David Bell, author and Professor of Marketing at Wharton School of Business, talks location-focused marketing and the best way to bond with a customer base
When we read David Bell’s 2014 book Location is (Still) Everything: The Surprising Influence of the Real World on How We Search, Shop, and Sell in the Virtual One, we loved its effective explanation for why businesses should never have a one-size-fits-all approach to marketing. In the book, Bell simply and eloquently proves how our shopping habits naturally change based on where we live, where we travel, and what our real-world friends and social media network recommend. Basically, he’s an expert in consumer shopping behavior who finds the time to write brilliant books, speak globally about e-commerce, and occasionally host the show Marketing Matters on Sirius XM—all while holding down his day job as Professor of Marketing at Wharton School of Business. We couldn’t wait to pick this New Zealand native’s brain on everything from digital ads and influencer marketing (hint: he thinks it’s here to stay) to his own quirky shopping habits.
“Online makes the world ‘flat’ in terms of access to goods and services, but not in terms of demand patterns.”
Can you explain the premise of your book—how location plays a key role in online and brick-and-mortar shopping habits—using your own shopping habits as an example?
David Bell: Our choice of physical location in where to live (dwelling and neighborhood) is a considered one and says quite a bit about our characteristics, e.g., socio-economic status, and our preferences, e.g., for outdoor space, access to shopping and restaurants, and so on. In addition, it dictates, to a large extent, the value of online experiences, such as shopping and consumption of content. When, for example, I’ve lived outside of the Philadelphia downtown in Fishtown and Northern Liberties, I’ve tended to do a quite a bit of online shopping for clothes and household items, given that offline options are not so prevalent. Conversely, when living in New York City, I’ve done more offline as options are plentiful and convenient. So these three neighborhood factors—characteristics of residents, preference of residents, and access to offline options—do a lot to shape online demand. Online makes the world “flat” in terms of access to goods and services, but not in terms of demand patterns. The amount and kind of demand that an online seller has in a particular location is very much shaped by these three factors. I’ve seen this over and over again in the sales data of numerous companies.
Your book was prescient in terms of the need for offline and online marketing and sales, depending on the product and location of the target customer. Have you noticed any major changes to this line of thought since the book was released in 2014?
DB: There have been three major things both within the United States and elsewhere, especially in China. First, what I would call “online-offline convergence” is accelerating. To use two recent and notable examples, on June 16th of this year Amazon announced a purchase of Whole Foods for $13.4b. Somewhat overshadowed was the announcement (on the same day!) that Bonobos was acquired by Walmart for $310m. So, the biggest online-first player is acquiring offline, and the biggest offline player is trying to infuse “online DNA.” Second, while offline is “dead and dying” (Credit Suisse anticipates that up to 9,000 stores will shutter), it is also “alive and thriving” in the sense that Digitally Native Vertical Brands (DNVBs) from Away (luggage) to Warby Parker (eyewear) have tremendous offline operations. The essence of this conundrum is that the offline is not going away. What is happening is that offline is being rethought and reshaped to fit the digital economy. This means an experience focus, rather than a fulfillment focus. For example, we see a move toward small-footprint stores that tell an exceptional narrative and provide outstanding service, and a move away from large-footprint stores that attempt to have full inventory available for immediate sale.
Do you believe that location-focused digital ads and experiences can help close the gap in influencing locations where a brand’s online and physical sales aren’t as robust?
DB: Absolutely. I saw this firsthand in some of the work that I did with Diapers.com. One of the great things about the Internet is that you can form markets around preferences and interests, rather that just around geographics. Practically speaking, this means that location-based ads—to different locations, but where people are “similar”—are highly effective. It’s been a while, but I recall that in the case of Diapers.com, the click-to-conversion on location-based ads, relative to generic ads, was about double. A related notion that I talk about in my book is something called “preference isolation;” the individuals that suffer from it are “preference minorities.” Preference minorities are people to whom local markets are not especially responsive or friendly. If, for example, I want to buy vegemite in Philadelphia, I am fresh out of luck (my tastes are too obscure), or, more prosaically, if I have a young family and most of my neighbors do not, the local store won’t have much of a selection of diapers. Preference minorities make great targets for Internet businesses.
We’re curious about your take on the use of brand influencers for social marketing. Do you think paying for influencer content is a lasting business model? Is it better to promote social sharing on a more personal level?
DB: I think that influencer marketing and the use of brand influencers is here to stay. The reason is pretty straightforward. First, advertisers are “shut out” of many of the media channels through which people consume content, e.g., Netflix, Hulu, Amazon, and so on. Second, in channels like YouTube, brand content is not that popular. What I mean by that is that individuals are much more likely to consume the content of other individuals, like PewDiePie, than they are to watch content from Coke or Nike, for example. Platforms like FameBit and Reelio allow influencers to embed commercial messages in their “organic” content; this can be highly effective as the influencers have an incentive to be somewhat authentic so as not to alienate their audiences. Additionally, advertisers can target, via the influencer, consumers who are likely to be most receptive. Social sharing is highly effective too, but the trick is having the right kind of reward or incentive for the sharing (since sharing takes some effort). I guess the best kind of sharing that happens is when the product is so good that customers can’t help but tell others!
How can brands avoid shutting down, and instead get out of old business models that aren’t working (for example: a discount and sale-focused retail model)? Is it even possible to shift gears?
DB: I think that is is always possible to shift gears, but it is particularly hard for established incumbents to do so. I think that “gear shifting” is more likely to be successful for brands that have a strong narrative that they continue to tell and elaborate over time. I am thinking about Allbirds, Away, DollarShaveClub, Warby Parker, and so on. One thing I’ve been working on lately (in regards to a new book ☺) is the idea of “bonding” as opposed to “branding.”Firms that bond create a deep and reciprocal relationship with customers. The core is a great product at great value, but the wraparound is an ecosystem of content and narrative that really creates a meaningful connection. This is the best way to get out of the “discount trap.”
“Retail needs to be more like a Tesla showroom than a large lot car dealership of the 1990s. What I mean by that is that experience and tech lead, and fulfillment is done centrally, not at the location.”
How do you see new brick and mortar stores evolving to work in tandem with a strong digital business model? Who does it well?
DB: I see the brick and mortar evolving to a small-footprint, experience-centric, digitally-enabled environment. Retail needs to be more like a Tesla showroom than a large lot car dealership of the 1990s. What I mean by that is that experience and tech lead, and fulfillment is done centrally, not at the location. There will of course be some exceptions to this—especially in food and beverage retail—but for other classes, local experiences and centralized fulfillment make the most sense. I’ve mentioned these brands a few times, but my all time favorites have to be Away and Warby Parker. I think Bonobos is great as well—they really pioneered the so-called “zero inventory store.”
Just a few more burning questions, please…
Last thing you bought online: Moschino Milano sweatpants from FarFetch.
Last thing you bought in a store: I bought 6 pairs of awesome socks from Declic in the Chadstone shopping mall in Melbourne, Australia.
What’s your breakfast of champions? Two espresso macchiato and a good protein shake (made at home).
What’s the one book (other than yours!) every marketer should read? I really like Tap: Unlocking the Mobile Economy, by Anindya Ghose, and for a “classic” I’d say Confessions of an Advertising Man, by David Ogilvy.