Far more interesting, however, is the opposite end of the spectrum, when channels die.
Now, obviously, channels do not die. People still place orders via fax or phone, people still purchase stuff after watching a television commercial on ABC, CBS, or NBC.
But channels are forced to morph into something else when faced with the challenges brought on by new technology ... channels that were once prominent become much, much less prominent. Let's explore the process incumbent channels go through, because the process is quite interesting!
One might call the first stage "self evidence". Sales stop growing in the incumbent channel, and it becomes self evident that something is wrong. Business leaders all know, intuitively, that the limits of the channel have been hit. Think catalog marketing in 2000, think independent music stores in 2002, think e-mail marketing in 2007, think e-commerce in 2012 or 2013 when mobile commerce truly takes off.
The second stage is "complexity". Pundits respond to inquires by business leaders by suggesting that the incumbent channel is inherently more complex than it used to be. In catalog marketing, this is represented by the "matchback", the concept that you need advanced analytics to be able to understand that the incumbent channel is still as relevant as it ever was. For e-mail marketing, the shift was to advanced segmentation and CRM techniques ... all of a sudden, you needed trigger-based e-mail campaigns based on real-time data, or you needed multiple versions of campaigns to improve productivity. In any case, one finds that sales still don't appreciably grow, even if you manage complexity appropriately ... this is a key signal, folks ... sales still don't grow after responding to complexity in an appropriate manner.
The third stage is "integration". When sales fail to grow, in spite of the addition of "complexity", the punditocracy suggest that the incumbent channel is the "peanut butter" to the "jelly" of the new channel. In catalog marketing, you are told that print is the channel that drives the customer online or in stores ... without print, you cannot make the online channel or retail channel work. In e-mail marketing, we're being told that e-mail and social media are the dynamic duo, we're being told that e-mail marketing is actually the original "social media channel", you are being informed of new terms (i.e. Social CRM) that aren't likely to resonate with actual customers. You'll begin to see a lot of case studies that "prove" that the incumbent channel is responsible for the growth of the new channel. The case studies, unfortunately, are seldom funded by the folks managing new channels, the case studies seem to come from those managing the incumbent channel. When you observe case studies coming from the incumbent channel, you know that the incumbent channel is going through "integration".
The fourth stage is "cannibalization". This is the realization that the incumbent channel is dying, that maybe the incumbent channel is truly responsible for driving sales in new channels, but eventually, the customer changes behavior and switches to the new channel ... the new channel is fully cannibalizing the incumbent channel and the pie isn't growing, meaning that sales in total are essentially growing at the rate of inflation. This is a painful stage, this is the stage that the e-mail marketers are about to enter, this is the stage that, over the next five years, the e-commerce folks will go through as mobile marketing fused with sparse elements of social media plunder traditional e-commerce. This stage is important, because it causes Management to make significant changes to advertising budgets, leading to the fifth stage.
The fifth stage is "contraction". In this stage, Management prunes budgets, actively allocating resources to new channels. This hastens the demise of the incumbent channel. Catalog marketers know all about this stage. This stage leads to many unfavorable consequences. In "contraction", business partners (like the USPS) make the unfortunate decision to increase prices in response to a contracting market, further hastening "contraction". Contraction is painful, most business leaders try to avoid contraction at any cost, diving into "complexity" and "integration" in an endless drive to avoid "cannibalization". In most cases, "contraction" is unavoidable.
The sixth stage is actually quite positive. This stage is called "acceptance". The business leader realizes that the incumbent channel is now well positioned among niche audiences, resulting in profitable opportunities across smaller but loyal customer segments. It is here that the incumbent channel finds a purpose, a reason for being. Think "AM Radio", for instance. As better technology cannibalized music, "AM Radio" morphed into a talk radio channel --- clearly a channel that didn't have the market share that other channels had, but a channel that had a purpose, a reason for being. Once the incumbent channel moves into "acceptance", the incumbent channel becomes profitable and re-emerges as relevant across a smaller but loyal audience. Management prunes the incumbent channel of unprofitable market share, allowing the incumbent channel to achieve a new (but smaller) level of prominence.
Mind you, the pundits will say that AM Radio is dead ... and the pundits are right to an extent ... except when it comes to the millions of folks who listen to Coast to Coast AM each night during the overnight hours ... to those folks, the channel that is technically "dead" is highly relevant!
The process of going from "self-evidence" to "contraction" is painful. Arrival in "acceptance" is actually quite positive. Our job is to capitalize on the profit among customers who will always love the incumbent channel, while shifting dollars to emerging channels among other customers.
The six stages are:
E-Mail marketing is stuck in "integration" and "cannibalization", with painful days ahead as Social Media and Mobile drive the implosion of traditional e-mail marketing. According to the Pew Internet Project, only 11% of teens use e-mail daily to send e-mail to friends, 68% of teens use e-mail for other purposes at least occasionally. So e-mail needs to evolve to respond to other channels that allow for real-time communication ... to date, leadership in e-mail marketing are not moving fast enough to respond to this shift in user behavior.
Classic Search is in the "integration" stage, but Social/Mobile Search are, in many ways, just beginning, making this a really interesting channel to watch. In Classic Search, we're just learning how customers behave after receiving an e-mail message or a catalog or after seeing a re-targeting ad. Social/Mobile Search will cannibalize the existing Search business, yielding a really interesting and exciting future.
E-commerce is entering the "self-evidence" stage in what is about to become an epic battle with the mobile channel. Pay close attention to the growth rates reported by e-commerce ... because the e-commerce folks will include mobile in their numbers (that's often a leading indicator of the "self-evidence" stage). In the next five years, e-commerce leaders will protect their channel by adding mobile volume to traditional e-commerce ... "self-evidence" comes into play when a "bean counter" asks the question ... "what happens to e-commerce sales if you strip out mobile sales?"
Think about mobile for a moment. Gilt Groupe generated 3% of their total sales off of the iPad after just three days ... think about that! eBay will generate $1.5 billion in mobile sales this year after generating $900 million last year, and their sales aren't growing much, so that's all being cannibalized from traditional e-commerce. The long-term future of traditional e-commerce is in doubt, folks ... the future of selling by distance is, and always has been, promising.
Measure the six stages of channel death, and be ready to respond to changes in customer behavior!