Marketing Personalization 3.0 – ‘Co-creation’

I wrote in a recent piece on this blog, titled “Marketing Personalization 2.0,” about how companies are increasingly applying techniques from mass customization, using ideas such as personas and embracing what Patricia Seybold refers to as ‘customer scenarios’ to improve personalization of marketing efforts.  I also cited a range of technologies that can manage execution of this type of marketing.

Yet, even as this evolution represents an advancement over Marketing Personalization 1.0 (i.e., demographic and lifestyle channel targeting), there is much to be desired.  We are still at a point as marketers where we are guessing at personalization.  It is still possible to make costly mistakes, particularly if we misjudge customer persona or the channels for interacting with a given persona.

Source: Adam Needles, Propelling Brands (original)

“If you think backward from the audience you’re trying to reach and the channels and methods you’ve used to try to reach them, it all argues for taking a much more integrated approach to the work of marketing and communications,” argues Jon Iwata, SVP of Marketing and Communications for IBM, quoted in a recent piece by Paul Dunay on the MarketingProfs Daily Fix blog.

Fortunately, waiting in the wings is a new wave of technologies that promise to rapidly leapfrog the current state and to take us to what I believe is a very tenable basis for structuring and ‘propelling’ forward to Marketing Personalization 3.0 (see diagram).  These technologies, which include semantic analysis and social graphs, offer the potential not only to get closer to customers than ever before, but they also approach enabling what I believe is true ‘co-creation‘ of the marketing experience.

What do I mean by this?  Customers, who increasingly have power and leverage over brand-companies, will not only specify what they want but will also shape the boundaries and expectations of their communication with, recommendations regarding and the ultimate delivery of products and services from vendors. 

The entire experience will become a partnership, but why is this important?

This may sound altruistic, but I think there is critical goal, more important than mere customer experience that underlies why marketers should care about this.  Marketing Personalization 3.0, through co-creation, offers the ability to improve customer-brand engagement, increase marketing ROI and fundamentally upgrade the profitability of many businesses.  And technologies such as semantic analysis and social graphs are the keys to unlocking this.

 

What is driving the need for Marketing Personalization 3.0?

You’ve heard it before, but it is true.  There is a continuing shift in power from companies and their brands to the end customer.  “The war is over,” decried PR-industry executive Steve Rubel in a 2005 piece on his Micro Persuasion blog site.  “The people have defeated the corporation.  …  They are the ones who are in charge now.  They are using the Internet to tell companies what products to make or telling the world what a word means.  That’s when they’re not developing new products of their own and marketing them.”

So this shift in the power balance is not new, but as it becomes more weighted toward the customer it has important implications for marketing activities:

• Customers increasingly determine the rules of marketing engagement;
• Brand-companies must know their customers better than ever (a huge leap for B2C companies that rely on channel partners, such as retailers, for actual customer sales and delivery – a reality that is very different from B2B companies that actually maintain detailed customer accounts and records, especially via CRM systems); and
• Companies must understand how to stay in touch with increasingly ‘mobile’ brand communities across a diverse set of communication channels and media platforms (something I covered in another past piece on this blog, titled “Changing How You Think About Marketing to Your ‘Mobile’ Brand Community”)

  

What do I mean by co-creation, and what is the implication for marketers?

The idea of customer co-creation is most commonly applied to concepts of approaches to new product/service innovation, but holistically it represents customer and brand-company working together in any type of partnership to develop a joint outcome.  Co-creation has lived for years in the B2B world.  (For example, in a public-relations agency, many of the agency’s outcomes and marketing of itself, especially via RFPs, are very much collaborative and result from a partnership between agency and client.)  Co-creation remains very new to the B2C world, yet it is quickly becoming a critical concept – one that is being used to respond to the fundamental shift in power, mentioned above; moreover, co-creation is being applied to a broader range of customer-brand interactions.

Whereas past thinkers such as C K Prahalad and Venkat Ramaswamy have advanced the concept in a new-product development context, I believe Patricia Seybold really frames up the opportunity to extend this concept into the marketing sphere via the introduction to her 2006 book, Outside Innovation:  How Your Customers Will Co-design Your Company’s Future: 

What can you do to channel this customer energy into a positive direction — one that will power your business rather than sink it?  Here’s the answer:  Engage your customers in more ways to help you redesign your business, your products, your processes, and your business models.

You’ve already begun to open the floodgates by giving your customers the ability to do business with you electronically.  You’ve felt the excitement of working shoulder-to-shoulder with specific customers to help them solve problems or design new products.  You may have already empowered customers to solve each others’ problems.  Your executives are immersed in customer meetings.  You’re sprinkling your organization with customer survey data and customer loyalty scores.  But that’s drip irrigation.  Now it’s time to turn the spigots on full:  Invite customers to play more roles in driving your business direction.

Marketing co-creation is more than simply asking customers when, where and how they would like brand-companies to engage with them.  It is also more than simply externalizing the process of formulating marketing strategy and tactics.  It is about giving customer-brand marketing active life and making it two-way, give-and-take.  It means brand-companies becoming engaged in their customers’ worlds as much as customers are engaged with brands.  It means blurring the line between your objectives as a marketer and those of your customers.  It means acting in an integrative fashion.  What do I mean by integrative?  I mean “the more complex process of trading off between issues (people are ‘making the pie bigger’ by matching or ‘integrating’ their interests priorities and differences),” as G. Richard Shell defines in his text on negotiation theory, Bargaining for Advantage.  The outcome, ideally, is win-win, rather than one party getting more than the other.

Valeria Maltoni focuses on this new relationship and mode of communication in a recent piece, titled “How to Talk with Customers Differently,” on her Conversation Agent blog:

You speak the language of efficiency and scarcity, your customers think in terms of collaboration and story – most likely their story/experience with you and other providers.  You hear what they say as a problem, when you could be listening for the opportunity it comes with.

In many cases all of the ingredients are there, they just need a different mix. Or you may need to open up the kimono, let your customers tell stories about you – your brand as open-source API for the meaning they are looking for. Think of the alternative – if nobody is talking about you, do you really exist? Are you top of mind? And if they’re saying negative things, join the conversation, show them you can and do pay attention.

The insights of Maltoni point to four key elements of approaching marketing co-creation and gaining this level of engagement:

• Participating in customers’ channels and platforms:  Whether it is a mainstream broadcast network channel, or a Twitter conversation, if customers are engaging with brands, the brand-company must be there, participating in the dialogue. 
• Letting go of messaging and taglines:  The best brand positioning strategies are holistic.  They are about a feeling and an experience; they transcend specific words.  And to enable marketing co-creation, customers must be able to put positioning in their own words.
• Meeting on neutral ground:  Marketing co-creation, in order to be most effective, means that customer and brand-company must interact on an equal footing.  Finding new opportunities for neutral ground, whether it is an online social-media platform such as Facebook or an offline music festival or sporting event, will facilitate this interaction.
• Embracing negative feedback as a critical component of tuning your marketing:  Not only should you be open to negative feedback, you should embrace it and respond to it in a constructive fashion.  As Maltoni points out, this is an opportunity, not a challenge in the world of marketing co-creation.

  

What is the business case for Marketing Personalization 3.0?

Bridging between the theoretical look at co-creation and the technologies underpinning this new level of interaction is its business case, which is quite simple.

Marketers face three strategic challenges in the current era – challenges that cost money and that limit ROI, or ROMO, “return on marketing objectives …,” which means “… did the campaign meet lead goals, pipeline goals, conversions of leads to opportunities, etc.,” notes marketing agency BluePoint Venture Marketing in a recent post on its blog.   

These challenges are:

• Explosion of communication channels and media platforms:  When and where to communicate with and share information with customers is increasingly more difficult each day.  Lurking in the digital abyss is the customer, calling the shots.  Trying to find him/her can be very costly.
• Lack of buy-in from customers in marketing programs:  Customers are increasingly resistant to participation in any type of marketing activity.  Why is this?  Spending to find that customer results in a very high degree of marketing messages that are off-target.  Customers build up ‘immunity,’ and then it takes more and more marketing and spending to get through to them.  This gets even more costly.
• Inefficiency of old approaches to targeting:  To make matters worse, the tools of Marketing Personalization 1.0 – of targeting via demographics and via lifestyle channels – pervade every aspect of marketing.  This means much of the spending today continues to be on tools and modes that don’t have a chance of finding the customer in that abyss, anyway.  And this is the most costly issue of them all.

So the tools, and the technologies that underpin them, ultimately are the keys to making this all work.  This brings us back to the technologies that are the key to Marketing Personalization 3.0

  

What technologies are enabling Marketing Personalization 3.0?

Two new technology trends – semantic analysis and social graphs – are critical to enabling marketing co-creation and to achieving Marketing Personalization 3.0.

  

> Semantic analysis:  Semantic analysis enables companies to target advertising based on the true meaning of a text stream or Web page.  This technology “… looks at how words in a sentence relate to one another and tries to understand the context of keywords.  Terms with several meanings require semantic analysis of the other words around them for context,” according to a recent article in eWEEK.

Semantic analysis is differentiated from traditional text-search advertising, which keys in on specific terms and their frequency via platforms such as Google AdSense; contextual advertising, which focuses more on the environment or nature of the text stream via platforms such as Proximic; or behavioral targeting, which looks for patterns of activity.  These existing ad-targeting platforms often make costly mistakes.  The problem is that “… Google’s AdSense program will occasionally place misleading or inappropriate ads for certain articles,” points out eWEEK writer Clint Boulton, article cited above.  “For example, next to a New York Times science story on a jaguar, the Google AdSense algorithm picked out ads for Jaguar automobiles. In another article on an airline disaster, AdSense showed ads about low airfare rates for vacations.  The algorithm didn’t intend to provide results in poor taste, of course, and neither did Google’s human engineers.  /  The problem is that AdSense relies on keyword frequency but doesn’t drill down into the semantics—the meaning in the words.  [Semantic platforms attempt] to go further by using semantic intelligence to analyze the text on each page and ensure that ads are placed appropriately to increase click-through rates.”

Semantic analysis enables marketers to move closer to marketing co-creation by bringing accurate ‘listening’ to ad targeting and enabling this on a mass-scale basis.  If a customer says on his/her blog or fan website that (s)he is looking for ‘X,’ a brand-company is able to match up an ad for X.  It also knows when not to place an ad, say because a customer specifically said (s)he does not want X.  This means less un-targeted ads and, as a result, it lessens the need for customer immunity and raises the likelihood of customer buy-in to marketing.  It also becomes more important as traditional media channels integrate with digital and enable comment/feedback functions.

Some of the emerging leaders in the semantic analysis space include:

• Peer39:  “Based on natural language processing and machine learning, Peer39’s patented algorithms understand content meaning and sentiment, enabling precision targeting down to the page level so that display ads appear on pages most relevant to their message,” asserts the company in a June 2008 press release.  “SemanticMatch gives brands the necessary protection to target any page, including inside social media, and opens entire new targeting capabilities to online brand and performance advertisers.”  A Crain’s New York Business article from the same month also notes, “Since its software does not track users’ Web-surfing habits, the firm avoids any privacy issues that other online ad firms confront.”
• Expert System:  “Using semantic intelligence, COGITO Advertiser analyzes the text on each page and ensures ads are placed appropriately to increase click-through rates,” asserts the company in a September 2008 press release.  Boulton’s eWEEK article, cited above, further provides insight into how the technology works, noting that “… Cogito Semantic Advertiser understands content based on four key methodologies:  studying the morphology of words; looking at parts of speech; sentence logic, or the reduction of sentences to subject, verb and object; and disambiguation … .”

  

> Social Graphs:  Social graphs move marketers even closer to enabling true co-creation through the ability to sense identity and community in the digital-marketing arena.  This means you can (a.) know who/where your customer is and (b.) be thoughtful in engaging that customer in marketing efforts by understanding the mediums and messages that are relevant to them and their network.  “The advertising community has been searching for the ability to identify and reach micro-affinity groups on a scalable basis through tangible, data driven methods,” notes Dr. Joseph Plummer, a marketing professor at Columbia University School of Business, on why social graphs are important (via a Media6Degrees press release).

Alex Iskold, in a post on the ReadWriteWeb blog, helps to explain what is meant by social graphs:

Our society spawns one gigantic social graph.  In this graph, each one of us is a node.  There is an explicit connection, if we know each other.   For example, two people can be connected because they work together or because they went to school together or because they are married.

Sociologists have been studying these graphs for decades.  Famously, the social networks have a so called Small World property – more widely known as the Six Degrees of Separation.  This is both an anecdotal and scientific observation that we all are connected to each other – no more than six people away.  The secret?  It’s because this is how human networks form – dense clusters are interconnected by shortcuts.

A simple way to think about it is this:  your friends know each other, and with time, they meet each other.  If at least one person in a group meets someone from a remote part of the world, the whole group is now connected to another part of the world.  …

With the recent rise and proliferation of social networks, the social graph comes into the spotlight. Unlike the one that scientists have been studying, this one is digital and defined explicitly by connections in all social networks.

Marketing via social graph has recently been advanced via the rollout of Facebook Connect, which creates the ability for customers to maintain a constant identity thread, via Facebook, throughout their online communication and commerce.  And there is an open-source alternative, known as OpenID, which is Facebook’s main competitor and which has a similar purpose.

   

Source: Marshall Kirkpatrick via ReadWriteWeb blog

    

Privacy concerns aside, social graphs are a huge development for marketers.  They have the potential to be the CRM of the B2C marketing world.  In a recent presentation, digital ad agency Razorfish said, “We believe that portable social graphs coming from Facebook, MySpace, Google, Yahoo and Microsoft are going to transform how consumers interact with digital technology and each other.  Marketers and Web product managers must take notice today.”

This space is still developing, but two interesting developments could potentially help marketers better target customers and stay in better contact with their mobile brand communities.

• Media6Degrees:  “[Media6Degrees] uses patent pending algorithms to produce audience analytics based on the familiar concept that ‘birds of a feather flock together.’ [Media6Degrees] will build on ‘network neighbor’ data and social graph theory that shows advertisers can achieve a lift in response rates of up to 500 percent,” asserted the company in a May 2008 press release.  More recently, the company has conducted analysis showing the improved performance in marketing ROI using its platform.  “In a discovery with important implications for the emerging field of social media, [Media6Degrees] demonstrated that a consumer who was connected to any firm’s existing customer (a ‘network neighbor’) responded to advertising from the firm at rates 2X – 30X higher than consumers targeted using traditional demo or geo targeting techniques,” noted the company in a December 2008 press release.  “This occurs because linked consumers share high degrees of homophily (the tendency of like-minded people to be attracted to each other) and evidence similar psychographics and engage in group purchase behavior.”
• Google Android:  While much has been made about Google Android as a mobile operating system and mobile search platform, what is most interesting is that it establishes a mobile identity and point-of-contact for marketing to mobile communities on the go – in line with the comments from Razorfish on mobile social graphs.  This is a distinct advantage for Google in that it helps bridge the obvious issue of marketing via social graph when your customer is not at home or at work and online – thus bridging the true ‘digital divide’ between a social graph’s interactions online and off.

  

What’s next?  What do you think?

As always, this dialogue is just beginning.

• What are your own experiences with marketing co-creation?
• Are you using semantic analysis and/or social graphs in your marketing?
• What are the precursors to Marketing Personalization 3.O — i.e., what are the steps/path between 2.0 and 3.0?