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Advertising & Marketing Fundamentals For Data Scientists

Advertising & Marketing Fundamentals For Data Scientists

I am an advertising and marketing veteran who is currently transitioning towards data science. You can read about my transition here. Over the last 25 years, I have worked in different marketing roles from advertising copywriter for FMCG (fast moving consumer goods) to marketing director for highly specialized B2B software.Advertising and marketing are subject to data science, and the hopes are high that data from the past might help make better decisions in the future such as:

improve product recommendations and thus increase cross- and upsell
decrease customer churn and thus grow customer lifetime value
enhance opening-rates of email-blasts
boost online ad click-rates

There are great books on this subject such as “Introduction to Algorithmic Marketing: Artificial Intelligence for Marketing Operations” by Ilya Katsov. Henry Ford once said: “Half of my advertising is a waste – I just don’t know which half.” These ratios are somewhat symbolic than factual, but the quote accurately describes a problem which persists until today. Marketing is a highly inefficient discipline with vast amounts of money at stake. A company’s marketing spends can be as high as a double-digit percentage of their revenue. Red Bull is reportedly investing ⅓ of its 7.4 billion USD 2017 revenue into marketing. Their Formula 1 engagement alone consumes a third of their marketing budget. That’s more than half a billion USD per year. Does every single dollar spent on racing cars translate into more cans sold? Certainly not, and every marketing professional would agree on this. A couple hundred million USD are being wasted by a single company like Red Bull, in spite of their remarkable commercial success over the last three decades.Generally speaking, data science can undoubtedly help optimize marketing investment decisions based on deep insights into historical data. How can this write-up be of value for someone working in data science? Consider this blog post a highly opinionated view on advertising and marketing based on broad experience over decades.

Snickers “You’re not you when you’re hungry” campaign | Source: BBDO
Never trust a  marketing manager who has never worked in FMCG (fast moving consumer goods)It’s always a good idea to talk to colleagues in the discipline you want to learn about. Business to consumer (b2c) marketing has traditionally been far ahead of the curve compared to business to business (b2b) marketing. I met excellent marketing managers in both b2c and b2b type of companies. However, those who have never gained experience in business to consumer marketing do not understand their discipline on a deep level.Your marketing efforts are seen an irrelevant distraction by your customersThere is a fundamental difference between how a marketing department views their efforts vs. how customers think and feel about the same.

Only business to consumer, FMCG marketing teaches marketers the sole fundamental truth in marketing. Customers don’t give a crap about you. As a marketer, your reputation equals that of a used car salesman or debt collector. You are the guy who:

distracts them from watching their favorite TV show without interruptions
regularly stuffs garbage (aka direct mail) into their mailbox
pollutes their neighborhoods with oversized, ugly, illuminated billboards
spams their email mailbox and thus unnecessarily grows the daily dose of emails
eats up bandwidth by displaying ever-annoying (aka rich) online ads

As Mike Tyson once said: “Everyone has a plan until they get punched in the face.” FMCG marketing is that punch in the face. Some large, well-known b2c companies I’ve worked with even have panic rooms for their employees. A frustrated customer might show up at the doorstep with a baseball bat in his hand. Yelling, beating, spitting is the ugly reality of what marketers euphemistically refer to as “customer engagement.” The business to business marketing world is a much nicer one. The stakes are smaller, the battle for customers is not as fierce as in the business to consumer space. In fact, most b2b marketers remain unpunched throughout their entire career. They are very much like nuns living in a celibate: They have a profound theoretical understanding of human relationships, but little do they know about how things work on the ground. Especially, when the going gets tough.Your product is likely very much the same as dozens of other productsIf your company is selling chocolate bars, the product is likely the same as your competitor’s one. They might even come from the same supplier’s factory. If you are selling cars, most components are utilized across the entire organization: Audi, Porsche, Seat, Skoda, and Volkswagen share the same engines, underbodies, and parts. Even fierce competitors share technology to drive efficiency. So do BMW and Daimler for example.A business to consumer marketer’s job is to differentiate products which are factually almost the same. Nonetheless, a Porsche is a different car than a Volkswagen. But what makes both different from each other is certainly not the technology under their hoods.“Oh, business to business marketing is entirely different.” some b2b marketers might argue. “Products and services sold to enterprise customers differ a lot from each other.” Really? So, your company is selling the xth data visualization software, ETL tool or Hadoop distribution. What’s so uniquely different about your product compared to what’s already available on the market? Frankly nothing, beyond some bells and whistles. Very likely though, your company is monetizing on a market inefficiency: demand is growing faster than supply, thus creating opportunities for newcomers offering virtually the same products as the incumbents. This is particularly true if you are in the technology space, where market inefficiencies pop up and disappear in the blink of an eye. Whenever a supply-demand-mismatch occurs, more food is showing up on the table.By contrast, if you are providing ubiquitous, fast moving consumer goods in saturated markets, you are competing for the food that is on your competitor’s table. You can only get more food if you take it from your competitor. He won’t give it to you voluntarily. You have to fight for it by distracting customers from what they like doing: watching TV, browsing the web or reading emails from friends, relatives and business partners.In a nutshell, marketing is the discipline of selling products and services that are almost the same as your competitors’ ones to customers who profoundly don’t care about your efforts. That’s the wall you have to break through!Marketers who still argue that “our product is different, it just needs marketing” underestimate their customers’ intelligence: If your product is so different, customers would have had already learned about it by word-of-mouth and research. Indeed, they do not need to be “educated” by corporate marketing via spam-emails and other distracting measures.This all might sound very depressing. Is there any hope for marketers? Yes, there is.Marketing is about creating relationships that matter to your customersOn a profound level, customers are humans. They are not numbers in a database, and they do not want to be talked to as if they were: “You are a white, educated, 40-years-old male with a superb credit score, living in a wealthy suburb – you might be interested in our latest 100,000 USD SUV.” Maybe he is, maybe he’s not. He certainly would laugh out loud if you told him how you aim to sell an expensive car to him.What if he prefers to stay low key? Wealthy people often do. Maybe there is a market for luxury cars that look average from the outside? How do you figure that out?Talk to peopleAs a data scientist working for an automotive company, you might get odd looks if you tell your superiors: “I am going to be out of office for a week, talking to car dealers, mechanics, and drivers.” A couple of years ago, I read an anectodical story about Ferdinand Piëch, the former chairman of the Volkswagen Group. He reportedly had a meeting with his truck division’s executives, and they jokingly talked about driving trucks, until Piëch produced a valid truck driver license from his pocket. Being known as someone who has gasoline in his veins, Piëch had little tolerance for executives who are industry-agnostic (aka don’t care what they sell, as long as the pay is good): “Yesterday, I sold cosmetics, today, I sell cars and tomorrow – who knows – maybe pet food.”Truly understand how people feel, think, act and spend their moneyYou can’t fake it. You have to “smell” the business. Leave your desk, for starters. I remember once working for a POS (point of sale) design agency. One of our biggest customers was a family-operated retail business with approximately 300 duty-free airport outlets at that time. One thing that our agency wanted to remove were bargain bins which we found quite disturbing. It looked odd to us that Gucci, Prada, and Dolce & Gabbana bags worth north of 1,500 USD apiece were heartlessly dumped into those bins. “Wouldn’t it be better to have high-quality touchpoints for each of those brands?” we thought. Our customer’s executive team was supportive of that idea. But then, luckily, we hit the road and talked to sales people working in our customer’s outlets. “What are these bargain bins all about?” we asked. Many sales representatives shared the same observations: “Customers actually love those bargain bins. Some of them storm our shops during a stop-over and they spend 5,000 – 6,000 USD on two or three of those bags within minutes. They feel like hunters who stumbled upon a rare, overlooked treasure.” As a result, we didn’t touch the bargain bins. Although the total volume of luxury handbags sold was microscopic, we realized that those bargain bins attracted a wealthy clientele. This had a positive impact on our customers’ brand, as the vast majority of customers with average incomes want to spend their money where the wealthy do.Talk to real people. Marketers surprisingly rarely talk to customers and those who interact with them on a daily basis, such as support agents and salespeople. How do they know how customers feel, think, act and spend their money? Frankly, they quite often have no clue. They might know all their products’ bells and whistles in and out, but they can’t put themselves in their customers’ shoes.Treat your customer like an intelligent friendBill Bernbach, the founder of legendary ad agency DDB and creator of some of the most outstanding advertising campaigns, advocated the idea that marketers should treat customers like intelligent friends. Talk sense, and they will listen. An excellent example of that approach is the Snickers “You’re not you when you’re hungry” campaign. It’s an entertaining, often quoted campaign based on real-world observations. People tend to behave weirdly when they’re hungry. They seem not to be themselves. You can’t make those things up as a marketer.In contrast to that, when you flip through corporate websites and brochures, customers (mainly hired models) are happy most of the time. They have a lot of fun. Why? Because they use your product. You’re making their lives so much better. They’re inspired to make the world a better place. Whether you’re selling washing powder or ETL software, happy customers all over the place. Some FMCG marketing professionals I worked with call these: “Far, far away in marketing land campaigns.” Many marketers operate in a fantasy world because that’s the only reality they know. They are sentenced to live with it, and so are their customers who have to bear that nonsense.As a data scientist, you can derive a lot of value from real-world insights. These observations can give you the necessary grounding in your customers’ experience reality, which is very beneficial for your work as a data scientist: “Do the things we do even make sense from a customer perspective?” Do the reality-check as often as you can.You can go even one step further.Buy the products your company sellsAirbnb is known for hiring people who are fanatic about their service. This approach has a fundamental impact on the company’s culture: People who work at Airbnb care about Airbnb because they use Airbnb in their daily lives. Their customer experience is superb.Netflix, by contrast, offers one of the worst customer experiences I came across in the entertainment industry. Sure, they are hiring data scientists who are tirelessly improving their recommendation engine. But did anyone make a step back and ask himself: “Do customers even care about a recommendation engine?” I don’t, and from experience, I know that many Netflix customers feel the same. Why does Netflix:

recommend series based on my watch history, even if I disliked them? I found “The Haunting of Hill House” just boring, and I downvoted it, but Netflix recommends further, similar series because “you watched this”
suggest continuing watching “El Chapo” which I have already consumed in full length?
not provide any information whether “Mindhunters”, “Suburra” and “Ozark” will be continued?
change the covers of series so that it’s impossible to find them, even if they are on your watchlist?
not inform about upcoming series which soon are soon going to be released?
not provide trailers for every single series but instead just for some of them?

None of that makes any sense from a customer perspective. Netflix CEO Reed Hastings was right: “Our biggest competition is sleep.” Ironically, I fall asleep quite often while watching Netflix because I select poor series due to their lousy user experience.Sure, you can be an Airbnb and Netflix user and gain first-hand customer experience that way. But you can’t buy a nuclear power plant if your company is building those. However, you can get exposure to people and organizations that buy, sell and consume electricity coming from those plants. You likely can’t buy a jumbo jet, but you can book flights with your employer’s plane. If you have absolutely zero exposure to your employer’s product or service: Why did you pick a job at that company in the first place? Do you even care about what they sell? If you can’t relate to your company’s products and services, you are sentenced to work far away from your customers’ experience reality. Lucky you if you have a profound relationship with the products and services your company sells.Below are some reads on the subject of advertising and marketing fundamentals. Most are quite old, yet still relevant in today’s world:

Truth, Lies and Advertising: From the creators of the “Got Milk…?” campaign. If you have ever wondered how to sell a commodity in a saturated market – here’s the answer
Bill Bernbach Said: The hardcover trades for 300 USD, but Bernbach is a legend and he lay the foundation for marketing and branding
Ogilvy on Advertising: Another ad & marketing legend providing insights into his craft

Neither Apple’s nor Nike’s success would be thinkable without the above gentlemen’s’ groundwork. Enjoy!
I work as a data literacy expert, and I cater to large companies in Europe and the US. You have questions I didn’t answer in my write-up, or you want to share your experiences? Please leave a comment or reach out to me via email or LinkedIn. Thank you!

Link: Advertising & Marketing Fundamentals For Data Scientists