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Behavioral versus Demographic Data
Drilling Down Newsletter # 67: 5/2006

Drilling Down - Turning Customer
Data into Profits with a Spreadsheet
*************************
Customer Valuation, Retention, 
Loyalty, Defection

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Prior Newsletters:
http://www.jimnovo.com/newsletters.htm
========================

In This Issue:
# Topics Overview
# Behavioral versus Demographic Data
--------------------

Topics Overview

Hi again folks, Jim Novo here.

Most businesses want their visitors or customers to "do something" - to take an action of some kind.  Trying to drive action, businesses engage in marketing / advertising to reach "audiences" with their message.  

These audiences can be quantified in a number of ways using Demographics, Sociographics, and Psychographics for the purpose of "targeting" the campaign.  The idea is to make the campaigns more efficient by focusing resources on the types of people thought to be more interested in the product or service.

This is fine.  But from psychology and actual practice, we know behavior predicts behavior and demographics do not.  So given you want people to engage in a behavior, why would you not use behavior to target campaigns?  This question we explore in the newsletter.

Also, I didn't find anything particularly new or relevant in the trades this month, so we're going to skip the article links for May.

OK?  Let's do some Drillin'!


Questions from Fellow Drillers
=====================

Behavioral versus Demographic Data

Q:  Just finished my print out version of the latest Drilling Down newsletter, and came across what is probably your best quote ever: "You should be really most interested in what people do and why, rather than who they are, because behavior predicts behavior, and demographics do not".

A:  "Print out" version?  Are you implying my newsletter is too long?  You're not alone... :0

Q:  Man !... I'm having the design department make a big banner and hang it next to the web analytics team cubicles...

A:  My favorite story on this issue: for years we thought the "best buyer demo" at Home Shopping Network was affluent women 50+.  I mean, you hear their voices on TV, you see their letters, you just know, right?  Then we did an enhancement of the database with what was then the most comprehensive and powerful demo package available.  And it didn't look right, there were "too many young people".  So we rejected it.

Then we started doing "best buyer focus groups" and had a "best buyer advisory panel".  Guess what?  Only about half were affluent women 50+.  So we finally got the message.  It ends up the behavioral trait all best buyers had was **they watch a lot of TV**.  It so happens as a coincidence that a lot of these people are affluent women 50+, but that's a LifeStage thing, it's not "behavior".  And it is not *predictive* of being a best buyer, only *suggestive* of being a best buyer.  This means for acquisition purposes, we would be better off to go with heavy TV viewers than affluent women 50+.

Q:  This has profound impact; I mean, I know you know that thousands of marketers will see this as heretical and just insane thinking.

A:  It's funny, this idea is finally gaining some traction.  It caused a huge uproar in a discussion group I am in composed of mostly agencies and media branding / exposure / impressions types.  They almost killed me.  But I explained to them this "behavior versus demographics" idea doesn't mean what they do has no meaning or is not legitimate, it is just what it is, as far as they can take it, without any kind of behavioral data.

These people are in the "reach" business, as in "200,000 men 25-54 saw the ad at least 3x".  Fine.  Nothing wrong with that.  But that's where it ends, it doesn't mean any of these people "did anything" as a result of that reach, regardless if they are the target demo or not.  That "branding" business is about nameless, faceless impressions.  Generally, and specifically offline, you have no idea which individual people received these impressions.   

Behavior is about individuals with specifically known behavioral characteristics and prior actions.  The person most likely to make a purchase online is the person who has made a prior purchase online - regardless of their demo.  Behavior predicts behavior.

Q:  I am presently in the middle of such a debate with one of my clients; I'm trying to make him understand that we would be way better off segmenting his site visitors by usage patterns than trying to connect arcane psycho-socio-demographics characteristics to their web site usage.

A:  Ask the site owner what he wants as an outcome or goal for the site.  Does he want to "sell impressions", or does he want people to take action, engage in "behavior"?  Also, the site owner should keep in mind psycho-demo stuff self-reported online is likely poor quality.

Not that the psycho-socio-demographics thing is worthless - especially when you can't get to behavior, there is no way you can get your hands on a list of people with a known desired behavior.  Then you have no choice, and something is probably better than nothing, as long as it's not too expensive.

Q:  People just don't seem to understand this concept because marketing has always been focused on demos.  How do you convince people that the demo data don't really matter?

A:  It's not that the psycho-socio-demo data doesn't matter; it's a question of is there anything better and more suited to the goals of the marketing program in question; this goes just as much for online as offline.

Think of it this way.  On the web, there are two macro bodies of knowledge, "who visitors are", and "what visitors do".  "Who visitors are" I'm sure is fascinating and that's all about the panels and surveys and all the stuff many marketers, especially offline, care about.

Branding and impression campaign managers are usually more interested in "Who visitors are", goal-oriented campaign managers are more interested in "What visitors do".  Some brand-oriented people may care about both data sets, but I don't think many goal-oriented folks care about "Who visitors are" in a demographic sense, because that is irrelevant. 

Here is why.

Visitors enter the site from specific sources, start the visit with specific pages, follow specific paths, and either accomplish or don't accomplish specific goals.  The source of the visitor (including content / placement of the ad, search engine / search phrase used etc.) and the content of the entry page largely *predict* if the visitor will accomplish site goals or not.  So for behavioral purposes, "who visitors are" is really defined by source analysis - they are from Google or from MSN, and they clicked on this ad with this copy - not age / income / likes / dislikes etc.  It's segmentation by behavior, as opposed to demos.  If what you want in the end is behavior, you segment by behavior.  It's that simple.

That may seem like precious little information to brand / media marketers, but it is predictive of likelihood to accomplish goal, and that is what matters if you are trying to optimize a web site's contribution to a business model.

You often find, for example, that visitors from web sites that are clearly *not* "in the demo" are the highest converting visitors, and vice versa.  Demos may be *suggestive* (many of our best customers are women over 50) but they are not *predictive* (people who watch a lot of TV are our best customers, and women over 50 in general happen to watch a lot of TV).  Behavior predicts behavior, demos don't.

For example, many people read Hot Rod magazine and never buy anything advertised in it, but some people do.  This as opposed to a list of known "hot rod" merchandise buyers, regardless of whether the product has ever been advertised in Hot Rod magazine.  So here again, you get to a "suggestive" versus "predictive" kind of thing.

You can think of these data sets as a "pyramid" with increasing power to target.  Demographics are generally at the bottom; least powerful but largest "reach" because the definition is so generic.  Above that, you have socioeconomic, which is really (to me, anyway) a "finer cut" on demographics, the same data used in a different way.  Then you have psychographic, which is usually created by modeling data from the previous two plus additional sources with "Life Style", "Values", or "Attitude" implications.  From the bottom up, each is more powerful in "suggestive" capability because you are using more data.

And each of them is useful if you don't have or can't get anything else to target with.  If you can get behavior, which is usually in the form of a list of people who are "known to have taken action X", you get to prediction of likelihood to "take action X again", because there are direct correlations between current behavior and past behavior.  

To be clear, "Reads Hot Rod magazine" can be predictive - it predicts they are likely to read similar magazines, because reading magazines is a behavior.  But this behavior does not translate directly to other behaviors, it does not mean you are more likely to buy related gear or go to the track when compared with someone who has actually bought gear or gone to the track before.

And of course, the more Recently you have engaged in a behavior, the more likely you are to engage in it again for most behaviors.

It is true that you will "reach" fewer people using behavioral targeting, but the question you should be asking yourself is this: for your product, how important is it to "reach" masses of people as opposed to communicate a relevant message to the people likely to buy?

Q:  How do you reconcile this "behaviorist" view with the current interest in "personas" for designing web sites to increase conversion?  Aren't personas based on "psychographics"?

A:  Not as data providers define it, and I would argue that using typical psychographic data to design personas is a faulty way to go about it.

There are two issues in this area:

1. In the demo / psycho versus behavior issue above, we're talking about audience definition and source - "I want to show my ad to Men 25 - 54" versus "I want to show my ad to people Searching for hot rod parts".  This has little really to do with personas; personas come into play after the audience has been selected.  Personas are about message, not audience.  In other words, either audience, "Men" or "Searchers", certainly contains multiple personas.  You could argue that ad copy may be written to be reflective of a persona, but I think that approach would be suboptimal - unless all your customers have the same persona, which is unlikely.

2.  Much of psychographic data is implied by things like what magazine subscriptions you have, what clubs you belong to, stores you shop in, sometimes combined with zip code in the case of models like PRIZM  - audience segmentations like "Shotguns and Pickup Trucks" or "Furs and Station Wagons".

Personas (at least the ones I think make sense to use) are a psychological profile of a person based on a personality model like Myers-Briggs - it's about how people think and buy.  I don't believe you can buy a list of people with a certain Myers-Briggs profile or any other true psychological parameters; that would be a massive violation of privacy.  That's what I mean when I say psychographic data is "implied": based on what kind of car you drive, where you live, where you shop, etc, certain conclusions are drawn about your "Attitude".

True personality models are predictive of the approach someone takes to interacting with the world.  Psychographics or "Who you are" data is fundamentally different from "How you think" as a personality, and in the case of personas, the way you make decisions.

In other words, engineers that read Hot Rod magazine probably make buying decisions very differently than marketing execs who read the same magazine, even for the same product!

Jim
-------------------------------
If you are a consultant, agency, or software developer with clients needing action-oriented customer intelligence or High ROI Customer
Marketing program designs, click here
-------------------------------

That's it for this month's edition of the Drilling Down newsletter.  If you like the newsletter, please forward it to a friend!  Subscription instructions are top and bottom of this page.

Any comments on the newsletter (it's too long, too short, topic suggestions, etc.) please send them right along to me, along with any other questions on customer Valuation, Retention, Loyalty, and Defection here.

'Til next time, keep Drilling Down!

- Jim Novo

Copyright 2006, The Drilling Down Project by Jim Novo.  All rights reserved.  You are free to use material from this newsletter in whole or in part as long as you include complete credits, including live web site link and e-mail link.  Please tell me where the material will appear. 

 

 
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