Our friends Bill Green and Alan Whitley at digital shop BFG sent us a Mashable article declaring demographics are dead. The column’s author, Jamie Beckland, raises excellent points that new forms of personal data are more effective for marketing … but stretches too far.
We jotted this email back.
Conceptually I agree that marketers continue to improve targeting, and that psychographics are better than demographics. But, as with any provocative article, this writer takes the case too far, because the theory can’t be implemented usually and demographics, while a broad categorization, are still an effective form of targeting. If you are a mom in your 40s, yes, I’ll run a morning news spot promoting a local hospital, because your demo makes sense, and no amount of psychographic profiling in the world can predict that yikes, you just found a lump in your breast.
Yes, there is waste in such approaches, but advertising is a game of what you catch, not what you spill.
I spent an early part of my career working with Don Peppers, the father of 1to1 marketing, who wrote a book in 1993 titled “The One to One Future” (and spawned the CRM craze of the 1990s which eventually became a term for software after marketers had difficulty implementing it). Don’s idea was that eventually marketing targeting would get so perfect, it would become 1to1 personalized relationships, a feedback loop with every customer. Brilliant idea, but very difficult to implement. When I read people like Joseph Jaffe now claim “the 30 second spot is dead,” I laugh a little, because it’s the same vision 20 years later. It is coming, but slowly, and we’re not there yet.
One of Don’s great thoughts was that “1to1 marketing” – or hypertargeting – works best in certain industries which have
a. Variance in what customers need or
b. Variance in the customer lifetime value to the business
This is why personalization has been implemented best by Amazon.com and Netflix (where Bill Green and I likely have very different “needs” in books and movies), and why differential treatment strategies are implemented by airlines and hotels (where a business frequent flier has 100x the value of a typical vacation traveler). In such industries, investment in customer data systems and corresponding hyper media targeting make sense.
But in other industries with mass appeal, demographic targeting is fine. Insurance is a classic example – State Farm and Geico spend millions on billboards, which is smart, because their products appeal to almost everyone and it is almost impossible to tell when any individual is going into play after a bad experience with their old insurance company.
Psychographics cannot predict customer modality, which is why Netflix personalization is still problematic. I don’t know what movie I want to watch next week, and I’m me.
In terms of the quote that a 1% response rate is bad so traditional advertising doesn’t work, that is ridiculous. As I said, advertising is a game of what you catch, not what you spill. If the math works out on a tiny response rate, at an acceptable cost per acquisition, marketers will throw money at the channel every day of the week. There are 3.5 billion women in the world and I married one – was my personal marketing effort for love and sex a bad campaign? No.
Finally, one major error in this type of prediction is it doesn’t look at how humans actually use media. Internet use is still less than 1 hour a day for most U.S. consumers. The typical U.S. consumer watches 5 hours and 9 minutes of television a day, which works out to exposure to 166 :30 second TV spots each day. People spend hours in their cars, looking at billboards. There are more marketers who want to push a message out than consumers who want to receive them; people still spend huge amounts of time letting mass media wash over them; and personalization just can’t work at that scale (who would possibly respond to half of those 166 TV offers even if they were exactly what you want?). It will be decades before media channels figure out how to implement personalization across such broad media touchpoints.
Personalization is coming and we’ll continue to improve our tools, but as with any idea, the theory is often better than the execution. Pinpoint targeting is a dream, but broad media hammer strokes still work, too. Our recommendation is to try to combine both tools, but certainly not to disregard either one.