So you are a company and you have 100 people in your audience. By audience I mean all the people who are active customers, past customers, potential customers and those who are interested in your products and services. Not everyone buys your stuff, at least not all the time. Some people just really like your company and follow it in one way or another. Other people are just browsing.
You'll find over time that the Pareto principle (sometimes described as the "80.20" rule) takes shape. Only a small portion of your audience drives that vast majority of your revenue. Let's say your version of the 80/20 rule is more like 75/25, meaning 25% of your audience generates 75% of your revenue. In this case, those 25 people drive $75 in revenue.
The big secret marketing is still difficult
If you want to double that revenue, you can find another 100 similar people and it's pretty likely that, over time, you see that 25% will be your buyers. For each new "set" of 100 people, you'll get another $75. The key is to find a whole bunch of new "sets" of people.
Sometimes, this method of growth is called "scale." That's the first way to grow.
The second way to grow is through "efficiency." Efficiency means doing a better job of turning your current audience into buyers: After all, the vast majority (75%) doesn’t buy your stuff. That's a lot of waste. To be more efficient you need to leverage data, insights, offers, promotions and other cross-sell and up-sell techniques to turn some of those non-buyers into buyers. To double your revenue, you need to convert 25 of those slackers into buyers. Now half the audience buys. Ultimately, you have changed your own 75/25 rule into a 50/50 rule!
Generally, scale is easier yet more expensive and wasteful. Efficiency is more difficult yet more enduring and profitable. Companies often have to choose between the two as a primary business strategy.
Now into the conference room strides a group of white suited concepts designed to make you a better marketer, particularly if you are using digital channels such as search and display advertising to find those new audiences. Each has a business card with a three letter acronym, including real time bidding (RTB), demand side platform (DSP), data management platform (DMP) and supply side platform (SSP). There are a lot of them, and they all come from this very scary place.
They have a great story to tell you. They tell you that you no longer need to make the trade off between scale and efficiency. You can get both quality and quantity. All you need to do is let manage your digital media spend, or at least tag all your digital media and email, and maybe drive your off line media to a landing page and the technology will take care of the rest.
First, they'll help you better understand the buyers in your audience. The technologies will look at what your buyers do on the web, add a whole bunch of third party data and ask some smart analysts, who will use still more technologies, to create a more accurate portrait of your buyers. Once you understand your buyers better, you can use those insights to convert more of the NON-buyers to buyers (there are lots of ways to do this, such as email, re-targeting, etc.). You will be more efficient! You will change the 75/25 rule into 50/50.
Now, armed with that information, you can then go out and seek...people who look just like those buyers!! You no longer need to spend your resources acquiring the mass of un-differentiated non-buying slackers. Instead, feed the technology machine with all that data, and allow it to bring in only those people who are more likely to purchase your stuff.
But wait! There's more. You can buy those "audiences" over and over and over and over and over again. Now, you are not only finding customers more efficiently, but you are finding them at scale. VOILA! No more trade offs necessary!!
The thing is...it's not that simple. Turns out, not all of those little niche audiences of buyers can achieve any meaningful scale. At some point, and a lot sooner than we all thought, the ability to scale any individual audience tops out. In other words, the technologies will help you better understand who your buyers are likely to be, but there are just not as many out there as we thought.
No technology will solve everything. That's the big secret that no one will talk about, or at least we willfully forget when the conference room door opens. We so desperately want our jobs to be easier that we hope, HOPE, that something will come along and be the magic potion. But it doesn't exist.
Make sure you, and your agencies understand this. And be very skeptical of any technology vendor that oversells its value.
By the way, one company, [x +1], is owning up to the limits of these technologies. At a recent conference, they went through a case study of how they have helped a client address the situation.
So now what?
Well that's where it gets interesting, meaning you just are going to have to think a bit harder.
- You are going to have to incorporate these technologies into your marketing mix, but you can't rely on them totally.
- You are going to need to investigate other technologies that will help you better manage your upfront awareness (i.e. CPM/scale media) so you can keep finding new people, whether or not they are exactly the "buyers" you are looking for.
- You may have to live with your 75/25 rule for a while
- You need to beef up your CRM efforts and your creative to make sure you are talking to your customers, and listening to your customers in a way that best meets their needs
- You need to incorporate other buying tactics into your media plans (such as cost-per-engagement, cost-per-action) to help generate ROI throughout the purchase process
- You are going to have to get social
- You are going to have to experiment with mobile
- You are going to have to test advertising on the iPad, and other tablets
Wherever your consumers are, and however they interact with your company, you will need to be there.
Make no mistake. It's not going to be easy, but it will be fun.
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