Making sense of microtargeting

August 20, 2019

By Jim Newcomb at Financial Management on July 31, 2019

Micro-targeting — using digital data to precisely target highly specific audiences — is an essential means for companies to tap a new, rich vein of sales that eludes their traditional marketing efforts. If CFOs are to capitalise on the sales potential, budgets will have to be expanded, rebalanced, and shifted between departments. That requires a significant effort, and scepticism from CFOs is understandable.

However, in the race to make sales via digital and social media, and to maintain customer loyalty in the face of an onslaught from new competitors, the urgency is palpable.

Here are five things finance professionals need to know when talking to marketers about investing in micro-targeting.

THE CONCEPT IS NOT NEW

Targeted advertising has always been around, but it exploded in the 2000s with the advent of the digital era.

As recently as 20 years ago, marketers primarily targeted customers based on broad data characteristics, such as past purchases, location, and projected income. Postcodes were considered good proxies for this type of information and served as the backbone of the direct-mail and catalogue business for more than 100 years. More broadly, companies selected which customers to advertise to based on what researchers could tell about which newspapers they read or which television shows they were likely to watch.

However, the growth of Amazon, Facebook, Google, and ad networks has given marketers access to extraordinarily granular customer data. It has allowed them to combine information that customers share about their age, interests, income, location, and more with "browsing" behaviours they track to determine purchase intent, and to serve advertising and product messages tailored to individuals.

DATA ARE KEY

By marrying this incredibly detailed customer data to powerful algorithms that can sort customers based on the performance of live advertising, decisions that used to take months and were made only against large segments are now being enacted in real time at scale by computers. As customers interact with ads, websites, and emails, the databases that held those data became further enriched with specific, detailed information.

As this cycle has been continuously repeated, enriched, and improved upon, technologists and marketers have been able to create the most powerful marketing tools that have ever existed. Data have been used to scale companies from novel ideas to global, powerhouse brands overnight, and they have left behind others who did not adapt. In each case, the company that uses data better is ascendant.

Nor is the evolution over; far from it, in fact. We are still in the primordial ooze phase of development in digital marketing, where new leaders and new losers are being developed every day, and it is often hard to tell which is which at the outset.

Financial managers will need to partner closely with marketers to help make these investments, with both sides learning as they go. Fortunately, there are a few near-certainties that can guide companies' investment decisions today and in the future.

HOW TO CATCH UP

Many companies — maybe even most — find themselves racing to catch up. Marketers are urgently looking to upgrade their foundational toolset to compete. Inevitably this will involve a series of significant investments into new data systems or software-as-a-service vendors. Here's an introduction to some of what you need to know:

  • Database or data management system: This will house the mother lode of marketing/customer data, including names, addresses, products purchased, preferences, etc. The system needs to be robust, extensible, and able to interact with various digital platforms to both share your data and enrich your database. It is the heart of any digital marketing effort.
  • Identity management solution: Customers use many devices to search for information, buy products, etc., and they expect to be treated in the same individualised way, wherever they search from. You need a product or service that can identify them even when their IP address is different and they have not signed in.
  • Analytics system: If you cannot see and analyse how your customers respond in a useful way, your investments are for nothing. You need to be able to analyse and optimise future performance based on past performance data and predictive analytics, or you will not be able to scale. Modern marketers are awash in an ocean of data, and without a platform to help you navigate, your business will be adrift.
  • Decision-management tool: This is needed to implement your digital marketing programmes automatically at scale. A decision-management tool will allow you to plan and adjust how you reach your market based on the metrics you have coming in. You can adjust media buying parameters, switch priorities, adjust the art and copy of your ads, and define and automate customer journeys from email, to display, to search, to web, to video, and to mobile across platforms.

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