Larry and Allen talk about why storytelling is a vital element in your direct marketing strategy, which could be the difference between successfully engaging your...
In the ninth 2 Guys and Some Data podcast, Allen and Larry discuss the traditional marketing mix concept - if it's still relevant today, and how huge amounts of data are now available to affect the four Ps.
Allen: Hey to all the data-driven marketers out there looking for new ways to reach unique prospects and better engage your audiences. This is the ninth podcast for the 2 Guys and Some Data series, giving you the nitty gritty advice you need to actually make more money. Hey, I'm Allen Abbott.
Larry: And I'm Larry Kavanagh.
Allen: And today, we're gonna go old school on you and dust off a very traditional marketing concept but with a bit of a twist.
Larry: Sounds intriguing. What's the topic, Allen?
Allen: So Larry, marketing as you know is classically defined as putting the right product in the right place at the right price at the right time for a consumer. And marketing academics came up with the concept of the four Ps — product, price, place and promotion — which they call The Marketing Mix. For today's podcast, I thought we'd talk about whether the four Ps are still relevant today and how a huge amounts of data that are now available affect them.
Larry: Man I had forgotten that the four Ps were called the company’s marketing mix. If you ask me today about the marketing mix for a company, I'm gonna be start thinking about channels. This sounds like it could be a fun topic, let's get to it.
Allen: Okay, sounds good. So let's take them one by one. So how is data and specifically intent data influence product selection?
Larry: Well, I mean the first thing that pops to mind are like the recommendation algorithms that Amazon really pioneered, goodness 10-15 more than that years ago. You got people who bought this also bought that, people who viewed this, all of it trying to figure out what's the right product for that person. But you know there was also a lot of other things that went into those algorithms you know, you have top sellers trying to help people find what their right product is. You got customer favorites, you had product rankings by customers. Shoot, even in movies today, think about like Rotten Tomatoes. You go through and you read Rotten Tomatoes metacritic scores to figure out is there a movie? Is that the right product for you today? What are you thinking about?
Allen: My first thought went to research. So I'm thinking back to when you wanted to develop products back in the day. You know the first thing you'd do is, you may have some ideas from in-house but you go out and do research. You do focus groups or you do some quantitative research. And today, when you want to start thinking about new product development or category extension, the first thing you do is look at your site, on-site search results and what are people putting in the box. It's going to tell you what they want and maybe what they want more of. So that's an application that I think is really cool and has a lot of potential, it's not been tapped at this point.
Larry: I think you're right on, because what you were talking about there is, you've got like an audience and that's how all of this really started. What's the right product for that audience? But if you think about it, the way the world is changing, you can go sort of the opposite direction. You can say, "How do I find the right audience for this product?" So you can think about things like your own browsing data on the website. If you know that people are browsing a particular category, you can actually design as you're suggesting. You can find products and source products so that you're actually finding the right audience for the right product. Product is still relevant as an element of marketing mix and that data has really enriched it tremendously from at least when I was in school.
Allen: Yeah, there's one other thing that I had thought of, which is the concept of gateway products. We now have enough data from website visits and transactions that we can start to understand what products actually drive purchase even if they're not buying that particular product and that's something that really we were never able to do before back in the day. So that's another I think instance of where data and ability to analyze data has really helped us.
Larry: That sounds great. The one thing, just popped in my head when you were talking about data, you know we're in Cincinnati, which is the home of what used to be called DunnHumby but now 84.51°, think about all that shopper card data that those guys use. They use it to figure out where to even place products next to each other in retail stores so that you're trying to present the right product next to the right product in terms of trying to maximize, I would say, customer utility but also perhaps maximize sales for Kroger or whoever is using that shopper card data. So a lot of good stuff there, but let's move on to price. Allen, is price still relevant and how does data affect price in today's world?
Allen: If you look at the airline industry and the hotel industry, they've been the leaders and not always popular with consumers certainly, with pricing algorithms and determining price based on availability. And you know that's something we can all learn from although the disparity in the prices sometimes is shocking. You know my flight from Philadelphia to Cincinnati, which as you know I do every couple weeks could be anywhere from $289 to $600 and it's tough to get used to that, but you know clearly they know something that I don't.
Larry: On the flip side though if you think about you know when you were talking about airline, what popped in my head is those great old ads for Priceline with William Shatner, you know, name your price. Again, very data-driven, but they give consumers sort of the ability to be a little bit in charge of that. Something that when the academics came up with the four Ps of pricing, I'm sure they never really considered. But technology has allowed — and data has allowed — pricing to not just to be purely like the airlines, how do you maximize price, but it sort of put some of that back into your own hands. I think shopping comparison sites, if you think about how shopping comparison sites worked, you know where companies have data feeds in and again consumers can go in and they can actually price compare in a way that was not possible many years ago.
Allen: Yeah, that's so true and also you know the ability to look at things like what people searched relative to what they bought from a price standpoint, I think is a very interesting opportunity and I'm not sure it's really been exploited terribly. But if you look at products by category, you can start to understand and map out what prices people are willing to pay, kind of what their first choices in terms of selecting a price point by product category, and I think there's probably a lot of value in that as well.
Larry: One of the things that I think there is huge opportunity for now is really looking at a company’s inventory, how fast a product's moving and really be able to dynamically change or on the fly change pricing across channels. You know certainly today you see companies when they get big inventory positions they'll tend to lower pricing, but like I say, I'm seeing more and more, there's the ability of algorithms and software to say, "Hey what's moving fast and maybe there's an opportunity to raise price there."
Allen: I'm thinking about the bar in town here where the price of the beer goes up and down based on demand for that day.
Larry: Absolutely. You know you walk in there in Rhinegeist Truth gets priced you know starts at six, goes up to seven and if you want to keep on buying Truth, you gotta pay seven bucks. You know there's always something down at five and a quarter if that's what you want to buy instead.
Allen: Okay so let's take a little break now cause I think it's time for our trivial question. And you're sure you want this, Larry?
Larry: All right, hit me with it.
Allen: All right, last time you knew the answer to the trivial question about nano-magnets so I get another chance to stump you and came up with I think a good one this time. And by came up with it, I mean I looked online and found something that would be painfully difficult for you.
Larry: All right, let's go.
Allen: So on the last episode, we talked about the future of marketing as the Internet of Things. And obviously this is gonna lead to a huge increase in the number of internet connected devices worldwide. So the question is how many devices do you think are estimated to be connected to the internet by the year 2020?
Larry: So does a lot count as a correct response?
Allen: Not really, but I'll give you a hint. There are currently 13 billion devices connected to the Internet today and that number might be slightly higher in three years.
Larry: Well, there are about 3.6 billion people who are connected to the internet today, so things already outnumber people four to one. I'll think about this.
Allen: Okay, so we'll give you a little time to ponder that and let's jump back into the four Ps. Let's talk a little bit about place and how has the ability to collect and sort and analyze data influenced that.
Larry: The one that popped into my head, and I think you know is one of my favorite topics, is Geo-fencing. Cause all of a sudden, in today's world based on your device, based on the phone that you carry around and based on what the Internet of Things is doing, there's other devices that now carry geo location. You can actually do things like geo-fence an airport or hotels that are near airports and send pizza coupons at four o'clock in the after to the phones or perhaps other internet connected devices that are owned by people who happen to be staying near airports.
There's a great case study written about selling Ringling Brothers Circus back when they had Ringling Brothers circus, to moms. They were trying to find a place where moms would be just scrolling on their phones. And so if you geo-fence places like maybe parks where moms were likely to scroll on their phones, and you know the circus is coming into town — maybe it will be SteamPunk Circus instead of Ringling Brothers today, you know people are more modern — and deliver that piece of marketing at the right place where they're ready to purchase. Place doesn't necessarily mean just channel anymore.It's sort of like where is the place where you're going to receive that piece of marketing communication.
Allen: That's a great example of consumers driving place versus the marketer driving place. Geo-fencing is really interesting, and I think a lot is gonna be done with that. A great example of someone being able to show up at a particular place and drive that part of the marketing puzzle. But you can also I think look online and look to see what people are doing online . You know trigger communications to them based on where the consumers are in the purchase funnel. So if you are sort of near the top of the funnel, digital display ads and things like that might be appropriate, and if you are closer to the bottom of the funnel, you might want to do something a little but more impactful like personalized postcards.
Larry: I think the other thing, when you think about place, when people think about the channel of marketing, people tend to be responsive to different types of marketing. I know one of the problems that we see in today’s marketing world is that marketers have so many different ways to communicate with customers that I think they've lost track. You know they're trying to do it all, and they've lost track of sort of figuring out what is the right channel, what's the right place for a particular customer. Not just you know, “I think you're right now.” Where they are in their path to purchase is a big component of it, but there are people who are frankly more responsive to direct mail and there are people who are more responsive to digital advertising. And you know marketing in general, we can make it a lot more efficient and a lot more powerful if we pay attention to what's the place someone really wants to be communicated with.
Allen: Right, that's very good. And I think we're gonna continue to learn more and more from consumers in terms of where we should market to them and what type of communication they're gonna get.
Larry: So let's move on to the last P — promotion. So Allen, how do you see promotion really being driven by data today?
Allen: I think first of all, we should talk a little bit about what we mean by promotion. Promotion has come to mean discounting in marketing today, and you know the original authors of the four Ps, that's not what they meant. They meant how are you gonna represent your products and how are you gonna present them to consumers. You know one of the really cool things that's going on, and you mentioned the grocery industry earlier, is personalized supermarket flyers that are being developed. So every week they go out in the mail, 32 pages and a couple hundred products and out of the thousands and thousands of products available in that particular supermarket, they select on a customer-by-customer basis, based on a loyalty card data that they are able to get exactly what should appear in that flyer and where it should appear. And to me, that's amazing and you know something that everyone should be doing more of.
Larry: Yeah, no I mean that ... I remember when I saw an example of that, it blew me away. You know as we talked about, it kind of crosses over product a little bit because they are picking what's the right product to show me. I think you're right on, it fits promotion because pricing fits into there, it fits pricing. That whole idea of you know ultra-personalization really is I think the key way that technology is driving the four Ps today. When I think about promotion, my brain did go straight to as you say, discounting. I thought about RetailMeNot, you know that built a huge brand off of essentially ... And there's other, all these coupon sites that have become very important as a channel for a lot of retailers today. Didn't exist when the four Ps were invented. Gosh, maybe you can go back and say Green Stamps might be something close to that but have really evolved dramatically beyond that.
Allen: Yeah, there is some, as I was thinking about this, I did struggle a little bit about where some of the stuff actually fits in the four Ps. But you mentioned personalization and one of the really exciting things out there now is the ability to personalize communications, personalize even direct mail based on what somebody is browsing online. So you know not only can you understand who is looking at your website, you also understand what they're looking at and trigger a communication that's appropriate for that person.
Larry: The other thought I had is people today can now segment, and they've been able to do this for a while, certainly in direct mail been able to do this for a while, but you can now do it really across all digital advertising as well, is segment who are my existing customers, so my current customers, who are my lapsed customers and who are my prospects, and deliver different promotions both in terms of you know sort of that look and feel but also in terms of pricing and offer it you know so a new customer type of promotion. You can segment it and really drive audiences that way and it's been something that's done in direct mail for a while but now even with Google paid search, you can segment out those different audiences and make different decisions about what it is you're going to do from a promotion standpoint across the board.
Allen: Right on. So it's pretty clear that the four Ps are still a pretty sturdy foundation on which to build businesses, but the availability of data and the accessibility to it has just really changed how we execute against those four Ps. Okay, Larry, so let's go back to the trivial question, what is the answer to the question, how many connected devices will there be by 2020?
Larry: So my guess is 50 billion.
Allen: 50 billion? That's quite a number, that's six or seven per person. My research showed 30 billion was a reasonable estimate but who knows, we can perhaps check back in three years and see where we are.
Larry: Well I'll tell you what, I think that's way too low. Now I think I know where they got 30 billion. I've been following sort of the growth of number of people who use the internet for a long time and about every four years, the number of people connected has doubled. So they may be thinking hey the number of devices will do a little bit more than doubling so maybe that's where they got 30, but here's where I think they are wrong. There is a finite number of people in the world that can be connected. Well, there are a finite number of devices. Think about how many devices each of us has. We've got easily 100 different devices that could be connected. My bike could be connected, my toaster could be connected, my watch could be connected, my ring could be connected, my shirt could be connected. You know all of these things could be connected. I think that this sort of doubling every four years, way off for devices. In fact if anything, I think I may be low in only quadrupling it. But as you say, we can call this back up in four years and see who's right.
Allen: Yeah, you're scaring me a little bit here actually though but wow, it maybe is going to be more than that, maybe it's a 100 billion.
Larry: It could be but the other good thing about this is it just means it will be a lot more data for us to talk about as we continue moving forward.
Allen: Indeed, true very good.
Larry: All right well I think that's all that we have for today. So we hope you enjoy this discussion about marketing mix both as a concept and how it applies in the real world in 2017. If you like this topic, check out our blog Why Customer Experience is The Fifth Key Principle of E-commerce Marketing. You can find it in more articles about a variety of marketing related topics at navistone.com/blog. Again, that's navistone.com/blog. Thanks for listening and we'll see you next time. I'm Larry Kavanagh-
Allen: And I'm Allen Abbott, have a great day.