Targeted Marketing and Smart Audiences

Stephen DeAngelis

August 28, 2019

Both brands and consumers need advertising; nevertheless, they have a love/hate relationship with ads. John Wanamaker, the late department store magnate, summed up the retailer perspective when he stated, “Half the money I spend on advertising is wasted. The trouble is I don’t know which half.” Consumers, on the other hand, often see advertisements as a nuisance — unless they are in the market for something and desire product information before buying. Adding tension into this love/hate relationship is growing consumer unease that advertisers are becoming too intrusive, too personal, in their targeting efforts. Targeted marketing has been around from the beginning of advertising; however, in times past, it was generally less intrusive. In its early stages, targeted advertising was used mostly for gender-related products such as clothing and personal grooming products. The targeting was primarily accomplished by advertising in places frequented by one gender or the other. In the big data era, however, targeting has become much more sophisticated. For example, Sarah Vizard (@scviz) reports, “Procter & Gamble (P&G) has credited a shift from ‘generic demographics’ to ‘smart audiences’ with helping improve the effectiveness of its marketing and its innovation pipeline.”[1]

Vizard reports, on a conference call with journalists and analysts, “[P&G] CEO David Taylor said he is excited about its ‘smart audience work’, which is helping the company move from ‘wasteful’ mass marketing to mass one-to-one brand building. To do that, it is using the more than 1 billion consumer IDs it has to build audience segments and then do ‘propensity marketing with people who have similar characteristics’.” Taylor said, “We are going from generic demographic targeting, like women aged 18 to 35, to more than 350 precise smart audiences, like first-time mums, millennial professionals or first-time washing machine owners, to help us reach the right people at the right time, in the right place. That is only going to get more powerful … and we will get more accomplished at performance marketing to serve people messages that meet their needs.”

The fine line between useful and creepy

McKinsey & Company analysts, Julien Boudet, Brian Gregg, Jane Wong, and Gustavo Schuler, note, “Anyone who has gotten an unsolicited and irrelevant offer related to something they’ve done online knows that creepy feeling that someone is watching me. This kind of reaction is the third rail of today’s drive to personalize interactions with customers.”[2] They add, “That’s a problem because, when done right, personalization can be a huge boon for retailers and consumers. Targeted communications that are relevant and useful can create lasting customer loyalty and drive revenue growth of 10 to 30 percent. The challenge is to personalize in a way that doesn’t cross lines and delivers genuine value and relevance.” Patrick Hounsell (@patrickhounsell), Executive Vice President of Media Services at Merkle, writes, “In the last few months, I spent time catching up with colleagues, clients, and partners about the things that are top of mind for them in digital marketing. One word kept coming up — privacy.”[3] With the enactment the European Union’s General Data Protection Regulation (GDPR) and passage of privacy laws by U.S. state legislatures, Hounsell notes there are increased calls for a federal law. It’s natural that consumers don’t want to feel victimized or manipulated. Conversely, marketers want to ensure they are getting the right message about the right product to the right consumer at the right time. Hounsell concludes, “We can do a better job of creating an ecosystem that works for everyone. Users should be able to access free, ad-supported content in full faith that their online privacy will be respected. Publishers should get fair compensation for their work. And marketers should be able to connect with people who are interested in what they have to offer.”

Hounsell suggests brands and marketers can do three things that can help ensure consumers feel informed rather than violated as a result of targeted marketing. They are:

1. Collect data responsibly. “Move to a first-party measurement system if you haven’t already. Ask for consent directly from your users to collect and use their data, and avoid any solutions that aren’t compatible with people’s expectations for privacy.”

2. Be resourceful with how you reach audiences. “Place ads with publishers who’ve built a consent-driven, first-party relationship with their users. And if audience signals are restricted because of cookie limitations, use the context of the ad to tailor your message instead.”

3. Hire and train for privacy. “Build a team or partner with agencies who are well-versed in regulatory requirements and have experience with responsible marketing approaches, like first-party data collection and cloud-based measurement. Train your teams to be thoughtful about their analyses and recognize when to segment reporting by browser and operating system to draw conclusions about your marketing.”

Hounsell adds, “To get this right, privacy can’t just be the responsibility of one executive or department. … We have to support a strong approach to privacy together — which requires everyone having a role to play in making change happen.”

Getting to know your customers

Keeping in mind how fine the line is between being informative and creepy, there are ways to get to know your customers better. P&G’s Taylor believes understanding consumers is the key to making the smart audience approach work. He stated, “We start with understanding consumers then create ads that make people think, talk, laugh, cry, smile, share and, of course, buy.” How do you get to know your customers that well? Steve Smith, Chairman, CEO, and co-founder of Finicity, suggests using psychographics.[4] He writes, “Marketers are always on the hunt for answers about how to better understand and connect with consumers. Although demographic segmentation has helped them inch closer towards consumer truths, uncertainty still remains. Whether it’s a consumer’s favorite brand of clothing or their most beloved sport, demographic statistics help shed light on who a buyer is but not how they think. Focused on a consumer’s spending habits, values and motivations, psychographics help complete the buyer persona. This well-rounded understanding of consumer behavior opens the door for greater insight into how they ultimately make decisions.”

Smith believes providing the consumers with the right information about products for which they have shown an interest can help both brands and consumers. He explains, “Broad demographics such as age, gender and race often cause marketers to group consumers in the same category without considering how they think and what actions they take. With transaction data, marketers … can be more precise with strategy. They can analyze patterns of behavior, thus better highlighting who a potential buyer might be. Given that the data is based on actual buying actions, the insights generated should be more accurate than ever before. Psychographics aren’t meant to eliminate demographics. Rather, they complement one another to create a more robust picture of consumer types.” Brands and marketers have found themselves in hot water when they use personal data without consent. The more open brands are about how they gather and use data the more likely they are to avoid unwanted headlines. McKinsey analysts suggest there are five things consumers value when it comes to personalized communications. They are:

  • Providing relevant recommendations they wouldn’t have thought of by themselves.
  • Communicating primarily when they are in a shopping mode.
  • Reminding them about things they want to know but may not be keeping track of.
  • Making omnichannel experiences seamless (i.e., knowing the customer no matter where they interact with you).
  • Sharing value in meaningful ways.

Concluding thoughts

The love/hate relationship between advertisers, brands, and consumers will always be present. Targeting smart audiences, however, can ease that tension by making ads more informative, entertaining, and useful. McKinsey analysts conclude, “While data and advanced analytics play a crucial role in understanding shopper behavior, qualitative listening tools are also critical. Regular engagement with an ongoing shopper panel, for example, and ethnographic research and observation can offer valuable, in-depth, attitudinal feedback on the impact of personalized communications. Close monitoring of social media helps with the quick identification and resolution of potential problem areas. There’s no question that doing effective personalized marketing at scale is a sizable challenge. Companies that deliver customers timely, relevant, and truly personal messages, however, can build lasting bonds that drive growth.”

Footnotes
[1] Sarah Vizard, “P&G shifts from targeting ‘generic demographics’ to ‘smart audiences’,” MarketingWeek, 30 July 2019.
[2] Julien Boudet, Brian Gregg, Jane Wong, and Gustavo Schuler, “What shoppers really want from personalized marketing,” McKinsey & Company, October 2017.
[3] Patrick Hounsell, “A smart approach to balancing data-driven marketing and user privacy,” Think with Google, June 2019.
[4] Steve Smith, “Psychographics: Marketing Myth or Reality?MarTechAdvisor, 23 February 2017.