February 16, 2012

Targeting's Diminishing Returns

In the past few weeks I've written a couple of posts (here and here) about the lousy record of "hyper-targeting." My bottom line on this has been... 
"As we have developed the ability to target people more and more precisely on the web, click-through rates of these hyper-targeted ads have dropped dramatically."
The question is, why? If you believe conventional advertising wisdom, being able to target people based on individual behaviors, attitudes, and demographics ought to make advertising substantially more effective. And yet no one's smarter than the facts. It hasn't made online ads more effective. So what's going on?

A thoughtful friend of mine, Bob Knorpp, who hosts the BeanCast, wrote the other day to offer his opinion. Bob said,
"The trouble with targeted marketing is no one is really willing to do it. We take a few data points, hit lame demographic messaging and call it one to one. Then people like you (correctly, I might add) point out that it isn't as effective as mass.
Obviously mass is effective. Targeted marketers who claim otherwise are full of shit. But saying that targeted marketing doesn't work based on the fact that no one is doing it effectively is not proof against the practice, as much as an indictment against marketers' improper use of the tools."
If I may paraphrase Bob's point, it is this: The problem is not with the theory of hyper-targeting, the problem is that it's not being executed very well. Only time will tell if Bob is right about this, but I'm unconvinced.

I have watched digital media people do what they do, and as far as I can tell, they're pretty damn good. I don't think that's the problem. I think the problem is deeper and falls into two areas.

First, I think that the smaller we slice and dice populations the quicker the returns are diminished. Once we get beyond a certain point, we are just playing math games and are not really increasing effectiveness. Vinny Warren says his old boss once told him,
"You can’t parse humanity." While Vinny's ex-boss may have overstated his case a bit (there's no future in trying to sell golf balls to tennis players) I do believe there is an inverse relationship between the granularity of our targeting and its productivity. 

Second, I think that the quality of the message provides us with far more opportunity than the meticulousness of the targeting. The marketing industry seems to have bought into the fantasy that media strategy -- not the message -- is where the leverage is. It is pretty clear from the results that, so far, this hypothesis has been wrong.

Maybe Knorpp is right and we just need to execute more effectively. I'm officially skeptical.

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