INTRODUCTION: THE DREAM
The relationship marketing arena stands on the cusp of its golden age, at an inflection point parallel to that of the golfing world. Just as golfers with the best technology at their disposal should be shooting under par like never before, marketers equipped with cutting-edge technology tools and awash in a sea of consumer data should find that developing tighter and more profitable relationships with brands’ most valuable customers and prospects is easier than ever before. After all, in a digital age, consumers are easily reached through a proliferation of communications channels. We have hundreds of television channels, thousands of magazines, literally millions of websites and now even delivery of advertising messages to millions of individual mobile phones. The combination of all this data, advanced analytics and target-audience delivery through ever more tightly targeted media properties should make every chief marketing officer (CMO) into a veritable Tiger Woods.
So why are there all those hackers still on the course? Tiger has succeeded unlike anyone else because of his unique combination of determination, confidence, strategy, discipline, practice, competitiveness, physical shape, talent and thorough understanding of competitors coupled with an eagle-eyed focus on his targets and goals. By mastering all of these areas – and by pulling out the right club and hitting the right shot at the right time – Tiger has maintained his status as the “winingest” golfer in the world.
So what would it take for a CMO to achieve the same amazing record?
The path from brand awareness to brand loyalty has become unrecognizably congested, circuitous and complex. Far from experiencing a marketing golden age, many marketers and their agencies today find themselves part of a lost generation, seeking but failing to generate annual improvements in marketing effectiveness. Most are being asked to achieve more impact with ever-shrinking budgets, and not rising to the task.
One especially challenging aspect of the new marketing landscape is that consumers are operating at or near the advertising saturation point. In the digital age, it’s become increasingly difficult to track total messages received by consumers (Figure 1). The growth in marketing channels alongside increased bandwidth per channel has created a maelstrom of marketing white noise. A recent Forrester Research survey found that a majority of consumers feel bombarded by too many ads that are not relevant to them. Titled “The Age of Backlash,” the report found diminished levels of consumer trust in advertising and increased use of ad blocking tools – from TIVO to spam, banner and pop-up blockers. Even for ads that may reach their intended targets, consumers today are becoming less receptive to broadly conceived communications strategies that fail to address their specific preferences, buying hot buttons and unmet needs.
As a result, CMOs continue to express high levels of dissatisfaction with their advertising agencies and to experience frustration with the lack of systematic testing, learning and scaling-up the capabilities that help drive continuous improvements in marketing return on investment (ROI). Although marketers must bear an important part of the blame themselves, there is a swing doctor with a remedy: increasingly personalized and structured marketing strategies. In our experience, a Tiger Woods-level CMO confronts a demanding par-5 hole by directing his or her marketing teams to carefully integrate their shots sequentially from tee to fairway to green, and by avoiding the following two pitfalls:
THE FIRST TRAP: MARKETING TO THE DATA RATHER THAN THE MOTIVATION THAT SPAWNED IT
Many marketers have become seduced by the inherent appeal of behavioral data, confusing correlation with causality. In doing so, they market to the data rather than address the underlying consumer motivations that drive brand consideration, purchase and loyalty. Direct mail in the credit card industry serves as a good example of this problem. The confluence of credit bureau and response-based models combined with the attractive economics of the industry drive marketers to send the same communication (with its kitchen sink of benefits) to “target” populations that don’t respond 99.77 percent of the time.
In contrast, the key to achieving the dream of personalized marketing lies behind the behavioral data within the fundamental needs and attitudes of consumers, comprising the beliefs and thinking patterns that trigger consumer behavior. These beliefs unite seemingly disparate individuals into distinct, addressable segments. Personalized marketing identifies these fundamental drivers of consumer behavior, translating an understanding of how beliefs drive purchasing decisions and brand loyalty into targeted and tailored relationship marketing programs.
THE SECOND TRAP: A LACK OF STRATEGIC TARGETING DISCIPLINE
Many CMOs face a nearly irresistible temptation to homogenize the market into a large, undifferentiated mass of consumers, assuming that a larger addressable market will miraculously translate into higher market share. In other cases, the pressures to cut program costs blur distinct segments while blunting messaging strategies. In all of these situations, the effectiveness of marketing programs suffers when the initial blueprint is smudged, altered or redrawn without a disciplined approach to defining the target.
THE TEE SHOT: HIGH-RESOLUTION SEGMENTATION
As with Tiger Woods-level golf, the path to mastering personalized marketing starts with a precision target – high-resolution market segmentation in which the segments are defined by the differential beliefs that drive differential brand choice and category usage. In our experience, the following five criteria must be met in order for a segmentation to be a truly effective targeting tool:
- Intrasegment homogeneity. All of the consumers within a particular segment must be united through a highly consistent set of needs, attitudes and behaviors.
- Intersegment differentiation. The consumers in different segments must look very different from one another on the very same need, attitude and behavioral dimensions that unite consumers within a segment.
- “Actionability.” The segmentation should be “intuitive” from a structure perspective – for example, the need, attitude and behavioral dimensions that distinguish one segment from another should be logically tied to the factors of category competition. As a result, it should be very clear who the targets and non-targets are for a particular brand, and what marketing actions a company might take to capitalize on the buying hot buttons of the target.
- “Typeability.” It should be possible to “type” every consumer into the correct segment with high accuracy, by either modeling their responses to a few highly predictive questions on a seven-point scale or by building a predictive model based on their category behaviors.
- Stability. The segments should be persistent over multiple years, assuming the category is not rapidly evolving. Moreover, an individual consumer’s segment assignment should not fluctuate over time, since it is based on the fundamental category needs, attitudes and behaviors that shape brand choice and category usage.
A segmentation structure that achieves these five principles empowers marketers to:
- Select the right target. This means selecting the one to three segments that typically comprise 15 to 45 percent of the market and whose beliefs and preferences are aligned with the brand’s positioning and promise.
- Personalize the marketing treatment. This involves tailoring the creative to the consumers’ beliefs and preferences, or the buying hot buttons that actually drive brand choice and category usage.
- Track performance and continually optimize. By tracking the effectiveness of a targeted and tailored marketing treatment within a homogeneous population, the marketer can isolate the effect of the stimulus – or the marketing treatment – from the variations in beliefs and preference of the underlying population, and thereby continuously improve marketing effectiveness.
DISCIPLINE IN SELECTING THE RIGHT TARGET
A high-resolution segmentation helps to identify those few segments whose beliefs are aligned with the brand’s promise – in other words, the segments that are seeking the very benefits the brand is uniquely positioned to deliver. Marketers who pursue misaligned targets will impose a drag on marketing effectiveness and, ultimately, ROI, because marketing simply doesn’t work as well when it’s trying to sell a consumer a product or service that’s not tailored to that consumer’s beliefs and preferences. Once identified, the aligned segments and their underlying motivations form the bull’s eye at which disciplined programs take aim with their tailored personalized marketing treatments.
Consider the case of a major headache remedy brand that experienced declining market share for three straight years. Like many products and services, this brand was attempting to be all things to all users in a crowded and competitive marketplace. Through the use of high-resolution segmentation, however, the company was able to reposition the brand to focus exclusively on a single segment of users who were motivated by how the product’s mechanism of action allowed headache sufferers to return to their high levels of daily activity.
This particular brand of headache remedy contains caffeine, which accelerates the onset of relief and provides the high-energy boost sought by the target segment of “Productivity Seekers.” After extensive research among the target segment, these insights underpinned a complete re-engineering of the brand – from its positioning, new product forms and advertising right down to its packaging graphics. The resulting brand represented a serious, effective remedy for seriously productive people. As a result, market share not only stabilized but also increased over the following 12 quarters. As is so often the case, less – in the form of more focused target selection – resulted in more market share.
THE FAIRWAY SHOT: PERSONALIZING THE MARKETING TREATMENT
To drive target consumers along the awareness, consideration, trial and loyalty continuum, the Tiger Woods marketer must tailor communications based on two dimensions: 1) where the consumer is on the awareness-to-loyalty continuum; and 2) in which segment he or she resides. The barrier inhibiting the consumer from progressing to the next stage in the continuum is a function of what motivates this consumer (the segment ) and what action the marketer is trying to achieve (generate awareness, consideration, trial or loyalty) (Figure 2.)
Consider the addressable market for female cosmeceutical treatments – a relatively new, large and fast-growing market. Past purchasing and click-stream data reveals little about the underlying attitudes that will lead a diverse population of women to similar yet highly personal product decisions in the coming years. Only a high-resolution segmentation, based on the woman’s self-assessed needs and openness to high-end treatments, can be used to drive a personalized marketing program that successfully guides these disparate streams of potential users further along the path of consideration. In fact, the resulting segmentation cuts across the normal demographic categories, such as age, income and professional status, as well as geographic and cultural categories.
In the case of cosmeceutical treatments, personalized marketing identifies five distinct segments that vary along several major variables. One segment – “Prada Housewives” – is both highly materialistic and image-conscious. Women in this segment view their appearance and how others view their beauty as being so central to their self-image that it’s truly self-defining. Another segment is less image-conscious, viewing treatments as an extravagance. Analysis of category usage volume and projected profit confirms that there is higher potential ROI in targeting the former rather than the latter segment. But execution is as critical as formulation. Thus, the execution of the personalized marketing program needs to be tailored to the particular barrier for each target segment along the entire awareness-to-loyalty continuum.
For example, some potential cosmeceutical treatment users are seeking to transform their appearance through treatment programs and come out looking noticeably five to 10 years younger as a result. Others wish to look more relaxed and refreshed without appearing detectably younger or different. The language, tone and visual imagery employed to address these different segment beliefs and preferences must reflect these variations in desire.
Similarly, customers on the path of consideration differ in the degree to which they seek information regarding cosmetic treatments. Some segments find a factual, informative tone addressing safety and efficacy concerns more compelling while others are more motivated by communication that focuses on the outcome of youthful beauty and social recognition thereof. For others, the casual, familiar tone of a friend or confidant is more likely to nudge the consumer further along the continuum toward registration or an office visit.
THE PUTT: TRACK PERFORMANCE AND CONTINUOUSLY OPTIMIZE
As with scratch golf, the game is won and lost in the short game – on the green. In our experience, every marketer acknowledges the importance and value of ongoing measurement and optimization, but few actually carry out the tasks. It’s no coincidence that it’s easy to find a driving range but far harder to find a practice putting green.
The key elements of measurement and optimization include the following:
The right metrics. Many marketers mix up outcome measures from process flow measures. For instance, when trying to diagnose where in the awareness-to-loyalty funnel the marketing is less effective, make sure to measure each step of the conversion – that is, not just the click-throughs on a contact lens banner but also whether consumers who clicked actually visited an eye doctor and purchased the brand.
Correct data sources and flows. It’s critical to ensure that the marketer uses both direct and indirect data sources. Direct data like click-through rates, site visits, site dwell time and page views measures interaction with the marketing. Indirect data – typically measured in panels or via recontact research – looks at metrics (like awareness, recall, intent to purchase and store visits) among consumers who interacted with a specific marketing stimulus.
Imaginative integration and testing action. This is not an analysis-only exercise. The Tiger Woods marketer reviews the tracking measures with the account and creative teams so that this integrated team can come up with a hypothesis as to why a particular piece of communication is not compelling to a particular target segment at a specific point along the continuum. It is this ongoing measurement, analysis of results and hypothesis that creates the disciplined and informed environment in which personalized marketing can be continuously honed for maximum effectiveness.
CONCLUSION: THE DISCIPLINE OF CHAMPIONS
As with the golfer who is stuck in triple digits and avoids the driving range or believes a new set of clubs will be the panacea, many marketers are quick to rush to the implementation stage and equally quick to adopt new ideas, images and messages in a less-than-systematic fashion. After all, time always seems of the essence.
The high-resolution segmentation and programmatic discipline of a personalized marketing strategy thus represents a challenge to marketing departments and agencies alike. To date, it has not been easy for marketers and their agencies to change their approach in the face of diminishing effectiveness. Yet without anchoring their approach to the framework of personalized marketing, many marketers continue to mine incomplete customer data and succumb to hit-or-miss experimentation.
As technology continues to snow under the already saturated consumer, the goal of shooting par golf is likely to recede into the distance for many. Yet it also spells opportunity for marketing teams willing to adopt the discipline of personalized marketing and engage tightly defined consumer segments on the very drivers of their brand choice and category usage. Go ahead…be a Tiger.