David Bell Wharton Idea Farm – David Bell, author and professor of marketing at the Wharton School of Business, talks about location-focused marketing and how to best connect with your 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 Virtual One, we enjoyed the powerful explanation of why businesses don’t have to be one-size-fits-all. -fits-all approach to marketing. In his book, Bell shows simply and eloquently how our shopping habits naturally change based on where we live, where we travel, and what our real-life friends and social networks recommend. Basically, he’s an expert on consumer buying behavior who finds time to write great books, speak globally on e-commerce, and occasionally host Marketing Matters on Sirius XM—all while holding down his day job as a Professor of Marketing at the Wharton School of Business. We can’t wait to pick this New Zealand native’s brain on everything from digital advertising and influencer marketing (hint: she thinks it’s here to stay) to her quirky shopping habits.
David Bell Wharton Idea Farm
“The Internet makes the world ‘flat’ in terms of access to goods and services, but not in terms of demand patterns.”
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Can you explain the premise of your book—how location plays a key role in online shopping habits—using your shopping habits as an example?
David Bell: Our choice of physical location in the residence (house and neighborhood) is considered critical and says a lot about our characteristics, e.g. socioeconomic status and our preferences, for example. 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 consuming content. When I live outside of downtown Philadelphia in Fishtown and the Northern Liberties, for example, I tend to do a lot of online shopping for clothing and household items because offline options aren’t common. In contrast, living in New York, I have done more offline since the options are many and convenient. Therefore, these three environmental factors – resident characteristics, resident preferences, and access to offline options – go a long way in shaping online demand. The Internet made the world “flat” in terms of access to goods and services, but not in terms of demand patterns. The amount and type of demand that online sellers have in a particular location is driven by these three factors. I have seen this time and time again in the sales data of many companies.
Your book is prophetic about the need for offline and online marketing and sales depending on the product and location of the target customer. Have you noticed any significant changes in this line of thinking since the book came out in 2014?
DB: There are three main things in the United States and elsewhere, especially in China. First, what I call “online-offline convergence” is accelerating. To use two recent and famous examples, on June 16 of this year Amazon announced the purchase of Whole Foods for $13.4 billion. Slightly overshadowed was the announcement (same day!) that Bonobos was acquired by Walmart for $310 million. So the biggest online player gets offline and the biggest offline player tries to infuse “online DNA”. Second, while offline is “dead and dying” (Credit Suisse expects up to 9,000 stores to close), it is also “alive and thriving” in the sense that Digitally Native Vertical Brands (DNVB) from Away (luggage) to Warby Parker (glasses) have features great offline. The point of this puzzle is that offline is not eliminated. What is happening is that offline is being rethought and reshaped to fit the digital economy. This means focusing on experience rather than fulfillment. For example, we see a movement towards small footprint stores that tell a great narrative and provide great service, and a move away from large footprint stores that try to have full inventory available for immediate sale.
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Do you think location-focused advertising and digital experiences can help fill the impact gap in locations where a brand’s online and physical sales aren’t strong?
DB: Absolutely. I saw this firsthand in some of the work I did with Diapers.com. One of the great things about the Internet is that you can build markets around likes and dislikes, not just geography. In practical terms, this means that location-based advertising – in different locations, but where people are “similar” – is very effective. It’s been a while, but I remember that in the case of Diapers.com, the click-to-conversion in location-based advertising, compared to general advertising, is about twice. A related concept that I talk about in my book is something called “preference isolation”. those who suffer from it are the “favored minority”. A minority of preferences are those whose local market is not responsive or friendly. If, for example, I want to buy vegemite in Philly, I’m out of luck (my sense is unclear) or, more casually, if I have a young family and most of the neighbors don’t, the local store wins. I don’t have a variety of diapers. Preferential minorities are good targets for Internet businesses.
We are curious about how you use brand influencers for social marketing. Do you think paying influencer content is a sustainable business model? Is it better to promote social sharing on a more personal level?
DB: I think influencer marketing and using influencer brands is here to stay. The reason is quite clear. First, advertisers are “locked out” of many media channels through which we consume content, eg. Netflix, Hulu, Amazon, etc. Second, on channels like YouTube, branded content is not very popular. What this means is that people are more likely to consume content from someone else, like PewDiePie, than to see content from Coke or Nike, for example. Platforms like FameBit and Reelio allow influencers to embed commercial messages into their “organic” content. This can be very effective as influencers have an incentive to be quite authentic so as not to alienate their audience. In addition, advertisers can target, through influencers, consumers who are likely to be more receptive. Social sharing is also very effective, but the trick is to have the right reward or incentive for sharing (because sharing takes some effort). I guess the best kind of sharing happens when the product is so good that customers can’t help but tell others!
Wharton School. Industrial Research Unit Records
How can brands avoid closure and get out of old business models that don’t work (eg: retail models that focus on discounts and sales)? Is it possible to change gears?
DB: I think it’s always possible to shift gears, but it’s especially difficult for incumbents to do so. I think “shifting gears” is more likely to be successful for brands that have a strong narrative that they continue to tell and refine over time. I think Allbirds, Away, DollarShaveClub, Warby Parker and so on. One thing I’ve been working on lately (in connection with the new book ☺) is the idea of ”binding” as opposed to “branding”. The companies involved create deep and mutual relationships with customers. The bottom line is a great product at a great value, but the wrap is an ecosystem of content and stories that really create meaningful connections. This is the best way to get out of the “discount trap”.
“Retail should be more like a Tesla showroom than a large 1990s car dealership. What I mean by that is experience and technology and fulfillment done centrally, not at the location.”
How do you see new brick and mortar stores evolving to work with a strong digital business model? Who does it well?
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DB: I see brick and mortar evolving into a small-footprint, experience-centric, digitally-enabled environment. Retail should be more like a Tesla showroom than a large car dealership from 1990. What I mean by that is that the experience and technology and fulfillment is done centrally, not at the location. Of course there will be some exceptions to this – particularly in food and beverage retail – but for other categories, a local experience and centralized fulfillment makes the most sense. I have mentioned this brand many times, but my all time favorites have to be Away and Warby Parker. I think Bonobos is great too—they really pioneered the so-called “zero inventory store”.
The last thing you bought in a store: I bought 6 pairs of awesome socks from Declic at Chadstone Mall in Melbourne, Australia.
What’s one book (besides yours!) that every marketer should read? I really like Tap: Unlocking the Mobile Economy by Anindya Ghose, and for “classics” I’d say Confessions of an Advertising Man by David Ogilvy. This website uses cookies that recognize your device to provide you with the best user experience and improve website navigation, website usage analysis and assistance.
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