Marketing practitioners are divided on whether it’s necessary to understand why consumers behave the way that they do. One view is that understanding “why” enables marketers to develop appealing offers and messages to best match consumer needs. The alternative view is that “why” doesn’t matter when determining the effectiveness of marketing and ROI. Behavioral information is what’s required.
This is not a new argument. It’s been around as long as there have been direct marketing specialists, who focus on demonstrated behavioral lift in response to marketing activities, and mass media specialists, who focus on response to mass advertising and intermediate indicators of behavior in attitudes and perceptions. But several things have changed in the marketing environment that materially impact this debate/struggle, including technological developments like the Internet, mobile and Big Data, an economic environment of scarcer marketing resources, and new research (practitioner and academic) that provides new evidence on how marketing works.
Behavior Rules
Demonstrated in-market response is the most tangible evidence of marketing effectiveness. This can be seen in the direct marketing of offers via paper mail and telephone, and in person, such as for credit cards, insurance, telephones and wireless services, and retail store campaigns. Increasingly, these types of campaigns have moved to e-mail and other Internet formats, but they retain some of the same principles. The target can be individually identified and addressed, and response can be evaluated for each customer. The method of evaluation can be basic counts or more rigorous designs that include test versus control cells, pre versus post campaign comparisons, and extensive data mining to identify predictors of success. Importantly, the ROI can be directly calculated based on the cost of acquiring a customer, the cost of the campaign, and the revenue response—that is, when a customer signs up for a product or service.
Understanding why a customer responded or didn’t respond to a direct offer is not critical to measuring this type of effectiveness. It is important to know what factors contributed to the yield so that they can be improved upon in subsequent offers and campaigns, such as the quality of the prospect list (Do they have the income to be able to buy the offer?), the execution of the creative message (Did the use of humor increase yield?) and the nature of the customer (What needs-based segment does he belong to?).
While some indication of motivation may be included, it likely accounts for a small increment in sales uplift. Basic consumer characteristics, such as income, assets and location, probably account for more than perceived product benefits and emotional needs.
A key part of the marketing process is the ability to test and learn from prior offers to improve subsequent offers. It’s not always crucial to “get it right” the first time, since the interactive nature of marketing allows for fixing product problems in real time.
Technology improvements such as Internet tracking devices enable targeting on a more refined level and increase the future prospects for addressable marketing. This includes digital advertising, which can be measured more precisely than mass media. Since the effectiveness can be directly and immediately assessed, the ROI and future resource allocation can be closely managed.
This is critical in an economic era when resources are scrutinized for indications of payback. Why invest significantly in understanding the consumer’s motivation when it’s costly, imprecise and not immediately linked to sales uplift? If the “why” question is important in today’s environment, how can it be proved in a behavioral way, such as in demonstrated sales impact?
Mindset Matters
The arguments in favor of understanding “why” often relate to the strategic choices that marketers make about what their brands should stand for and how they will communicate with the consumer. Prior to measuring effectiveness, the marketer has to ask what’s going to be evaluated. What distinguishes our brand from competitive brands? Why should a customer consider using it? In practice, these issues have been investigated via measures of “what’s in people’s heads,” such as brand awareness, consideration for purchase and perceived favorability compared with other brands.
In the last five years, there have been numerous studies that establish quantitatively that these mindset metrics do influence product sales, over and above the direct response to marketing activities. The most powerful and comprehensive results come when both marketing mix and mindset together play a role in the analysis. If one of these types of influences is left out, then it reduces explanatory power and limits the marketing executive’s ability to effectively influence sales.
To be useful, the mindset metrics have to be translated into specific brand sales outcomes by measuring how changes in mindset relate to sales through mechanisms like elasticity, such as the change in sales that is associated with a change in mindset, like brand consideration.
Some brand dimensions have greater impact than others and are better candidates for improvement based on the potential upside available in the market. For example, trust may be the most important dimension across the product category for building strong brands. However, the implications for action are quite different for the most trusted brand, which may have little room to move up, compared with less trusted brands that have more upside (but a harder task to achieve it).
A related set of recent research findings distinguish the time horizons of marketing influences. The marketing mix impact usually is captured in the short term—six months, for instance. However, studies consistently show that the long-term impact of marketing goes beyond these immediate responses. Moreover, the long-term impact can be multiple times the size of the short-term impact. For example, long-term advertising effects often are twice the size of short-term effects.
These two established findings related to mindset metrics and long-term marketing effects provide powerful support for going beyond immediate sales lift as the sole measure of marketing effectiveness. They give a compelling reason to measure consumer mindsets and incorporate the “why” question in comprehensive strategic marketing. Limiting the focus to marketing’s short-term impact runs the risk of understating marketing’s overall effect, and its ROI, and missing opportunities to improve it.
Behavior and Mindset
The challenge for marketing intelligence is not that all marketing issues must be tackled with complete information on marketing mix and mindset. This may not be feasible or necessary in every case. The challenge is to develop the appropriate information, based on what’s important for understanding short-term and long-term impact, and what type of actions can realistically be taken. Research shows that different types of marketing actions combine to produce overall impact. Ideally, marketing organizations can take advantage of these possibilities for integrating different ways that marketing works, rather than treating them as two sides to a competitive conflict.
This article was written by the AMA contributor: Gordon Wyner and this post was re-purposed from the American Marketing Association. Read more Marketing News here.