Big Data is the Oil That Fuels Digital Marketing

Database marketing has become a multi-billion dollar industry.  It is by far the fastest growing segment of the advertising business.  In fact, Ad Age’s two largest agencies of 2012 are database marketing firms; Epsilon (largest) and Acxiom (second largest).  This trend shows no signs of slowing down and as data continually grows, it will only become more sophisticated and effective.

Acxiom, based in Conway, AK has amassed the world’s largest commercial database.   The firm’s large scale data mining and analytics is processing 50 trillion data “transactions” annually from more than 500 million consumers and 1500 data points.  This multiplatform approach of predictive consumer behavior allows clients such as Wells Fargo, Toyota and Macy’s to reach consumers with messages relevant to them.

Personal data allows Acxiom to create messages and offers built on its own classification system known as PersonicX, which places consumers into one of 70 unique socioeconomic clusters and then markets to them accordingly.  For example, a consumer may be classified as a “savvy single” meaning they are in a group that is mobile, upper-middle class, banks online, attends pro-sports events, is price sensitive and responds to free shipping offers.

While “cookies” have been used for years to track online activity, the new models of database marketing are far more comprehensive and incorporate offline (e. g. Frequent Shopper cards), online, mobile and GPS information.  The combination of geo location, mobile and database marketing is actually allowing retailers to offer personalized promotional offers to consumers who are in the area of their store or as they are browsing the store.

While many consumers are wary of this approach and the personal data / privacy issues, the marketers see this approach as one that helps them make sure the right people are getting messages they are interested in and therefore establishing relationships with companies.

Until now, consumers have willingly (or unconsciously) been giving away their personal data for free.  However, the Facebook IPO, political advertising and higher concerns regarding online privacy are changing this relationship.    Not surprisingly, there are now a number of companies in development that will allow people to take control and even profit from their personal, digital data.  These firms offer something called Vendor Relationship Management (VRM)

As consumers are realizing they are “for sale.”  VRM programs make it possible for people to empower themselves as independent and autonomous players in the marketplace and not simply “targets” for marketing messages.  Whereby, individuals receive a share of revenue from the sale of their personal information.  It is then about relationships not transactions and allows individuals to be independent and self-empowered when it comes to their personal data.

These VRM platforms are centered on the concept of a personal data locker.  People have a single account containing their personal information.  Because they retain control over their data they can then demand some sort of payment for access to their data.  However, while consumer information may be worth billions in aggregate, an individual’s data has minimal value.  A recent JPMorgan Chase study valued a Facebook unique user at $4 and Google user at $24.

The privacy issues related to the commercial usage of these mountains of personal data are significant.   The FTC is calling on Congress to pass legislation that will give consumers the right to access the information that the firms hold on them, similar to credit rating companies.  However, the FTC does not endorse a particular piece of legislation, it is only asking for something to be done to allow consumers to opt out of online advertising that tracks online user behavior.

At Boelter+Lincoln we believe personalized messaging utilizing consumer data will continue to grow and provide marketers a highly effective medium to communicate with consumers.  Used properly, it can develop mutually beneficial relationships between brands and consumers.  We are also very cognizant of privacy issues and work with clients to utilize data and customization responsibly.