Pareto Rules

The future of interactive conversation

In case you missed it, the current issue of the scientific journal Neuron reports that researchers are now able to view the brain activity of people in the throes of making a purchase decision and accurately predict whether or not they’ll actually buy the product or service under consideration.

The article states that a region of the brain called the nucleus accumbens is activated when people see something they want to purchase. If the price turns out to be too steep, however, then another region of the brain, called the insula, kicks into high gear and a third region shuts down. Or something like that. I'm not a brain surgeon. All I know is that all this neural circuitry activity shows up on a brain scan as clearly as the ringing of a cash register.

The fact that researchers can determine whether a person will purchase something even before he or she is fully conscience of making the decision is pretty amazing. The discovery has obvious implications in the context of interactive marketing, given that a key driver of such programs usually involves figuring out which levers are at the forefront of the consumer’s purchase decision.

Of course, marketers probably won’t have much luck convincing consumers to attach electrodes to their scalps as they browse different product offers in order to gain insights into, say, price optimization. So it may be a while before the discovery has commercial application.

In the meantime, marketers have another way to understand what considerations drive customer purchase decisions on an individual basis. It involves having a conversation. That's right. It's as simple as asking customers relevant questions about themselves while giving them a good reason to want to share their personal information.

That’s the main point of a new article I wrote about the quid pro quo of customer data collection. It discusses how companies are combining various incentives with advanced analytics and increasingly sophisticated technologies like dynamic survey engines and rules decision systems to build more actionable customer profiles.

What I don't mention in the article is that marketers will eventually embrace voice—asking questions verbally as an alternative to using text-based interfaces—to make the conversations seem more real. As it happens, my friends at Jellyvision are pioneers in Interactive Conversation Interface, which is designed to create and maintain the illusion of human-like awareness, to make it feel like a prerecorded character is actually talking and listening to you. Their website provides some great examples of the future of interactive conversation.

In the article, I explain that a data-driven relationship should mimic an interpersonal relationship to the extent that it should evolve as a series of repeated interactions that accumulate over time into a positive memory of experiences. This means asking questions at various iterations, over the course of the relationship. And it means making sure that the responses to the questions result in meaningful conversation along the way—conversation that eventually translates into positive brand experiences.

And if you don't believe me, you don't know jack.

Precision Marketing Is a Green Initiative

Forty-one pounds. That’s how much direct mail every adult in this country is sent each year, on average, according to a new nonprofit organization aptly named 41Pounds.org.

I stumbled upon their website only after writing an article about the massive amounts of waste generated by the direct mail industry—and, importantly, why precision marketing is a big part of the solution. After all, combining customer data integration with micro-segmentation and advanced analytics invariably leads to more targeted, lower-volume offers.

In the article, I discuss some of the initiatives currently underway in the U.K. to reduce by billions the number of direct mail pieces that end up in the landfill. (My learned colleague Ian Turvill, himself a native Londoner, shines some additional light on these initiatives in his Healthy Green Blog.) I also make the point that the U.S. could be doing more—much more—if only our government, together with the Direct Marketing Association, would rise above the short-sighted demands of industry lobbies to finally put some environmentally responsible policies in place.

Of course, many smart companies are already embracing the latest advances in precision marketing to drive marketing improvement. No doubt, they’re more interested in fueling revenue growth and cost reduction than saving trees and minimizing pollution. Still, whatever the motivation, the net effect is the same: To send more of the right offers to the right people at the right time.

Of course, sending the wrong offers to the wrong people is a good a definition of junk mail. And here 41Pounds.org cites some alarming statistics:

• The average person gets only 1.5 personal letters each week, compared to 10.8 pieces of junk mail. (Others, like me, get that many pieces each day.)
• More than 4 million tons (62,000,000,000 (billion) pieces) of junk mail are produced yearly.
• The production and disposal of junk mail consumes more energy than 2.8 million cars.
• 100 million trees are ground up each year for unsolicited mail.
• 42% of timber harvested nationwide ends up as pulpwood for paper.
• 28 billion gallons of water for paper processing are wasted each year.

Cut your bulk mail for 5 years, according to 41Pounds.org, and you’ll conserve 1.7 trees, 700 gallons of water and prevent 460 pounds of carbon dioxide from being released into the air. The organization helps people do exactly that, by instructing dozens of direct marketers to remove their names from distribution lists for credit card solicitations, coupon mailers, sweepstakes entries, magazine offers, insurance promotions, and any specified catalogs. 41Pounds.org claims that it can eliminate 80-95% of all direct mail. The cost for the service? $41.

The DMA readily admits that only 2% of mailed ads lead to a sale—or, for that matter, any type of response from recipients. Meanwhile, approximately 44% of direct mail gets tossed into the wastepaper basket unopened.

Should the government place limitations on the amount of direct mail a company is allowed to produce and distribute? Maybe. All I know is that marketers as a whole would greatly benefit by harnessing the power of advanced analytics to make their prospect and customer communications more timely and relevant, based on people’s specific wants, needs, behaviors, lifestyles and situations. Consumer response rates (and incremental sales) would rise. The environmental impact of the direct mail industry would decline. And all inhabitants of the planet (including us 300 million Americans) would have reason to celebrate.

A Nation of Three Hundred Million Customer Records

Yesterday, for the first time ever, the Dow Jones Industrial Average closed above 12,000. Two days earlier, the U.S. Census Bureau announced that the United States has now officially became a nation of 300 million people.

What do the Dow Jones industrials and the U.S. population have in common, other than having both set new records? For one thing, both are highly dynamic.

Of course, stock prices and markets fluctuate on a daily basis. And while the U.S. population only grows larger with each passing day, as indicated by the parking situation at my local megamall, demographic statistics point to a continuous state of flux, as well. This year, for example, there will be over 40 million residential moves. There will also be four million births, two million marriages, a million divorces, a million retirements and 2.5 million deaths, give or take a few hundred thousand.

For those of us immersed in the world of database marketing, these population shifts speak to the importance of Customer Data Integration (CDI) as a key enabler of precision marketing—and, ultimately, increased revenue growth. It also speaks to the importance of CDI in the context of bottom-line cost reduction (e.g., sending merchandise catalogs to dead people is never a good idea; no matter how compelling the offer, you’re unlikely to elicit a favorable response).

Following years of experimentation, often with less-than-satisfactory results, companies today have come to view CDI as a critical success factor. And more of them are taking advantage of recent innovations in CDI solutions to better propagate a single view of the customer across the organization. Aaron Zornes, founder of the aptly-named Customer Data Integration Institute, predicts that the market for CDI solutions (software and services) will exceed $1 billion by 2008.

I'm told by my colleagues at Fair Isaac that the two primary criteria in CDI solutions are match rate – the proportion of records that are successfully matched to a reference database ID – and precision, the accuracy with which those matches truly reflect the individuals and households concerned. These two criteria tend to trade off against one another in that being overly aggressive on matching by loosening rules to achieve a hit against a reference database can lead to poorer accuracy.

For example, James Brown (the Godfather of Soul) and Jim Browne (his next-door neighbor) may be viewed as one and the same because they’re “close enough”. But in fact they’re two different people, only one of whom is included in the reference database. By combining these two names, you increase the match rate but decrease the precision.

In marketing to potential consumers in situations where the offer has low risk and low cost, companies tend to err on the side of a higher match rate, sacrificing precision in the process. In situations where there is significant downside –- for example, a pre-approved offer of credit –- companies tend to err on the side of caution and focus on precise matching over volume of match rates. They'd prefer to throw Jim Browne away rather than risk sending him an inappropriate offer.

In short, most applications tend to cluster around two universes: a marketing-oriented universe and a risk-oriented universe. Providers of CDI solutions generally choose to build their solutions around one of these clusters. Those with a focus on marketing solutions may sacrifice precision for match rates while those with a focus on risk may emphasize precision over match rate.

At Fair Isaac, we seek the middle ground, balancing match rates and precision to achieve an optimal balance. That said, certain business situations certainly benefit from turning the dial one way or another. A client whose stated business goal is “customer acquisition at all costs” will be more inclined to seek higher match rates and risk lower precision. An example might be a company aggressively building market share in long distance telephony. On the other hand, some clients (e.g., a credit card company or catalog merchant, for whom precision marketing is a mantra and tailored offers are the norm), may be more inclined to sacrifice match rates for accuracy in identification.

In any case, CDI is merely a means to an end. Resolving discrepancies in the spelling of customer names and addresses, and the variations in their phone numbers, birth dates and other numerical identifiers, reduces mailing costs while increasing response rates. Bigger picture: CDI provides the foundation for deploying decision management systems that enable companies to deliver highly relevant customer experiences, services, messages and offers. For marketers, it’s a prerequisite for doing business in a nation of 300 million people.

Cracking the code on next-generation code promotions

After reading my latest submission for Chief Marketer, the editor remarked that my brain seems to be swarming with oodles of arcane knowledge. It’s true that I usually do well with “Jeopardy!” topics that concern obscure people, things and events in history. It's the important stuff that often escapes me.

This particular article begins with a reference to Leon Battista Alberti, the Renaissance-era cryptographer who invented the cipher disk, a device that served as the basis for the “secret decoder” premiums that were often included in breakfast cereals and snack foods, beginning in the 1930s. By the way, I find it interesting that kids have always had a fascination with secret codes for sending and deciphering hidden messages. Just yesterday, my six-year-old refused to leave FAO Schwartz without a “Spy Case” packed with secret marker pens and undercover secret codes “to completely disguise important information so that even the cleverest guard or enemy can’t spot it.”

Alberti was a great cryptographer. But a single profession does not a Renaissance man make. So he also became a great painter, poet, linguist, philosopher, musician and architect. Yet still apparently feeling inadequate, Alberti decided to further embellish his accomplishments. In his autobigraphy, he wrote that he "excelled in all bodily exercises; could, with feet tied, leap over a standing man; could in the great cathedral, throw a coin far up to ring against the vault; amused himself by taming wild horses and climbing mountains." Yesterday, in Battery Park, I saw a street performer leap over five standing children. But, alas, his feet weren’t tied.

My article focuses on the evolution of code promotions. It discusses how the advent of specialized technologies and analytic capabilities now enable innovative marketers to use dedicated websites built around code promotions to collect far more than just basic demographic info from their consumers. The My Coke Rewards program offers perhaps the most sophisticated example of how brands can utilize code promotions to also capture behavioral and psychographic info, including insights into their favorite music groups, sports teams, hobbies and other specific passions.

As it happens, I recently wrote a lengthy article on the My Coke Rewards program in the context of Coke’s new marketing decision management platform, which my colleagues at Fair Isaac helped develop. The platform serves as the foundation for all of the company’s interactive marketing programs, across all thirteen brands within the Coke product portfolio and on a global scale. It’s enabling the company to make intelligent marketing decisions about the treatment of individual consumers each and every time it touches them.

Think of it as Coke’s new secret formula for building consumer relationships. But unlike Coke's other secret formula, which is reportedly kept in a security vault in a federal building in Atlanta, this one contains no coca leaf or kola nut extract.

Best Buy plugs into the power of precision marketing

Best Buy’s customer-centric transformation is helping to produce some impressive results. For its fiscal first quarter ended May 27, the company reported net earnings of $234 million, representing a 38 percent earnings gain. No wonder so many analysts are upgrading Best Buy to "buy".

But while much has been written about the big picture initiatives—in particular, the reconfiguration of stores to local neighborhood demographics, leading to an 8.4% increase in same-store sales (compared to 2.3% for traditional stores)—scant attention has been paid to the critical role of customer analytics in enabling the transformation.

In this article, published yesterday in Brandweek, I attempt to rectify that shortcoming, by focusing on the analytics component. Unfortunately, my original 2000 words were savagely cut down to 700 words due to space constraints (e.g., a stupid cartoon in the print edition), so I’m not sure my efforts were terribly successful.

In any case, what amazes me about Best Buy is how well the company captures data from every transaction and interaction—from phone calls and mouse clicks to delivery and rebate check addresses—and then deploys sophisticated match-and-merge algorithms to identify over three-quarters of its customers, or more than a 100 million individuals. Also amazing are its behavioral modeling techniques for scoring customers in terms of their interests, lifestyles and passions.

Is the customer in the home theater space? Is he in the music, gaming or digital imaging space? Is he productivity- and business-minded? Having discerned this information, Best Buy can anticipate—and actively drive—his next likely purchases. Of course, some purchase sequences are obvious—the fact, for example, that a “Buzz customer” buys MP3 accessories and MP3s thirty days after he buys an MP3 player. But what about the fact that a “Buzz customer” is also five times more likely to buy a digital camera thirty days after he buys an MP3 player?

Best Buy looks at thousands of nonobvious transactional correlations (thanks, in part, to our Peacock technology) to drive highly relevant messages and offers. The goal is to combine the creative messaging and tonality best suited to each customer with very specific offers, based on their behavior, and to then package and deliver it in a format that is consistent with the brand.

An important aspect of modeling is determining customer value. To that end, Best Buy has developed a customer lifetime value model that may be the most sophisticated of its kind. In addition to measuring transaction-level profitability, it factors in a host of customer behaviors that would tend to either increase or decrease the value of the relationship. Are customers heavy rebate redeemers? Are they heavy users of the sales channel? Are they heavy returners?  Looking through these various lenses, Best Buy gains not only a clearer view of customer value, but also insight into how to change customer behavior.

Besides customer value, Best Buy looks at factors like “promotional sensitivity” (Which customers are price conscious and promotion-driven?), “channel preferences” (Which customers prefer to interact online versus in-store?), and “ability to buy” (Which customers have disposable income?). One factor of emerging importance is “technology adoption” (Which customers are likely to buy new technology ahead of the mainstream?). No surprise, given the nature of the business.

Best Buy is shifting an increasing amount of resources away from mass marketing and toward precision marketing. It’s also moving away from broad-based price and promotion tactics—e.g., sending every customer a coupon for 10% off—and toward customer-triggered incentive programs. Best Buy believes that, given enough trigger responses and customization, consumers will find their own individual paths through the company’s communication streams. So far, the strategy seems to be working.

The visual display of marketing information

The Russians are reading Precision Marketing. A case of these books arrived yesterday from my publisher. At first, I didn’t even realize it was a translation of my book. It then took me a while to figure out what language it was. I had to do a lot of asking around. I felt like Denzel Washington in that scene from “Inside Man” where he’s blasting a recording in a foreign language to passersby on a busy street corner in a desperate attempt to determine the ethnic origin of those nefarious kidnappers.

Speaking of Russia, I just published an article on marketing dashboards and data visualization tools that begins with a discussion of a thematic map of Napoleon’s ill-fated march from the Polish-Russian border to Moscow. (Of the more than 614,000 troops that embarked on the campaign, only 50,000 survived.) The map, by the French civil engineer Charles Joseph Minard, appears in Edward Tufte’s classic book The Visual Display of Quantitative Information.

I attended a talk by Tufte a long time ago. Clearly, it made a lasting impression. By the way, he actually sells posters of the map, although I’m not sure it’s something I personally would want to hang over my sofa.

In researching the article, I was fortunate to interview a number of leading experts on data visualization. Ultimately what I learned was that the market is still in its infancy but that the near-term growth potential is huge now that we're seeing the alignment of all the planets—from marketing accountability to data integration to software technology.

The explosion in data visualization over the next couple of years will be largely due to the significant improvements of rich Internet applications, as seen, for example, in the new versions of Adobe Flex and Flash. These will make it possible to bring any data set—including those related to precision marketing performance—to life in a dazzling array of color-coded charts, funnels, pies, spider webs and other configurations that can be navigated and manipulated in countless ways. The experts agree that the power of next-generation dashboards lies largely in the ability to interact with data to reveal hidden patterns, connections, and insights.

According to Al Gore’s movie, which should be mandatory viewing for all 300 million Americans, a different set of experts agree that global warming is real and that immediate action needs to be taken to halt and reverse it. Gore relies heavily on data visualization to drive home many of his key points. Let’s hope political and business leaders pay heed, lest we continue down a path even more devastating than the one down which Napoleon led his troops during that Russian winter of 1812.

Placing Sure Bets on Customer Knowledge

The only thing I wasn't sure about in writing this article regarding the role of customer knowledge in driving marketing effectiveness was my anchoring metaphor: the roulette table. That’s because, despite occasional visits to the casino, I’ve never actually played the game.

Googling the rules, just to make sure I didn’t fumble the basics, I learned that roulette was invented by the 17th century mathematician Blaise Pascal, whose scholarly interests included perpetual motion and the laws of probability. Speaking of which, I also learned that the odds of winning on a European-version table (2.63%), which uses only a single zero, are considerably better than on an American-version table (5.26%), which uses both a single and a double zero.

That casinos were able to get away with suddenly upping the house advantage by 100% is just another historic example of American ingenuity.

The article talks about how smart companies like Best Buy are infusing more customer knowledge into their marketing decisions. For starters, this means learning as much as possible about the key attributes and behaviors of profitable customers within narrowly defined segments and then acting upon those insights to deliver relevant and context-sensitive messages and offers.

It also discusses a decision model developed by some of my colleagues at Fair Isaac. The model takes into account a broad array of inputs to determine what set of marketing actions a pharmaceutical company should take for each target physician to maximize revenues. Pay them more sales visits? Increase the number of TV spots? Leave behind more drug samples? The model leverages the fact that there’s an enormous amount of publicly available data that looks at physicians on an individual basis, including their past prescribing behavior.

Of course, if you’re Harrah’s Entertainment, which has gained a lot of attention lately for its own customer analytics prowess, you probably also know their gambling behavior.

When vending machines call you by name

Used to be that buying a soft drink or candy bar from a vending machine felt a little bit like gambling. Getting the machine to accept your money could be a challenge in itself, especially if the dollar bill you were feeding it was in anything less than mint condition. Then, making your selection, there was always some chance that your requested item would get lodged somewhere along its journey to the dispenser tray.

What a difference a couple of decades can make. I can’t even remember the last time I had to thrust my weight against a Coke machine, rocking it to try to pry the can loose from its rest stop and release it to the force of gravity.

Today not only do most self-service vending machines operate flawlessly, but some are even elegant in terms of the mechanical levers and robotic arms that shepherd the purchased items to their new owners. On the flip side, most of the machines are still dumb in that they do nothing more than enable transactions.

Even state-of-the-art kiosks, such as the prototype Zoom Store I recently stumbled upon in a Macy’s in San Francisco, do little more than take your money and spit out your merchandise—in this case, iPods and related accessories. Macy's plans to roll out 180 of these 28-square-foot units this fall, stocking them full of consumer electronics.

To be fair, the Zoom Stores have a touch screen that allows customers to get product and price info. Still, there’s little indication that they aspire to deliver true interactivity, let alone the kind of customized brand experiences and precision marketing capabilities we’re starting to see in some of the more sophisticated Web-based retail environments.

Well, I have a feeling that’s about to change and that we’re on the cusp of a new era in vending machines, a $30 billion industry that’s growing by leaps and bounds. For evidence, look no further than Dubai, where The Middle East Vending and Kiosk Expo 2006 took place earlier this week. By all accounts, there were some pretty impressive machines on display and, importantly, a lot of talk about incorporating personalization technologies like wi-fi, radio frequency identification (RFID) and biometrics into future models.

Will there come a day when Coke machines deploy retinal scanners to automatically dispense your beverage of choice while delivering a brand experience related to your favorite rock band and sports team? Speaking earlier this month at Fair Isaac’s InterACT conference, Doug Rollins, the head of interactive marketing at Coke, seemed to suggest as much. With over two million vending machines in the US alone, Coke is coming to view the machines as  “consumer connection points” and “opportunities to drive traffic and participation.”

It may be some time before manufacturers and retailers fully capitalize on vending machines as an additional customer touch point and relationship-building vehicle. Meanwhile, at least, with the push of a button, customers can usually get the item they paid for without resorting to brute force.

The Large Marketing Organization Artistically Considered

“All things in nature have a shape,” wrote the Chicago architect Louis Sullivan in his 1896 landmark essay “The Tall Office Building Artistically Considered”. According to Sullivan, “it is the pervading law of all things … that form ever follows function.”

With this dictum—form follows function—Sullivan argued that the “upward character” of high-rise building design is a natural extension of the “pervading law”.

Which begs the question: If form should follow function in building architecture, shouldn’t the same hold true for business architecture? Like the physical building it occupies, shouldn’t a company’s organizational design be appropriate to its purpose?

It’s a question a lot of folks these days are pondering, including participants in last month’s board of trustees meeting for the Marketing Science Institute. Noting that “the customer equity paradigm” forces a company to structure its activities around customers rather than products, the group moderator asked: “Is a new marketing organization emerging out of this evolution?”

I have a few thoughts in the context of precision marketing—which, after all, provides a whole new set of financial metrics for the marketing organization to report and track against. Good timing, given that marketing accountability is rising to the executive suite, to the CMO, who has traditionally had no P&L responsibility whatsoever.

Given today's emphasis on ROI, the CMO might think about drawing a line down the middle of the organization, between those who set the marketing objectives and those who execute them. Bill Mirbach, VP of Direct Marketing at Intuit, once told me that a good organizational model might be to simply say, “Okay, finance guys, tell the marketers what their allowable cost per order is, and you figure it out depending on the business needs as defined by the senior manager.” Makes sense. After all, marketing managers shouldn’t be spending their time crunching numbers when they could be arm wresting with vendors for cheaper ad space.

The best way to resolve the internal conflict that exists in many companies with respect to marketing ROI may be to simply divorce the Art from the Science. Create two separate functions, in essence, and let each one do what it does best. Let Art focus on messages, ideas and creative development and let Science focus on the analytics of data management as well as the underlying economics of the overall marketing program.

To that end, how about creating a new executive position? Call it the Director of Marketing Economics. Reporting to the CMO, the DME would oversee all activities related to marketing ROI. The job description would vary, depending on the specifics of the portfolio and purview. In all cases, however, the resource allocation questions would naturally flow from a customer-centric perspective.

For example: Which customer segments should we spend money on? How much should we spend on customer acquisition versus retention? How much should we spend on mass marketing, and what are each of the different vehicles to which we'd want to allocate funds? How much should we spend on precision marketing, and what are each of the different vehicles to which we'd want to allocate funds?

Just an idea. CMOs might not go for it. But at least Louis Sullivan would've approved.

Galbraith and the New Affluent Consumer

John Kenneth Galbraith, who died yesterday at age 97, was a towering figure in the world of economics—both figuratively and (at 6 feet, 8 inches) literally.   

Galbraith made a big splash with his 1958 book The Affluent Society in which he contrasted the affluence of the private sector with the squalor of the public sector. Industrial production is all about satisfying trivial consumer needs, he argued, whereas we’d be a lot better off as a society by focusing our resources on things like improving public education and social services.

The result would be a better quality of life, Galbraith reasoned, instead of an ever-increasing quantity of consumer goods. What he failed to understand is that consumer goods and quality of life go hand-in-hand. Just try to imagine true happiness without an xbox 360 attached to your home entertainment system or a 30 GB iPod in the back pocket of your designer jeans.

I’m kidding, of course. And I have smiley pictures of me as a Peace Corps volunteer in rural Bolivia to prove it.

But now, a decade later, I find myself in the customer segment Visa calls the “New Affluent Consumer”. As such, I’m a prime candidate for the Visa Signature card. But which version? Each card has specific rewards and privileges build into it, whether that means airline miles, special restaurant access or discounts at fancy spas. Which version depends on a person’s individual interests, lifestyle, attitudes, preferences and situation—psychographic information that can be largely attained through dynamic surveys and transaction analytics.

For his part, Galbraith didn’t care much for money. In fact, he saw the widening gap between the rich and the poor as a threat to economic stability and even a moral crime. Given that psychographic profile, it’s unclear which Visa Signature card would have suited him best.

Life takes precision marketing

Writing this article about Visa’s new branding initiative, based on a recent conversation with Suzanne Lyons, the chief marketing officer, I was reminded of the old vaudeville joke about the man who said his credit card was stolen but decided not to report it. Why not? Because the thief was spending less than his wife did.

Nowadays, the joke might be viewed as sexist (although, in theory, it should work just as well with the gender roles reversed). Also, the problem of identity theft puts a damper on the punch line (at least for the 3.6 American households that have suffered the consequences). In short, the joke probably played better in 1964.

The article mainly focuses on the launch of Visa’s first new tagline in 20 years and the strategic thinking behind the multi-channel marketing campaign, unveiled just two months ago during the Winter Olympic Games on NBC. But, of course, I couldn’t help but also spend some time talking about precision marketing in the context of the financial services industry.

While most banks could be doing a lot more in this area--using transaction analytics to trigger relevant cross-sell offers, for example, based on indicators of impending lifestage events--Visa seems to be making impressive inroads on the retail front with the recent launch of its Visa Incentive Network. According to the press release, the network helps merchants "offer dining promotions to cardholders who are avid restaurant-goers, discounts to consumers who prefer boutique shopping, or special offers to frequent travelers.”

Whether the Visa Incentive Network does everything it purports to do is a topic for another article. Meanwhile, did you hear the joke about the man who walks into a talent agent’s office with his wife, children and dog, wanting to audition his act …?

Five out of five consumers prefer precision marketing

When it comes to contextual marketing I can’t help but think about Marshall McLuhan, the communications visionary and provocateur who talked a lot about how “the medium is the message” (but, alas, who may be better known for his cameo appearance in "Annie Hall"). McLuhan also talked a lot about context.

For example, he observed that the one thing about which a fish knows exactly nothing is water, since it has no “anti-environment” which would enable it to perceive the element it lives in. It's only when a fish is pulled from the water that it becomes acutely aware of its former environment. For marketers, the challenge would seem to lie in achieving an “integral awareness” of their consumers’ environment, so as to be able to market to them in a context-sensitive manner.

And now comes a nationwide survey, published by market research firm Synovate, that reaches the same conclusion in a way that only a market research firm can. The survey was sponsored by Traffic Marketplace, an Internet ad distribution network (which I’m sure has no hidden agenda but was merely trying to satisfy its own curiosity).

The survey asked 1,000 adults about their attitudes in terms of online ads. It found that three out of five consumers (62 percent) are more apt to respond to contextual marketing—worded in the survey as “a subject of particular interest to you"—as opposed to demographic marketing, worded as “a specific group you may be a member of."

Which prompts the question: Since when is it okay to end a sentence with a preposition?

According to the survey, only 18 percent of consumers said they were most apt to respond to behavioral targeting—that is, online ads based on "your past behavior on a given website". Another key finding: “72 percent of nonwhites respond to relevant subject matter, against 60 percent of whites.” The fact that white people are apparently less able to stop themselves from clicking on whatever online ads happen to come their way points to a social epidemic that warrants some serious government attention.

As I may have already suggested, this new survey strikes me as not only fundamentally flawed but also profoundly stupid. The reason is simple. Can anyone really talk in such generalities about what “targeting type” (contextual, demographic, geographic or behavioral) is most likely to elicit their response? I, for one, would be hard pressed to say that I’m more likely to respond to one "type" over another in the absence of any real content—or context. All I know is that if an ad seems relevant to my wants and/or needs, I may decide to click on it.

The irony is that the survey itself wasn’t conducted in a contextual manner. Maybe showing people real ads, and then mapping their responses to their various backgrounds and experiences, would have yielded some valid results. Then again, what's the point?

The survey treats each “targeting type” as a stand-alone approach. In reality, it’s the combination of approaches that culminates in the creation of a relevant personal profile and ultimately helps determine an individual's propensity to respond favorably to a particular message or offer. Precision marketing is driven by an understanding of a consumer’s “generic makeup” based on both geo-demographic and behavioral information, as well as contextual, attitudinal, psychographic and situational data along with any number of other considerations.

The survey’s conclusion—that “the best way to pique consumers’ interest" is to present them with "subjects they care about”—comes as no revelation. It’s something that any merchant could tell you, going back to time immemorial. The fact that technology and analytics can now be used to replicate the intimacy of those age-old merchant-consumer interactions to some degree (including serving up relevant product recommendations) is the reason that precision marketing has been gaining so much steam.

Synovate’s latest survey results? “Older men find older women ‘just as attractive’ as their younger counterparts." Now there’s a research finding with far-reaching implications. Well, maybe not. But at least it goes beyond stating the obvious.

Precision marketing on the first date

When one of my colleagues sent me Google’s latest press release with the suggestion that I reference it in a future blog entry, I told him that I generally prefer to write about real things.

Apparently, he didn’t notice that the release—announcing the launch of a new service, called Google Romance—was dated April 1. Or maybe he was simply unaware that Google has a history of playing April Fool's jokes, which in past years have included announcements related to its Copernicus lunar research center, its MentalPlex search engine and its PigeonRank technology. The latter purports to rely on dense clusters of common gray pigeons “to compute the relative value of web pages faster than human editors or machine-based algorithms”. 

Or maybe my colleague, somewhat of a jokester himself, was merely hoping to see me land on my face after singing praises of Google’s supposed latest twist on precision marketing.

In any case, the fictitious "Contextual Date" service almost has the makings of something real, which of course is why it works so wonderfully as a hoax. Aristotle once observed: “Plausible impossibilities should be preferred to unconvincing possibilities.” This seems a plausible possibility and maybe it’s just a matter of time before we see a contextual dating option that, as Google decribes it, “offers an all-expenses-paid romantic evening in exchange for viewing contextually relevant advertising throughout the course of the users' date”.

Tim Armstrong, Google’s VP of Advertising, once told me: “We want users to trust us for unbiased information and advertisers to trust us for contextual placements.” No doubt, some companies would pay a hefty premium for contextual placements targeted to individuals at different stages of a romantic relationship—with the "breakup stage" probably offering the greatest commercial value!

Given the right incentives, I’m sure some people would welcome the intrusion (yes, even context-sensitive marketing can be intrusive), although perhaps less so during a first date. On second thought, don't some reality shows have entire camera crews hovering over them during the first date?

Google Romance offers the following FAQs:

6. What is Contextual Dating?
It’s a free date plus the added accrued value of the past decade’s worth of post-Industrial Age online marketing genius, all tied into a real-time, video-based, GPS-tracked, psychographically astute and environmentally pervasive promotional system.

7. Come again?
You see ads that might make your date better.

8. Such as?
Flowers. Music. Personal advice. E-greetings. Later on, depending on how our long-term opt-out natural-language-based monitoring system thinks things are going, personalized thank you notes, romantic getaway offers, various intimate pharmaceutical come-ons, engagement and bridal wear catalogs – you know the drill.

9. What if I don’t want to see contextual dating ads?
Don’t use the product.

Jim Brickman Plays the Music of Precision Marketing

I’m not a 35-year-old woman. And I don’t have a particularly strong affinity for romantic piano ballads. So, how did I come to write this article about recording artist Jim Brickman? Credit for the idea goes to a marketing executive at Disney Records. After reading an article I’d written about Chip Davis of Mannheim Steamroller fame, he suggested I give Jim a call.

As it turns out, Jim Brickman is more than “just” a Grammy-nominated songwriter and performer with several Top 40 radio hits, four gold records and a PBS special. He’s also an extremely savvy marketer and entrepreneur who recently launched a new company dedicated to helping artists extend their brands by establishing a compelling online presence.

These artist sites incorporate an impressive array of database technology (including a loyalty points program!) that in many ways are more sophisticated than what I’ve seen from some of the major consumer brands companies. For someone who spends his days writing songs and playing concerts (more than 125 per year), Jim has a firm grasp not only on the value proposition for his new company but on the new potentialities, in general, for capturing, analyzing and leveraging customer data. He speaks the language of precision marketing quite fluently.

It was fun to write about another smart musician in the context of precision marketing. Maybe I should try to land a regular column in Spin magazine or Rolling Stone.