Big Data: Friend or Foe of Digital Advertising?

February 18th, 2014 | ACA Team,

By ACA Staff

Five Ways Marketers Should Use Digital Big Data to Their Advantage

It was just this past November at ACA’s Annual Conference that Gian Fulgoni, Founder of comScore’s Media Metrix, announced that his company’s multi-platform online measurement tool was coming to Canada. Marketers would soon have access to seemingly endless amounts of data from Canadian mobile and tablet users, providing insight and opportunity that was previously unobtainable.

But in this new world of Big Data, measurement mogul Fulgoni dispenses words of caution: While the wealth of statistics can pique revelations about consumer behaviour and buying habits, marketers must avoid the temptation to react for short-term gain, and continue to concentrate on their long-game goals.

Below is a summarized version of Fulgoni’s full-length article on the topic, published in the Journal of Advertising Research*. This summary has been printed with permission from the ARF.

Twenty-five years ago, Big Data generated by UPC point-of-sale scanners changed the face of marketing in the consumer packaged goods (CPG) industry by causing marketing spending to tilt ominously in favor of price discounts and away from advertising. Suddenly retailers and manufacturers had timely access to weekly (and even daily) scanner data. The granularity of these new data clearly revealed the substantial impact of short-term marketing tactics, including temporary price reductions. It wasn’t long before retailers figured out that they could pressure manufacturers for more trade-promotion dollars.

The results were dramatic; CPG marketing underwent a fundamental marketing shift from advertising to price discounting. Today, it is estimated that the average CPG manufacturer spends 67% of its marketing budget on trade promotion and 10% on direct-to-consumer promotions, whereas less than 23% is spent on advertising. In effect, this is just training consumers to buy on the basis of price discounts only; an unhealthy situation for any brand.

Similarly today, real-time digital Big Data has the potential to erode long-term brand equity because of its tendency to cultivate a short-term decision-making mindset.

To help avoid this trap today, here are five recommendations that can help marketers maximize the positive benefits of Digital Big Data.

  1. Avoid the Race to the Bottom on Pricing – it is critical that marketers establish a clear point of differentiation for their brands that helps them justify a higher price point versus their competitors. Well-crafted brand advertising can do this.
  2. Stop Optimizing to the Click – clicks are valid for search advertising, where the click-through rate for paid advertisements averages about 3.5%, but for display advertising they are pitifully low and a misleading metric.
  3. Understand the Limitations of the Ad Cookie – about 30% of internet users delete their digital-advertising cookies each month, resulting in over-delivery of frequency and under-delivery of reach. But this can be substantially improved by using in-flight campaign optimization techniques.
  4. Don’t Ignore Potential Customers by Over-Targeting – marketers should seek to strike the right balance between strategies so they can yield the benefits of targeting but not at the expense of serendipity.
  5. Accurately Determine Attribution – maximum sales lift can be obtained by overlaying display on search. Put another way, display builds the equity that search converts into sales.

Digital Big Data generated by the internet now are providing consumers with pricing transparency across many product categories, allowing them to easily and quickly find the lowest price for any product. Marketers should remember that the “past is prologue” and seek to avoid a pricing race to the bottom in today’s digital world.

*Journal of Advertising Research, December 2013, Volume 53, Issue 4.