When a scarce resource suddenly becomes plentiful, the repercussions can be enormous. Take, for example, the over-supply of cheap-and-easy calories in modern consumer economies and how this phenomenon is, quite literally, changing the shape of wealthy nations’ citizens.
Historically, high-quality information – the brain-food of marketers – has been as difficult to come by as calorific food was once sought after by our ancestors. With the arrival of store loyalty cards and digital data trails, however, information is moving rapidly from chronic shortage to continuous feast. So how will a super-abundance of data on people’s consumption habits change the shape of marketing?
Shape of things to come
Martin Hayward, director of strategy and futures at Dunnhumby, the data specialists behind Tesco’s Clubcard, has ideas on the shape of things to come. By and large, the profile that he conjures up is not one that market researchers are likely to find pleasing. Hayward argues that, historically, marketers have made business decisions based on the self-claimed behaviour of small, and often inherently unreliable, samples of people. Now, all that is changing.
“We are reaching a tipping point where a lot of the proxies that we have had to depend on, for decades, will become redundant,” he says. “The market research industry bases much of its output on surveys that ask people how they spend their money and how they spend their time. But, the reality is that in many categories we no longer need to ask questions, because we know [from Clubcard data] what 13 million households are buying every week.”
The opportunity for marketers who can lay their hands on customer data isn’t simply to find out what people are buying. By linking data on what groups of consumers have bought to information on their media exposure, businesses are fast approaching, what Hayward terms, the “holy grail” of being able to say with confidence how particular marketing campaigns and promotions have affected sales. “We are getting to the point where we can paint quite a joined-up picture of people’s lives.”
A number of technologal developments are coming together to make the aspirations of the marketing world a reality. The simplest scenario is where a retailer, such as Tesco, knows, from trawling millions of loyalty card transactions, whether customers who brought a newspaper containing an advertisement, or who shopped while a product was promoted on in-store TV, subsequently purchased the featured item, or bought more of it, than they would otherwise have done. “Because the sample sizes are so large, we can be confident that any differences that we spot between the exposed and non-exposed groups are robust.”
But, the endgame isn’t simply to exploit the resources of single source databases. David Fletcher, head of research at media buying and planning business, Mediaedge:cia, makes the point that the set-top box technology used by Sky television allows marketers to say whether or not households received specific commercials.
Provided that the households’ identities are anonymised, it is possible and, on the industry’s current reading of the situation, legal to cross-match this data with the purchasing records of participants in consumer panels or holders of loyalty cards. It is then a relatively simple matter, by comparing the datasets, to find out whether, on average, households that received the advertising bought more of the featured brand than those that did not.
On top of that, says Fletcher – who predicts “cultural shocks” in years to come – what is true for Sky households today will, increasingly, be true for cable and broadband households too. “Some of the traditional measures that we’ve used to assess the impact of advertising, such as awareness, could suddenly become redundant.”
The digital revolution would be grim news, indeed, for the market research industry if the role of market research were simply to help brand owners and retailers estimate marketing effects. Fortunately, this is not the case.
To begin with, argues Millward Brown communications research director Dan White, when a piece of marketing works, brand owners want to know why it works, so they can replicate that success in the future. “To understand why people prefer one brand over another, you need to talk to them about their perceptions of brands and what messages they take away from advertising.” But why, if it is becoming possible to measure the sales impact of one burst of marketing activity against another, do marketers need to concern themselves with the nebulous stuff of what consumers think?
Advertising vs promotions
If advertisers could quantify the return on investment of an advertising campaign versus a series of in-store promotions simply by measuring immediate sales effects, the business case for talking to people about “brand image” would look shaky. The fact is that while, in the short-term, advertising has less of an impact on sales than price promotions, which deliver an instant hit, over the long-term it stimulates demand and makes customers more inclined to pay premium prices.
Says White: “If companies focus purely on transactional data, they will tend to make short-term decisions in which price promotions dominate.” In the long-run, this pattern of prioritising instant sales lifts over gradual brand building erodes the brand’s credibility and, in the worst case scenario, its ability to command a decent price. So what does all this imply for the future of marketers and customer insight specialists?
In the short-term, agencies that run tracking surveys have opportunities to sell household consumption and lifestyle data to businesses that want to know about the goods their customers buy from competitors. Or, they might want to know about the things that customers don’t buy at all but might, with a little coaxing, be persuaded to buy. For example, a retailer might discover, by cross-matching its own customer data with survey information, that a group of customers approve of organic produce, yet rarely buy it. What that tells you, says Hayward, “is that there is an opportunity to offer customers in those groups an incentive to try organic foods.”
Handling the volume
Capitalising on the ability of survey data to plug the gaps left by digital sources is not, by itself, a recipe for long-term prosperity, however. As more and more data streams gush forth from mobile networks, online channels and interactive television, data management firms may be tempted to diversify into online research to complete their service offering. To compete in this integrated space, market research firms, for their part, will need to demonstrate to their clients that they, just as much as the new entrants, possess the skills and infrastructure to handle vast volumes of data.
One looming issue, that has yet to be broached, is how marketing services providers should configure their infrastructures to handle the torrent of consumer data that search engine businesses, such as Google, could, one day, make available to brands. Synovate global brand practice chief executive Ged Parton makes the point that, even as things stand, data management firms and market research agencies struggle to cope with the plethora of data streams spouting from surveys, loyalty cards and EPOS systems. Add to that the colossal volumes of data that search engines could disgorge and the problem threatens to overwhelm.
The digital challenge
“At the moment, we don’t have a currency for understanding what people are doing in the digital space,” says Parton. “The challenge is to build a platform that could take all those feeds, in different formats, and turn them into datasets that can talk to each other.” So how will the landscape that is taking shape affect the different types of companies in the market research community?
At one extreme, the largest market research groups with the financial muscle to build robust data management platforms clearly have opportunities, albeit at considerable business risk, to extend from market research into data integration and analysis. At the other end of the spectrum, after trawling through oceans of customer data, brands may want to know more about the motivations that underlie observed patterns of behaviour. If this is the case, those standing to gain most are the qualitative experts, such as ethnographers, consumer psychologists and semioticians.
“Quite a lot of what insight requires is empathy, observation, intuition and an ability to articulate something quite subtle that changes the way in which clients see the world,” says Simon Lidington, Market Research Society spokesman and founder of the Insight Exchange. “Those aren’t the skills that typically characterise professionals who are brilliant at data modelling,” he adds.
The swirling tide of data issuing from digital channels won’t buoy up everyone, however. Compared to other marketing services sectors, such as advertising, market research is a highly fragmented industry with a broad middle layer. The problem for these middle-rank firms is that to take on the sorts of projects involving multiple data sources that large clients are increasingly likely to specify, agencies will need not just brainpower, but critical mass too.
Says Parton: “The market research businesses that will struggle most are not the boutiques with specialist skills but the generalist mid-sized agencies that don’t quite have the scale to invest in the necessary IT platforms. As in many industries, the worst place to be is the mid-ground because you get squeezed from both ends.”
When the waves of the approaching data storm die down, the agencies that emerge in one piece may be stronger – but their numbers will be fewer.