Marketing and Research Consulting for a Brave New World
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Interview marketing leaders as I have on various assignments.  They will sound visionary about our digital, social, and mobile future…like they are risk-takers.  However, in reality, collectively, marketers are cautionary and conservative, budgeting like it’s 2011, favoring the levers that were known back then.

Why does this happen and how can this be fixed?  That is the subject of this blog.

Marketers are locked into the past

According to a paper in the Journal of Advertising Research in 2011, “The Power of Inertia; Conservatism in the Marketing Budgeting Process” (Marcel Corstjens, et. al.), it is proven that marketers are conservative rather than optimizers in their budget setting. Marketers tend to budget based on last year’s plans rather than by equalizing the expected yield of each marketing dollar and not much get adjusted as the year goes on.

Even the rapid increase of digital, social, and mobile (DSM) advertising reflects conservatism. Marketers are playing catch-up ball to prior years of growth in DSM usage.  Like doctors prescribing a new drug, the rule seems to be, “Start low and go slow”.

Why is this a problem?

Marketers are leaving significant money on the table. Evidence offered by Marketing Evolution proves that marketers could improve the productivity of marketing funds by 30% over and above any benefits from already using marketing mix and attribution modeling.

Why does this happen?

Marketing research and analytics have not provided the right tools to the enterprise. The most prevalent science for guiding deployment of marketing funds is regression-based marketing mix marketing. It assesses the relative impact on sales of channel level spending (e.g. TV vs. digital vs. print…) using time series data. These techniques came into prominence back when the marketing world was a much simpler place. Marketing options were not changing that fast so analyzing 2-3 years of data for planning the upcoming year of marketing spending was not an issue.  Marketing operated at a slow pace, where marketing budgets were deployed via pre-set media and retailer deals, and there was very little fast pivoting other than cutting advertising or maybe shifting money from advertising to promotion in quarter 4 to make your numbers.

Where can a 30% improvement in marketing ROI come from?

There are 6 principles for improving marketing ROI:

  • Move money around in flight during the campaign based on real time feedback about what elements of the campaign (creative, media placement, ad units, etc.) are working
  • Put the consumer in the equation.  Marketing mix modeling regresses media spending against sales.  The consumer is literally not in the equation.  Each marketing channel’s performance at driving sales is actually an average.  If you get under the average to the distribution, you’ll discover that for some subset of consumers, each marketing channel works well.  By selectively targeting the right segment with the right creative that works well FOR THEM, you can improve the portfolio of impressions’ performance substantially.
  • Get granular. Going below the channel level is key to making each channel work better.  For example, video might not be working well overall in a given campaign, but if you go deeper, you might find that cable “how-to” shows, videos on their digital sites and pre-rolls on Youtube targeted to those who watch such shows work really well. Marketers need to unpack the big buckets to find ROI increases.
  • Keep an eye on the long-term. One of the biggest knocks against marketing mix modeling is that it encourages a focus on driving short term sales, usually favoring promotion over advertising as a result.  When you put the consumer in the equation, you can optimizing spending against leading indicator metrics of brand health as well as short term sales .
  • Move money early to emerging digital, social, mobile levers that are proven to work. Don’t wait to follow the herd.
  • Create an integrated process. Marketing ROI performance comes from a process where budgets are set at senior levels without much data other than last year’s performance and reports from marketing mix modeling. Commercials are tested using a different supplier.  Creative comes from the creative agency, media strategy and execution come from the media agency, programmatic targeting comes from the DSP, and campaign assessment comes from marketing research.  That is no way to run an airline!

A better marketing future

Tools are now beginning to emerge that address these shortcomings, contemporizing how marketing works and I am honored to count them among my clients and service partners (please contact me joel@rubinsonpartners.com for more info). Some elements to look for…

Big data.  Surveys can be seamlessly integrated and enriched with digital, social, and external data (e.g. weather) so ad tech targeting variables are brought into the analysis.

Consumer level predictive modeling. Make sure that the system accommodates a variety of methods that are fit for purpose.  Regression works well for big bucket items but tags/pixels/cookie/ID systems are needed to create A/B testing of newer digital options. Make sure that the modeling strategy is user-level, predictive modeling.  That is the only way to align to programmatic impression buying.

Integrative process, changing how marketing works. Finally, the system needs to be designed with budget-setting, creative testing, campaign planning, and real time sense and respond agility use cases in mind so it acts as an integrative force for increasing marketing productivity .

Why is this transformation starting to happen now? 

We have entered into the era of 1:1 addressability of marketing messages, enabled by infinitely scalable computer technology, where massive databases can be accessed for algorithmic and automated decision-making in under two-tenths of a second.

Are you ready?

 

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