Are you a log splitter or a diamond cutter?
In my last post I discussed how marketers are changing their methodology for driving more effective campaigns by expanding their testing from A versus B to A to Z. In that same post, I cited the power of machine learning to test in-numerous combinations to determine the winners.
Some people took the post to say, “Great. Now with machine learning I can find the best offer not from a simple bake off but against any number of offers. I’ll take the best one out of an A to Z test (which will clearly be better than what I’d get from a simple A/B test) and scale that one, say offer T, to EVERYONE, right?!”
Wrong. That’s like taking a highly trained gem cutter and replacing their facet cutting machine with an ax to cut a rough diamond. Imagine the amount of waste of that precious mineral. Customers need to be thought of in a similar way; like precious metal versus a piece of wood.
Woodcutters don’t care how they treat each log. Each one is cut indiscriminately with the goal of building a big pile of fire word and getting a good work out. Traditional marketers are a lot like woodcutters; they batch up customers into big piles and send messages or offers from a pool of what has worked in the past. And what do they have to show for it? How many customers they touched and results that aren’t very ground-breaking for the business.
“But if you could target the best offer at the right time and place to each customer, would you shoot better than average? In a word, yes.”
Back to my last post, when I posed the above question what I was really asking is: are you ready to take this new, more precise way of marketing and really let it change the way you market? In short, are you ready to become an advanced marketer?
Advanced marketers don’t view customers as a pile or one mass. They see the power in understanding a customer’s unique attributes and behaviors. They see differences – natural fissures in base that divide customers into meaningful sets – and how each might respond to specific treatments. They look for ways to cut customers into these finer slices to get better results.
Advanced marketers understand that traditional offer-response driven campaigns – where the focus is on pounding customers with offer message after offer message – may be short term optimizable but certainly not sustainable when the pounding stops. They see the shortfalls of focusing solely on offer-response because they understand that reliance on offers is like “ginning” up results – anyone can get a great take rate if you offer everyone an iphone-5!
Understanding customer potential is the key
Advanced marketers see potential in their customers but they also see waste. They know that, for any given marketing objective, there are customers that have zero potential and marketing to them is a waste of time and money. The advanced marketer knows it’s just as important to find these customers who might as well be a “box of rocks” and isolate them as it is to find new campaigns that work.
Understanding a customer’s potential is the key. And the only way to do that is to understand their past behavior and predict their future behavior. This is the real power of what I described in my last post. Machine learning doesn’t just give you the opportunity to do A to Z or alpha to omega or infinite combinations of treatments; it gives you the ability to apply that capability according to a customer’s potential to achieve the marketing goal you’ve set.
Doing A to Z testing where you apply the winning treatment to everyone is just a different form of batch campaigning that we’re all familiar with from the past. And just focusing on customer’s behavioral response (post treatment) without understanding their potential is just as bad.
Diamond cutters measure in slices.
And diamond cutters certainly don’t measure results in batches. They do it in slices.
Marketing measurement has to change. It’s not about reporting a single number that reflects an average response rate across the entire base. It’s about slicing your customer base into as many slivers as possible and reporting on the impact you have with each target group.
In a typical marketing campaign, think of how many customers you touch who have zero potential in helping you achieve your marketing objective. Advanced marketing is about eliminating those customers as targets, determining the customers who do have potential and targeting them with the right message in the right context. Think of it as a never ending process of finding gems and eliminating rocks.
Slicing your customer base into smaller and smaller slices is how you move the needle and deliver dramatically better results. It’s also how you get the coveted title of “advanced marketer”.