In many ways, 2016 seems like a lifetime ago. Cast your mind back to February 2016 and you will recall a very different place. We had the effortlessly cool and immensely reassuring figure of Barack Obama making most of us feel like the free world was in safe hands. The UK was an established and essential member of Europe and, aside from a few right-wing nutters, the future of the British Isles was inextricably and irrevocably entwined with our Euro-cousins.
And then it all changed. First, Brexit took this country by storm on that overcast day in June. A few months later, despite pussy-grabbing and wall-building his way through his election campaign, the Donald duly became the 45th president of the United States.
The common thread, other than incredulity, that links these two seismic events is a little-known British company called Cambridge Analytica. You may not know the name but you are about to become very familiar with the company in the months ahead. Led by impressive CEO Alexander Nix, the firm combines three disparate capabilities – psychometrics, big data and addressable marketing communications – into one apparently indomitable model used by both the Brexit and Trump campaigns.
As any trained marketer can tell you, psychometrics is nothing new. There have been four options for segmentation for the past 50 years. You can segment a consumer market by geography, demographics, psychographics or behavioural means. Each has its own strengths and weaknesses and we often combine multiple modes together to create the most parsimonious approach.
Psychometrics makes a comeback
Until the recent arrival of Cambridge Analytica the use of psychographics in market segmentation had been in decline. That’s because psychographics has one big advantage and one even bigger drawback.
Clearly, if we know the outlook and psychological drivers of each consumer, we can create a powerful positioning message that speaks directly to how our product or service caters to their very specific outlook on life. If I am marketing car insurance to a ‘neurotic conscientious’ consumer, I push the idea of how well our brand will cover and compensate for any accident. If I am marketing the same brand to a ‘closed agreeable’ consumer, I emphasise the history and heritage of the brand and how it has become a tradition among better drivers.
We may be about to become as smart and as powerful as everybody in the market assumed we always were.
Despite the obvious advantage of being able to separate a market into groups based on their outlook on life and position them accordingly, the actionability of such an approach has always let it down. I might know, for example, from a representative survey that 28% of my target market are neurotic conscientious consumers. But unless I also know specifically the names and contact details of those three million people in the UK that make up this group, there is very little I can achieve with this segment because targeting is either impossible or highly inefficient.
That’s where big data comes in to play. Cambridge Analytica uses a well-established five-factor model called Ocean to psychographically profile a large sample of consumers into 32 predetermined sub-groups based on their answers to a series of questions about their preferences and motivations. Nothing new there. Where the firm went one step further was to also analyse these consumers’ other behaviours and attitudes gleaned from accessible secondary data such as Facebook activity, purchase history and so on.
The power of secondary data here is that it enables the firm to extrapolate the psychographic segments from a small sample of a few thousand consumers to the entire population. As Nix told an audience at last year’s Concordia Summit: “We were able to form a model that could predict the personality of every single adult in the United States of America.”
Finally, with each and every adult identified and the respective campaigns developed to speak to the different types of consumer and their inherent personal motivations, the evolution of addressable advertising adds the third and final piece. With addressable advertising, Cambridge Analytica can send very different messages to individual consumers that they have already identified in their psychometric segmentation. This can be done through social media and also – as addressable TV advertising becomes a reality in the not so different future – via individual TV ads placed into programme content in real time via a set-top box.
Targeting’s newest tool
There is no doubt that this three-stage method was used by both Donald Trump in the final three months of his election campaign and by the Leave campaign in the UK to fashion the correct messages and deliver them to the right voters in the run up to the Brexit vote. Irrespective of involvement, the degree to which Cambridge Analytica was directly responsible for these two political shockwaves is a less certain point. Clearly, every success has many parents and it could be that this British firm is merely making the most of fortuitously finding itself on the right side of the polls twice in a row.
But a more cogent analysis of the Cambridge Analytica model suggests that it really was a major contributor to both political campaigns, perhaps decisively so. Its approach really does suggest a new and potentially more effective approach to communications than anything we have seen in the past. The confluence of big data, psychometrics and addressable advertising offers a potent new step in the evolution of marketing communications.
For marketers the implications are significant. Targeting has already become a complex and evolving discussion in marketing in recent years with a strong movement, led by Professor Byron Sharp, eschewing most targeted approaches for “sophisticated mass marketing”. This new approach presents a powerful alternative approach to that narrative and suggests that different messages, delivered to different targets at different times really might be back on the strategic agenda.
There are implications for the type of segmentation too. We have relegated psychographic segmentation in recent years and treated it as a poor cousin of behavioural segmentation that is built from market research. This new movement, and its ability to target everyone psychographically, opens it up as a fruitful and extremely interesting approach for many big brands to consider. The use of Ocean segments, all 32 of them, could well provide a more meaningful approach to segmentation than the banality of demographics, the complexity of behavioural segments or the incestuous limitations of the CRM system. We could see a renaissance in psychographics in the near future.
Marketers will face an inevitable backlash when consumers and activists discover exactly what is possible in terms of targeting and positioning. For many decades, consumers have assumed marketers were data-fed, manipulative experts who could change attitudes at the flick of a switch. The frankly piss-poor reality versus consumer paranoia always made me chuckle. If only, I used to say to myself, the public could see how fucking hopeless we actually are.
But with Cambridge Analytica and the combination of big data, addressable advertising and psychometric segments, we may be about to become as smart and as powerful as everybody in the market assumed we always were.
Professor Mark Ritson will be teaching the next class on the Marketing Week Mini MBA in Marketing from April 2017. To find out how it could make you a more confident, more effective and more inspired marketer, and to book your place, click here.