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Ad industry must change

There has long been a need for the advertising industry to modernise. Now digital transformation is upon us and change is non-negotiable. At the same time, the industry is facing disruption from new entrants, writes ALISTAIR MOKOENA is CEO of Ogilvy South Africa.

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No longer is advertising creation the sole preserve of advertising agencies. Consulting firms are getting into advertising. The platform owners – Google, Facebook and Amazon – now sell and create advertising. Clients are using technology and data to insource marketing services. Brand managers are doing their own community management and social media is shrinking…

These modern marketing challenges require serious introspection on the part of agencies, but they also present vast opportunities to rejuvenate the advertising industry and deliver a broader, more holistic service for our clients.

The customer decision journey has several steps. It involves creating awareness, signing up customers, increasing sales, problem solution, customer retention and deepening relationships. As advertising agencies, we have traditionally been involved in the beginning of the journey – creating demand and sales.

Today, the prospect of becoming involved in other stages of that journey is an attractive one for agencies open to expanding their capabilities and reinventing the way they work. If we can develop the right skill sets, we can play across the entire value chain.

Marketing has changed irrevocably from what it was only a decade ago. Clients now look to agencies to help them win with consumers who are always connected, on multiple channels, and exposed to media streams from innumerable sources. Budgets are tight and clients want rapid innovation.

Delivering in this environment means agencies must embrace the opportunities in digital disruption, and build the skills to work in this space. Once we have those skills, we can use them to help our clients develop strategy. The agency then becomes a digital consultancy instead of just a supplier.

For ad agencies to make this change to a broader professional-services offering, they may have to redesign their entire internal ecosystem.

It is one thing to offer a wider suite of services, crafts and capabilities, but clients want simplified functionality. They want to access all these services from one point of contact. A byzantine corporate structure of a dozen subsidiaries confuses clients, and hampers delivery.

Modern agencies need to ensure they have the most efficient structure, processes and technologies. Agencies must be quick and agile, and customer centric, as they play across a bigger part of the customer decision journey. They can be more relevant to client businesses and have more control over the outcome.

This is uncharted terrain for many agencies, but there is no time to lose. We must adapt our business models, our structure and our offerings – many of which have not changed since the middle of the last century.

We must simplify how we work, and provide a seamless client experience, with a single point of accountability, and a structure that’s nimble and cost efficient. This will enable us to partner more effectively with our clients. It may also mean new compensation models linked to sales or other deliverables, instead of the traditional time- or project-based approach.

The people in these new agency structures must be fully conversant across different capabilities, without any duplication of skills. The agency of the future won’t just provide creative ideas for marketing communications, but ideas to win with the customer and to succeed as a business.

We must now put the customer at the heart of what we do, to consider the entire customer decision journey, and not just create demand.

Brands have multiple stakeholders – the brand owners, the marketers, as well as society and the broader community. Our challenge is to make the brand matter across all those different stakeholder groups, to maximise the potential success of the brand.

Every industry is affected by digital disruption, structural change and greater customer demands – from the motor industry to financial institutions to the media. Every CEO is grappling with digital disruption, fighting to survive, trying to win with the new, multi-connected, always-on consumer.

The agency of today is no different. How we adapt to these challenges and create new ways of approaching business and building brands will determine whether we survive or prosper in the new marketing environment.

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Online retail gets real

After decades of experience in selling online, retailers still seek out the secret of reaching the digital consumer, writes ARTHUR GOLDSTUCK.

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It’s been 23 years since the first pizza and the first bunch of flowers was sold online. One would think, after all this time, that retailers would know exactly what works, and exactly how the digital consumer thinks.

Yet, in shopping-mad South Africa, only 4% of adults regularly shop online. One could blame high data costs, low levels of tech-savviness, or lack of trust. However, that doesn’t explain why a population where more than a quarter of people have a debit or credit card and almost 40% of people use the Internet is staying away.

The new Online Retail in South Africa 2019 study, conducted by World Wide Worx with the support of Visa and Platinum Seed, reveals that growth is in fact healthy, but is still coming off a low base. This year, the total sale of retail products online is expected to pass the R14-billion mark, making up 1.4% of total retail.

This figure represents 25% growth over 2017, and comes after the same rate of growth was seen in 2017. At this rate, it is clear that online retail is going mainstream, driven by aggressive marketing, and new shopping channels like mobile shopping. 

But it is equally clear that not all retailers are getting it right. According to the study, the unwillingness of business to reinvest revenue in developing their online presence is one of the main barriers to long-term success. Only one in five companies surveyed invested more than 20% of their online turnover back into their online store. Over half invested less than 10% back.

On the surface, the industry looks healthy, as a surprisingly high 71% of online retailers surveyed say they are profitable. But this brings to mind the early days of Amazon.com, in 1996, when founder Jeff Bezos was asked when it would become profitable.

He declared that it would not be profitable for at least another five years. And if it did, he said, it would be in big trouble. He meant that it was so important for long-term sustainability that Amazon reinvest all its revenues in customer systems, that it could not afford to look for short-term profits.

According to the South African study, the single most critical factor in the success of online retail activities is customer service. A vast majority, 98% of respondents, regarded it as important. This positions customer service as the very heart of online retail. For Amazon, investment back into systems that would streamline customer service became the key to the world’s digital wallets.

In South Africa online still make up a small proportion of overall retail, but for the first time we see the promise of a broader range of businesses in terms of category, size, turnover and employee numbers. This is a sign that our local market is beginning to mature. 

Clothing and apparel is the fastest growing sector, but is also the sector with the highest turnover of businesses. It illustrates the dangers of a low barrier to entry: the survival rate of online stores in this sector is probably directly opposite to the ease of setting up an online apparel store.

A fast-growing category that was fairly low on the agenda in the past, alcohol, tobacco and vaping, has benefited from the increased online supply of vapes, juices and accessories. It also suggests that smoking bans, and the change in the legal status of marijuana during the survey, may have boosted demand. 

In the coming weeks, we can expect online retail to fall under the spotlight as never before. Black Friday, a shopping tradition imported “wholesale” from the United States, is expected to become the biggest online shopping day of the year in South Africa, as it is in the USA.

Initially, it was just a gimmick in South Africa, attempting to cash in on what was a purely American tradition of insane sales on the Friday after Thanksgiving Day, which occurs on the third Thursday of November every year. It is followed by Cyber Monday, making the entire weekend one of major promotions and great bargains.

It has grown every year in South Africa since its first introduction about six years ago, and last year it broke into the mainstream, with numerous high profile retailers embracing it, and many consumers experiencing it for the first time. 

It is now positioned as the prime bargain day of the year for consumers, and many wait in anticipation for it, as they do in the USA. Along with Cyber Monday, it provides an excuse for retailers to go all out in their marketing, and for consumers to storm the display shelves or web pages. South African shoppers, clearly, are easily enticed by bargains.

Word of mouth around Black Friday has also grown massively in the past two years, driven by both media and shoppers who have found ridiculous bargains. As news spreads that the most ridiculous of the bargains are to be had online, even those who were reticent of digital shopping will be tempted to convert.

The Online Retail in SA 2019 report has shown over the years that, as people become more experienced in using the Internet, their propensity to shop online increases. This is part of the World Wide Worx model known as the Digital Participation Curve. The key missing factor in the Curve is that most retailers do not know how to convert that propensity into actual online shopping behaviour. Black Friday will be one of the keys to conversion.

Carry on reading to find out about the online retailers of the year.

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Reliable satellite Internet?

MzansiSat, a satellite-Internet business, aims to beam Internet connections to places in South Africa which don’t have access to cabled and mobile network infrastructure, writes BRYAN TURNER.

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Stellenbosch-based MzansiSat promises to provide cheap wholesale Internet to Internet Service Providers for as little as R25 per Gigabyte. Providers who offer more expensive Internet services could benefit greatly from partnering with MzansiSat, says the company. 

“Using MzansiSat, we hope that we can carry over cost-savings benefits to the consumer,” says Victor Stephanopoli, MzansiSat chief operating officer.

The company, which has been spun off from StellSat, has been looking to increase its investor portfolio while it waits for spectrum approval. The additional investment will allow MzansiSat’s satellite to operate in more regions across Africa.

The MzansiSat satellite is being built by Thales Alenia Space, a French company which is also acting as technical partner to MzansiSat. In addition to building the satellite, Thales Alenia Space will also be assisting MzansiSat in coordinating the launch. The company intends to launch the satellite into the 56°E orbital slot in a geostationary orbit, which enables communication almost anywhere in Africa. The launch is expected to happen in 2022. 

The satellite will have 76 transponders, 48 of which will be Ku-band and 28 C-band. Ku-band is all about high-speed performance, while C-band deals with weather-resistance. The design intention is for customers of MzansiSat to choose between very cheap, reliable data and very fast, power-efficient data. 

C-band is an older technology, which makes bandwidth cheaper and almost never affected by rain but requires bigger dishes and slower bandwidth compared to Ku-band connections. On the other hand, Ku-band is faster, experiences less microwave interference, and requires less power to run – but is less reliable with bad weather conditions.

MzansiSat’s potential military applications are significant, due to the nature of the military being mobile and possibly in remote areas without connectivity.  Connectivity everywhere would be potentially be life-saving.

Consumers in remote areas will benefit, even though satellite is higher in latency than fibre and LTE connections. While this level of latency is high (a fifth of a second in theory), satellite connections are still adequate for browsing the Internet and watching online content. 

The Internet of Things (IoT) may see the benefits of satellite Internet before consumers do. The applications of IoT in agriculture are vast, from hydration sensors to soil nutrient testers, and can be realised with an Internet connection which is available in a remote area.

Stephanopoli says that e-learning in remote areas can also benefit from MzansiSat’s presence, as many school resources are becoming readily available online. 

“Through our network, the learning experience can be beamed into classrooms across the country to substitute or complement local resources within the South African schooling system.”

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