Commentary
Separating The Strategic Signal From The Tactical Noise In Marketing
- by Gord Hotchkiss , Featured Contributor, April 4, 2013
It’s somewhat ironic that, as a die-hard Darwinist, I find myself in the position of defending strategy against the onslaught of Big Data. Since my initial column on this subject a few months ago, I’ve been diving deeper into this topic.
Here’s the irony.
Embracing Big Data is essentially embracing a Darwinist approach to marketing. It resists taking a top-down approach (aka strategy) by using data feedback to enforce evolution of your marketing program. It makes marketing “antifragile,” in the words of Nassim Nicholas Taleb. In theory, it uses disorder, mistakes and unexpected events to continually improve marketing.
Embracing strategy -- at least my suggested Bayesian approach to strategy -- would be akin to embracing intelligent design. It defines what an expected outcome should be, then starts defining paths to get there. But it does this in the full realization that those paths will continually shift and change. In fact, it sets up the framework to enable this strategic fluidity. It still uses “Big Data,” but puts it in the context of “Big Testing” (courtesy Scott Brinker).
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To remove the strategy from the equation, as some suggest, would be to leave your marketing subject to random chance. Undoubtedly, given perfect feedback and the ability to quickly adapt using that feedback, marketing could improve continually. After all, we evolved in just such an environment and we’re pretty complex organisms. But it’s hard to argue that a designer would have designed such flaws as our pharynx, which is used both for eating and breathing, leading to a drastically higher risk of choking; our spinal column, which tends to become misaligned in a significant portion of the population; or the fact that our retinas are “inside out.”
Big Data also requires separating “signal” from “noise” in the data. But without a strategic framework, what is the signal and what is the noise? Which of the datum do you pay attention to, and which do you ignore?
Here’s an even bigger question. What constitutes success and failure in your marketing program? Who sets these criteria? In nature, it’s pretty simple. Success is defined by genetic propagation. But it’s not so clear-cut in marketing. Success needs to align to some commonly understood objectives, and these objectives should be enshrined in -- you guessed it, your strategy.
I believe that if “intelligent designers” are available, why not use them? And I would hope that most marketing executives should fit the bill. As long as strategy includes a rigorous testing methodology and honest feedback does not fall victim to egotistical opinions and “yes speak” (which is a huge caveat, and a topic too big to tackle here), a program infused with strategy should outperform one left to chance.
But what about Taleb’s “Black Swans”? He argues that by providing “top down” direction, leading to interventionism, you tend to make systems fragile. In trying to smooth out the ups and downs of the environment, you build in limitations and inflexibility. You lose the ability to deal with a Black Swan, that unexpected occurrence that falls outside of your predictive horizon.
It’s a valid point. I believe that Black Swans have to be expected, but should not dictate your strategy. By their very nature, they may never happen. And if they do, they will be infrequent. If your strategy meets a Black Swan head on, a Bayesian approach should come with the humility to realize that the rules have changed, necessitating a corresponding change in strategy. But it would be a mistake to abandon strategy completely based on a “what-if."
With many Fortune 500 clients, I can say without hesitation what works in marketing is KISS – Keep It Simple Stupid. The digital age should take a moment to learn from old and simple market ideas that still worked well. I charge my clients a flat billboard price to publish their sweepstakes verses CPA because it is simple and old school, but works. The question you ask about “success and failure” in marketing in my opinion has much to with not making marketing so complex that you fail to see your goals you set in the first place. The goal should be getting the customer to buy the product and not to worry about every useless statistic that can be generated today.
Very thoughtful piece and an interesting analogy of evolution versus strategy (mixing your metaphors).
I would add to the Darwinian Soup that the machines (algorithms/big data) seem to want to go faster to a great answer if they are pointed in the right direction (a form of creationism, I guess) than if they have to boil the ocean.
All that said, my favorite and most reliable surprise is the gap between the 'responders' to a marketing effort and the 'target audience' described in the strategy.
Great post, Gord. How I can I not like something that includes references to both Taleb and Nate Silver in the same piece about the future of marketing?
Thank you for the kind nod on "big testing."
One funny observation: all of these companies that are marketing "big data" solutions to marketers still have -- um -- their own marketing departments engaging in a tremendous amount of strategic and tactical activity that is not being run on auto-pilot by HAL. When one of these vendors fires their entire marketing team and just lets the machine run their rise to world domination, THEN I'll be convinced.
I know, a facetious comment. But in all seriousness, as much as I am a fervent advocate of data-driven marketing, I think there are a few key points to remember before slipping from data-driven into "data fundamentalism":
1. The models which leverage this wealth of data in marketing, whether explicit or automatically derived through machine learning, are still woefully incomplete. Refer to Laplace's Demon. That's fine if you're using this to help make a better informed decision, but it's patently ridiculous if you're expecting it to guarantee you wealth and long life.
2. Evolution is a wonderful system on the timescale of eons, but it's damn vicious when it comes to the survival -- or non-survival as the case may be -- of individual creatures in the present day. For an individual creature to govern its day-to-day choices based on "I guess whatever evolution wants to have happen to me today will happen" and relinquish any deterministic effort to improve its own survival would be ridiculous as well. (Ironically, that very approach would no doubt quickly be eliminated by evolution.)
3. Evolution doesn't have memory in the way that humans do. If a certain species fails at evolving in one dimension, but successfully succeeds on another, Mother Nature is blissfully unbiased. Human consumers and their collective markets, on the other hand, have brand memory. And if a brand throws a bunch of junk at them in a random walk towards one winner, it's going to incur brand debt with those buyers that will not automatically be forgiven. Trust and reputation cross the boundaries of individual experiments.
Anyway, all that is to say, that I whole-heartedly agree with the application of "intelligent design" when it comes to the strategic management of an individual business. Data is a wonderful thing. Being data-driven is really smart. But if you take it to a ridiculous extreme, you're going to see the real business end of evolution in action.
Gord, I totally agree and think too many people are getting caught up in the hype of big data, and too quick to abandon proven tatics. What people should focus on ASAP is the all the low hanging big data fruit that can augment current search strategies using a KISS approach.