First Principles of Marketing

Check out this jumble of logos.  Pure Madness.

Chiefmartec.com did a great job of aggregating all the fish swimming in this sea of distractions for marketers.  Luma Partners VCs started building their “Lumascapes” years ago to make sense of different niches in AdTech and MarTech. You probably get emails and voicemails from some of these people every day.  The enthusiastic “customer success enablement technicians” are certain that their solution will fundamentally change your marketing.  What if they’re right?  What if adding ________ will help us hit our budget next quarter…(I don’t know how we’re going to do it otherwise).  If I get a bonus I could buy a boat.  I want a boat.

To make sense of it all, marketers need a framework for evaluating options and making decisions.  I call it the “First Principles of Marketing.”  You may remember Anthony Hopkins’ chilling Dr. Lecter chiding Clarise in the Silence of the Lambs to use First Principles to strip something down to it’s essence to understand it better.  He hisses, “First Principles, Clarice…read Marcus Aureilius.”

Yes, that’s the same Roman emperor from Gladiator who appointed his megalomaniacal jerk of a son Commodos as his successor.  Roman Stoic philosophers used the process for evaluating ethical conundrums, but it works here too.

The fundamental challenge for marketers is to communicate value and facilitate transactions. Simple to say, not so simple to do.  To accomplish this feat, we must gain Insight into the consumer and the marketplace.  Using this insight, we craft compelling Messaging that positions our products and services as valuable in the mind of the customer.  Next, we Deliver this message via promotional tools and media channels as efficiently and effectively as possible.  Finally, we Transact with the customer, coming together in a place to exchange goods or services at a price that (hopefully) delivers a profit.  These are the First Principles of Marketing.  All marketing activities can be distilled into one of these four core objectives.  Using this lens for evaluating activities and infrastructure investments creates priorities in a fast paced, constantly changing world full of distractions.

Clearly all businesses need all four things to be successful, but specific markets and contexts demand more at certain times.  Through a thorough understanding of your needs, you can solve the problem that will deliver the most impact.  Investing in technology that solves the right problem (or problems), creates Leverage – maximizing your return on the investment of time and resources.

Insight

So much energy is focused on promotion (Advertising, Public Relations, etc.) that we often forget, the most important role of the marketer is to understand the marketplace, for guiding the creation of products and services that are unique and valuable.  This demands information on competitors, government regulations, and most importantly – potential customers.  Historically, this was referred to as market research, but increasingly, this is the realm of Third Party data, Customer Insight, and other initiatives that prompt investments in data and the technology to make sense of it.

A central hub in the marketing technology landscape is the customer database, often in the form of a CRM solution like Salesforce.  As you capture data on your customers you can start to do some really interesting things.  You can identify your best customers – you can start to identify patterns based on demographics and behaviors leveraging external data sources.  This insight helps you find more of your best customers with look-alike targeting or other activations that become possible with a Data Management Platform (DMP).

You can also identify your worst customers – you can start to develop ways to make them more profitable through more efficient transactions leveraging automation tools or use analytics to predict add-ons they might purchase to increase their lifetime value.  Through understanding who your customers are, you can also understand who they are not – identifying potential new markets, refining ad targeting, and improving your messaging.

Clearly data alone doesn’t answer the important questions, and no matter how beautiful your Tableau reports are, true insight comes from the synthesis of information on Customers, Competitors, Context etc.  Creativity is still an essential tool for marketing success.

Messaging

The preternatural ability to predict exactly what a customer wants based on intuition is magical.  If you’ve got access to a Steve Jobs or Don Draper that can do that consistently – you should stop reading right now and go talk to them.  For the rest of us, consumer data, and technology that facilitates testing and messaging optimization offer help.

Data and technology are no substitute for rigorous thinking about your customer segments, the customer path to purchase, and the context in which they are engaging with you. However, sometimes, despite all the data enrichment and analytics, you still aren’t 100% certain what the right message is.  As Miller Lite wondered in the 80’s – do people drink it because it tastes great or because it’s less filling?

Today’s marketer can let the customer tell them.  Dynamic ad optimization technology will automatically increase the volume of impressions for the creative that gets the most clicks.  Web-page optimization tech will test different landing page elements and layouts, automatically adjusting to the configuration that delivers the most conversions.  Email platforms will change subject lines even after you hit send, based on what is getting opened most.

New companies find this particularly valuable since they don’t have an existing customer database or First Party Data, to mine for insights. For new product launches or conquesting new markets, messaging optimization technology can be a powerful tool.  For more established brands, personalization is great, but may be less of a priority, particularly as they struggle to manage bigger advertising budgets and attempt to maximize the impact of their delivery.

Delivery

Here is the domain of most advertising technology (AdTech).  There are a few sub sections here so it’s worth breaking it down further into solutions for Targeting, Buying, and Management.

Message Delivery – Targeting

Want to target only people reading articles about fishing in San Diego?  How about only people who have already visited your website?  Maybe people who share the same demographics and like the same pages on Facebook as your best customers, but have never bought from you before?  There are lots of ad tech tools for contextual targeting, retargeting, lookalike targeting and more.  Some of them need data from you, and some of them don’t.

Many ad networks have built in targeting capabilities that are part of the plumbing, but some marketers choose to supplement these by doing things like hooking a DMP to a Demand Side Platform (DSP) to programmatically target known prospects (identified by cookie-ing site visitors), and web surfers who “look alike” across multiple ad networks.  Although it’s leveraging Insights from customer analysis, it’s still essentially a targeting solution.

Message Delivery – Buying

So you know you want 40 year old males reading about fishing, and you don’t care what site they’re reading the article on, as long as you don’t pay more than $.40 per impression or $1.00 per click…there’s an app for that.  Need to manage bids on hundreds of keywords concatenated with hundreds of different location names?  There’s technology to power that too.

This brings us to an interesting intersection – Paid Search solutions deliver insights (what keywords get the most searches) targeting (only users who search for your keywords get ads) buying (you can optimize bids based on outcomes) and management.  Many solutions deliver multiple benefits or empower you to do more things (more on this later when we talk about Leverage) but it’s important to truly understand the core essence of a solution, the nature of the thing, what does it really do.

Bidding solutions that pick impressions based on lowest price for similar inventory and similar users are buying technology, but these are often baked in to targeting solutions.

Delivery – Management and Optimization

Here too we have some added nuance.  Many ad management solutions have an added layer of value in that they might provide insights around which customers engage, or which ads perform better, but it’s important to understand what their essence is.  For solutions that were cobbled together in acquisitions, they’re usually best at whatever the buyer did before they bought the other companies.  For example, if they were an ad server that bought a creative optimization company, they’re probably better at serving ads than optimizing creative.  When thinking in first principles it’s important to get to the core of what the solution does and what it’s best at.

Coordinating media buying across touchpoints or publishers can be a powerful tool that frees up marketers’ time for more strategic thinking, but management platforms themselves are no silver bullet.

Many automation tools (particularly those that send triggered emails) and the Email Service Providers (ESPs) themselves are essentially delivery management technology in that they automate the delivery of a message, but don’t do anything else.

Optimization can be “built in” for a number of solutions as many publishers have a conversion tracking pixel you can place on a web-page to track users who convert.  The publisher then programmatically refines targeting to other users who are statistically similar in some way to those that are converting.  Where these solutions provide insight on who the better responding segments are they accomplish multiple objectives, but when they are “black box” in nature you can’t give them credit for insights, only delivery.

Fundamentally, Attribution solutions, whether MMM (Media Mix Modeling) or MTA (Multi-Touch Attribution) are optimization tools, as they optimize across channels and media touchpoints while controlling for the impact of other internal and external factors.

Transactions

All the technology that powers e-commerce stores falls into this bucket.  This includes websites and content management systems (CMS) where the product is information (like this blog).  Website analytics solutions may be focused on facilitating transactions, but are more typically insight focused as they capture information on user behavior on the site.

There’s significant technology for powering call centers for phone orders.  Some of it brings in insights from prior media interactions (what keyword brought them to the site where they found the 800 number), while some of it facilitates personalization, automating script changes based on new data received on the call.

Evaluating Marketing and Advertising Technology with First Principles

To understand which of the Four Principles should guide your prioritization of technology investments, I recommend an Exocentric approach.  Focus on your customer and their context.  Not only who they are and how they behave, but what their customer path looks like, how they become aware of the need, and how they evaluate alternatives.  Empathetic thinking can go a long way, but solid data confirms theories.

In considering the customer context, think through your product life-cycle.  Reaching early adopters in the introduction phase requires different capabilities than reaching laggards in a mature market.

Consider too, the company’s current situation.  Obviously a new company with a small customer list will gain less from better CRM tools than from Insights on customers and Messaging optimization tools. Likewise, an established brand operating in silos may find more impact from a solution to automate existing processes rather than a solution that requires a challenging integration across departments.  It’s important to think strategically and plan for future infrastructure needs and best practices, but don’t obsesses over lowering your cholesterol at the expense of ignoring the sucking chest wound spewing blood (eww).

Through a careful analysis of the real marketing needs, it becomes easier to evaluate potential alternatives.  Picking the right solution for the right problem is the first step to achieving Marketing Leverage.

Marketing Leverage

If I borrow $200 from you (I owe you $220 next week – the original $200 + $20 for the favor of the loan) and then put it on “28” on the roulette wheel – and it hits, I’ll get $7,000 back.  Even after I pay you back the $220 I just made $6,780.  From $0 to $6,780.  That’s leverage.  To get that kind of leverage from Marketing and Advertising Technology investments requires picking the right solution on three dimensions.  The first two are addressed above, picking the right solution based on the current marketing challenges you need to solve (as seen through the lens of First Principles) and evaluating your current context (don’t invest in a CRM system if you don’t have or expect to have a big customer list).  The third aspect centers on secondary benefits.

As referenced above, many technologies deliver or empower multiple objectives.  Paid Search management tools can save time in managing keyword lists, save money in managing bids, provide insights into customer behavior while improving messaging through reporting on keywords, and many other benefits.  Although the primary benefit may be keeping track of keyword lists or just managing campaigns across publishers, the extra benefits create real leverage.  A DMP is technically just a place to store your data (usually customer data), but once you have it set up, you can enrich and activate that data in ways never before possible, creating new, unique Insights, customize Messaging by segments and maximizing efficiency in Delivery.

Ultimately, there are more “good” things to do than there is budget or time to do them.  As marketing leaders we must prioritize projects that will deliver the highest value, real leverage.  Implementing MarTech and AdTech solutions usually requires a lot of time, from a lot of different people, often impacting IT, Finance, or other team members outside of Marketing.  This carries a cost that’s additive to the actual price tag.   Picking the right projects through a focus on First Principles in both the primary and additional benefits of the solution creates leverage that maximizes the return on your investment of time and money.