Read the full interview at inpractise.com
We spoke to Ben Legg, Former COO of Google, Europe, to discuss the long-term structural change in marketing and the future of people-based marketing.
In the full interview we also discuss:
- What are the potential reasons TV spend has held up as viewership has declined?
- What are the challenges for TV advertising to compete with the ROI from digital advertising?
- How would you organise a marketing department of a large CPG company?
- As Head of Marketing at a large CPG brand, how would you split your advertising budget between the various channels?
- How does transfer pricing work in the advertising value chain?
- Non-working and working dollars in the advertising industry
- What are the pressures for the traditional advertising agency business model?
What key structural changes have you seen over the last decade or two in marketing?
The first thing to say is that the heads of everyone in marketing are exploding, and that's okay. Marketing is going through a massive transformation. All the old rules that were taught in business school and taught at places like Procter and Gamble are on the challenge. Some are still relevant; some are less relevant, but there's a whole load of new tricks to be learned. Every CMO in the world is being pitched multiple times a day or a week on new technology or data that they should be using; otherwise, they're going to become obsolete. Most CEOs are unhappy with marketing because they know it could be doing more, but they do not quite know what it should be. Marketing is in massive flux. And yes, it is in the process of being reinvented. I do not have all the answers, but I will have a go at some of them.
To me, the fundamental change in marketing is the move from mass marketing to people-based marketing. What does that mean? That means in the past, for anyone who watched Mad Men or anything to do with advertising in the 60s, 70s, 80s, 90s or people who worked in agencies a couple of decades ago, it was all about the big idea. Thus, the brands would need to be defined maybe every year or a couple of times a year. That's a big piece of work; that'd be a big campaign. The CMO would brief a few agencies on what they want to do, "It's about this product. This is our brand strategy; what should the campaign be?". The agencies would go away, have lots of brainstorming, storyboard a few ideas, and then present back to the CMO.
The CMO, based on mostly judgements and maybe a few bits of panel research, would pick one of the Agencies, or one of the ideas have to be turned in production. The production would be a very fancy affair, going off to Hawaii with some celebrities and champagne and lobster and basically spending millions on producing one TV ad, then a bunch of additional ads would be made for outdoor, and print and what have you, and then the campaign would be run. And it was one message to everyone. There were some subtle variants on that. But broadly speaking, that's what marketing was. It was about getting an idea as brilliant you could and as well-executed as you could. And that message went to everyone. ROI on most marketing was relatively unknown. And that was accepted. But you could see that if you run a big campaign, sales went up. If you run a bad campaign or no campaign, sales went down. So, it was something companies had to do.
If you fast forward to the future, you could argue that you could be serving a different ad to every single person. Now that's technically complex. Most companies are not quite there, but they're on a journey in that direction. So, what does that mean and why? The reality is that every single person is different. And every single person's relationship with a brand or a company is different. They have different past purchases, potential purchases, price sensitivity, the timing of purchases, and media consumption. Regarding where they might see ads: some people are on Facebook, some on Instagram, some watch TV, some read print newspapers, some see outdoor ads, etc. They have different experiences with competitive brands, some are loyal to another brand, and you need to win them over. Some are already loyal to your brand. You just need to keep them and a whole lot of switches in between. They will have different potential lifetime value.
For every customer, you need to be able to say, "If I got this right, what kind of relationship will I have this customer? What kind of products and services will they buy or consume? And what's that worth to me? And what's the right path to take them down in terms of interactions? And how much will that path of interactions cost? And when you add up all the revenue and profit coming from that customer and subtract the cost of the marketing, what's the overall customer lifetime value?"
Now to do that by person with potentially a different ad served to every single person is a massive undertaking. I can safely say there is not a single company that's there, but there are many on a journey in that direction. So if you talk about the transition: step number one for any company is, organize your data about customers. When I say customers, I don't just mean existing customers, but lapsed customers and potential customers. You gather all the data from your own databases and gather extra data that maybe you did not cover in the past. Who's been to your website? Who's in your loyalty scheme? Who's used your app? Who's been in your store? What aisle did they walk down? If on the website, what did they put in the basket? Did they call customer service? And so on. You then enhance it with useful third-party data. Third-party data may include household income, marital status, education level, number of kids, what car they drive, what they buy in the supermarket, etc.
Using a combination of your own data and that third-party data, most companies are already starting to organize that data well, and create more segments with more tailored campaigns. So the most sophisticated advertiser that I am aware of, they're already targeting thousands or tens of thousands of people with different ads per group, based on those factors that make people different, instead of targeting ads at tens of millions of people with the same ad.