Category Archives: 1to1 marketing

The sad case of Twitter’s missing personalization


Way back in the 1990s I had the fortune to work with Don Peppers, who created the concept of “1to1 marketing” strategy. Don wrote a series of best-selling books describing a future world where information would allow nearly every service to be personalized — the idea being such customization, newly empowered by cheap databases, would build unbreakable switching costs. LIke a marriage where your spouse remembers you like chocolate in your coffee on Sunday mornings, you’d never leave a business that remembered so much for you that it became inconvenient to go somewhere else. Don’s 1to1 idea was adopted by software companies, renamed CRM for “customer relationship management,” and ended up a sales bullet point for Salesforce.com. The rise of social networks in which consumers talk to each other also took some steam out of the idea, since the business-to-customer 1to1 dynamic became less the focus of marketing strategy when CMOs were scared that the surrounding customer networks had grown out of control.

Which is sad. Here’s a case in point: Twitter. Go to Twitter.com and click on the “# Discover” link at top and you’ll get hit with stories that are popular right now among everybody — but not tailored to you. Imagine all the data Twitter has on us: Our tweets express all our interests, politics, purchases, hope and fears, and our links match up to homophily friendships that could further define exactly what we want. Twitter could build an unmatched predictive newsfeed for every individual, blowing The New York Times or Fox News out of the water with tales customized to our whims.

Except Twitter doesn’t. One top “Stories” recommendation for me today is a link to a Kentucky-Baylor basketball game. I don’t watch basketball. I have never mentioned basketball in any of my 24,410 tweets. Twitter, the game bores me to death, and a cursory analysis of my stream should show I’d much prefer a link to artificial intelligence advances, science fiction films, or chocolate recipes. (Don’t judge. That’s me.)

Perhaps for Twitter the cost of mining tweet data is too high (really?), or the small Twitter team is still underwater keeping the servers running (probable), or Twitter would rather go after very large advertisers such as Pepsi and AmEx who can spray everyone with the same message (ding! we have a winner!). So your news feed inside Twitter is completely off base.

Maybe Twitter just can’t see beyond the initial investment. Treating everyone the same is the easiest form of marketing, and 1to1 requires an upfront investment hurdle far before services reap the rewards of loyalty or increased use. The only companies really doing personalization are Amazon.com and Netflix, which must offer recommendations right before each sale, and so 1to1 prediction is a competitive requirement. Twitter is still just learning to accept ad payments from mass marketers, so the personalization concept may be too sophisticated at its early monetization stage.

Sad. Because, Twitter, this unpersonalized “# Discover” news stream stinks, and makes me spend yet more time on Google+. Which is exactly the point: If you treat everyone the same, customers don’t feel bad about leaving you.

Ben Kunz is vice president of strategic planning at Mediassociates, an advertising media planning and buying agency, and co-founder of its digital trading desk eEffective.

Originally posted on Google+.

Why personalization fails


Personalization is everywhere, especially online, where companies retarget you with banner ads if you visit their web site, or bid on competitor terms that pop up on finance pages (see the nice play by Blockbuster, above), or even chase you if you don’t click on an ad by figuring out a lot about who you are. For instance, savvy digital media buyers can run a few hundred thousand banners on a WSJ.com section read heavily by CEOs and pay a small fortune — but then tag the CEOs’ computers to serve additional banners downstream, wherever those CEOs go online, at 90% savings. In essence, this “lifts” the audience from WSJ, aligns offer with the target, and slashes media costs.

The premise of all these tactics is personalization lifts response. But does it? More than a decade ago I worked with Don Peppers, the brilliant father of 1to1 marketing who helped launch the CRM craze in the 1990s (before the term Customer Relationship Management became an acronym for software baloney). Personalization assumes that an offer with higher relevance, based on your personal and unique needs, will grab your attention, convert you to a sale, and keep you as a loyal customer.

Yeah, 1to1 can work, but it’s only one aspect of three major prongs of competition — the others being price (or perceived value) and product (where innovation is hot). Wives love husbands, but some still chase younger boyfriend or girlfriend products over personalized marital service. Apple doesn’t give a damn about personalization, for instance, yet makes a fortune in profits off of hot product designs. (I’ve often thought the reason iTunes’ interface is so horribly cluttered is Apple has found confusion leads to more sales as we click on random songs/videos we didn’t know we wanted). Consumers want deals and cool product designs; personalization cannot address those aspects.

No one ever, ever, ever asked for a two-door minivan or a cell phone with a camera or a flat computer screen with no keyboard.

Personalization does not lead to market revolutions.

Another problem with personalization is entire industries make money off waste. The cable industry, for instance, pushes more than 166 :30 second spots to a typical U.S. consumer each day (based on 5 hours and 9 minutes of TV time and 16-18 spots per hour). If you could get only the personalized ads you wanted, you might put up with 10 or 20 spots — but the remaining 146 spots would vaporize and all the ad revenue with it. Media intermediaries make boatloads off of waste. True targeting on TV, the current king among consumer media consumption, would erase billions of dollars from the ad industry.

Finally, people are not unique data sets. We have modality. I’m constantly frustrated by Amazon.com offering me Legos or Oprah books when those recommendations are based on shopping I’ve done for others. Amazon, like Netflix and others who attempt personalization, needs to provide a modality dial. Tonight I may want food, or history, or a book on technology, or sex, or a spy film. I have no idea who I will be in a few hours.

So keep trying, marketers. We try for our clients too. But it’s hard, when your carefully crafted personal offer is sent to a moving target.

We are humans, and we contain multitudes.

Inspired by +Len Kendall

Ben Kunz is vice president of strategic planning at Mediassociates, an advertising media planning and buying agency, and co-founder of its digital trading desk eEffective.


The long road to personalization


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.

Ben Kunz is vice president of strategic planning at Mediassociates, an advertising media planning and buying agency, and co-founder of its digital trading desk eEffective.


Facebook to become a telephone (changing the future)


In a few weeks Facebook will join internet voice players such as Skype by offering voice chat. That’s right — Facebook phone service. You will sign up by installing a simple plug-in from Vivox, and away you go, chatting with Facebook friends.

Thank “Voice over Internet Protocol” (VoIP), the fancy technical term for phone calls sent over the internet instead of the old public telephone networks. The revolution of VoIP is driven by a little pricing secret — your old phone company charges you for voice transmission based on time, but internet costs are tied to the amount of data transmitted. The difference is like that of a lawyer who charges you based on the good ideas he provides instead of by the hour. Since the actual data sent in a phone call is relatively low, internet calls are exponentially cheaper than old-school phone minutes, and service providers can give it away practically for free.

Finally, human networks out of the office?

The Facebook voice service has several hooks designed to make it scale in adoption — it will include free dial-in numbers to set up conference calls, and Vivox is making its system available to all other third-party developers so they can add voice to their Facebook plug-ins. Players of those dreadful Mobster/Farmville games on Facebook can soon talk with their fellow gamers. Mashable reports Facebook is working on a video version, too.

Play it forward and the future will give you video conferencing standard on every computer or handset, as cheap as water from a spigot. Telecommuting will finally take off. Ad agencies could form using virtual communities of the best talent around the globe. Businesses will create partnerships quickly without plane flights or time-intensive proposals. Teens will go to college without moving away from home, saving room and board. As the surge in cheap video transmission erodes wireless revenues, companies such as AT&T will need to innovate more rapidly in product design and services to defend their customer base. Driven by this competition, mobile phones get exponentially sexier, adding new features. And marketers, faced with a vast increase in video inventory, will finally work on one-to-one personalization to make their messages break through the content supply overload.

All of which means that by 2015 you, with a tiny glass handset, will video-conference in the pizza delivery guy, who in turn remembers exactly how much you love double pepperoni.

Image: 2 Dogs.

NYT’s future model? We suggest it’s not personalization.


Jason Moriber has been writing insightfully about what might save The New York Times, including personalization. We debated this on his blog and are replaying it for your amusement.

Jason:

Beyond the ongoing debate over what will eventually happen to newspapers I feel there needs to be some quick pragmatic thinking on what can be done “now.” The quickest changes can be made to print-media’s online sites.

Show me the static content for free. I’ll pay you for the active content … Offer me something you can’t get anywhere else but online – my behavior and my preferences. Don’t sell my data to marketers, sell it to me! Mix the available content and data with my behavior, let me set a few preferences, and you have a paid model.

Me:

Very interesting ideas. I debate, though, whether personalization is enough to build a subscription base or loyalty. The idea of 1to1 marketing has been around since Don Peppers in 1991 and never seems to make it as a real business model; Netflix and Amazon try and still fall far short.

The problem is the switching costs to find relevant information are now so low, that as soon as NYT charges – I’ll fly somewhere else, where the same quality content can be had for free.

What I might pay for though is access to the minds of the people writing the stories. Imagine spending $20 a month to be able to converse with the top technology writers at NYT, or perhaps a club of similar top readers interested in the topic. But even that is a tough sell given the ease of setting up other social networks.

The truth is that the content we all love so dear has become a commodity. There is only so much demand; the supply has become almost infinite; as the quantity of supply moves farther and farther to the right on a classic supply-and-demand curve, the price of the good (content) must fall. I suggest that there have always been millions of brilliant minds in the human population out of the billions on the planet; journalism in the past limited our access to these minds, so we perceived that NYT and other top papers had the “few” people needed worth spending to see. But now that I can find you, or anyone else I deem smart or wise or reporting real news that I find useful, I can flow to this huge real supply of intelligence. The profits disappear as the friction between content supply and demand are gone.

As far as the solution? The only one I can see is for the current knowledge empires like NYT to become nonprofits, lock in their brand, and admit that advertising or subscription revenues will no longer be enough for them to survive. Knowledge, like data, has always wanted to be free.

We’ll take the line for frantic panicked travelers, please


Maybe it’s time to let your customers personalize their own experience.

Fallon Planning wrote recently about the new traveler check-in process at Orlando Airport, in which travelers choose from one of three lines — expert, casual, or family travelers — for different experiences. As you’d expect, expert travelers are people with small carry-on bags who whisk themselves through the metal detectors with no change in their pockets. On the other end, families struggle with many bags and crying kids. Yet, bizarrely, this process — which was suggested to the Transportation Security Administration by focus groups — has streamlined check-in as travelers perceive more control over the experience.

Which is all brilliant, because the TSA has pushed personalization into the control of the consumer, not computers. Back in the 1990s, the idea of personalization and 1to1 marketing was almost arrogant, in that companies assumed they could analyze your data and then use fancy “business rules” to give you the perfect, next-best offer. The idea had its roots in airline seating (high-value business up front, schmucks in the back) and financial services (if you’re investing a cool mil, your broker returns your calls).

Different customers would be treated differently, but only based on predictive modeling.

The Holy Grail of personalization broke down because (a) it’s really hard to understand the actual future financial value and potential needs of all your customers, (b) mass-customizing a response is almost always cost prohibitive, and (c) the theory never really translated into a competitive advantage. Personalization is only one of the value factors that consumers perceive. Brands, design, financial cost, opportunity cost, competitor entries, what your spouse will think … all of these make personalization just one push toward the purchase.

But personalization is still important. Google has succeeded wildly by creating the most personal response of all, by simply allowing customers to ask for what they want. And now airlines are allowing customers to pick their own line, for a more positive check-in experience even if it means admitting they aren’t “expert travelers.”

So, Netflix, Amazon, and all you other collaborative filtering tell-us-what-we-want recommendation systems: We love the kindness. But sometimes, maybe you can just ask us what we’d like instead.

(Photo: United terminal at O’Hare by Ken Douglas)

Apple TV and the end of 1to1 marketing


The most interesting thing missing from Apple’s presentation yesterday wasn’t a new iPhone. It was 1to1 marketing.

Steve Jobs spent much of his keynote at the Macworld conference trying to turn Apple TV from a toy into a serious attempt to control America’s living rooms. U.S. consumers spend billions each year on home movie rentals, video and music, and yet no one has figured out how to own the entertainment market. Apple TV now makes it easy to get video-via-internet, but there are still too many pipes leading to the den. Netflix sends envelopes via mail and is toying with wireless internet delivery. Blue-ray and HD DVDs are still fighting over the next disc format. Cable sends movies with a click. Consumers are still confused and we all still have three or four remotes.

Back in the 1990s, 1to1 marketing was supposed to break through such competition. The idea was to identify the customers with the most financial value, figure out their unique desires, and then to personalize content or service delivery in a way that competitors could not match. If anything calls for personalization, it would be the entertainment content consumers receive — since we all have such varied interests. You’d think if 1to1 personalization works, technology leaders such as Apple would be all over it — giving us iPhones that remember our contacts in ways competitors couldn’t, and personalized video or music recommendations so good we’d never switch from iTunes to Amazon. Netflix has offered a $1 million prize to anyone who can improve its collaborative filtering by more than 10%.

But the public and media seem to yawn. We don’t want personalization as much as we want the next, hot gadget. A lot of Apple’s new video interface makes it easy for users to pick from menus, not get pre-customized recommendations. There are only two ways this can play: Either 1to1 personalization is a true competitive advantage and the world’s communications leaders are ignoring the opportunity, or maybe customers need far more than personalization to drive entertainment impulse purchases.

We think 1to1 works, but that its control panel now lies directly with consumers, not business intermediaries. Why should anyone wait for Netflix or Amazon to tell us the next thing we’d like, when we can now find it ourselves with a click? Navigating choices has now become simple with search engines that can pinpoint any whim anywhere from the internet; video will follow this path. Don Peppers and Martha Rogers saw the future back in 1991. They just didn’t see that true personalization would eventually be controlled by each individual themselves.