A marketing tragedy: The wrong data and mindless discounting
Note: While recuperating from vocal cord surgery, I'm on restricted voice use. That of course doesn't actually apply to writer's "voice" but in this case I'm not writing that much either — and resting a lot.
But the business world never rests, nor do the active minds of my colleagues in the world of customer-facing thinking. One of the best thinkers and significant writers I know is Dr. John Tanner, a.k.a. Jeff Tanner, a professor of Marketing at Baylor University and a pioneer in CRM for more than a decade. He is not only the co-author of the all-time best-selling textbook on sales, but also was the first person to provide an MBA with a CRM specialty as a degree choice. He is also a wonderful friend who I am proud to know.
Recently, Jeff came out with a new book, Analytics and Dynamic Customer Strategy: Big Profits from Big Data (Wiley, 2014) which provides a framework for a customer-facing strategy with big data — the first of its kind to my knowledge. I asked him to provide a small peak at what this strategy would look like since we are in a world where that particular take on strategy not only matters, but is becoming crucial to understand how to fully and continuously engage customers. He kindly did so.
So, my friends, read on. Jeff, the floor is now yours.
Like an earthquake, did you feel the shift as it happened? Or did it sneak up on you? The balance of power in the marketplace shifted. The consumer of today has taken control – and if you need evidence, just Google the phrase “empowered consumer” and you’ll get over 9.5 million hits! Yes, today’s consumer has been empowered by the internet. And yes, marketers have been worried about it for some time; so pundits, consultants, and even professors are teaching and sharing the growing body of knowledge about what to do in the age of consumer empowerment.
Social media has empowered customers to reach a broader audience with a complaint – empowered. Mobile web has empowered customers to gain information – empowered. Customers can buy anywhere, anytime – empowered.
Essentially, that’s it. That’s the argument
But if you look closely, the only real shift in power is the increased information available to the consumer. The consumer always held the power of the decision – what changed is the ability to make an informed decision.
You can create the data you need to know: where to spend marketing dollars, and what offer will generate sales without mindless discounting.
If knowledge is power, then we’ve failed to recognize how Big Data has empowered marketers. The balance of power is restored, at least somewhat, by the value of Big Data for those that can take advantage of it. Just as the empowerment of consumers is really about having more information, so is the empowerment made possible by Big Data.
The shame, the utter crying shame, is that we marketers are limiting ourselves by two tragic practices.
The first is simply taking data as it comes. I can get sentiment analysis? Ok. I’ll plug that into my model. I can get sequential web browsing data? Ok, plug that in, too.
Why is this use of data tragic? Because all too often, our ability to know, to really know, is limited by the quality of data that just comes to us. Are we using what we need or what we can get easily and cheaply?
What we really want to know is what causes what. And to do that, we have to make our own data. We have to take the decision(s) we’re trying to make and create the right data that allows us to determine what causes the outcomes we desire.
Mindless discounting
The second tragic practice is what I call mindless discounting. What’s frustrating is that I keep hearing people make the same mistake as one speaker at a recent conference. He was going on about a case involving a mass transit system in Canada that’s probably really cool but his example is just not that smart. You can ride the train or trolley or whatever, log in to their loyalty system on your phone, and get a Starbucks coupon pushed to your device for use at a store at your stop. Or the next stop.
Who cares? If Starbucks wants to give a big discount, what makes that better than just putting a sign in the window saying a dollar off a latte? “Well, it’s not targeted.” Targeted doesn’t mean relevant, nor does it mean profitable.
Yeah, I know, “Starbucks can track it.” So what? Starbucks doesn’t get access to the phone – that data is owned by the transit company. The data is from their loyalty system, not Starbucks’. So again, Starbucks really can’t track it to the user unless they do something in the store – and I go back to the sign in the window. And I don’t get what the value of that data is to the transit company unless they’re selling the access to Starbucks, who should save their money and just put a big sign in the window giving away lattes.
What I do need – or at least, what companies need – is something a lot better than that. What offer can I make that gives you enough value to make it worth your while and still allows me a profit?
Or, tell me where to spend my marketing dollars so I can reach you. Tell me that, Mr. Big Data.
Well, actually, I can. Through the discipline of Dynamic Customer Strategy, you can create the data you need to know, to truly and really know, where to spend marketing dollars, and what offer will generate sales without mindless discounting.
One brief example: You’re Cabela’s (Nebraska-based direct marketer and retailer) and you’re wondering why some buyers fill up a cart and then empty it, multiple times. You’ve got a theory that the problem is a value problem. Hmmm, low value, increase it with a discount, right?
Wrong.
Instead, increase the value by promoting products that sell at premium, not discounted, prices.
Guess what – the conversion rate was a little lower but the overall revenue was up and at a 400 basis point improvement in margin. And all because Cabela’s made the offer the consumer wanted, not pushed a mindless discount.
To say that marketers are fighting back is, well, failing to recognize what the new balance means. Big Data doesn’t mean that marketers gain the upper hand. Rather, the new balance of power is just that, a balance. By creating the right data, balance is restored and everyone is empowered.