and size of average sales. In 2009, marketers will also leverage the unique power and cost-effectiveness of e-mail to identify, pursue and secure new customers.

Focus on demonstrating cost-effectiveness. Because of increased pressures to demonstrate the positive return and impact of every campaign, marketers across all industries will build on their skills at gathering, interpreting and quickly acting upon e-mail metrics. At the same time, the historic weight placed on e-mail metrics such as opens and clicks will shift to an increased emphasis on campaign-specific conversions.

Leveraging customers’ real and evolving needs. Since customers and prospective customers will only act upon messages that are relevant and timely, marketers will take advantage of the flexibility and instant measurability of e-mail to personalize their campaigns. This is in line with a 2008 Aberdeen Group study, where 96% of surveyed companies believe that e-mail personalization improves marketing performance.
Source: Chris Carder, president, ThinData.

Digital will likely gain increased share of budgets as marketers are pushed to demonstrate ROI
In 2009, consumers will likely demand a more tailored and relevant experience from brands online. The prescription for marketers in a slowing economy is to increasingly use digital to connect in smart and meaningful ways that can be directly attributed to business results.

Consumer reliance on the Internet, from socializing to shopping, has forced marketers to get better faster. In 2009, it will be critical to reinforce the business case for digital and continue to gain share of the marketing budget. This means accelerating the use of various marketing disciplines, as well as mashing up traditional marketing efforts, to demonstrate the effectiveness of the medium.  
In addition, this is the year for online marketers to speak the same language as the CFO, communicating tangible benefits like rapid cycle testing and shortened time frames for measurement and improved ROI. Think spreadsheets, not speeches.  The larger challenge as an industry, as in past years, will be to communicate metrics in a straightforward and cohesive way.
Source: Michael Seaton, vice-president - Digital Marketing, Thornley Fallis Communications

Canadian affiliate marketing will attempt to “catch up” to
US as marketers need to base spend on performance increases
The circumstances seem right for 2009 to finally be the year of affiliate marketing. With the uncertainty of the economy, marketers will more easily be able to justify spend on performance based marketing like search and affiliate. As it pertains to e-commerce, more US-based merchants searching for growth in a slow US economy will be opening up to Canadians. These American businesses will bring their existing affiliate marketing programs with them as one of their many tools and Canadian retailers will either be proactive or reactive (hopefully the former). The Year 2009 will be a catch up year for affiliate marketing in Canada.
Source: Derek Szeto, president, RedFlagDeals.com

Digital media sales teams will need to be more consultative to help educate marketers
No doubt 2009 will be a tough year. Difficult economic times will likely place increased pressure on performance and effectiveness evaluation. The year should be good for digital, but advertisers will continue to demand and require from their suppliers more creative ideas on how to reach consumers with depth and in creative ways and they will want to truly understand the value of what they are paying for.

As more marketers contemplate or shift budget to the Internet, agencies and publishers will need to meet the ongoing need to educate and drive learning of digital’s role with other media and as a stand-alone direct marketing tool. As the front line in educating marketers, media salespeople need to be more consultative in their approach, focusing on client interests, and not simply taking orders.
Source: Brent Bernie, president, cMM Canada, comScore, Inc.

Happy Holidays!
Thank you for reading my column this year. I hope you find it to be interesting and useful. I am always looking for column suggestions, so please e-mail your topic suggestions, comments or questions to me.

For more than 13 years, Jay Aber - president of The Aber Group, has been advising Canadian marketing executives on how to use the Internet to create successful direct marketing campaigns. The Aber Group’s team of Internet direct marketing strategists, online media experts, and paid search engine marketing pros develop, execute and optimize online direct response campaigns for a broad range of blue chip clients. For more information, contact jay@abergroup.com or 416-322-2909 x222.