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Before You Buy More Ad Tech, Read This
Over the last two decades, the marketing and advertising technology industries have been promising marketers a whole new world of ROI. Unlike traditional marketing, the story goes, digital marketing enables brands to measure their performance and demonstrate the value of their initiatives. This has been driving the increase in budget allocated to digital marketing and the subsequent explosion in martech and ad tech startups. But all of this investment—billions and billions of dollars of it—assumes that the way to get better ROI is to put the right offer in front of the right customer at the right time – what I’ll call The Personalization Manifesto.
Here’s the logic: If you present the customer with something highly relevant and personalized, then you increase their propensity to interact with your offer. That increased propensity translates into an incremental revenue increase that you otherwise would not capture. There is no doubt some truth to this, and there are certainly products on the market that drive this kind of performance improvement. But the reality is that the Personalization Manifesto is built on a number of assumptions, often overlooked in strategic discussions.
Assumption 1: Targeted advertising is the right strategy for your brand
One of the most commonly held marketing myths is that targeted advertising is more effective for brand growth than mass marketing. To grow your brand, it’s more than likely that you should be employing a mass marketing strategy, which means limiting the amount of targeting and focusing on reaching the largest possible audience and attracting new customers. This principle continues to be supported, not only in the pioneering work of Byron Sharp, but also in more recent research.
For example, in a study of over 125,000 customers, McKinsey & Company found that purchasing decisions for the majority of products are not generally based on loyalty. Rather, we are living in a “shop-around environment” where “it’s easy to lose consumers faster than you add new ones.” Thus brands should focus on “expanding [their] window for growth potential.” This means focusing on reaching new customers rather than targeting your loyal customer base.
Assumption 2: The data you’re using to target your audience is accurate
The dirty little secret of the data industry is that not all of the kinks have been worked out yet. There’s a lot of inaccurate and suboptimal data out there. For instance, when a couple shares a single laptop – it’s still a fuzzy science to separate your spouse’s online activity from yours. While data providers are making massive strides to improve data clarity, it’s still far from pristine. It’s still up to individual brands to interpret the intentions behind users’ behavior and the extent to which any one ad contributes to a conversion.
Assumption 3: Measurements are unbiased
This is quite a leap of faith considering the misaligned incentives between brands and vendors. Simply put, vendors want to prove the efficacy of the technology they’re selling – they’re not necessarily incentivized to provide information that increases visibility in content performance. Add to this the sheer volume of data, which produces a huge potential for spurious connections, and it’s reasonable to approach metrics about your ad targeting efforts with a certain amount of skepticism.
Despite all of this, the Personalization Manifesto has remained remarkably unchallenged over the last 20 years. This has translated into an endless appetite for customer data (to make sure you’re targeting the right customer), algorithms (to make sure you’re targeting the right offer at the right time), and systems to help marketers manage all this personalization information.
The result: the tech market continues to be flooded with products and services that focus on personalizing and targeting content and few solutions that help marketers actually make that content better. Marketing teams now spend a huge amount of time and money managing their ad and mar tech investments and trying to make sense of the results – time that could be more productively allocated to improving the quality and consistency of their marketing offers.
Without a system to track and measure content creation workflows, it’s easy to see why many brands underinvest in technology that improves their content. But there’s mounting evidence that higher quality creative actually contributes to better business results. A recent study by Havas found that brands that ranked highly on a measure of “meaningfulness” (which was highly correlated with content effectiveness) outperformed the stock market by 206%. Percolate’s own research found that over 70% of marketers have a clear sense of the ROI of their content, but most agree that they incur the highest production costs in the first step of the process: their content and creative workflows.
So, while personalization still has its place in marketing strategy, the time for a sober reassessment of martech and ad tech investments is long overdue. Many marketing organizations would benefit from investing in technology to facilitate and encourage great creative at the same rate they invest in optimizing it.
Want to learn how brand innovators at Land O’Lakes, Sutter Health, Google, and more are thinking about the future of marketing? Request an invite to Transition 2017 in San Francisco.