Young & Shand take nation’s digital marketing pulse, large growth diagnosed

Late last year, up-and-coming digital agency Young & Shand asked 150 New Zealand chief executives and marketing managers about their organisations’ spending intentions and planned commitments to digital marketing in 2011. And while the results showed there’s no doubt Kiwi businesses see digital as an integral aspect of the marketing mix, there still appears to be an unwillingness to splash too much e-cash.

Ben Young, Young & Shand’s marketing director, says the motivation behind the survey is to try and get a feel for digital as a whole in New Zealand. He says surveys have been conducted for individual digital aspects like email, search engine optimisation and social media, but he and the Young & Shand gang felt there was something of a knowledge gap.

“We always get these international surveys saying we’re ahead of the curve, behind the curve or punching above our weight. Talking with Andy Lark, the chief marketing officer at Dell, which is a company that’s obviously pretty big on digital, he believed Kiwis were well ahead in terms of their digital knowledge.” And, from a marketing perspective, this seems to be borne out in the IAB NZ’s figures, which showed that the percentage of ad money spent on digital in New Zealand was smaller than in overseas markets, but the growth was much faster.

Unlike some other media channels, the survey (download the pdf and marvel at the array of pie charts and other graphs 2010 – Young Shand – 2011 Digital Leadership Survey) showed there’s certainly no image problem for digital: 96 percent of businesses understood the importance of digital marketing channels and Young says the encouraging thing is that this is actually higher than in the US, where in a CMO Council and Accenture survey showed only 78 percent agreed with the statement “digital channels are important to their organisation”.

Despite the awareness, however, only 66 percent of businesses have heavily committed and invested in interactive marketing strategy and a similar amount said they used technology to underpin their customer experience. For those that hadn’t invested in digital, 56 percent pinned it on a lack of senior management understanding, 54 percent on a lack of internal resource and 42 percent on insufficient funding.

The main issue for the digerati is that there’s still a big gap between the time consumers spend with digital media and the advertising money being spent there. Young believes this is because there’s still a bit of a play it safe mentality in operation in New Zealand. There have been a lot of small digital projects that have been highly successful, but until the chief executives fully embrace the medium, he says it could take a while for the budgets to follow. But follow they will, he says, because the sector will only grow and mature and he believes rates will increase in line with the ability to target ads (such as buying direct demographics on Facebook) more effectively.

While there are plenty of evangelists predicting the death of everything else in the face of an all-powerful digital behemoth, Young sees its role as enhancing the more traditional mediums, with the likes of Apple TV, Google TV and the Windows7 Phone all trying to embrace the social experience of the web to improve their offerings. He thinks this blending will continue, and, as such, in five years he thinks the phrase digital agency could be irrelevant, simply because digital will be so entwined with consumers’ lives—and marketing as a whole.

Young says there were a couple of surprises in the survey, chief among them that 58 percent of the respondents said they would use digital channels to focus on customer acquisition, while just 11 percent said they would use them to focus on customer retention. For Young, online tools are a great, cheap way to interact with your customers, maintain relationships and add value between purchase events. And when the old adage about it costing six or seven times more to acquire a new customer than to retain an old one, he says this approach is hard to fathom.

Young alludes to the case study of V, which decreased its media spend and focused on its most loyal consumers by setting up the Republic of V. Turns out that four percent of the users represented 60 percent of the consumption, so it pays to look after them.

The survey showed spending shifts for this year were largely as expected, although a slight surprise was that web design and development came out on top, with 72.1 percent of respondents saying they would spend more on it in 2011, something he puts down to website design getting a little tired over the past few years and the need for more social sharing functions. 70 percent planned to spend more on social media and 67.3 percent planned to spend more on online video, which Young sees as having big growth potential this year.

“There is so much consumption [of online video]and not much creation,” he says, and very few of the most popular videos are done by brands or professionals. But, put a bit of effort in and, as the Old Spice guy proved, he says the results can be huge.

The winners in the traditional marketing mix were direct marketing, telemarketing, tradeshows and radio all with slight increases in investment intentions. 50 percent planned to spend more on PR in 2011 than this year, something Young believes is a reflection of the importance of word of mouth and social media in the marketing mix. And the losers were print and TV, where more people indicated that they will be reducing their investments than increasing.

These results are very similar to a survey run by Marketing Sherpa of US based marketing managers, where the real only difference was a more severe decline in traditional media than the intentions seen from New Zealand business owners and marketing managers. This could be explained by the fact that the US is suffering a deeper recession and have to make tougher decisions and perhaps because they are further along the migration to digital marketing.

Young says how businesses evolve their marketing over the next five years could make a significant difference to New Zealand’s competitiveness. And Young & Shand see their role as educating the next generation of New Zealand marketing managers through their blog, newsletter, digital survey and This Week in Digital Marketing podcast, “an accessible digital discussion about the latest trends in the digital space and a first-to-market New Zealand initiative available for download on iTunes”.

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