Way back last century, management consultants started selling CRM (customer relationship management) systems. Big expensive ‘transformational’ changes in IT systems and staff training. The worthy aim was to lower costs and improve customer service. One of the main ways this would be done was to fix the ridiculous situation where the same customer was listed multiple times in different databases. You see these old databases couldn’t ‘talk’ to one another. This annoyed customers who, quite naturally, assumed that the service person they were talking to would know that they had had contact with another service person (or another branch) the week before, and so on. It also led to wasteful activity such as trying to cross sell insurance to customers who already had that insurance product with the company.
So the premise of much CRM work was quite sound and practical. But the CRM systems were expensive, so these sorts of commonsense improvements weren’t enough to justify the price ticket. The consultants needed something more, something sexier, something more “strategic” that would win over top management. Loyalty was the answer. CRM systems were sold and justified on the basis that they would deliver astonishing gains in customer loyalty. Customer defection would become a thing of the past, and cross selling would generate huge gains in revenue. This was all helped along by absurd claims, backed by shoddy evidence, that small gains in loyalty would generate huge profits.
With the benefit of hindsight, plus scientific evidence, we now know that this was wishful thinking (and snake-oil selling). The returns from CRM investment turned out to be less than stellar, there was plenty of over-investment.
This story has a modern parallel. Programmatic buying of media is, at its heart, a bit of streamlining automation applied to the messy, archaic business of trading advertising space. Computers can talk to one another, which can handily replace the system where two people (or more) sit at their respective desks staring at their own spreadsheets and talking (arguing/shouting) with one another as buyers and sellers of media spots. The potential cost savings are obvious. With the added benefit that it might also give advertising planners greater ability to focus on the strategy (the algorithm they instruct the computer with) rather than fretting over day-to-day spot availability and vendors’ idiosyncratic buying conditions and constraints.
Computers (talking to computers) can also handle detail so much better and faster. Like serving thousands of different ads for the different products currently in the warehouse, or altering the product’s price listed in online ads depending on how many rooms are left in the hotel.
Programmatic is particularly useful for those buying from the pool (cesspool?) of cheap digital spots away from few main properties of Google and Facebook. This is a truly vast universe of advertising spots, each spot seen by very few human beings (many robots?), but collectively adding up. It seems obvious, essential even, for the trading of these trillions of spots to be done by computers, human involvement is simply too expensive.
Unfortunately, again, this just isn’t sexy enough for the sales consultants. So again we have overblown promises based on marketing theory and fashion not facts. Programmatic will apparently allow deeper relationships with customers. It will deliver hyper targeting – zero wastage. Moreover ads will reach viewers just at the moment they are most susceptible to persuasion. ROI will be fantastic. On goes the sales spiel.