Why Digital Availability aids Strategic decision making plus why digital ads aren’t analogous to rent or signage

I published a paper with WARC a couple of weeks ago that expanded the detail on one of my earlier blog posts on a concept called Digital Availability. I’ve tweaked and extended it a bit here –

  • Researchers such as Professor Byron Sharp have written about the need to build mental and physical availability. These are rightly considered key factors in driving brand growth because it makes it easier for people to notice and buy your brand.
  • A lack of nuance in language and detailed knowledge mean that a third “availability” should be added to improve understanding and serve as a partner to mental and physical availability. Digital availability is concerned with improving the breadth and depth of a brands distribution brands online.
  • Digital Availability channels include the likes of PPC, affiliates, mobile commerce, social commerce, review sites and third party retailers like Amazon or vertical specialists like Mastersofmalt.com or the various websites of The Hut Group

By enhancing the nuance around ‘availability’ we can improve our communication with the C-suite by clearly talking about all the levers at play to help brands grow in three simple classifications – mental, physical and digital.  

Conclusions

  • Many digital availability channels and routes to market are more akin to merchandising/purchasing models rather than advertising models which require a whole different way of thinking and skillsets, including complex fulfilment engines required to service and stock goods
  • If you view digital channels as separate (Digital Availability) the budget and structural implications become clear. You cannot compare a Google Shopping or Amazon link to a TV ad – although they both fall under the auspices of the 4P’s one is concerned with Place whilst the other with Promotion.  
  • Just like Physical Availability a true cost benefit analysis still needs to be done for Digital Availability channels to make financial sense. 
  • Strategic decision making is improved through enhancing the nuance around the options to drive growth
  • All ads with a CTA are signage not just certain types of digital “ad”, and the term “signage” lacks nuance as these “units” are more akin to being stocked in a shop i.e. shelf space
  • Digital Ads aren’t replacements for RENT because there is so much more that goes into e-commerce over and above placing ads (storage, fulfilment and distribution) plus accountancy terminology treats them very differently (revex vs capex)

THE BIG definitions

Physical availability = brands being available to buy in more places (offline )

Mental availability = being the first brand in mind when an individual comes to buy

Digital availability  = brands being available to buy in more places (online)

Here is where we start –

Mental and Physical availability, according to Professor Byron Sharp (source HBG 2011)

At first glance all seems fine. The all-encompassing nature of the Physical Availability definition seems to encapsulate every eventuality, including availability to purchase within the digital sphere.  In fact Professor Sharp has on occasion stated that PPC (as an example) is simply a Physical availability channel.  I agree. To simplify, view Google as similar to Tesco.  Brands merchandise their product within the Tesco store just as much as they could in Googles “store”.  Brands negotiate with Tesco about where their product will sit on shelf (or Gondola end/POS) just as they do with Google’s search listings.  

So why am I suggesting that a new categorisation is required? Much of the world is digital and if the COVID-19 era has taught us anything it’s that conceptually Physical vs Digital distinctions are less important than maybe we thought. That said, whilst concepts can be great, in the real-world language matters, and over-simplification can lead to blind spots.

To enhance an already influential and well known concept is risky. However; I think it’s worth learning from the realm of science that Professor Sharp has less time for, the social sciences, and in particular Behavioural Economics. I believe “Physical Availability” has a Framing problem. Words matter and it’s a simple truth that for some people the word “Physical” clouds their thinking to physical-only environments (like Bricks & Mortar) and whether we think that’s foolish or not, it’s still a fact. 

Taking it one step further, If we take Sharps/Ehrenbergs heavy and light users, we can apply them to knowledge too.  The “heavy users” in this example will know the complete definition of Physical Availability and be comfortable encapsulating and communicating every potential distribution channel however; the majority (the light users) will simply use the term “physical availability” and a proportion will trip up on the language and consider it only in a Physical sense not a Digital Sense.  

This has major strategic implications and as marketers we should be looking to enhance understanding through communication rather than dismissing the “light users”.

As such I have proposed an expansion of the Availability Duo to an Availability Trio.

Now I’m sure there will be many, including Professor Sharp himself, who will think this is pointless, it confuses, “we spent years trying to educate people that digital isn’t a separate thing” (privilege is writ large here) and I agree it is, for those who are “heavy users” that is i.e. those who know the definition inside out.

You could also argue that a simple “be available to buy in more places” and “be the first brand to appear in someones mind at point of purchase” would suffice. I actually prefer this but we’re working in a world where Physical and Mental Availability are known concepts and have worked their way into the lexicon (even if they are jargon)

But; a reminder, we aren’t doing this for the “heavy users”. This isn’t for them, it’s for the light (and non) users so that we can grow the influence of marketing at the boardroom level by effectively talking about all the levers at play to help brands grow.  In other words I’m talking about driving penetration growth of the availability concept.  Better thinking and better marketing helps everyone. The concept, in practice also aids allocation of resources within client businesses where Marketing is very separate from Operations (and on and offline ops are also separated).

So, that’s the simple extension of the concept and its definition. That said it’s also useful to understand what Digital Availability channels are and which brands are demonstrating an effective and strategically beneficial use of them.  Like most things in strategy there is a degree of “it depends” at play but for simplicities sake here’s a (definitely) non-exhaustive list:

  • SEO – Optimisation of availability (this works across e-commerce platforms
  • Generic PPC and Google Shopping – Using Googles shop to sell
  • Affiliates – Essentially using a digital  3rd party to sell your product,
  • “Collapsed” ad formats (click to buy etc)
  • Mobile commerce – Can you easily buy the product via a mobile device?
  • Social commerce – Do you have social media commerce capability activated?
  • Review sites – Are you present with click to buy activated?
  • Third party retailer listings (online only retailers including amazon  or vertical specialists such as The Hut group or a website like Mastersofmalt 

The list could go on and on. Each one opens up a new avenue to purchase. A new avenue that services a potential new customer and could extend market penetration. Obviously, the cost of set-up and ongoing fulfilment needs to be validated against the potential opportunity. Some of this would be Revex  and some would be Capex (adverts are typically defined as revex in financial parlance whilst capital builds e.g. website builds are capex) which takes you further down the road with strategic applicability and C-suite influence.

Another key thing to point out is that many Digital Availability channels and routes to market are more akin to merchandising/buying models and require a whole different way of thinking and skillsets. Strategic choice requires you to factor in the complex fulfilment engines required to service and stock management implications too, e-commerce is rarely easy as I have written about before here and here.  

The point being that if you view these type of digital channels (Digital Availability) as separate, the budget and structural implications become clear. You cannot compare a Google Shopping or Amazon link to a TV ad (the same difference is akin to comparing product on shelf at Tesco with a TV ad) although they both fall under the auspices of Marketings 4P’s (Price, Product, Promotion and Place).  Even in this categorisation of marketing tasks its clear that Google and Amazon are Place whilst the TV ad is Promotion”.  I believe that by splitting out Digital Availability in the way I have choices become more transparent and therefore more useful to strategic decision making.

The recent COVID-19 impact on e-commerce really sheds a light on those who are being successful in this field and on the strategic intent that comes to light by creating distinction from Physical Availability.  

One of the most interesting is Nike who are shifting their Digital Availability emphasis away from third party vendors towards owned assets .  At face value this suggests that they are reducing their digital availability however strategically they have made the choice to “own” the full brand experience, relying on fewer intermediaries where they have little control. A decision which; over time may lead to greater profits (there is much more going on here that won’t fit in this paper).  Obviously this approach isn’t open to everyone and therefore it’s certainly a problem for CX and UX management for brands that can’t.   There is an argument that there is no real difference to relying on Tesco to appropriately manage your sales channel.  That said, Tescos are a retailer, Amazon are not (really).

This stands in contrast to Adidas who have signed a deal with Zalando to run their digital fulfilment which requires a truly integrated strategic partnership between the two German companies .  Adidas are essentially outsourcing this function rather than owning it, allowing Zalando to run the CX and UX for a large proportion of sales online.   The implication being an acknowledgement that e-commerce is tough to do right and even the biggest brands need a little help in making it all work. There is a loosening of control here and a different kind of risk, which is clearly a strategic choice.  Whether it is the right choice will be seen.

Looking at the UK grocery market as another example, you can see that very few are really “outstanding” when it comes to e-Commerce.  What do I mean by this? Well  a review of the financial literature by these players suggests that they all saw penetration double  as a result of covid restrictions, this suggests that no one Brand really outperforms/is stealing share via Digital Availability i.e. it’s not driving relative growth.  That said, all the brands are active in this space meaning that it’s probably restricting loss i.e. game stakes.  There are clearly different models of fulfilment within this category though which is probably another article in itself.  

In the opposite direction many direct-to-consumer brands are finding that despite their success (in building digital availability) they are reaching a ceiling due to a lack of physical availability. Brands like Harrys and Fenty have looked to build Physical availability via merchandising deals with large retailers.  

This duality between Physical and Digital availability is clearly a balance and a strategic choice which needs to be identified at a brand and category level.  

Just like Physical Availability a true cost benefit analysis still needs to be done for Digital Availability channels to make financial sense.  This is another reason to split it out and make it separate .  The immediate capital investment for much digital availability will be lower but; there are other implications linked to the full value/supply chain that need to be factored in.  Just because you can doesn’t mean you should, you still need to ask “Is there really enough demand to justify creating the avenue and also is it driving incremental sales?”  

Why Ads for online businesses are NOT rent or signage – The pursuit of nuance

Related to the above concept are a few papers written in the summer. Around this time Grace Kite published a paper on the two-types of online advertisement. This states there are two types of ads online. One that is similar to traditional “brand” ads and the other that of a signpost for e-commerce businesses, it also suggests that marketers may not be aware of this dichotomy. I’m not sure i agree here. There is clearly a “future cashflow” & “present cashflow” or Brand & DR situation going on online (much like in the offline world) but also a third type of solution which is really what this is about. This concept of of “e-commerce signposting” relates more strongly to the concept of Digital Availability.

There are some similarities to my thinking, not least the belief that there are some quirks in the online advertising ecosystem that mean that some of the “ad” solutions aren’t actually ads at all (and are closer to the traditional retail Merchandising or Buying roles) however this is the 3rd type of “ad” not the 2nd. i also don’t think the term “signpost” is that helpful. All ads with a call to action are effectively signposts, whether they are online or offline. Bundling terms is great but not when it reduces nuance and there is plenty here.

Furthermore the water was muddied somewhat with the paper in WARC based on another paper in the Economist suggesting that Ads are similar to Rent. So, is it Rent or a Signpost?. Does it matter? Yes, i think it does. As mentioned above, i think “signposting” is incorrect as it doesn’t add enough nuance to the debate. I also think that when thinking about these Digital Availability channels the term Rent is also incorrect. There are two reasons for this, both from an accounting perspective and also from a task perspective.

I’ll explain – Rent is a periodical cost and is typically Capex. Ads are a variable unit cost (they’re typically CPC) and are typically Revex. So in simple accounting terms we have clear difference (and remember part of this exercise is to help improve communication at a c-cuite level).

These “digital availability” placements are typically situated in online marketplaces, listings or e-commerce platforms i.e. you are paying upon completion of a sale by another entity. Google is allowing you to use its “shop”, Amazon is allowing you to use its “shop” etc There is no signage (you could argue that a partner ad placed by a media agency next to the listing is signage). It’s like being stocked on Tescos shelves (as i mention above). Would you consider being stocked in Tescos as “rent” or “signage”? I’m sure you wouldn’t. BTW this isn’t an attack but more an attempt to pursue clarity and aid strategic decision making.

Ben Evans has also alluded to this here with a little more nuance as he groups the trade-off between online and offline in a way that acknowledges the difficulties of e-commerce. That is, its not as simple as just transmitting offline rent into online ads, you must also include fulfilment costs, returns, storage etc etc, so that the Rent signifier obscures a lot of additional cost associated with trade online. Its striking how many people still think that e-commerce is cheap and easy, this sort of labelling does nothing to dissuade this thinking.

In all of this, that should be our objective, to aid strategic decision making with enough nuance to provide context. Words matter and we’re in the effective communications industry after all.


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