Targeted Marketing Will Change Consumer Behavior

Stephen DeAngelis

October 8, 2012

Al Ramadan & Christopher Lochhead, co-founders and partners at Play Bigger Advisors, claim that “social, mobile, and cloud technologies are giving both consumers and marketers more power than ever.” [“The new $50 Billion software category,” Fortune, 1 October 2012] “Power” is probably not the word that first springs to mind when I think of these technologies. “Influence” is perhaps a better word. Nevertheless, Ramadan’s and Lochhead’s assertion does reflect a truth about the direction marketing is headed. They begin their article with a great quote from the late department store magnate John Wanamaker. “Half the money I spend on advertising is wasted,” Wanamaker stated. “The trouble is I don’t know which half.” That is a challenge that continues to face marketers; but, thanks to targeted marketing that may change. Ramadan and Lochhead begin their discussion by writing about the influence that new technologies have given to consumers.

“Today when we have an interest in a product or service we do most of our research, browsing, and buying digitally. As consumers, we have more ability to dictate how we want to interact with a company’s brand, customer support and sales channels. We have more power than ever to find the best prices and service levels. And websites like Yelp, Angie’s List, Facebook and Twitter give us a platform to praise and pummel brands as we see fit. This new technology is creating the biggest change in consumer behavior in a generation. Consumers are demanding compelling and relevant marketing, buying and customer service experiences. And they want to interact with brands in the context of who, what and where they are, on the computing device of their choice.”

I’m not sure how accurate their statement is that “we do most of our research, browsing, and buying digitally.” The data is mixed. For example, of the sales made by customers shopping at four of America’s largest retailers (Sears, Macy’s, Target, and Walmart) only 8.7 percent of Sears’ sales, 7.2 percent of Macy’s sales, 2 percent of Target’s sales, and 2% of Walmart’s sales are completed online versus in-store. [“Why Wal-Mart Is Worried About Amazon,” by David Welch, Bloomberg BusinessWeek, 29 March 2012] On the other hand, current trends certainly support the direction that Ramadan and Lochhead indicate consumers are heading. “Research from GroupM Search reveals 86 percent of buyers who purchase in-store use generic terms on search engines to inform their purchase decision.” [“Eighty-Six Percent of In-Store, Retail Buyers Search on Generic Versus Branded Keywords, Research from GroupM Search Reveals,” groupmnext, 17 October 2011] In addition, results from a 2011 national consumer survey on online holiday shopping revealed that consumers “were overwhelmingly in favor of online shopping because of convenience, value and variety.” [“Eighty-Nine Percent of Consumers Prefer Online Shopping to Store Shopping According to Part II of Survey by Online Retailer Safe Home Products,” PR Newswire, 11 December 2011] Manufacturers and retailers are certainly aware of the changes that new technologies are making to the business landscape and are they adjusting accordingly. Ramadan and Lochhead next discuss the influence that new technologies have given to marketers. They write:

“Marketers also have more power than ever before. Every time we make a digital move, we spread big data breadcrumbs for marketers to hoover up. Ever notice how quickly you see ads in Gmail for hotels in Montreal right after you and your friends fire up a thread about visiting La Belle Province? Or how you see ads promoting tickets to see KISS on tour after you ‘like’ the band on Facebook? Savvy marketers are using new big data applications and analytics to capture, study and act upon a rushing avalanche of customer data.”

The latest indication of how important big data is to marketers comes from Facebook, which is trying to rebound from its disastrous IPO offering. “Facebook Inc. is experimenting with new ways to leverage its greatest asset—personal data on about 900 million people—reigniting concerns about privacy. The strategy: selling access to its users. To amp up the effectiveness of its ads, Facebook in recent months has begun allowing marketers to target ads at users based on the email address and phone number they list on their profiles, or based on their surfing habits on other sites.” [“Facebook Sells More Access to Members,” by Geoffrey A. Fowler, 1 October 2012] Ramadan and Lochhead believe these trends are ushering in “the ‘BIG Customer’ era.” They write:

“BIG Customer is the emerging label to describe an all-encompassing category of big data based, customer focused technology and the consumers who conduct the majority of their research and buying online. According to Wells Fargo Securities, BIG Customer technologies could represent more than $50 billion in new software investments over the next ten years. ‘We think the BIG Customer represents the convergence of multiple and disparate customer-related technology systems. We think the new approach will result in the inevitable collision of advertising technology, marketing systems, customer-focused engagement apps, sales automation, service & support, commerce and, of course, analytics,’ writes Wells Fargo Securities Senior Analyst, Jason Maynard, in a new research report.”

While Maynard sees $50 billion in software investments over the next ten years, the overall spend on targeted marketing in the BIG customer era will overshadow that figure. As I have noted in several previous posts, Marianne Timmons, a Senior Principal at Accenture, told attendees at the Grocery Manufacturers Association (GMA) Executive Conference in Colorado Springs, CO, that less than five percent of the $200 billion spent annually on consumer packaged goods (CPG) marketing is targeted. An increasing portion of that amount will be spent on targeted marketing in the years ahead. If John Wanamaker is watching, that should put on smile on his face because it means that fewer marketing dollars will be wasted. Ramadan and Lochhead write that they “see 5 seminal drivers of the BIG Customer Era.” They are: BIG customers generate BIG data; monetizing data is the new competitive advantage; BIG customers have BIG power; Mad Men are Dead Men; and, syndicated commerce. About the first driver, they write:

1) BIG customers generate BIG data. Over the past five years we have experienced a massive up-tick in the amount of data available to marketers. According to IDC, the volume of digital content will rise to 2.7 zettabytes of data (equivalent to 2.7 billion terabytes) in 2012. This includes video, images, files based on social media and Web-enabled workloads. Just think of all the digital consumer behavior that exists today they didn’t less than a decade ago. From liking, posting, thumbing up a song, tweeting, reviewing, recommending, pinning and checking in. Not to mention the explosion in Internet searches, each of which can be a new marketing opportunity.”

As I have noted in other posts, integrating all of these disparate data sources and types remains a challenge. Much of the $50 billion in software investments predicted by Maynard will undoubtedly be applied to integration and analysis. Concerning their second driver, Ramadan and Lochhead write:

2) Monetizing data is the new competitive advantage. The material explosion in BIG customer data creates both threats and opportunities for businesses. Companies that figure out how to turn BIG data into big dollars will gain the upper hand. The BIG Customer Era lets marketers go beyond strategies shaped largely on intuition and opinion polls or Nielsen ratings. It turns them into data scientists that use digital technologies to make the right offers, at the right time, on the right device to the right customer. BIG customer behavior is forcing marketers to re-imagine advertising, demand generation, revenue acquisition, customer retention, and loyalty strategies.”

Monetizing data is obviously the primary goal of marketers and the primary advantage of targeted marketing schemes. The World Economic Forum has declared data a new class of asset that is as important as physical assets like gold and oil. As noted earlier, Facebook recognizes that its primary asset is data and it is trying desperately to monetize that data. Concerning their third driver, Ramadan and Lochhead write:

3) BIG Customers have BIG power. The strategic shift from analog to digital engagement is empowering customers. Consumers have powerful access to information about products, services, companies, and people with a swipe of a screen. Today, most consumers spend more time researching products or services online before visiting a store. Social sharing, crowd sourced ratings, group buying, and other social commerce technologies have upset the marketing and sales process, putting customers in control of what, how, and from whom they want to buy. This has removed buying friction and increased transparency, materially changing the comparison-shopping game.”

As I noted in a previous post entitled Vendor Relationship Management: Making the Customer King, people like Doc Searls, director of Harvard University’s Project VRM, insist that consumers are going to gain increasing power over their relationships with manufacturers and retailers in the years ahead. Concerning their fourth driver, Ramadan and Lochhead write:

4) Mad Men are Dead Men. There is a $152 billion annual advertising and promotion industry in the US. And it is getting massively disrupted by the growth in digital media consumption and the decline in traditional media. If you’re under 30 years old, chances are the only use you have for a TV is to figure out how to get your smart phone video content playing on it. Never mind the fact that digital video recorders make it possible for people who still watch legacy TV to blast through ads. This means marketing must shift from being more art than science, to being more science than art. BIG customer technologies provide new, measureable ways of tracking investments in customer acquisition and retention like never before. New applications, services, and commerce options are delivering the sort of measurements, metrics and sales channels that marketers have been salivating after for decades. Modern software can analyze, target, predict and even suggest the way to deliver the perfect customer experience.”

Monetizing data represents “why” targeted marketing is important to retailers and manufacturers and the discussion above addresses “how” that can be accomplished. At Enterra Solutions, we believe we are on the leading edge of creating software that “can analyze, target, predict and even suggest the way to deliver the perfect customer experience.” Concerning their final driver, Ramadan and Lochhead write:

5) Syndicated Commerce. Just as marketers and publishers have syndicated their content to gain the widest possible audience, the same is becoming true with offers, promotions, and daily deals. Marketers are looking to go beyond advertising for awareness to digitally acquiring revenue. Correlating the identity, preferences, location, and context of a person can perfect the setup for commerce by providing the right offer, from the right source at the right time on the right device to produce new revenue. The future will most likely look like digital ‘commerce ads’ that are embedded throughout the social/mobile web as CMOs strive to acquire more revenue through so-called performance marketing that is sprinkled around the digital world. The syndicated commerce approach to advertising makes it more possible to link advertising dollars invested to sales transactions produced.”

By writing that “the future will most likely look like digital ‘commerce ads’ that are embedded throughout the social/mobile web,” Ramadan and Lochhead make “commerce ads” sound almost sinister. While companies certainly want “to acquire more revenue,” consumers also prefer seeing advertising that is more relevant to their personal tastes and lifestyles. Targeted marketing is a win-win since it will keep marketing costs in check and that ultimately means better prices for consumers on products that fit their lifestyle and tastes.