Marketing At The Margins

Walker SmithDecember 19, 20122164 min

This is the third of three articles here on Branding Strategy Insider to feature the valuable marketing lessons to be learned from the recently-concluded Presidential election. One and two can be found here and here.

Of the many lessons the successful Obama campaign taught brand marketers, one has been largely overlooked. It is this: the current Big Data ramp-up in marketing database infrastructure needs to be focused on winning at the margins.

Stories about the campaign’s voter database continue to dominate post-election coverage of Obama’s victory. These stories are filled with fascinating details about the fusion of disparate databases, the profiles constructed of individual voters, the likelihood scores assigned to each individual, the targeted phone calls made and the frequency of making them, and the experiments conducted to optimize the framing of Obama’s message to voters. But few of these stories describe, or even recognize, the most valuable purpose of these efforts, which was to sway and motivate voters at the margins.

There were two such marginal effects the Obama campaign needed to accomplish. The first was to get the Obama constituency to the polls. Romney’s campaign made a huge bet that Obama would fail to get the vote out among his strongest constituencies, and thus the final distribution of actual voters would wind up in Romney’s favor. As it turns out, this was a very bad gamble. The Obama campaign was able to use its data infrastructure to turn out likely Obama voters at the margins who, otherwise, would probably have not gone to the polls.

The second effect was to persuade many of those on the fence to vote for the President. Again, this was a marginal effect, one of winning over the next voter, and then the one after that and the one after that, etc., with each successive voter a little harder to convince than the one before.

This election turned on these marginal results. If the Obama campaign had been unable to influence the distribution of voters or the votes of undecided voters, Romney would have prevailed. Only by winning at the margins did Obama wind up with the bigger share of votes cast.

The Obama campaign was fully cognizant of this. A combination of sophisticated targeting models and detailed media profiles enabled the Obama campaign to place ads in media more likely to be viewed by key voters. This resulted in far greater efficiency, or more ad exposure per dollar spent to reach a particular voter, which enabled Obama to offset Romney’s fundraising advantage. Obama’s fewer dollars bought more impact than Romney’s dollars. As noted by Larry Grisolano, who helped develop the system driving media buying, the campaign was willing to forego big audiences in order to reach the “right ones.” This is a focus on efficiency, and efficiency like this is yet another marginal effect. Ken Goldstein, the president of Kantar Media/CMAG, a media monitoring and analytics consultancy that worked with both campaigns, was blunt about this when interviewed following the election:

“All of this stuff [done by the Obama campaign] only matters in the margins.”

In politics, though, voters at the margins matter only in close elections. In a landslide, the winning candidate can afford to lose voters at the margins without threatening his or her victory. In brand marketing, though, margins always matter. The key metric for brand marketers is profit per buyer not total number of buyers, and consumers at the margins are usually the most profitable.

There are many ways of calculating the profit contributed by individual consumers, but the most common way allocates overhead and other operating costs in such a manner that consumers at the margins yield a higher contribution. This is not just bookkeeping; it reflects the actual way in which a company’s revenue scales. The first consumers to buy pay the bills; after the bills are paid, subsequent buying is all profit.

Impact at the margins is what brand marketers must get from huge databases for these investments to be worth it. Certainly, there are other uses to which these databases can be put, but these databases pay for themselves by identifying incremental consumers at the margins who would otherwise go unnoticed, untargeted and unconvinced. As the Obama campaign made clear, the enormous investment of money, time and talent it takes to establish and operate Big Data databases pays off at the margins.

Brand marketers have lots of interest these days in building massive customer files to support sophisticated microtargeting. But the biggest payoff from these investments comes from consumers at the margins. This, then, is the way in which to think about building, managing and, especially, evaluating these databases. If Big Data infrastructure is not working at the margins, in all likelihood, it is not worth the investment. But when it does work at the margins, its value is clear. It is the difference between winning and losing in a highly sophisticated marketplace that is far more competitive than ever before.

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