Marketing scientist Kevin Gray asks Professor Byron Sharp of the Ehrenberg-Bass Institute about key mistakes many marketers are making in an interview for ESOMAR online magazine RW Connect.

KG: Just for background, could you give us a very brief history of marketing and how it has evolved over the years?

BS: Humans have been trading things for a very long time but marketing really got started about 15,000 years ago when in a few areas in the world humans started farming. Farming generated surpluses, suddenly a group had a lot of one thing (e.g. wheat) and not much of other things (e.g meat) so this specialization really encouraged trade, which in turn encouraged specialization. I don’t think anyone could have guessed just how astonishing the increase in productivity would be. It supported huge increases in human population and led to specialization that would usher in the scientific and industrial revolutions. It led almost immediately to the first civilizations in Egypt, Rome, China. It’s amazing to observe that this revolution is still occurring, more trade than ever before, super specializations (even marketing scientists!) and we are growing more food and using less land than ever before.

The other big event was the arrival of mass communication (print, radio, TV) and chain stores in the last century. Again this is a revolution that is still going on, especially in the developed world.  But importantly it led to global brands. This had a number of positive effects brands empowered consumers because they could obtain quality and consistency of features by simply looking for the brand they bought before. While for companies they gave them incentive to invest heavily in quality, consistency, and in broad reach – brands gave them a chance of sustained profits over decades.

The third big event is the gradual application of science to marketing practice. I don’t mean whizz-bang statistics I mean real-world evidence underpinning marketing beliefs and practice. Science has transformed every discipline it has touched.

KG: You work with companies all over the world. Do you see major differences in how marketing is conducted in different regions and countries? In what ways is it more or less the same everywhere?

BS: I see large differences in sophistication between industries. There are old industries like banks and universities are very new to working in truly competitive markets, they have had strong regional or legal monopolies. They are pretty erratic in their product development, struggle with pricing, and have little idea how advertising works, nor how to use media effectively. This is in spite of some players now having huge marketing budgets.

KG: You’re a noted critic of many things many marketers believe to be sound marketing practice. What are the worst mistakes marketers are making, in your opinion, and what are the consequences?

BS: In the absence of knowledge myths will emerge – fast. Humans are extraordinarily good at inventing stories and convincing themselves of things. History is replete with ideas that lasted an extraordinary long time that we now know to be wrong. Even ideas that we look at now and think “how preposterous” were believed for centuries. Some even survive today.

So it’s hardly surprising that there are ideas that are considered “sound marketing practice” that are the equivalent to Roman generals consulting pecking chickens, Chinese architects worrying about feng shui, or Presidents checking their horoscope.

The worst mistakes made by marketers are simply due to not knowing about the things we have discovered about buying behavior and brand performance. I’ll give one example, which is what I call “marketing’s attitude problem” which is the tendency to turn any problem into one that requires changing consumers beliefs and attitudes. So if people aren’t recycling their rubbish we think we have to make them care more about the environment, and convince them that landfill is evil.  If not enough people are buying our brand then we need to convince them our brand right for their needs and better than all alternatives. Naturally this leads to persuasive style advertising.

But before that it fuels much analysis (paralysis?) of brand positioning, brand personality, consumer motivations, brand DNA, choice modeling, and so on. Marketers worry about what media to use, not in terms of who it will reach and when, but whether or not it will match the brand’s personality. They miss important opportunities like making their brand easier to see on shelf.  A large industry feeds off this misplaced idea that attitude is what is holding back sales, if we just crack the special code and convince people we are best for them then the sales will come flooding in. Even people enamored with behavioural economics still adopt this rather high-involvement view of buying behavior. It’s easy to get things wrong when you are (even subconsciously) operating to the wrong assumptions about the world.

KG:  Big Data, under various definitions, has been getting a lot of buzz in recent years.  Targeted online ads are now commonplace and Customer Relationship Management (CRM) is big business.  Do you have thoughts on each of these you’d like to share?

BS: There is quite a bit of confusion about the term Big Data. It doesn’t mean ‘lots of numbers” i.e. any large data set, it refers to continuous data that flows in usually from unobtrusive measurement. So, clicks on webpages, calls to call centres, TV audience data, that sort of thing. The key attraction for marketers is to use this data to tailor offers to reach people who are good prospects, especially people who are interested in buying now. This sounds very powerful, but it’s been over-sold, the power has been over-estimated. Take Amazon for example who have been in this business for longer than most. They have data on your past purchases, plus vast amounts of continuously updated data on what other products were bought by people who bought items you bought. So they have real, hard behavioural data, which sounds exciting. Yet look at Amazon’s recommendations for yourself; I think you’ll find they are pretty unimpressive, usually rather obvious recommendations e.g. another book by the same author.  A lot of the time they simply recommend books you’ve already bought, for me they even recommend books I’ve written!  It’s not that Amazon are stupid, or they haven’t hired the right quant jocks, it’s that there are severe limits to the ability of complex models to produce valid predictions. Adding a whole bunch of weak correlations together does not improve predictive power. So don’t let someone try to ‘pull the wool over your eyes’ by claiming that artificial intelligence or machine learning can overcome this fundamental problem, they can’t.

Possibly the most useful piece of big-data-driven targeting is simply display ad retargeting. If you went to an airline’s website and looked up flights to Rio then for the next week ads for that airline and its flights to Rio will follow you around other websites you browse. This works, sometimes, because it keeps nudging us to do something we got halfway through before being distracted.  It’s pretty basic, but that’s probably why it can work.

Otherwise the strategic assumption that hyper-targeting is sensible, let alone possible, is unrealistic thinking. I’ve explained why with many different examples in my books.

KG: Any critic of the status quo is likely to encounter resistance.  What kinds of reactions do you receive to the things you mentioned earlier?  Do you feel you and your colleagues at Ehrenberg-Bass are being misinterpreted or misconstrued in any way? 

BS:  Mainly the reaction has been extraordinarily positive. Marketers are hungry for evidence, after being starved for so long. They are not upset by seeing popular theories fall as the evidence comes in. It’s harder for some marketing ‘gurus’, consultants and academics, because they have based their reputation on selling fantasy theories. But even some of these people are big enough to say “OK I was wrong, in fairness my reasoning appeared sound but, hey, the world turns out to be a surprising place”.

Yes, Ehrenberg-Bass Institute discoveries do sometimes get misreported, or misinterpreted.  Probably the most common is to say we discovered that there is no such thing as brand loyalty, or more crudely that loyalty does not exist – when page 92 of ‘How Brands Grow’ explicitly says “loyalty is part of every market”, and our textbook explains with lots of examples how and why loyalty is natural behaviour. It’s easy to understand how people who haven’t read the books could get the wrong idea – “a little bit of knowledge can be a dangerous thing”.

KG: Finally, the way forward…How do we get people to change their ways?

BS: Marketers, like consumers, are habitual and hence change is difficult. That’s not to say it doesn’t happen. First, it requires exposure to the evidence, and then re-exposure and re-exposure accompanied by thinking and doing – then insight builds (‘ah ha’ moments) as well as evidence-based skills. It does happen. Just look around at the impact of science on other disciplines (like medicine and engineering). The same will happen to marketing.

KG:  Thank you, Byron!

Kevin Gray is president of Cannon Gray, a marketing analytics consultancy.

Byron Sharp is Professor of Marketing Science at the Ehrenberg-Bass Institute, University of South Australia. He is the author of How Brands Grow and co-author of How Brands Grow: Part II.