Behavioral Potential for Digitally Minded Direct Marketers

I had a short discussion recently with Carla Hendra, co-CEO of Ogilvy North America, about how behavioral marketing has transformed with the digitalization of media. Hendra, who heads Ogilvy’s one-to-one marketing network, discusses how direct marketers are making the most of this and how, when properly executed, behavioral marketing can benefit individual consumers.

David Rittenhouse: How do you see behavioral marketing evolving?

Carla Hendra: Direct marketers have been running behavior-based programs for some time now. The big change the Internet has introduced is the ability to capture customer behavior in real-time.

This enables us to get a richer picture of the quality and quantity of interactions a consumer has with a brand. This can’t be done as easily, as inexpensively, or as quickly offline, though databases are used to drive the marketing in both cases.

DR: Can you give us an example?

CH: Take the credit card marketing we do for American Express. We match offers with cardholder spend patterns, and we take the value of the customer into account. We can say, “The top decile looks like this,” and act on that information.

Tracking behavior on the Internet offers an added advantage because of the amount of information we can get about consumers. What pages have they visited? What offers have they engaged with? What functionalities of a site have they tried out? How much time have they spent? How many times have they been back? We get a better sense of what’s going on with them as individuals. Their actual behaviors reflect the real world each consumer lives in.

DR: So it would seem behavioral marketing isn’t new to direct marketing, but digital media enable new things?

CH: All this information presents a big challenge for marketers. As a marketer you can track behavior, aggregate it, report it. But then what do you do with it? Smart marketers use it to develop adaptable marketing programs that are automated in real time. This leads to the idea of mass customization and, ultimately, the holy grail of personalization.

DR: How does it work?

CH: Messages and offers are matched to customer profiles, for example, built on recent behaviors. So, communications are more relevant to the individual. Marketers can say, “I know this about this person and so will offer this.” When done in real time over the Internet, it’s really database marketing on steroids. The challenge for marketers is to be able to respond and fulfill requests in the same timeframe. The DM industry has been using offline models to project and predict outcomes that are starting to evolve to this new business context.

DR: Does this create problems with consumer privacy?

CH: Marketing to someone’s behavior can be done anonymously and, at the same time, address them as an individual with relevant messages and offers.

If I buy cookware from Williams-Sonoma, it’s reasonable for them to follow up with a Pottery Barn or Williams-Sonoma Home catalog based on my behavior. I don’t think anyone would find this objectionable, because the subsequent communication is likely relevant. The real solution is to use the tools of permission-based marketing, where the consumer provides the level of private information that they’re comfortable with. This is usually in order to get something from a marketer.

I think the industry has learned some valuable lessons about this already. And the government has learned as well, though they’re still trying to answer the question, “Who legislates privacy?”

Just think about how many people have joined the federal Do Not Call Registry. Many consumers are not OK with being interrupted at dinnertime with a call from a telemarketer selling something that’s totally irrelevant to them. Internet marketing also has to be careful about being too interruptive and to avoid the appearance of Big Brother. That’s why permission-based techniques are best.

I don’t think the concern about privacy will ever stop entirely, but it is something the industry is taking very seriously.

DR: What about the special problems the Internet poses?

CH: Internet marketers, especially, put a halo around privacy. Peoples’ right to privacy clearly must be respected. I met with PricewaterhouseCoopers recently, and they shared a study on the issue of privacy.

They found younger segments, say from 11 to 18 years old, are much more willing to exchange personal information for offers and information. Kids don’t care the way their parents care, because they’re in a comfort zone with online behavior and usage.

If they give permission, they understand they get something in return. It’s an exchange. They give to get.

Part of the whole privacy debate is generational and will certainly change over time, perhaps out of a sense of resignation. Some people already believe, as Scott McNealy of Sun once said, “[You have] no privacy. [Get] over [it].”

In general, using behavioral information to increase relevance is a good thing.

DR: I saw a recent Jupiter Research survey of marketers’ plans to utilize various approaches in the next 12 months. It seems behavioral targeting is not as high a priority as it has been in the past. Do you agree?

CH: What was it replaced by?

DR: Podcasting, RSS, blogs….

CH: No, I don’t think that interest is decreasing. I’d say that the question just leads marketers to answer in a certain way. Behavioral marketing and RSS and podcasting are not competing against each other. RSS and podcasting are tools that allow marketers to deliver messages, content, and offers. These contacts are worthless if they are irrelevant.

I think that they can work together; for example, via microcasting so the message is tightly aligned with the individual consumer’s interests (blogging, podcasting). Most of the Internet brand leaders seem to be moving in this direction. Yahoo is, with all the original content and features they’re offering to their users.

DR: Any thoughts you’d like to leave us with?

CH: Marketers are using behavioral data from their Web sites in new and interesting ways. They’re saying, “This and this means that that person may be about to do this” and responding quickly with communications and offers.

We use this information day in and day out as direct marketers, though the challenge is using it correctly. I’m not sure if, for example, search histories are valuable compared with behavioral data such as purchase histories. We’ll find out.

But no such data is always right. Look at Amazon.com. If my children use my log-in to buy something, say, video games, then Amazon.com gets a certain picture of who I am. Or if I buy business books for my office, they think of me only through that dimension and their “suggestions for you” might be totally off base based on the behavioral portrait they have of me.

I think these are still early days for behavioral marketing on the Internet. The potential is really great for digitally minded direct marketers.

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