State of Change, Chapter 17: Marketing
What is often called “disruption” tends to be the mere aftermath of a mistaken forecast. “The Death of E-mail” is a topic I’ve been asked (usually by e-mail) to cover countless times in the past few decades. (“This guy said e-mail is dead. Scott, how come you’re not on top of this?”) I’ve declined for reasons which, to me, were obvious. Like any new toy introduced to a kindergarten, e-mail was — and is — abused by this first generation of Internet proprietors. If misused tools could be easily declared dead by the media, the world would be devoid of firearms.
“E-mail marketing is absolutely not dying. I would say it’s evolving,” says Matt Byrd, senior e-mail marketing manager for a service called WeddingWire. “It’s part of a growing ecosystem of various digital touchpoints. It’s definitely not the only communication channel to reach users and drive relevancy and build engagement. But it is still a very foundational one.”
WeddingWire is an online gathering point for couples planning for the most important vow they will take in their lives, bringing together all the vital services that planners may require into one resource. There are plenty of Web technologies that would enable WeddingWire to run completely automated. Instead, it uses e-mail to maintain contact with its customers, for a reason that undermines the basis for any theory that e-mail is somehow dead: Unlike an automated service, a modern e-mail marketer is staffed with people who communicate with customers using common language.
“I would love to kill the word ‘blast,’” says Byrd, referring to the technique of replicating a single e-mail message for a business’ entire customer base. “That is what I think is absolutely dead.”
Which makes this not really a story about disruption at all, but rather a resumption of the evolutionary course e-mail had already begun before being besieged by spam. True, modern e-mail client software, such as Outlook or Web browsers, remains ineffective at filtering out the tremendous clutter that plagues users every day.
But what is that clutter, exactly? It’s a strange, semantic paste, assembled through a brute-force effort to punch through the filters and blockers that occlude a clear path from mass marketers to mass audiences.
In short, spam is poor marketing. When firms do use brute force, it’s because they believe they lack the power or skill or resources to reach their would-be customers directly. They know the percentage of people who pay attention to their messages may fall into the hundredths of a percentage point, but regardless, if they blast tens of thousands, they may pick up a few dozen. And in summoning the wherewithal to launch such attacks, they sacrifice any integrity their brands may have carried, assuming those brands are even legible.
“Now, we see that B2B buyers are in control of the situation, and are up to 60 to 70 percent down that purchase path, not only before they’ll reach out to you as a vendor, but before they’re even willing to have a conversation with a vendor. So if I’m back in that old paradigm, I’m not even in the consideration set.”
There is a growing class of digital marketing professionals who are doing more to combat this methodology than a spam filter ever could. They believe that much more scientific principles can be applied, in order to learn customers’ shopping habits and purchasing preferences. They are becoming scientists, sociologists, students of human behavior. Instead of brute force, their tool of choice is business intelligence. Rather than fish for dozens of customers among a list of tens of thousands using methods that typically don’t work, they search for hundreds of customers where they tend to gather together, using methods that typically do.
“There is a balance now in marketing between art and science,” remarks Sheryl Pattek, vice president and principal analyst with Forrester Research, in a recent interview with me. That balance is reflected, Pattek says, in a shift in the role of the Chief Marketing Officer to more of a business manager. The new CMO is becoming more of a CIO, she tells me. “They do understand data — maybe not to the level of a scientist, but they understand the importance of insights. And they also have recognized the importance of technology.”
In a recent Forrester report on the CMO’s role in purchasing decisions, Pattek demonstrates that marketing as both an industry and an art, has already completed its evolution to an information science. In an earlier era, marketing campaigns were treks onto a battlefield where advertising was a key weapon, and success was measured in revenue. Today, marketing strategy is a planning maneuver, whose success is measured in the quality of the data it produces. With that data, salespeople can then execute the plan, with far more assurance of success. She continues:
We have seen a shift in marketers’ understanding that they need those skills. Some people have made that journey; some people are still in the process of making that journey. We’ve also seen clients who don’t have those skills surround themselves and their team with people who do. For example, you’ll see a rise in marketing technologists — people who understand what marketing is trying to accomplish, but they also have a very rich technology background, and they can communicate those needs to IT, making the bridge between IT and marketing.
The Marketing Funnel
Advertising, born in the 20th century, is the art of reaching a mass audience with an enticing message. For most of that century, marketing was equated with advertising — in some circles, the two words are still being used interchangeably. The art of marketing to a customer has always been predicated on an understanding of that customer’s profile, including his gender, general age, median income, geography, and sometimes heritage. We rarely think about them in this way, but stories, programs, shows, and “content” in the mass media are engineered to gather audiences of addressable, manageable types. Even theatrical films (which don’t all necessarily include product placement, or ads up front) are produced with the interest of bringing together audiences of like interest, and then following up with them in some fashion through marketing.
Throughout the 20th century, this was the purpose and the business model of mass media: It’s a platform designed to be leveraged by advertisers to gather people of like interests, making customers more addressable by marketers. Even news today has flavors to suit the tastes of its audiences.
The stratification of content in movies and television into common genres has historically made it easier for marketers to push their products towards their more typified viewers (the “key demographics”). Had it not been for the needs of marketers, the whole notion of genres might not have been developed in the first place, and performance art would have continued to evolve, from the 16th century on, as inattentive to the needs of its customer base as poetry. Every professional marketer or advertising executive knows this, though perhaps not with such clinical language, like the report of an archaeological dig. It’s important to see marketing in this context, because it makes the dynamics of the shifts in the marketing industry much more comprehensible.
When the Web was launched, the expectation was that it would become the next great, influential element of mass media. Rather than see it as the successor to television, traditional marketing firms perceived the Web as an extension of television — a kind of bolt-on upgrade. Before too long, YouTube appeared to confirm their perceptions.
But what’s happening today is both a structural and cultural shift which is so odd and unexpected that it can go entirely unacknowledged: Because the Web is a two-way platform, mass media is now less effective at targeting customers than directed media — programs and content that may only reach small niches of viewers. Through YouTube, and more often recently through Netflix, viewers are developing their own tastes and preferences for content without the need for, as Matt Byrd calls it, the “blast.”
And because social media is more effective than anything before, mass media becomes less effective than it was before.
New online platforms are taking stock of viewers’ peculiar, uncategorized, unusual interests, and giving marketers the instructions they need for how to reach them. It’s the reason I can watch a YouTube video of an old PBS show and have it interrupted by an ad for a white paper on cloud security.
As a result of this trend, the Internet is evolving away from the mass media Web, and toward social media that uses Web technologies. These are two extremely different orders of beast, for reasons Facebook’s stockholders have yet to comprehend. As a platform, social media enables marketers to address smaller, better defined groups of customers, in a much more direct and personal manner than mass media could ever allow.
“Acquisition through social is not heresy,” declares Jason Falls, vice president of digital strategy at custom online products platform CafePress, at a recent Connections conference in Indianapolis sponsored by marketing platform provider ExactTarget. In his role, Falls has come to realize that the Web is not one more tool in the marketer’s arsenal, but rather a single replacement for all of them. Falls goes on to tell attendees, most of them marketers themselves:
We have singular thinking, a lot of times, in marketing. We’re going to use this (A) for customer acquisition, this for ranking awareness (B), this for customer service (C), this for engagement (D). And you never think, “Wait a minute, we can use one of them for lots of things. We can accomplish multiple goals.
The people who have been telling you this for so long, I like to put them in a category called the “social media hippies and tree-huggers.” I don’t mean that in a necessarily negative way... I am a social media hippie and tree-hugger. I believe what they believe. But I also believe that if you’re not using social media for business purposes, if you’re not using it strategically, if you’re not acquiring customers, if you’re not fostering customer retention and meeting the business metrics that your executives are demanding, then you’re not doing a good job...
The full story is, yes, we want to engage with our customers. We want to join the conversation. We want to hold hands around the campfire and sing “Kumbaya” with our customers. Absolutely, I hundred-percent agree. But we also have to take that engagement, that opportunity to build those relationships so that we earn the right to do the other half. Earning the right to do the other half is, asking them to buy things, asking them for their e-mail address, so that we can pull them into a marketing funnel.
From Falls’ perspective, prospective customers still require engagement. This is the role mass media used to perform. In social media, customers are engaged about certain things in particular. Marketers need to enter their conversation at that level.
In an earlier era, advertising and marketing were generally synonymous, marketing messages were engineered exclusively by the merchants, and media content was produced to be a vehicle for those messages. Amid this earlier reality, the style and, yes, the substance of content was geared to suit what the advertisers expected — or at the very least, what content producers anticipated they would expect. But now these marketing messages are not only becoming bifurcated by emerging trends, they are moving away from mass media. Forrester’s Sheryl Pattek points out the following:
Information used to be a scarcity, and would be more or less controlled by the way salespeople interacted with you as a buyer, on a one-to-one basis — the salesperson would be able to control that buying process and that information flow, depending on where the potential buyer was in their thought process. Well now, information is abundant and is everywhere. And customers prefer to self-educate, and are very empowered to go out into digital channels and find the information they’re looking for to help them make their business decisions. So that totally changes the dynamic.
Because information is available outside of advertising, the role of advertising changes to that of forging an appropriate image for the brand, based on the information that customers already have. And because that information may be different depending on the audience segment, mass media is no longer the most appropriate means of forging that image. In this environment, the distinctions between marketing and advertising are made clearer. There’s a widening gap now, the effects of which have already severely threatened the business models of online media.
It’s a little fact that might be neatly swept under the rug if not for that rug being on fire: All mass media is hurting — not just the mainstream, but also the Web to the extent that it’s used as mass media. The Web wears down the value propositions of publishers and broadcasters to, basically, interesting tidbits with clever headlines. They cannot present their products as programs or volumes or albums any more, but instead as articles that stand less than a one-in-one-thousand chance of retaining their readers inside their domains. Everything is pitched à la carte.
Social media platforms are now the gathering points for vast numbers of users. Publishers leverage social media as advertising tools, relying on readers to retweet hyperlinks to articles like the one you’re reading now. But social media users are not mass audiences. Rather, social platforms are extremely bountiful collections of interest groups. So the new science of digital marketing leverages the power of the information it can learn from those groups, to tailor marketing messages that reach them more potently.
And it is here where the dead shall live again.
The Birth of E-mail
“The biggest sender of e-mail is social media channels,” says WeddingWire’s Matt Byrd, in so doing presenting the chief reason why e-mail failed to die as predicted.
You have to have an e-mail account to sign up for Facebook. You get notifications about who’s following you on Twitter in your e-mail account. E-mail is still very much a foundation of what has become the ecosystem of digital touchpoints, [including] SMS, push notifications. There are many different ways that we can reach users, but e-mail is still very much the base of it all.
...The idea of sending one batch-and-blast, generic e-mail to all of your users is absolutely what’s dying. Users are expecting that we’re going to take the data we know about them, and use it to create relevant messages. If I send you an e-mail about, for example, my spring wedding specials, and you’re having a fall wedding, you’re going to say, “That’s so irrelevant to me. You sent this to your entire user list; you didn’t care about me as an individual subscriber.” I think that’s the kind of e-mail marketing that is going away. E-mail marketing is now much more driven by relevance and data, using it to truly create a one-to-one experience, as opposed to creating one big image as an e-mail campaign and sending that out to a million people.
It isn’t always possible for marketers to reach every customer on a one-to-one basis. But it can select which ones deserve such treatment, and it can use new digital marketing tools to divide the market base into dozens of segments, some with numbers small enough that certain classes of messages can accurately target 100% of their membership.
On its surface, this may sound like the antithesis of “cloud dynamics” as I’ve defined it elsewhere in this series. Dividing and conquering runs the opposite direction from pooling and collecting. The key to linking these two seemingly disparate concepts lay in Matt Byrd’s references to relevance and data. The resources necessary to not only gather the data in one place, but then to analyze it and distill it for relevance, demand the existence of a common platform.
“Many marketing platforms to date have been built with acquisition focus, because first-dollar transaction has been the most important metric of conversion,” explains Andrew Pearson, marketing director for service provider Windsor Circle. His company produces what’s called a customer retention platform, designed for use with ExactTarget’s digital marketing service. By gathering existing sales data from e-commerce platforms, Windsor Circle produces segmented customer lists — people whose purchasing histories and preferences suggest different modes of communication.
In a purchasing environment where the customer defines value, she cannot continue to generate value for the merchant if she’s treated like a rat in a trap — once acquired, permanently caught. As Pearson explains to me, if a merchant is truly serious about treating customer relationships as lifecycles, then it needs to understand the patterns of such cycles and how they’re differentiated.
It’s a way to ensure that the delivery of the brand promise and presence is done for every single customer sequentially, based upon where they are in their purchase cycles. For example, my experience of a retailer should be different once I’ve purchased ten times, from somebody who’s just made their first purchase. Even though we’re making those two purchases at the exact same day, the e-mail we receive should be entirely different.
As relationships are being built, he goes on, merchants develop varying styles of e-mails for segments of repeat customers. Once customers have repeated long enough to establish patterns, the segments get smaller, but their associated styles get more tailored. Those customers who don’t repeat are treated to a different style of message, perhaps depending on what they purchased initially.
Pearson points to a 2012 report conducted by Adobe (PDF available here) presenting the findings of an analysis of 33 billion e-retailer visits over a 14-month period. That report showed that some 40 percent of the average online retailer’s revenue comes from the 8 percent of their customer base who have repeating patterns. It takes the acquisition of up to 7 new customers, the report found, to make up for the loss of just one regular customer. By that logic, Pearson says, an investment of $1 in retention marketing produces the same ROI as a $2.50 investment in acquisition marketing.
We’re seeing more brands hire specifically retention managers, or retention marketing specialists, because the skill set, the messaging, the automation framework they need, and the use of data, is substantially different from an acquisition mindset... We recommend that a lot of retailers consider a certain lifetime value, or a certain number of purchases, as a trigger event that takes [customers] out of a traditional marketer’s list, and puts them into a personal shoppers’ assistant “bucket.” Now you’re not even necessarily getting standard e-mails, or even automated e-mails, as much as you’re getting an e-mail from Jane who knows you absolutely and can recommend to you, “Here’s a new pair of jeans coming out; do you want to beta test them?” Or, “Would you like to come meet our team at the next New York fashion function?”
The use of retention platforms and broader, cloud-based customer engagement platforms is changing the nature of sales promotion. In physical “brick-and-mortar” retail stores, from a customer perspective, a “sale” is a promotion that’s for everyone. The ethic has always been, to treat customers fairly, they should all be treated alike. Of course, this is not the case for private purchasers (“B2B”) whose relationships with their vendors have always been tailored to suit their individual needs, and in many cases, their relative value to the merchants.
Had it not been for cloud dynamics, the Web might have merely perpetuated these existing relationships. But platforms such as Windsor Circle are helping merchants establish more private, exclusive relationships with people who were once considered merely shoppers. This is in addition to platforms such as ExactTarget itself, which can send SMS messages to exclusive mobile apps residing on customers’ devices — apps they’ve installed themselves because they foresee loyalty as something worth investing in, with a potential payoff.
The Customer Model
For decades, businesses of all types, including merchants, have utilized business performance management (BPM, sometimes with the “P” standing for “process”) to model the fundamental functions of their business. BPM has become the foundation of several cloud platforms by itself, some of which I covered here last April. Over the years, BPM has evolved to the point where business functions are not just flowcharted, but sketched using drawing tools that are intuitive enough to understand what your sketches may mean.
But marketers are coming to realize that BPM models exclusively internal processes. In an earlier article in this series, I introduced something I called the “3D value chain,” (3DVC) taking an idea from Michael Porter and another from N. Venkatraman and literally fitting slot A into slot B. In that model, internal and external roles in an organization are separated, but information services address them both to equal degrees.
With marketing being an external role, platform providers including ExactTarget are suggesting that marketers model the external processes of customer acquisition, engagement, and retention using very similar tools. As BPM tools address the roles that affect the internal perception of value (margin), customer outreach management tools may address roles that impact the external perception of value (quality).
Forrester’s Sheryl Pattek calls this process “mapping the customer journey.” In her interview with me, she explains:
The reason why it’s become so important to understand the buying journey in B2B is, the entire way B2B buyers purchase today has totally changed. Companies that don’t understand how their buyers are buying today, and go to market with their marketing strategies and executions the way they did five and ten years ago, are missing the boat completely.
...Now, we see that B2B buyers are in control of the situation, and are up to 60 to 70 percent down that purchase path, not only before they’ll reach out to you as a vendor, but before they’re even willing to have a conversation with a vendor. So if I’m back in that old paradigm, I’m not even in the consideration set. That changes both the balance between sales and marketing, where marketing assumes a much larger role in educating the customer earlier in the cycle, and it focuses the sales organization from an efficiency and productivity standpoint. If marketing does its job well, and is in that consideration set in helping customers make the decisions they need, then by the time they’re ready to engage with sales, it’s a much more qualified opportunity than it was at the very beginning, where they were just in the awareness stage.
In 1903, A. F. Sheldon took out ads in popular magazines touting his “Sheldon School of Scientific Salesmanship.” These ads pitched a correspondence course promising to make individuals understand the sales process using a scientific model. “The Whole World is Waking,” one such ad trumpeted, “...to the fact that a new Science has been born, one most far-reaching in its influence upon the entire business world.” In that course, Sheldon presented a model of the customer interaction process as a funnel divided into strata, from large to small. Over the years, that model would be portrayed by students, or people who spoke with his students, as having three stripes, four, or five.
Sheldon perhaps did not create this model himself. But the earliest surviving depiction of that model is attributed to one Frank Hutchinson Dukesmith, who depicted it as a set of four weights of increasing mass, counter-balanced against a single weight on the other side of a weighing scale, marked “Sale.” “A sale of any kind,” wrote Dukesmith, “has four essential parts: Attention, Interest, Desire, and Conviction.” One more recent interpretation of this model, using Sheldon’s original funnel, remodels the verbiage to “awareness, interest, consideration, close.”
Forrester’s Pattek believes the usefulness of that funnel in modeling modern customer interactions, has itself drawn to a close. In its place, she believes, is an emerging picture of a new customer lifecycle. Here, the discovery process is much larger, as the customer deliberates with himself the nature of his needs and desires, and sorts through all the information that may or may not address them. The customer may go through an exploration process, seeking out all possible alternatives. Then the “buy phase” begins, which is analogous to the Attention or Awareness phases of the earlier funnel, but which is more than halfway into the lifecycle.
Engagement with the vendor begins there, and notice it’s the customer reaching out to the vendor rather than the other way around. In this lifecycle model, the customer journey may be circuitous, and may not follow a set path. But advertising does not appear to play a role at all, at least not from this angle. In actuality, the role of advertising becomes to make the customer aware of the initial information. Suddenly Google’s business model seems presciently appropriate for the times.
As a customer, “I’m looking to discover the information I need,” says Pattek, “without wanting to have a sales pitch.”
The way we work, and the way others work with us, are scientific processes. Throughout our history, when such processes have been discovered, they are declared “fundamental” and thus subject to no changes or alterations by future students or practitioners. But all science is based on what we perceive. And because how we perceive changes for any number of reasons — economic, sociological, technological, physical, spiritual — what we perceive takes on new dimensions, new aspects, previously unforeseen truths. And sometimes the old perception gets thrown out altogether.
Information is the most fickle commodity humankind has ever created. Its value is both immeasurable and unmeasurable. Its substance is relative to both its source and its receiver. The exchange of certain information can render it priceless or worthless depending on the circumstance. It therefore follows that information technology is subject to the greatest volume of change. Thus any business whose livelihood is predicated on information technology, must submit itself to being carried along by its wayward whims.
In this second part of our series on the changes in IT, we’ve highlighted industries whose fundamental principles are changing because their technology foundation must change for them to survive. In the upcoming third and final part of this series, I’ll examine the depths of these changes, and how their measurements relate to our world as a whole.
