The Future of Direct Marketing: Data-Driven Media Mix Optimization

The business of marketing has changed. A well known Bain & Company survey once found that 80 percent of CEOs believe they deliver a superior customer experience yet only 8 percent of their customers agree. These points represent an immense opportunity for brands to react by demanding accountability from marketing while also focusing on creating and increasing customer engagement and shareholder value. Consumers have now assumed a leadership role in defining the brand's success.
Optimizing the way you communicate with consumers—media mix optimization (MMO)—will soon rely far less on loosely connected econometric models, and far more on specific target audience identification and measurement of individual-level stimulus and response. Brands are seeking the accountability found in targeted media, such as email, and the line between mass and targeted media will keep changing as more traditional mass broadcast media, like TV, become increasingly addressable.

In this new dynamic, an increasing portion of media spend could still be classified as directly measurable and attributable, yet much of it will be delivered in the traditional channels that brands invest in today.

Personalized "Narrowcasting"
Selection and optimization of your media mix is fundamental to maximizing the precision of media investment. The future of media mix optimization is going to be a continual, real-time and integrated process driven by new capabilities made possible by two trends:

1. Media is becoming increasingly addressable, and thereby capable of being intentionally delivered and ultimately measured and optimized.
2. Customers are not all created equal. The top 20 percent of a typical customer portfolio delivers five times more profit than the bottom 30 percent, who actually consume 80 percent of profit.

The growing availability and reach of addressable media options will enable brands to shift increasing portions of their media investments from mass to targeted strategies. This will deliver on the promise of better accountability. This will create the capability to dramatically optimize media performance via the optimum mix of media. The shift to more addressable options will also enable brands to more precisely identify and optimize communications opportunities.

Based on the aforementioned vastly differentiated value of customers, brands will do more than just purposefully discern how they invest and optimize their media. They will plan and measure right down to the impression level. The benefits go beyond the concept of the "right message at the right time." Brands that have the capability to empower these new forms of media will be able to determine if the impression should even be delivered in the first place!

I affectionately call this concept "Narrowcasting," and many organizations do this today in the form of direct marketing.

Not Everyone Gets It
You think that insight abounds?! There are plenty of new technologies that use behavioral, average audience, in-market activity and context. Wouldn't this provide the level of targeting needed to increase efficacy? Not quite.

A Comscore 2009 study covering billions of dollars in display ad spend arrived at the conclusion that 80 percent of "targeted" display ads fail to reach their intended audience. There is the simple fact that a brand's target audience advertising impressions actually fail at an incredible rate.

While these solutions with their media properties and networks offer audiences of their own, they are a poor substitute for the advertiser's own insights. These media may be interesting, but offer too narrow a field of vision.

These are a poor proxy for the deep insights about the preferred audience that many brands possess today. They can assign a customer value based on many things, including transaction history, price sensitivity, brand affinity, in-market timing, preferences, demographics, lifestyles and much more. These insights are unique to the advertiser, the result of millions invested in research and information systems, and a frequent source of competitive advantage. This better aligns the brand to high value customers than would the inventory that a publisher has to sell.

Many top performing brands have become expert at delivering, measuring and optimizing addressable media for decades. It's the "groove swing" of direct marketers. While its' infancy was found in direct mail, customer service and telemarketing, many brands have developed a rich infrastructure of marketing tools, process and insight that yearn to be fed to additional media outlets. It's more a function of unlocking the value that is trapped in organizational silos. Brands need an executive vision to accelerate the enablement of these marketing assets in the light of their possibility in the new, digitally connected world we find ourselves.

Walk, Crawl and Then Run Fast
Done properly, media mix optimization more than pays for itself. But when you start your MMO journey, proceed at an incremental "crawl, walk and run" pace with your differentiated customer strategy. Then, rev the engine of your new media optimized machine as you adjust it.

Like any journey, you'll need a destination and roadmap to guide your way as you deploy the appropriate engagement strategies and tactics. This must be done while balancing customer demands and organization goals. Throughout the journey, you'll identify ways to reallocate budget from less profitable audiences and media channels to more profitable ones as you measure and refine your tactics.

This is a vision of high performance marketing and advertising in the new reality of our digitally connected world. A place where media mix optimization is increasingly a recurring, real-time and integrated component of advertising efforts. The objective is to develop capabilities that identify high value customers and prospects, develop rich analytic models and data forms to identify those most-desired individuals. They must then logically connect their marketing systems, enabling stimulus and response to be optimized across the range of customer engagement so that at the time when it matters the most—that moment of truth, the microsecond you have to optimize the next engaged customer experience—you've made the right media investment decision.

Tim Suther is chief marketing officer and senior vice president of Acxiom.