Digital Media Outlook for 2016: The Force Pervades
The Outlook: The term “robust” continues to describe digital signage application and supply. Growth at the double-digit compound annual growth rate (CAGR) experienced over each of the past 15 years continues in every important aspect of the business. In any venture, the probability of success must exceed the risks. By this measure, the future for location-based digital signage is bright indeed.
Every end user market is beyond the “Innovators” and “Fast Followers” stage of adoption and into the “Early Majority” stage of technology-enabled process adoption. This is the stage at which industry revenues accelerate exponentially as existing installations expand and new deployments are added.
The next stage of digital signage market growth is driven by the following:
- Small-medium sized businesses looking to take advantage of low cost, on-site patron marketing and the low-cost modernizing of their location(s). Sourcing of systems of one to 10 displays, video walls and projection will continue to be served by integrators and sign providers, retailers of business technologies and through the business and professional associations whose membership is comprised of end user organizations.
- An “us too” mentality will be a primary growth driver. As retail, food services, hospitality, education and entertainment venues see the application of digital signage by their competitors, their “templates of application” are attractive and help to mitigate the risk by “fast followers” of technology application.
- Existing installations will be expanded where impact analytics provide validation of further investment. Pilots, proof of concept, experimentation and assessment projects undertaken in limited scale offer insights while improving the competencies and confidence of end users to expand their use of the medium. Most current deployments have the capacity to increase the benefits exponentially that they provide to the enterprise through the expansion of the network.
- Digital signage initiatives have typically been funded and used by a line of business, operating as a silo within the enterprise. The trend is toward digital signage as part of a media platform used for multiple applications in the organization.
- The digital experience will be made more contextual and relevant as messaging and interaction reflect data from operating applications such as point-of-sale, inventory, security, customer data and external feeds. The visualization of data that has served digital signage use in status dashboards and control centers for so long will be expanded into customer-facing application.
- Advances in technology that deliver better price/performance, functionality, reliability, atheistic appeal, ease of implementation and a lower cost of operation make the technology investment increasingly attractive. Yet, end users need not wait for next levels of innovation as commercial grade digital signage technologies deliver high value now. Mobile interface will be the greatest area of development related to digital media in 2016.
Threats to Growth and Digital Signage Success
- Poor investment validation (i.e., the “why” of using the medium), is the greatest threat to digital place-based media growth. Many end-users do not know the value of the benefits from their investment. “Rational ignorance” is being applied where benefits are not easily quantifiable (such as the impact on brand equity), or where the attribution of the digital signage to the achievement of business results is not readily credited. When benefits are not quantified, investment in operations, content, technology upgrade and expansion is minimized, resulting in benefits erosion and failure to optimize or expand the use of the medium.
- The opportunity cost of not using digital signage now exceeds its cost of use when the medium is suitably applied. The pace of initiatives moving forward can be very slow due to “analysis paralysis.” Digital signage is a knowledge-based business application but the amount of research through literature review, education sessions, site visits and supplier discussions that is perceived as required is going far beyond risk management in a majority of cases. As the organization gains insights, the true value is in applying this knowledge so that the new asset (of this knowledge) is monetized. Presenters at end user conferences (National Retail Federation, National Restaurant Association, etc.) commonly reflect that successful organizations experiment and learn quickly, deepening their knowledge and drawing on experience for more rapid and wider deployment.
- Supply confusion is caused by the wide range of sourcing options and the wide disparity in the quality of supply options available to an end user. In the challenge of comparing options presented to them, end user confusion in the selection of a preferred approach frustrates and stalls project progress.
- Stale or poor quality content threatens future investment. Content that does not reflect the brand or is not relevant to viewers is a significant under application of the investment. While many digital signage users appreciate this, many are under-resourcing the “content” element of operations. While the medium is well suited to visualizing data from operating applications or feeds, many take little advantage of this capability in content strategy, tactics and composition.
- The challenge of gaining advertising revenues by ad-based networks and corporate networks seeking to offset costs, continues to frustrate their growth. However, the upside of this is that networks are refining their value proposition to maximize their appeal, which betters the networks individually and this display capacity at large.
Commentary on Key Influences in the Outlook for Digital Signage
1. Serving the hierarchy of corporate needs
When Abraham Maslow defined an hierarchy of human needs in his 1943 paper “A Theory of Human Motivation” he described that humans seek primarily to have physiological needs such as food, water and shelter and health met, and then seek safety, followed by love and belonging. Esteem and self-actualization are pursued when other lower level needs are met.
A hierarchy of needs exists for organizations also. In the corporate hierarchy of needs, corporate valuation is the highest level of need, followed by brand equity, a defendable competitive position and the creation and monetizing of assets, supported by productivity of people, places and processes. Digital media serves all levels as is increasingly important to the corporate contributions of the Chief Executive, Operating, Financial, Marketing, Information, Facilities, Human Resources and Technology Officers.
The ability to change in response to market forces and to exploit new enabling tools and processes allows the enterprise to maximize its return on investment.
The value of a brand and is one of the most valuable assets of a company since brand equity can be increased and can increase the financial valuation of the owner of the brand. Elements of brand equity include market share, profit margins, consumer recognition of brand logos, tag lines, audio and visual elements, and consumer perception of brand attributes and value.
Brand equity has been studied from two different perspectives: cognitive psychology and information economics. According to cognitive psychology, brand equity lies in consumer’s awareness of brand features and associations, which drive attribute perceptions. According to information economics, a strong brand name works as a credible signal of product quality for buyers and generates price premiums as a form of return to branding investments. It has been empirically demonstrated that brand equity plays an important role in the determination of price structure and, in particular, firms are able to charge price premiums that derive from brand equity.
Brand equity is reflected in consumer loyalty to the product/service, the firm, the employee (as brand representative) and a specific business location.
Creating and monetizing assets is “the business of business.” On the basis that “information is power,” or more accurately “information is powerful,” data is an asset that is captured and monetized as it is aggregated and refined at its levels of abstraction including data, statistics, information, knowledge and wisdom. Productivity/Efficiency in Outcome Creation reflects the day-to-day, transaction by-transaction imperative of operations and success that is effected by and impacts upon higher-level attributes.
This base level of corporate need is where customer experience through brand engagement occurs related to place, people and processes.
- Places must merit being a destination with dwell times that suit the monetizing of assets such as product inventory or staff knowledge. As a communications utility, digital place-based media provides a highly efficient method of merchandising, branding and providing ambiance that makes places, people and processes more productive.
- People, including staff and customers must be productive in contributing to brand growth through instruction, direction, motivation toward required actions, support in decision-making, and action.
- Processes are efficient when they exploit information assets, leverage communications tools, relate to the target audience, relate to and train and develop the target audience, enroll participation and manage engagement with the brand.
Processes are the most important aspect of operations and contributor to success, as waste or efficiencies are built into how things get done.
2. “Partnered” is increased in the “Paid-Owned-Earned” media model.
Digital signage is “owned” media in the “Paid-Owned-Earned” media model. It both leverages and supports other communications devices in multi-channel and Omni channel marketing by providing its contributions to the path to purchase and the customer/viewer experience.
As organizations seek to leverage the support resources of suppliers as partners, co-investment in paid media is finding its way into owned media. Illustrations are that of Pepsi or Coca-Cola paying for product promotion on a digital menu board, or a sporting good provider paying for promotion on the digital screens of a retail store.
Where co-op or market development funds offered as reward for revenue could be applied in any way by the retailer, the advertising envelope is being accessed for specific in-store promotion, with content created for paid advertising being adapted for display on owned media. Partnered media is at the convergence of paid and owned media. Brands that use paid media are challenging their media agency to better use their owned media.
“The chief financial and marketing officers will need to ask the right questions, and the answers to these must guide design, sourcing and optimization,” says Dan Williams, senior director, client activation at Stratacache. Williams adds, “The key question is ‘when should we invest?’ The ‘why’ can be clearly defined, but the ‘when’ has to reflect elements such as brand positioning strategy, the need for messaging flexibility, equipment refresh, current costs, retailing as part of the media mix and impact to the franchisee relationships.”
The lessons of e-commerce will inform physical retail. As improved audience targeting has challenged broadcast-based advertising, the store-per-customer approach envisioned by Bezos will inspire retailers to sell more effectively to its patrons. Context, relevance and recency will increasingly define consumer communications.
Brands have concerns about using social media commentary on digital signage regarding filtering for inappropriate content as well as concern for customer and personal privacy. Curating costs and risk generally outweigh the benefits.
3. Madison Avenue is straining.
Advertising agencies continue to struggle to serve their clients in the face of continuously evolving digital media availability. As reported in the Future Trends report by DigitalSignageToday, only 50 percent of respondent agencies said they used digital signage to promote their clients, with just 21 percent of these spending on out-of-home networks, though virtually all expect their spending to increase in the next two years.
The core question answered by the marketing industrial complex is: “What do we need to say to who and how, in order to get the results we want?” Mad men (and women) life was easier when fewer messages could be widely broadcast, but have become very complex, as message delivery options and audience segmenting have significantly advanced. Consumers have more influence as they vote with their wallets and voice their opinions on social media.
Advertising-based digital out-of-home networks continue to grow in numbers and installations. BUNN counts at least 450 ad-based out-of-home networks in operation in North America.
The creative work that has moved to the background as media planning and buying for audience targeting has become so important, must now have resurgence for all the reasons that matter to brands and the agencies that serve them.
Meanwhile, a new breed of agency has emerged to serve brands. Digital experience agencies such as Shikatani Lacroix Design, MaxMedia, Razorfish and SapientNitro are leading the way in defining immersive, digitally enabled engagement.
4. Focus on customer experience increases.
“Customer serving organizations need to think like Amazon in helping serve the customer better,” has noted Chris Riegel, CEO of Stratacache referencing the 1998 statement by Jeff Bezos, CEO of Amazon who declared: “If we have 4.5 million customers, we shouldn’t have one store, we should have 4.5 million stores.”
While the marching theme has been improved customer experience, the intention is more fundamentally “customer perception.” Presenting the features and benefits of a product or service are key to changing perception and motivating desired outcomes.
Quality of experience, memory making, value for time and money, immersion in a culture as defined by the location (sports, science, art, interests, events) become important to discerning consumes who are aware of their many options to spend time and money. Destination matters greatly to customer engagement, which is served significantly by digital place-based media in the store/branch or service counter.
Jean-Pierre Lacroix, CEO of the retail experience design firm Shikatani Lacroix Design, Inc. has said, “financial service providers, retailers and brands will meet their business goals through improved customer experience (CX) in a holistic approach that includes location design, voice of the customer initiatives, improved processes, staff expertise, improved messages and interaction between the brand and those it serves.” Lacroix has predicted, “Big data will be converted to personalization and customization of the brand engagement experience.” Branches will continue to be highly relevant to relationship-building,” he said, predicting, “Disruptive competitors will become a driving competitive factor.”
5. Content is king… Still.
It is content, in context that delivers the value of digital media once the technology infrastructure is in place. Content strategy, tactics and composition have been improving but best practices diffuse slowly across industries, within industries and even within organizations.
Resourcing for content improvement is often constrained by the lack of impact analytics. But an easily applied framework for evaluation (developed by BUNN) can provide insights into areas in which the content requires improvement, reflecting that content is required to offer benefits simultaneously in the areas of branding, influence, ambiance and vitality.
The quality of content will increasingly be influenced by the following:
a) Content creators will use the SWOT (Strength, Weakness, Opportunity, Threat) analysis of the brand as a foundation for content development.
b) “Voice of the Customer” programs will become more important to corporate success because of their ability to inform marketing, communications, staffing and facilities operation, and digital signage messaging.
c) Gourmet vs. Buffet content. Energies will be focused on creating content with greater appeal, rather than generating more spots that “bloat” the playloop.
d) The use of analytics will continue to grow in this business application. Rational ignorance (as noted previously) and anecdotal evidence will give way to quantified impact analysis and value assessment.
6. Digital signage supply is changing.
New suppliers are emerging and existing ones are adapting to market demands.
Security integrators will be the next major channel, following the supply chain entry of AV/IT Integrators and static sign/digital graphics providers. At the same time, current suppliers are adding to their capabilities or partnering more closely with vendors of complementary digital media supply chain elements in order to strengthen their supply proposition, as has been underway for several years.
The SaaS model has been well developed by content management software CMS providers such as BroadSign, ComQi and others, and by media player providers that bundle a CMS such as Spinetix. As “PC on a stick” advances to serve simple deployments in either a direct to business or an integrator channel model, more small businesses and IT departments will opt for bundled media player/CMS purchase. The examples of Roku, AppleTV, WD and others in changing the at-home entertainment model through internet-delivered content, offers an indicator of the option for low cost, high value, on-location digital signage in small (one- to five-screen) deployments.
The importance of flat panel providers will increase because the display device is seen as the dominant component to purchase. Display devices with an embedded media players and bundled CMS has been successful for LG Electronics, Samsung, NEC and others for the past 10 years, and as the lines blur between consumer, prosumer and commercial grade displays, flat panel providers will exploit the USB and HDMI ports.
7. Interface of digital signage and mobile
The interface of flat panels and mobile devices including phone, tablet and wearables that are corporate or customer/staff/student owned, can be a powerful force in engagement, experience and commerce. The interface has been a challenge, as multiple steps are required to establish the electronic “handshake.” Quick Response (QR) or an “app” interface download are commonly required and an opt-in or acceptance of a TXT or SMS message seek to inspire opt-in while respecting privacy. Economies of scale have been challenging to achieve, but digital display has offered the platform for electronic interface and display messaging to play a valuable part in multi-channel communications to drive “audience-of-one” engagement.
In 2016 watch for this interface to be significantly advanced as new approaches streamline the approach to online access, mobile browsing, download and navigation. Much is happening in this area, and many announcements are expected during 2016. In summary, the outlook for digital signage is extremely positive in 2016 and beyond. The force pervades.
This column was reprinted with permission from BUNN Co.