Advertising and Marketing: Has the era of “retention” arrived?

From "flow" to "retention"

If you pay attention to the series of press conferences hosted by digital platforms at the end of the year, you will find that a new word is beginning to be mentioned: retention.

Most of the time, "retention" appears alongside "flow". You can roughly understand the difference from the literal meaning. The key to retention is "retention", which means to retain the traffic.

In fact, "retention" is not a new term. People have mentioned this concept at least since the beginning of last year. But now, it is suddenly mentioned by different platforms at the same time. The reason is very simple: changes in the external environment have suddenly magnified the value of this term.

Half a month ago, at a seminar in Shanghai titled "Intelligent Science and Advertising Development", Miaozhen shared a monitoring data: from 2017 to 2018, the growth rate of Internet advertising traffic dropped sharply from 20% to 1.18%; but this is not the end of the downward trend. The traffic growth in the first seven months of 2019 has shown a negative growth of 10.1%.

Internet advertising traffic trends from 2017 to 2019

(Data source: Miaozhen Marketing Academy)

Although the trend of declining traffic dividends has become a consensus, it is still somewhat surprising that it has such a huge and negative impact on advertising. Miaozhen wrote a line of conclusion on the displayed data - we have seen the disappearance of traffic dividends, and digital marketing has entered the era of traffic management.

The so-called "traffic management" is actually not much different from the meaning of "retention".

In fact, from my own perspective, I can personally feel the decline of the traffic dividend. When operating a public account a few years ago, I found that about 100 readings would bring one new fan; however, an article a few days ago received 26,000 readings. If we don’t count the new fans brought by the reposts from more than a dozen other public accounts, the current fan conversion efficiency may have dropped by almost half.

The reason for this phenomenon is very simple. Once we have followed a large number of public accounts, it is difficult to motivate us to follow new public accounts. As traffic becomes more and more valuable, even becoming a scarce resource, it becomes more and more important to retain this hard-earned traffic.

In fact, before the concept of retention, a large number of new words that have appeared in the industry in the past two years also reflect similar thinking, such as traffic pool, private domain traffic, etc. In traditional thinking, traffic needs to go through layers of funnel screening to eventually filter out high-quality traffic that can achieve conversions; and concepts such as "traffic pool" can be understood as placing a container at the bottom of the funnel. Since the good traffic has been filtered out, it should not be wasted easily even after it has been used up once.

So, it is actually a reflection of a savings mentality. Why should we save? Because it has value. Moreover, due to changes in the environment, the value of savings flow is becoming increasingly greater.

Get close to consumers and gain the right to speak

This year, technology vendors providing DMP and CDP solutions have entered a new phase of busy business. Companies including Deepin Intelligence (formerly known as iPinyou) and Miaozhen have mentioned that they have begun to receive more and more bidding invitations from advertisers this year. In order to cope with advertisers’ increasingly expensive demands for self-built DMPs and CDPs, the iPinyou team even had almost no time to take a holiday this year.

DMP stands for "data management platform" and CDP stands for "consumer data platform" - the trend of advertisers starting to build their own first-party DMP and CDP undoubtedly shows their determination to control data.

In fact, the data points to consumers. Especially in the mobile era, a one-to-one relationship has been established between people and terminal devices, which means that as long as the data is mastered, accurate analysis at the individual level can be achieved technically. In other words, the stronger the platform's ability to control data, the closer it will be to consumers.

From offline physical businesses to online digital marketing, numerous examples have proven that the links closer to consumers often have more say.

For example, supermarkets not only make profits by selling goods to consumers, but also charge producers entry fees, end fees, stacking fees, festival fees, DM fees, etc., and also give different payment terms; online, e-commerce platforms also have absolute voice in the industrial chain, and the traffic distribution rights in their hands make them very powerful.

Why are large supermarkets and online e-commerce companies able to control the discourse? The reason is that they are close enough to consumers.

In an era when there is an apparent oversupply of information channels, being close enough to consumers becomes increasingly important, as this is a prerequisite for ensuring brand loyalty and conducting consumer relationship operations. You know, both "loyalty" and "relationship" have become "luxury goods" between supply and demand.

So overseas, you will find that DTC brands are beginning to become a trend worthy of attention. DTC is the abbreviation of Direct to Consumer. From the literal meaning, you can see the intention of brands to conduct marketing directly to consumers. It means that brands bypass the middlemen and directly establish websites for consumer sales. Many successful cases have been hatched in this trend.

In addition, even big brands like Nike launched a program called "Consumer Direct Offense" as early as 2017, with the same goal of strengthening connections with consumers to provide high-quality personalized experiences. This early shift has paid off - for example, the financial report for the first quarter of fiscal year 2020 showed that its e-commerce business grew 42% year-on-year, mainly due to the enhancement of digital services and the development of the App ecosystem.

NIKE 2020 fiscal first quarter investor conference call minutes

Rethinking brand advertising

Let me first tell you an unconfirmed but still interesting story.

When the news came that gold had been discovered in California, a 17-year-old farmer named Ammer got up and followed the large group to pan for gold. But when he heard people around him complaining about the lack of water, he resolutely gave up gold digging and instead used his tools to look for water. He eventually started a business selling water to gold diggers. The end result was that most of the gold diggers who dreamed of getting rich returned empty-handed, but Ammer became one of the few who actually made money.

The reason why the "water seller" can make money is that it has accurately identified the demand and chosen a road with dense population, which enables it to continuously obtain new customer flow. With sufficient flow of people, selling water is a profitable business.

But if the foot traffic starts to become insufficient, is selling water still a smart business? In fact, this is the dilemma that digital platforms and advertisers are facing. In short, the "selling water" business that relies on large traffic is always a "good" business with strict time and space environment restrictions, but it is by no means a long-term solution.

When traffic dividends are abundant, the "wide-net" fishing method can bring immediate feedback; but when traffic dividends fade, this kind of immediate effect feedback based on large traffic is no longer feasible. At this time, the call for long-term thinking such as "retention" naturally becomes a top priority.

Not long ago, an article about Adidas reflecting on whether its 77% digital advertising was reasonable became a "hot topic" in the circle. The reason why this article became so popular is somewhat related to the long-accumulated emotions in the industry. This emotion may point to a question: In an advertising plan, what is a reasonable proportion of brand advertising and performance advertising?

Later, Song Xing wrote in "A Serious Quantitative Calculation: How Much Should Brand Owners Spend on Brand Advertising? 》 was sorted out. The relevant analysis process will not be elaborated here, but one point mentioned therein is worth noting, that is, when we discuss the effectiveness of brand advertising, we easily conclude that it is inferior to performance advertising because we adopt the analysis framework of performance advertising when measuring the effectiveness of brand advertising.

In other words, we directly measure whether brand advertising can consistently lead to final conversions after exposure. But this is tantamount to forcing someone to do something against their will, as it forces the measurement of brand advertising to take place on the battlefield of performance advertising. If we change the perspective and discuss the cumulative effect of brand advertising from a longer dimension, perhaps it is comparable to the goals achieved by performance advertising itself.

Song Xing's article adds the indicator of "decay rate" when measuring the effectiveness of brand advertising. The fact behind this indicator is that the effect achieved by brand advertising will not disappear suddenly, but will slowly decay over time. However, the sum of the effects formed during the attenuation process may not be small. To put it in more popular terms, it is the "long tail effect" - the starting point is not high, but the result is not bad.

Retention, return to the essence of advertising

In any case, it will be an emerging trend for advertisers to start readjusting their perception of brand advertising.

Of course, this adjustment is no longer based on simple exposure and display effects, but a comprehensive consideration of long-term effects and LTV (user lifetime value). On the long-term side, advertising needs to maintain its relationship with consumers over a longer period of time; on the LTV side, this long-established relationship is also more likely to create more transactions and greater value. These are exactly what advertisers urgently need when facing the decline of traffic dividends.

Shiqu pushed an article in its official account titled "2010⇆2020: The peak of growth, the starting point of the brand." I basically agree with the judgment of the last eight words, that is, although the ROI pressure borne by the advertising and marketing industry is inevitable, people's enthusiasm for growth may be slightly reduced; what will follow will be a re-correction of the more or less underestimation of brand value.

What drives this change is that the external environment is forcing people to change their thinking.

For digital platforms, the shift from competition for traffic capacity to competition for retention capacity may become the new main theme. Although traffic is still important, it is natural that retention is frequently mentioned by digital platforms when traffic is declining.

Does it provide advertisers with the ability to efficiently direct traffic from public domain to private domain? Are there scenarios and tools provided for convenient “retention” operations? Has a chain of continuous conversion been established within the advertiser’s “retention volume”? These will become the topics that advertisers will focus on next.

For example, the improvement in the ability of live streaming or short video influencers to bring products is based on the collective shift of users' attention toward these content tracks, and on the other hand it is also due to the influencers' ability to accumulate fans and the more convenient conversion chain within the platform. From the public domain to the private domain, it has both traffic capacity and retention capacity, which ultimately led to this popular new business phenomenon. If this mechanism can be transferred to advertisers, it obviously has great potential.

So in general, with the decline of traffic dividends, competition will inevitably shift from incremental competition to stock competition. At this time, advertisers and digital platforms naturally began to pursue continuous communication with consumers: on the advertiser side, they began to rethink whether they had neglected the long-term effectiveness of brand advertising; on the digital platform side, they also began to pay attention to the ability to help advertisers establish private domain retention, and have frequently told similar stories at recent press conferences.

The word "retention" may be considered a return to the essence of advertising in the new marketing context.

The essence of advertising is communication, and its purpose is to achieve ultimate sales conversion through communication. The idea of ​​completing sales conversion instantly without paying attention to communication is becoming increasingly difficult in the current situation of declining traffic.

Author: Advertising Notebook

Source: Advertising Notebook