"Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Chris O’Hara, chief revenue officer of NextMark.
I recently had a cup of coffee with Christopher Skinner, who has spent the last dozen years MakeBuzz after selling his old company, Performics, to DoubleClick.
Lately, he has keynoted some of Google’s “Think” conferences. Google likes what his company does for it: After using his software, marketers spend a lot more money on branded display. In other words, instead of just loading up on keywords and obvious AdSense display inventory, marketers leverage data that helps build a brand’s customer base. Without getting too specific, the software offers geotargeted media recommendations that aim to optimize profits in specific areas, helping a company go from selling 100 widgets a month in Poughkeepsie to 150.
When I asked about the secret sauce, I was surprised at the answer. Skinner drew something on a napkin that looked like this:
The problem, he told me, was that marketers weren’t striking the right balance between branding and direct response, and they focused too much on capturing customers they already had.
In other words, if your business is like a lawn and the profits are grass clippings, most folks spend too much time cutting and not enough time fertilizing.
To get the grass to grow, you want to fertilize it (branding) and get plenty of new blades to pop up as often as possible. When you cut it (direct response), you want to do so in a way that ensures it won’t get burnt and lose its ability to sustain itself. It’s a delicate balance between growing demand through branding and harvesting those efforts through direct response.
What The Napkin Reveals
Looking at Skinner’s crudely drawn chart, the line represents reach, going from a single user to the entire population. Most marketers stop 20% of the way through and put all of their focus on their customer base through search and programmatic RTB display efforts. They use data to ensure they are reaching the right “intenders,” but miss opportunities to create new ones through branding.
On the dotted line on the far right, you have all the potential customers who are addressable; these users are still “targeted,” but so widely that hitting them with messaging is fraught with waste. This is the digital equivalent of advertising to the 18-to-49-year-old demographic on television. Sure, it creates demand for BMWs, but only a certain portion of the audience has enough dough to afford a 5 Series.
The simple message that many marketers continue to miss — either by focusing way too much on DR or overindexing on untargeted branded efforts — is that a balance is critically important in the digital marketing mix. While it sounds simple to find the right balance, it actually requires a strong base of knowledge to execute properly.
This is what I mean:
• Measure Differently: Before you can understand the mix between branding and DR you need to achieve, you need to agree on a meaningful metric. Far too many digital campaigns are judged by three-letter performance acronyms that are proxies for success. Great CTR and CPA are positive signs that you are doing all the right things to reach the audience you have already earned. They are poor indicators of your success in building new customers. Thinking holistically about your marketing efforts yields new benchmarks: If your company typically sells 200 widgets in the Upper West Side of Manhattan, why can’t you sell the same amount in San Francisco’s Nob Hill? In other words, how about using “profit optimization” as the primary metric? This requires a relationship with the advertiser that goes beyond the agency and plenty of first-party data, which is why such simple yet effective metrics are not used frequently.
• Spend More on Branding: Sometimes, what holds good marketing back is a reliance on known metrics. In another year, the banner ad will be 20 years old. While the banner ad ushered in an era of “measurability,” it also took marketers on a path to thinking that anything and everything could have its own success metric, and we went from a dependence on soft, panel-based, attitudinal metrics to today’s puzzling array of digital KPIs. Did Absolut vodka worry about CTR on its way to becoming the dominant liquor brand of the last quarter century? Or did it just design great packaging and put big beautiful ads on every magazine back cover it could find? At the end of the day, TBWA Worldwide turned a decent vodka into a great brand, and the only metric anyone ever worried about was case sales. They did it by spending lots of money on branding.
• Find the Sweet Spot: Spending more on branding is obviously important for “growing the grass,” but everyone can’t afford every product. While it made sense for Absolut to advertise to the broader population of adults in magazines, most marketers have a more limited audience and budget. Finding the sweet spot between branding and DR has a lot to do with knowing your potential customer and how they make purchase decisions. If you believe, as I do, that word of mouth is the most powerful medium, then it makes sense to apply as much granular targeting to a campaign, without restricting it with too much targeting data. Neighbors talk to and influence each other, and the Smiths and Joneses tend to chat on the soccer field about cars, vacations and even the latest medical procedures. Your sweet spot is where you can faithfully blanket ads in a neighborhood or larger area that has a built-in predilection to purchase. It’s not as broad as city targeting, which wastes messaging on customers who can’t afford your products, and not as targeted as “intender” targeting, which limits your addressable audience to people who already love your brand.
Today, it seems like digital marketers limit their reach to their existing customers—spending lots of lower-funnel effort dragging “intenders” across the finish line so they can attribute lower acquisition costs to their campaigns.
Although the real customer growth is grown through branding efforts, most marketers are scared to open up the spigot and deliver a large amount of impressions. They are especially hesitant to migrate marketing to cookieless mobile devices and tablets, which are harder to target.
But to grow customers, you need to introduce them to your brand — and find them where they live. When you water the lawn religiously, there is always plenty to cut.