Monetizing Data Intelligence

We always knew that Credit Card Companies were very sophisticated in utilizing consumer data to be smart in new card member acquisition and monetizing them as ongoing members. But even I was surprised to read in the latest Fortune magazine that Ken Chenault, CEO of American Express, mentioned the utilization of card member data as one of their most promising revenue streams in the near future:

“Another area that we feel strongly about is that we have information we can use in very effective ways for a range of partners. So, for example, what might be surprising is that the Darden restaurant (Red Lobster, Olive Garden, LongHorn Steakhouse, and other brands) relies on us to help with site selection for its restaurants. We believe that our information, which h we use in our own business and marketing, can be used by retailers, restaurateurs, and other corporations to improve their business, and that’s an increasing focus for us.”

Most interesting is that companies like Amex are not just utilizing their own data to improve their own business but that they are more and more experimenting in building an incremental revenue source. Over the next few years, most companies with data volume that is representative enough to draw meaningful conclusions will attempt to monetize their data intelligence.

Data Intelligence becomes a vehicle for revenue growth by selling smart intelligence to other parties. Quite a few retailers tried to pursue a similar path by packaging intelligence from their frequent shopper programs and attempting to sell it to manufacturers. There are some success stories (e.g. Tesco), and some stories of failure with such an approach (e.g. Safeway). The three most likely industries to pursue such a path are:

• Retailers (selling intelligence to manufacturers)
• Financial players (selling intelligence to card issuers and merchants)
• Travel companies (selling intelligence to non- competitive travel partners).

Everyone playing in this field of building an incremental revenue stream by utilizing proprietary consumer data will be smart in analyzing the up- and downsides of such a move. A retailer might be more interested in leveraging consumer intelligence in attracting incremental trade dollars from the manufactures instead of attempting to sell data driven marketing programs. The pay-back could be much larger.

Strategic vacuum

Following over the last months in more detail what large marketing agencies and service providers are communicating as their longer term strategy, I am more and more astonished by the apparent vacuum for longer term strategies and plans. It seems that the global recession further increased the obsessive short term focus of marketing organizations. My best guestimate based on discussions within the industry and reading through published material is that close to 90% of marketing agencies and service providers don’t have a meaningful and integrated vision, strategy, and execution focus with a time horizon of three to five years.

It seems that the exclusive focus of marketing agencies in today’s difficult economic times are only twofold:

• Meet and satisfy needs and demands of existing clients
• Win new clients at any prize.

Any other critical elements for longer term success, like talent recruiting and development or the development of proprietary intellectual ideas, products, or methodologies that are scalable, are totally neglected.

I come to believe stronger than ever before that only the outline of a simple but powerful company strategy answering a few critical questions can ensure that a marketing firm is not only satisfying current daily client needs but works on building an organization with true future potential. My short list includes

1. What is happening in the market you are trying to serve (Revenue developments by market and marketing functions; key client and market trends)?

2. What is the brutally honest assessment of your own marketing organization (SWOT-Analysis, Revenue and Profit trends, top market growth areas versus own ability to monetize them)?

3. What is the purpose and vision of your company for the next three to five years?

4. What are the key strategic bets that your organization will focus on?

5. How is the execution of the strategy ensured, monitored, and improved?

The 90% of marketing firms who are not answering these questions will be very likely in significant trouble. Only focusing on servicing and winning clients is not sufficient for long term success, it is just green fees to participate in the market place. And clients who are contemplating the strength of their current agency partners should ask the executive management of their partners to present their answers to these five questions. Their answers is significantly more important and a better indicator of future success of their partnership than the creative quality of one online banner or the music selection in one TV commercial.

Unfortunately a lot of clients focus on minor creative execution elements of their agency partners instead of inquiring about their partner’s ability to position their organization for long-term success through a simple and meaningful strategy.

Reinvented TV commercials

The whole discussion about the death of TV commercials is missing several points. First, looking at any of the media research companies predictions for the next three to five years, one will realize that total TV viewership will slightly increase in North America (and even more globally), especially amongst young people. Second, TV viewership is shifting from the four networks to cable and from live to time-shifted. But even the time shifted total TV viewer hours will not be more than 20% of total viewing behavior in three to five years. Third, TV commercials will find more distribution channels than just the TV screen in the living room. A longer version can find its way on any of the Online video channels, or a modified version can be placed on any of the mobile applications, etc. TV commercials will not have just one format but multiple with channel specific versions and interpretations.

But the wrongly proclaimed decline of TV should not hinder marketers to entertain serious discussions about the changed role and design of most TV commercials. I predict a few major shifts of how TV commercial are designed and utilized:

• More and more TV commercials will play on the humors side of communication, since it will promise a higher breakthrough rate than most other forms of 30 seconds entertainment. Commercials will be more entertainment oriented, since consumers can shift and ignore them as never before.
• TV commercials will stronger embrace a smart communication of product benefits. A good example is the TV commercials for the iPhone applications versus the majority of all car commercials that shows a car driving on a street, either at night in a cool urban setting or during a beautiful day on the countryside.
• TV commercials will become more “Call to Action” oriented. It is not at all about the traditional “Direct Response TV” make-up but rather about a clear drive for a particular action. This action will go beyond the call to visit a website or calling a particular phone number, it can entail a requested social behavior, a request to submit an idea, etc.
• Any TV commercial will be more a brand and product film that gets transformed into a TV commercial, a Mobile phone spot, a Web spot, etc. The essence of it will be the same but its artistic and commercial application vastly different depending on the particular channel.

TV commercials are not dying but their structure will change dramatically over the next few years. The first ever commercial aired in 1941, and it will live on for much longer than most of us expect.