Optimizing marketing spend.

It's been a kind of holy grail for much of my career. A homage to John Wanamaker's "Half the money I spend on advertising is wasted; the trouble is I don't know which half."

Now, with the bandwagon around big data and increasingly sophisticated analytical tools, it can feel like this holy grail is finally within reach. Marketers will not only be able to measure the real return on marketing, but also predict its future performance. Advertising will be perfectly matched to the individual customer.

However, in reality, there needs to be a major shift in marketing mindset, before this can happen.

I attended Brandworks University recently, which was exploring the subject of smarter marketing decision-making. Amongst all the excellent speakers, I was actually struck most by a presentation from Spigit, an enterprise innovation company. Describing how they crowdsource employee and customer ideas at scale to generate transformative innovations, for me it spoke to a broader truth: the brave new world of marketing optimization will require the collaboration of customers.

Why?

We need a model to optimize...

Almost by definition, optimization implies fine-tuning a model that works. Most of the discussion is still couched in the traditional idea of the sales funnel, moving customers in a linear fashion from awareness to purchase, with its attendant marketing and sales investments.

However, in today's connected world, that model has been disrupted. We now have a much more complex customer journey, heavily influenced by customer experience and the resultant word of mouth. (A subject explored by Brian Solis in his excellent What's The Future Of Business).

I remember the CMO of Hilton sharing with me many years ago how he had switched much of his marketing spend to focus internally on employees and the guest experience, because this was the key both to guests coming back, and generating referral.

Today, this is true for many brands. So rather than optimizing the traditional model, the focus instead should be on working with customers to understand the entire customer journey, and where the key moments of truth are. And then, on investing accordingly.

True personalization requires personal data...

The basic premise is that technology will enable you to perfectly profile an individual customer, and predict their reaction to a stimulus. Marketing can then be truly personalized, improving success rates, and eliminating marketing waste. Perfect optimization.

However, for this to happen requires an understanding of an individual's values and beliefs, and tastes and preferences, as well as their social network and behaviors.

Of course, good progress can be made by tracking behaviors, as Amazon and Netflix have shown. And the high valuations of the Facebooks of this world are based on the idea that understanding someone's social network enables more effective marketing.

But are customers really going to be happy to share their innermost feelings, so that a marketer can fully optimize their spend?

Customers don't care about optimizing marketing spend...

Marketing optimization is still framed in the traditional language of marketing. Customers are passive, to be targeted, and persuaded to purchase.

Yet there's evidence all around to the contrary. The recent furore round Abercrombie and Fitch, the outcry over Apple's substandard maps app, or indeed the growth of Airbnb, Zipcar, and the "sharing economy" are all examples of customers being active.

In reality, customers don't care about optimizing a brand's marketing spend. They don't crave advertising on their personal devices. Arguably, they don't care about many brands at all.

And technology is increasingly giving them the ability to manage who they share their data with, and who they want to hear from.

Simply applying the power of big data and analytics to the existing marketing mindset is not going to work. Hence, why I was so struck by the thought of collaboration.

Collaborate with customers to create value for them...

Rather than targeting customers, work with them. Figure out how to use their data to help them in their lives.

This was the thought that transformed Tesco from a second-rate UK food retailer to one of the world's leading retailers, embodied in their philosophy of "every little helps". In return for customers giving them data, they used it to improve their shopping experience in any way they could. (A story told in the excellent book Scoring Points).

Nike+ and the whole "quantified self" movement is a more recent example of sharing data, to create something that customers find useful. And then there's Safeway's just for U program, using customer data to make shopping both cheaper and easier.

This way, by creating real value for customers from their personal data, a brand can gain the privilege of access. And by being transparent about how the data is used, they can earn their customers trust.

By adopting this mindset, maybe then, the spirit of John Wanamaker can finally be put to rest...