What is Marketing Optimization? Testing, Targeting, and Behavior

It is the Year of Optimization.  The recent acquisition of TouchClarity by Omniture is yet another confirmation of an intense surge in interest in technologies that make computers sell better to people. 

But what in the world *is* optimization?

As a matter of disclosure I am not a PhD.  My ADD is a strong inoculation against advanced scholarly pursuits.

However, I have the unique viewpoint of experience.  I co-ran a company, Fort Point Partners, that was responsible for deploying a dazzling range of technology for companies like Nike, Best Buy, and about 50 other firms.  We launched rules-based systems (ATG Scenario Server, e.Piphany), search systems (EasyAsk and Endeca) and more advanced segmentation and modeling software (LikeMinds, Personify, netPerceptions to name a few).  We also ran a lot of tests.

Our goal was simple - make the computer capable as a salesperson. For us, optimization is a fancy word for making a selling process more relevant and engaging for your customer so that they make you more money. And the best optimization tool was one where a marketer could adapt and learn, but the machine did the work.

I see four major approaches to optimization that each have critical value for the marketer (I will use this space over the next week or so to go into more detail on each approach):

1. Experimentation - testing approaches including A/B, multivariate, Taguchi, optimal design and others. Showing different experiences to different control groups to determine a "winner" or "best recipe" based on conversion rate, revenue, or other outcome. Read more here.
2. Targeting - also referred to as "rules-based optimization".  Defining explicit segments and rules for delivering content experience. These can be simple definitions like "show the iPod when our customer searches for "iPod" on Yahoo or very sophisticated behavioral segments.
3. Behavioral - applying AI or linear regression to prior data to determine predictive factors from data to drive the display of content.
4. Social - offloading the work of relevance to the community through ratings, reviews, tagging, or other forms of participation.

Take Google, for example.  They are algorithm guys, right? They use a predictive model that is finely tuned to determine the elusive grail of "relevance" and their results are unbelievable. Yet they also use targeting and testing. True, they outsource the work of specifying the rules to us through keyword selection, bidding, and match type, but this is targeting at its finest.  And they test regularly - evaluating different treatments of the SERPs.

So what is the best optimization approach? Optimization is just marketing with math. If your user base ratings improve the relevance of your search results, then do it!  If testing helps to eliminate your CEO's bias towards acres of copy, do it! The marketing "mix" for optimization is going to take time to get right, but will yield tasty morsels of revenue improvement every step of the way.

We started Offermatica not because we discovered the magic algorithm that turned a computer into a selling machine, but because we found out that the keys to selling online were speed and control. Speed - because marketers had no time, so the machine was going to have to do the work.  And Control, because the marketer still needed to be "in the loop", either driving new ideas or removing crazy outcomes.

And remember this: Marketing is done by marketers. Machines just help us listen and aim better.

Comments

[Avinash Kaushik]

The money shot: "Marketing is done by marketers. Machines just help us listen and aim better." :)

Matt with your experience I would love to hear actual stories, if you can share, of cases where all this "machine magic" worked and cases where it did not.

Most people buy sexy technology as if it is the antidote to all problems (including missing web strategy or any value proposition for a customer or ...). More often than not a smart Marketer with a abacus will be a lot more effective a not-so Marketer with a million dollar technology in their hand (yes that would include TouchClarity or Offermatica).

In the end nothing replaces either a smart Marketer (or decision maker) with a basic grasp of business acumen and customer value proposition that he/she is trying to market. Technology comes next and it makes that process smarter, more effective, more powerful and customer centric.

I look forward to future posts that go into more detail on each of the four approaches above, but, selfishly, I would love your stories as well. Of course you can debunk my personal point of view above as well! :)

Thanks much,

Avinash.

[Jacques Warren]

Avinash,

Your comment rightly points to the essential human factor in the equation; a great tool in a fool's hands would rather be more dangerous than useful!

If one takes the definition of optimization as synonymous to automation, yes, at this moment, saying that the human factor doesn't count anymore is ludicrous (cf. Shane Atchison's warning in ClickZ to Omniture about claims surrounding the acquisition of Touch Clarity). C'mon! Press a button and let the selling runs by itself??

But... I would like to take an example from the banking industry. I have, in recent years, dealt with my bank for 3 loans. In each situation, I met with a very nice Account *Manager*, always a different one, who handled the transaction. What I found fascinating, since I was sitting right in front of that person, was that in each case a person who didn't know me would agree to the loan after keypunching a few things. They didn't call anybody, didn't ask the Branch Manager anything, didn't even ask that many questions. Well, then, WHO agreed to the loan? Sure, you gueesed it: a server did. The few seconds it took to say *yes* were based on certain rules and data about me.

That made me realize that, for many years now, computers ahve been ruling my banking/financial life. OK, it's a little blunt, but you get my point.

Now, back to interactive marketing. Is it really impossible to think that someday we will reach a very highly automated and sophisticated interactive marketing environment? It's already here, I believe, or at least some quite interesting experimentations are going on.

Sure, I wouldn't want to argue about the necessity of the human factor. I mean, I need to believe it will always matter, and it most certainly will. I also believe that the coming 10 years will see very very profound changes in how we market products, sell stuff, and how stuff is bought (stress on the latter).

Matt, I sure look forward to your next posts!

[mark taylor]

Machines are great for analytics - insights come from people.

Insightful post as ever.

[Azhar iqbal]

Yeah...

I found an article which was the third of your series.. but it is interesting that i am studying from the scratch as this is your wonderful and useful article of the series...

Well done.