This is part two of Sociomantic's 'Digital Marketing Deep Dive' series. From the forerunners at traditional catalogue companies to the data pioneers at young startups – Karsten Müller, managing director DACH, goes deep on e-commerce, online marketing and programmatic technology in Germany.
Sociomantic entered the market as the first European-founded demand-side platform (DSP) to offer real-time bidding. At that time, the RTB players in Europe could be counted on one hand. It took a lot of market education about programmatic display, but today Germany has grown to be the second largest online advertising market in Europe, second to the UK and followed by France, according to the IAB.
The startup hub that pioneers data-driven e-commerce
Berlin is Germany’s political heart and a bustling startup hub. On average, one business formation in Munich equals 2.8 new startups in Berlin. While investors spent up to €24 million in other federal states of Germany in 2012, the state of Berlin – which in fact consists of only one city – was supported with €133 million.
Entrepreneurs, startups, incubators, venture capitalists and talented professionals have discovered Berlin’s potential to become Europe’s equivalent to Silicon Valley. Especially in e-commerce, German startups are at the forefront. Flat hierarchies, dynamic processes, flexible teams and the professional experience of a skilled, international workforce – startup business models foster a culture of pioneer thinking and eagerness to experiment.
This is what allowed German e-commerce startups to gain a major competitive advantage over traditional retail companies. Namely, better business intelligence. Established retail companies are trying to make sense of big data, but they tend to produce and collect data in silos, making it difficult to use it across functions. Meanwhile, young pure-play e-commerce companies have developed their data strategies from scratch, building cross-functional, multi-purpose business intelligence systems that can be used for everything from churn management to online marketing. This state-of-the-art data infrastructure allows innovative startups to collect, structure and access customer data in order to utilise it for aggressive yet precisely targeted and personalised online marketing strategies.
Catalogue companies – the forerunners of e-commerce
For decades, our parents and grandparents had shopping catalogues as heavy as bricks delivered to their doors. Flipping through thousands of pages, filling out the order form in neat handwriting or calling friendly, customer service employees to then eagerly wait for the package to arrive - it was a common way of shopping. It was also a lucrative retail concept, the cornerstone for the massive success of the e-commerce industry. The transition from offline catalogues to online shops was, if anything, convenient rather than revolutionary.
When customers started to buy online, traditional catalogue companies encountered fierce competition and decreasing market shares. While some catalogue companies failed and disappeared, others mustered all their courage and digitalised their businesses. This was no easy task considering the industry’s long-standing offline processes, extensive decision making machineries and the lack of online expertise. But the strong succeeded nevertheless.
Their advantage: Former offline players like catalogue companies are champions of CRM. Every customer segment receives a specialised catalogue version tailored to the needs of the customers. Catalogue companies’ business intelligence departments are even able to forecast incremental orders based on the circulation of catalogues. However, some catalogue companies are still struggling to achieve this high level of business intelligence in their online departments, primarily due to data silos. Hence, integrating online and offline channels into a seamless multi-channel strategy still remains a challenge.
Revolutionising measurement: Attribution made in Germany
Germany is one of the global leaders in business intelligence. When it comes to performance metrics and campaign optimisation, German marketers are analytics mavens who value deep insights and extensive reports. While eCPO (effective cost-per-order – especially as attributed to different CRM groups) and other hard KPIs are the kings of efficiency for German marketers, so-called “soft” KPIs like views are often deemed as unreliable and vague. Over the last years, advertisers and agencies have come to understand the value of combining soft and hard KPIs, as well as the benefits of expanding performance campaigns throughout the full purchase funnel.
The performance-driven thinking that dominates German online marketing has fuelled the need for better measurement and optimisation, especially among the more data-driven retail startups. The result of these efforts is what online marketers all over the world have come to know as attribution models, like the last-click or u-curve model. Today, German e-commerce startups are pushing the development of even more sophisticated models that take into account additional customer journey touch points across devices.
Advertisers challenging their media agencies
For decades, advertisers have trusted their media agencies in handling their branding budgets. In Germany, most of these budgets are in the hands of the country’s top six media agency networks, but independent agencies and specialised performance agencies play an important role, too. In the past, advertisers gave their agency partners a lot of freedom in planning their media budgets. Today, advertisers are demanding more transparency and control over the budgets. They are also exploring the possibilities of programmatic branding and data integration, which challenges many media agencies.
This changing media landscape opens valuable opportunities for advertisers, agencies and technology providers to work closer together in order to create sophisticated full-funnel strategies. At Sociomantic, we see an increasing awareness of these opportunities in Germany.