If data really is the new oil then it’s high time advertising started learning lessons from the oil industry, suggests Alex Steer of Wavemaker.
“We’re obsessed by this notion that data may be the new oil,” Steer told Thinkbox’s recent Big Think event in London. “The problem is, if that’s true, we’re not acting like the oil industry.”
If the ad industry ran oil, he said, then based on the way it uses data “we wouldn’t tell people where it was from, we’d leave it lying around the place, we wouldn’t really bother processing it, we’d give it away for free – often to people we don’t know – and I’ll leave you to insert your own joke about the Russians having more of it than us.”
In fact, the industry treats data more like exhaust fumes, he argued – “ephemeral, slightly toxic stuff that comes out at the end of the marketing process” – than as oil that actually fuels the marketing engine.
The oil industry in this analogy essentially rests on three pillars: platforms, focused on the extraction of good quality raw material, refineries, which transform the raw material into products that have greater value to businesses and customers, and pipelines that distribute the refined product to where it’s needed.
The advertising industry has been investing in the third of these at the expense of the first two, Steer maintained: money has been poured into the tech stack which is effectively the pipeline that moves data around. “We’ve not invested as much at all in getting hold of good quality data in the first place [platforms] and in transforming it into information and products that are useful and meaningful [refineries].”
Wavemaker, launched in the UK at the start of the year as a merger of WPP agencies Maxus and MEC, has had an opportunity to “reset how an agency works from scratch”, he said. It has considered the various capabilities a data-led organisation needs, which he listed as audience science, business planning and precision marketing: each of these, he suggested, is equivalent to oil industry requirements.
“Audience science is your drilling capability. It’s our fundamental research and insights base that allows us to do good quality original research, data collection and customer analytics
“Business planning is market mix modelling, brand equity models, attribution .. it’s turning that data from raw material into something more useful.
“And then precision marketing is the tech stack, the operation that takes that useful information and applies it in the marketing process.”
You need all three of these things, he stressed. If you start at the wrong end, you find yourself with “data you can’t necessarily control or explain, that doesn’t have proven value to your business” – and that leads to a backlash from consumers.
But when you begin at the right end “you start to get to some really interesting places” – and not just in the tactical part of marketing, he added, but all of it.
For example, it allows closer examination of the 60:40 rule developed by Les Binet and Peter Field in The long and the short of it - in which the case is made for allocating 60% of your marketing budget for long-term brand building, 40% for short-term tactics around salience.
In recent months, Wavemaker has pooled its research across 60,000 brands around the world over the past five years “cut by their optimum ratio - their version of the 60:40.
“Because we’re taking data, putting it through the refining process and modelling it up, we can start to see interesting, useful things for individual brands and categories,” Steer revealed.
At one extreme were computer games consoles. “People almost always go into the market knowing exactly what they want to buy so the emphasis is hugely on investing in brand, so 60:40 doesn’t really work, it’s more like 80:20. With medical equipment it’s the other way round.”
Sticking with the oil analogy, Steer highlighted petrol stations, which “are slightly more dependent than average on short-term stuff because of the experience you have in store and how important that is. But in some markets that matters more than others.”
It’s possible to drill down further to isolate particular aspects of the perception of petrol station brands in different countries that people have and understand which drives value for the brand.
“Think about your data and your marketing organisation the way that an oil company would, he advised. “Think about what your platform is, about how you’re getting reliable and high-quality data; think about what your refinery is, about how you’re modelling that up to find things that are useful and differentiating; and think about your pipeline, think about your stack and how you deliver communications to where they matter.”