Friday, January 27, 2006

After Amazon ... The Line is Drawn

For marketers, mark this as “Year 11 AA” (After Amazon) – the point in history when a line was drawn between traditional marketing and data-driven marketing. A point in time when a convergence of technology, the rise of consumer power and the potential for longitudinal customer relationships mandated we change how we converse with customers. It is change or perish. It’s that simple.

In Year 1 AA, Amazon’s personalized recommendation engine launched ecommerce and began a revolution in marketing that has reached far beyond the World Wide Web.

When was the last time you walked into a store where the clerk greeted you at the door with an item selected just for you? In the world of online commerce, Amazon can accomplish the seemingly impossible. They have built a store for every customer, picking perfect items from a universe of millions, all in the blink of an eye, thousands of times each second. Since 1995, Founder Jeff Bezos has built an online store that can sell just about anything, with high margins, rapid inventory turnover and high customer satisfaction.
Just three years later, two Stanford programmers developed an algorithm that echoed Amazon’s automated personalized recommendation engine. They founded Google with an engineering concept that treated website links as recommendations, and from that foundation came the world’s most effective search engine.

Much has been written about Googlezon, a fictional scenario developed by Robin Sloan and Matt Thompson. In a thought-provoking look back at the history of the Web from the Year 2014 -- 10 years in our future. Their story is fascinating, amusing and unnerving. But their vision of an Evolving Personalized Information Construct is where marketing will eventually move. It will take time because a generation of marketers who grew up practicing the 4P’s is still at the helm. They are only begrudgingly giving up on traditional mass marketing.

But the facts are clear to anyone who wants to read them. Traditional marketing is no longer working.

Pete Sealey, former CMO of The Coca-Cola Company, at a conference of the Association of National Advertisers, was downright emotional in his assessment of the stupidity with continuing to mass marketing. "We've got to stop, folks!" he cried plaintively as he described the runaway inflation of network media pricing combined with stomach-churning declines in reach and effectiveness.

Seth Godin confirms the failure of traditional marketing in today's business world. Successful marketing is no longer "advertising" -- it's simply too hard to get people to care, because people in the U.S. already have everything they need, most of the things they want, and don't expect significant differences between brands.

A Tillinghast actuary noted: “The market is currently smart and educated, and we cannot trick them into lower benefits. We cannot provide lower benefits for the same amount of money, especially in an era of full disclosure. Rates of return for shareholders of insurance companies are barely at acceptable rates of return. There is no room to take profit from a shareholder.
Customers have never liked to intrusive marketing. While there are exceptions, most mass marketing has hovered in the 2% response rate for years and years, across all media – free standing inserts, mass direct mail, trade shows, TV and radio, banner ads. By any standard, a 2% return on investment is not a good deal. Our CEO’s would be better advised to invest the money in a long-term bond than to spend it on such programs.

There is a better way.

The New Marketing Construct for Changing the Customer Conversation

The new construct makes four fundamental changes:

1. Marketing becomes data-driven, targeted, addressable.

2. Marketing becomes customer-centric and more relevant to customer needs.

3. Marketing becomes a longitudinal, evolving, interactive personalized relationship.

4. Marketing becomes more measurable and accountable.

More to come ...


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