This is a guest post by Peter Zajonc and Nicole Tachibana (Epsilon) of DMA’s Analytics & CRM Community.
The marketing-consumption ecosystem is driven by a simple marketing axiom—the best predictor of future purchase behavior is a consumer’s past behaviors. At its most effective, advertising creates awareness about products and brands among consumers with a potential interest in them. Effective advertising leads to purchases, and new marketing messages follow up on these purchases to encourage future transactions. The cycle of the marketing-consumption ecosystem is a familiar part of our daily lives as consumers.
This marketing-consumption ecosystem, one generated by data-driven marketing and past consumer activity, is growing as marketers use consumer data to better target and deliver more relevant messages. Traditionally, consumer marketing databases were founded on catalog lists, magazine subscriptions and generally available demographics. As a result of the increased availability of consumer data and faster processing of data, messages consumers receive today are more relevant than ever before and often targeted in real-time through social, mobile and display ads. Consumers benefit from data-driven marketing; they receive a variety of marketing messages about products and offers that are “right for me.” With each new click and transaction, propensity models re-define the target audiences to receive interesting new advertising streams.
As marketers use consumer data smarter, they reduce marketing spend. One way to accomplish this is by creating propensity segments, or groups of consumers who share similar buying patterns or interests. Instead of trying to determine the propensity of an individual to make a future purchase, marketers use these segments in the aggregate, marketing to groups of people with a propensity to be interested in a product. The segmentation allows for more effective campaigns helping marketers to save money and resources.
Critics of the marketing environment suggest that propensity segments may do consumers harm by not presenting some with certain marketing offers. This is not true. Marketers strive to get relevant messaging in front of the entire potential audience. It is by design an inclusionary process; marketers want to grow consumer marketing databases to find more consumers interested in the offered product or service. Excluding those consumers who may be interested in a product negates the entire marketing process.
If segmenting consumers were restricted, the rich, relevant advertising that consumers have become accustomed to would be virtually missing. Consumers would be faced with fewer money-saving opportunities, and publishers’ websites, previously supported by ad revenue, would have to charge for viewing, using or sharing their content. Were the rich flow of consumer data to stop, along with marketers’ ability to use it to define propensity segments, no doubt the clock would be turned back to the early days of advertising when marketing efforts were impersonal, scattered, and irrelevant to most consumers.
Irrelevant advertising is only the tip of the iceberg. Without the ability to better target consumers, marketers would see an increase in marketing spend and those higher marketing costs could result in higher prices for consumers, negatively impacting our overall marketing-consumption ecosystem.
With increasingly large data stores and computing power in their grasp, marketers must preserve the ecosystem responsibly by using data and data segmentation according to our industry standards. We should also strive to improve messaging and targeting to audiences, and gain better control over marginal business so as not to waste advertising dollars. By protecting this practice, propensity segments can continue to help fuel today’s marketing ecosystem.