Last night, 50 Wharton alums gathered in downtown Boston to hear Professor Peter Fader speak about “The Paradoxes of Interactive Media”. Of special interest were Dr. Fader’s comments on how target marketing has changed. His message: when profiling your most promising prospects, focus on differences in behavior rather than demographics.
To illustrate his point, Dr. Fader looked at the data underlying a study that concluded that Hispanics were more likely to purchase DVDs than Caucasians. He began by acknowledging that the conclusion was accurate–but not particularly useful.
Lies, Damned Lies, and Statistics
First he called our attention to the difference in purchases between the two demographic groups which, although statistically significant, was only separated by a couple percentage points. A difference that he said would not yield enough revenue to justify unique marketing campaigns.
Then he presented a second graph which showed side-by-side comparisons of the two groups’ purchasing behavior. The curves were identically shaped bell curves–although the level of the curve representing Hispanics’ purchases of DVDs was slightly higher.
In short, the differences within each group–which recorded purchases under varying circumstances–trumped the differences between the two demographic groups.
Data you can use
His point? In the old days, our only option was to segment markets by visible (i.e. demographic) differences. Today, however, we have access to behavioral data–which is often far more useful–thanks to the web.
His suggestion? Follow the clickstream to learn how your buyers behave, especially the ones that purchase, and plan your marketing campaigns accordingly. Rather than grouping those in similar demographic categories, group those with similar behavior (e.g. the order in which they do things, the events that trigger action)
The catch? Fader says that other studies show that you can’t predict the behavior of individual participants, only populations, so you’ll need a lot of data to gather enough information to segment your market in a meaningful way.
Takeaway? The principles underlying Marketing 101 remain the same, the execution is constantly evolving. That’s what keeps marketers awake at night…
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