The Metrics Challenge: Felonious Ants, Pigeon Droppings, Dark Energy, and the Challenge of Marketing Metrics

1. Felonious ants, pigeon droppings, dark energy and the challenge of marketing metrics South Bank University 4 November 2010 Alan Mitchell

2. The metrics challenge Harder than we think

3. Can I trust my measuring instrument? Deviation from perfect circle: = 0.09341233 Tycho Brahe 1546-1601

4. Right theory, wrong reasons? Calculating the elliptical orbit of the planets Johannes Kepler, 1571-1630

5. Measurement error or evidence? Arno Penzias and Robert Wilson

6. Evidence of what? Benoît Mandelbrot (1924 –2010)

7. Nice theory, but where’s the evidence? Ignatius Semmelweis (1818- 1865)

8. What are our instruments not measuring? 96% of the universe remains beyond detection

9. We’ve got ‘evidence’, but what’s it evidence of? Joseph Glanvill 1636-1680 From the frontispiece, Saducismus Triumphatus By Joseph Glanvill, 1688

10. What is it evidence of? Felonious ants and the rule of law

11. What is it evidence of? Coleopterus vs villagers of St Juilen Execution of the sow of Falaise, 1386

12. Same evidence, different theories Aristotle Isaac Newton

13. We have evidence, but what is it evidence of? The metrics challenge Are we asking the right question? Are we looking for the right thing?

14. Discovering Oxygen Antoine-Laurent de Lavoisier (1743 – 1794)

15. Asking the wrong questions • Wrong categories of analysis

16. Asking the wrong questions • Wrong categories of analysis • Looking in the wrong place

17. Asking the wrong questions • Wrong categories of analysis • Looking in the wrong place • Assuming the wrong processes

18. Asking the wrong questions Dreams of Untold Riches ‘How to turn lead into gold?

19. Asking the wrong questions Dreams of Untold Riches ‘How to turn customers into corporate gold?’

20. Dreams of untold riches: selling hope “The emotional attraction of Lovemarks inspires Loyalty Beyond Reason. That’s loyalty beyond benefit, beyond price, beyond logo, beyond attribute.” Kevin Roberts CEO, Saatchi & Saatchi

21. Brand loyalty ‘Loyalty’ “The willingness of someone to make an investment or sacrifice in order to build a relationship” Fred Reichheld

22. ‘If only’ marketing “‘The acid test of brand loyalty is whether a housewife, intending to buy Heinz Tomato Ketchup in a store and finding it to be out-of-stock, will walk out of the store to buy it elsewhere or switch to an alternative product.” Tony O’Reilly (when CEO of Heinz)

23. Marketing alchemy Dreams of Untold Riches … based on theories of transmutation

24. Philosophies of Branding: Dreams of control “Psychology . . . is a purely objective experimental branch of natural science. Its theoretical goal is the prediction and control of behavior.” John B Watson (1878-1958)

25. Stimulus Response Philosophies of Branding: Dreams of control “We can follow the path taken by physics and biology by turning directly to the relation between behaviour and the environment and neglecting supposed mediating states of mind. “Physics did not advance by looking more closely at the jubilance of a falling body, or biology by looking at the nature of vital spirits, and we do not need to try to discover what personalities, states of mind, feelings, traits of character, plans, purposes, intentions or the perquisites of autonomous man really are in order to get on with a scientific analysis of behaviour.” B. FSkinner (1904 - 1990)

26. Philosophies of Branding: Dreams of control Stimulus Response “It takes time, yes, but think what it can mean to your firm in profits if you can condition ten million children to grow up as adults trained to buy your products as soldiers are trained to advance when they hear the trigger words ‘forward march’.” “Eager minds can be moulded to want your products!” Clyde Miller, The Process of Persuasion, 1946

27. Stimulus Response Philosophies of Branding: Dreams of control Philip Kotler The Principles of Marketing

28. Philosophies of Branding: Dreams of control Stimulus Response “The core challenge of qualitative research is in understanding the patterns in people’s heads that lead them to different purchase decisions. These are often hidden from our conscious and cognitive processes and are based on our major and secondary senses and the way they trigger emotional reactions.” “As our senses are triggered we get an emotional response– we feel things first and only think about them later. By taking individuals through the series of patterns that arise from the stimulus we can identify key drivers, images and associations that make up the product or brand as an emotional entity.” Market Research Bulletin 10 September 2009

29. Philosophies of Branding: Dreams of control Stimulus Response “Neuromarketing gives unprecedented insight into the consumer mind. And it will actually result in higher product sales or in brand preference or in getting customers to behave the way they want them to behave.” Adam Koval, Brighthouse Institute of Thought Sciences, 2006

30. Philosophies of Branding: Dreams of control Stimulus Response “Old fashioned television advertising at best has served brands pretty well by embedding slogans and images in the brain.” “I think we face a crisis that risks making invisible the core competency of the advertising industry which is building a brand into consumers brains. “Mirror neuron activity in the brain could be the magic bullet we’ve been looking for, indicating evidence of how we could measure the creation of branded empathy.” Robin Wight, The Battle of Big Thinking, November 2009

31. Stimulus Response Philosophies of Branding: Dreams of control David J Reibstein Marketing Science Institute survey of marketing metrics

32. Stimulus Response Philosophies of Branding: Dreams of control ‘A “value chain” provides the basis for a marketing productivity model. In this chain, company actions--such as R&D and advertising spending, and customer targeting--impact the mindset of customers, employees, partners, and competitors. ‘These impacts are linked to customer behavior in the product market; the consequence of product-market outcomes is financial performance. The final outcome is stock price or market capitalization.’ David J Reibstein

33. Stimulus Response Searching for the philosopher’s stone ‘Which stimulus will deliver transmutation, turning the consumer into corporate gold?’

34. Perhaps it doesn’t work that way ‘Double jeopardy’ Big brand = More people buy, more often Table 1: Shampoo brands , UK, 2005 Brand Market Share (%) Annual market Purchase Penetration (%) frequency (average) Head & Shoulders 11 13 2.3 Pantene 9 11 2.3 L’Oreal Elvive 5 8 1.9 Herbal Essences 5 8 1.8 Dove 5 9 1.6 Sunsilk 5 8 1.7 Vosene 2 3 1.7 Source: TNS Andrew Ehrenberg (1926-2010)

35. More questions than answers? ? Why/how? Fractal Phase transition Self-organised criticality Flocking Andrew Ehrenberg

36. More questions than answers? Why/how? So what? Andrew Ehrenberg

37. A different angle Marketer response Consumer behaviour

38. Perhaps marketers are not in control after all Stimulus Response One of thousands

39. Perhaps marketers are not in control after all Stimulus Response Which ‘stimuli’ fit my agenda, purposes and intentions?

40. Perhaps marketers are not in control after all Before Stimulus Response “I think I’ll do what I want to do” After

41. Alternative philosophies of marketing The job of marketing is to … a) Change customer attitudes and behaviours to fit the goals of the brand b) Align what the brand does to fit the behaviour of consumers

42. Who is ‘changing’ who? ‘Campaign-itis’ – measuring ‘changes’

43. Narcissistic metrics ‘Campaign-itis’ – measuring ‘changes’ ‘Effectiveness’ = ‘Our benefits’ minus ‘Our costs’ Sales uplift Customer retention Brand awareness Brand liking Word of mouth advocacy

44. An insoluble equation a + b = ‘Our benefits’ – ‘Our costs’ = ‘Consumer’s costs and benefits’ Aside from product research this is more or less completely ignored

45. Brand loyalty Claimed benefits of loyalty marketing Benefits of increased loyalty Reduced customer acquisition costs Increased cross/up-selling Reduced cost to serve Increased positive word of mouth Reduced price sensitivity Increased customer retention Source: Fred Reichheld, The Loyalty Effect

46. Brand loyalty Claimed benefits of loyalty marketing Benefits of loyalty for the company Benefits for customer Reduced customer acquisition costs ? ? Increased cross/up-selling ? Reduced cost to serve ? Increased positive word of mouth ? Reduced price sensitivity ? Increased customer retention

47. “improve my metrics” “better product” “better processes” “better decisions” Underlying dynamics of markets: person-centric ‘Improve my economics’ ‘Achieve desired outcomes better and cheaper’ ‘How?’

48. What does a better decision look like? Focuses on what matters to me life experiences, categories – not brands Cost/benefit trade off – decision-making is it worth investing time/effort researching? Cost/benefit trade off – implementation does a different decision make it easier or harder? Make it worthwhile Make it easy to choose, buy and use Personal economics: the dark energy of markets

49. Behavioural Economics Awareness, familiarity and liking Status quo bias and default options Priming, suggestion Availability, salience Heuristics ‘Do what I did last time’. ‘Buy the cheapest’, ‘Buy the one on offer’, ‘Buy what my friends recommend’, ‘If it’s expensive it must be good quality’ Richard H Thaler Cass Sunstein Dan Ariely

50. The dark energy of markets? Metrics are created by theories. Theories of marketing alchemy generate perpetual confusion and misleading metrics. Ehrenberg discovered evidence that marketing alchemy doesn’t work. But we don’t yet know he discovered evidence of. Perhaps the answer lies in understanding the behaviour of marketers as a reflection of the behaviour of people. Not the other way round. So far however, we don’t have the metrics to develop this understanding.