Making Sense of Micro-Targeting

Financial professionals who grasp these key concepts can help companies make the most of rapidly evolving marketing opportunities.

By Jim Newcomb 1 August 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.

The big concern with the marketing stack is how well these elements will work together. You and your team will have to decide whether to get all or a majority of these solutions from a single provider or whether to combine the offerings of individual providers.

Either way, the trade-offs can be painful, involving losing efficacy or requiring more employee-hours to install and set up the tools because tool A or B works less well with tool C or the platform of choice. In addition, because the larger providers have grown their businesses through acquisitions of smaller firms, even the expected benefit of interoperability is usually somewhat less than advertised.

USE THE INFORMATION

At the heart of these systems and the whole marketing operation is your company’s first-party data — the information about your customers that you own. It is the source of great competitive advantage, your hedge against competition, and the means by which you will find new ways to identify potential customers. Without it, you cannot make the best (or sometimes any) use of marketing platforms, ranging from email to social media ads. It is the most fundamental information a marketer has, and companies will need to invest regularly to add to, build upon, and refresh their data frequently to ensure that they are useful.

Once you have your data in a proper database, you can get much greater efficiencies when working with a platform like Facebook, Google, or an ad network. It is at this point that your marketing team can commingle your data and the platform’s data to supercharge the targeting of your marketing campaigns on the platforms. By creating lookalike audiences based on your actual customer data or creating customised audiences based on what you know about your customers, you can reach your prospects and your most-likely future prospects.

The process is simple enough: Your team uploads customer data; the platform automatically builds lookalike audiences; your marketers select performance parameters, frequency caps, and the like; and the platform’s algorithms go to work. It is largely — but not completely — automated, and you will need marketers who can help manage the campaigns to get the most out of them.

The benefits of automated optimisation can be breathtaking. In fact, I once had a high-performing campaign improve against goals by 1,500% over the course of a year due to continuous improvements on hundreds of minor changes that we made over time. We were able to achieve and then surpass our goals faster and much more inexpensively than ever before. Better still, the next campaign we ran did not have to change much because both we and the algorithm had learned how to drive better performance.

INVEST IN HUMAN CAPITAL

You need to ensure that your company is investing in the talent you need to expand your digital marketing efforts. There is a serious debate about whether you need marketers or technologists in this new and fast-growing world. The answer is you need marketers who understand how to use technology.

Hire for solid marketing fundamentals, intelligence, adaptability, and experience working with micro-targeted campaigns. The platforms often make major changes without notice, and your teams will have to work through the implications of those changes on a regular basis.

The either/or construction underpins an old and outdated way of thinking: that marketing and technology are unrelated. We do not ask whether we need an accountant or a technologist to work with accounting software. Companies need accountants who can understand accounting, use accounting programs, and work with technologists on an as-needed basis. Marketing is no different: Marketing needs marketers.

There is a need for smart, well-informed finance professionals to ensure that the needs of marketing are represented in the budget, and that the company is making the investments it needs to compete. Similarly, there is just as much of a need for the technical support of IT professionals and consultants to install new systems. Finance teams can add value by helping bridge silos and encouraging thoughtful investment strategy in the development and deployment of this new capability in their companies.


Jim Newcomb is a marketing consultant and a former senior director, Global Brand Management and Digital Strategies at Boeing, and is based in the US. To comment on this article or to suggest an idea for another article, contact Drew Adamek, an FM magazine senior editor, at Andrew.Adamek@aicpa-cima.com.