Summary: Intelligent Data-Driven Marketing: When Physicists Start Thinking about Marketing – From Mad-Man to Math-Man Marketing by Mathias Elsässer

Recommendation

During the 25 years physicist and marketing expert Mathias Elsässer spent consulting for CMOs, he observed a shift from a creativity- and intuition-fueled marketing process to one grounded more in analysis and mathematical principles. Elsässer makes the case that data analysis enables a new approach to marketing – he terms it “Math-Men” marketing in a play on the “Mad Men” moniker – whereby marketers track and nudge individual targets throughout their purchasing journeys by closing the data loop. Elsässer offers an interesting lens on marketing as he attempts to simplify its accelerating complexity by applying insights from the world of physics.

Take-Aways

• Applying physics principles to marketing can shed light on current marketing practices and suggest new ones.
• Ma.tomics offers a framework for data-driven marketing that breaks marketing down to its elements.
• Thought experiments can aid in the understanding and use of marketing metrics.
• Big Data analytics and smart KPIs close the loop by predicting audience actions from past behavior.
• Transposing the laws of physics into marketing terms can offer helpful insights.
• Data exerts a pull similar to that of gravity and can direct the flow of creativity.
• Implementing data-driven marketing depends on building on a set of internal capabilities.

Summary

Applying physics principles to marketing can shed light on current marketing practices and suggest new ones.

Thinking about marketing the way a physicist would can illuminate real-world marketing practices and suggest fresh approaches. Marketers can also use the same approaches physicists use to study the physical world – such as thought experiments and underlying principles – to think about marketing. Physics can apply to marketing in a more direct sense, as well: Just as physicists study subatomic particles and predict their behavior in laboratory experiments, marketers can also study and anticipate the behavior of human targets via predictive IT models.

“The topic of transforming your marketing isn’t a ‘Should I do it or not?’ question – yes, you should do it, no matter what.”

Old-school “Mad Men” marketing meant relying on pure creativity and after-the-fact measurement of impressions or clicks. Marketing has developed away from this style to embrace data. Data-driven marketing still respects creativity but places data at the center of its approach: hard facts replace marketers’ gut feelings. Math-Men marketing goes beyond data-driven marketing, employing tools that enable marketers to follow and nudge individual customers through each step of their journeys.

Ma.tomics offers a framework for data-driven marketing that breaks marketing down to its elements.

The ma.tomics framework breaks down the complexity of contemporary marketing into its basic elements. Marketers can then implement each element individually or combine them to create unique, smart data-driven approaches.

In the ma.tomics conception, each marketer functions within its own marketing universe. That universe includes the business’s fundamentals – its strategy, systems and processes – along with its target audience, its content management system and its budgetary choices. A marketing taxonomy, in the form of a data model, enables the marketer to gather and analyze market-related data and generate insights. Additional domains under the ma.tomics framework include, among others, portfolio and program management, creative management and agile campaign management.

Lookalike modeling software enables marketers to target strategic audiences by identifying the best customers and building clusters of new users likely to demonstrate high conversion rates. This capability underpins hyperaccurate targeting, another domain of the ma.tomics framework.

“Modern, intelligent data-driven marketing is based on single interactions that can be attributed to unique individuals.”

The framework also considers tools and strategies such as audience profiling, optimization of the paid/owned/earned activation mix, the dynamics of the sharing economy on social networks, optimization of action flows, demand windows and pricing windows, and more. Finally, creativity remains an essential element.

The ma.tomics framework enables marketers to optimize performance consistently across all marketing touch points and platforms. However, companies won’t thrive in today’s data-centric marketing world by devising an overly engineered setup, consisting of far too many creative optimizations, bots and predictive models; instead, they’ll win by employing lean and agile processes.

Thought experiments can aid in the understanding and use of marketing metrics.

Physicists have long used thought experiments to conceptualize complex systems by translating them into easy-to-grasp scenarios. To aid your understanding of marketing metrics, imagine your target population as a group of people standing around in a room. Imagine your message – your call to action – as words written on balls. Now imagine a person is hitting the balls into the room. When individuals catch the balls, they see the call to action. For the sake of simplicity, imagine the call to action as a message instructing the person to purchase a basket – a pile of which lie in one corner of the room.

“With all the data we collect, the highly sophisticated predictive models we developed, and the perfect agile campaign execution and automation, in the end, it’s the customer themselves who decide what their next preferred action is.”

In this scenario, your marketing universe is the total number of people who could theoretically participate. Planned costs and impressions correspond to the total number of balls you have in your own basket and the amount you’ve spent on them. Actual costs and impressions equal the number of balls you’ve thrown and the amount you’ve spent on those. The total number of times you hit a target represents gross reach, and the number of people you hit with a ball represents net reach. Conversions correspond to the people who catch balls and purchase a basket. Sales amount equals the number of baskets you’ve sold.

You can modify the basic scenario to visualize campaigns of any complexity. For example, testing two different marketing campaigns translates to throwing balls into two different rooms.

Big Data analytics and smart KPIs close the loop by predicting audience actions from past behavior.

Marketing teams must adapt to the digital era and move away from a focus on counting clicks and impressions via web tracking toward use of Big Data platforms that analyze unique individual actions on a customer’s journey. Marketers can collect data of two types: quantitative measures – such as the universe size, segment size, planned or actual impressions, impression costs, gross and net reach, conversions and sales amounts – and qualitative dimensions, such as identification of the campaign, audience and segments.

“It’s necessary to allow marketing departments to bid farewell to the historic way they consumed data.”

Collecting and analyzing these numbers and dimensions yields key performance indicators, including share of, meaning the percentage of the marketing universe that has been converted into customers; marketing pressure, calculated as net reach percentage multiplied by frequency; cost per, such as cost per action and cost per thousand of impressions; and conversion rate, or the rate of targets becoming customers.

Closing the loop means treating results data as feedback that you apply in a continuous process of improvement. Organizations pass through maturity levels in their use of data, beginning by limiting their reports and models to description, then adding diagnostics to seek cause-and-effect relationships, moving on to prediction and finally reaching the ultimate level: prescription, or determining future actions on the basis of data analysis.

Transposing the laws of physics into marketing terms can offer helpful insights.

In fluid dynamics, the law of continuity means water flowing through a pipe gains velocity when the area of a pipe gets smaller and loses velocity when the pipe gets bigger. Applying this principle to marketing suggests the need to find perfect flow in a strategy. For a marketing team, if you have a lean, agile flow of activity from ideation to production, you’ll create fewer bottlenecks and execute a campaign with greater velocity.

“We’ll never find some magical formula, like e=m·c2, that helps us to deliver perfect marketing.”

The physicist Isaac Newton postulated that every action introduced into a system will cause an equal and opposite reaction. A harmonic oscillator is a system that, if disrupted, exerts an opposing force to restore equilibrium. In a marketing context, this translates into understanding that changing a marketing approach will take time. A change such as boosting click-through rates won’t automatically trigger sustainable overnight success, as the system will initially attempt to return to a state of equilibrium.

The Second Law of Thermodynamics states that entropy never decreases in a system; it can only remain constant or increase. The implication for marketing: disorder will necessarily occur over time unless you invest energy in making incremental improvements and controlled transformations. An ideal marketing system can’t be a static entity; it must engage in an ongoing process of improvement.

Data exerts a pull similar to that of gravity and can direct the flow of creativity.

The renowned physicist Albert Einstein stated in his theory of special relativity that physicists must calculate all other speeds relative to the speed of light. In a marketing engine, creativity stands in for the speed of light, in that it separates those who are beating the competition from those lagging behind. When operating an agile closed-loop system, bear in mind that moving faster means you’ll gain time to perform other activities, as – according to Einstein – time is relative to speed.

“Besides data and budget, creativity in marketing is the main factor for a successful marketing campaign.”

Einstein describes gravity as the curving of space by an object, which is a natural effect of the object’s existence. In a marketing universe, data behaves much like gravity. As you accumulate data, you’ll very likely also attract services and applications as a means to exploit the rising perceived value of your data, as if by the gravitational force Einstein describes. When you build large, well-structured repositories of audience-centric data, you can benefit from positive network effects, which create barriers to entry for new sources of competition. And when you accumulate data, embracing the Mad Men to Math-Men shift, you’ll also alter the direction of creativity.

Implementing data-driven marketing depends on building on a set of internal capabilities.

The universe, as physicists describe it, has only roughly 100 distinct types of atoms, and its complexity results from myriad arrangements of this limited number of small parts. Similarly, the ma.tomics framework offers a limited number of small parts, which you can rearrange like Lego blocks to create a vast array of unique marketing programs. The ma.tomics framework can also help you manage your organization’s digital transformation as you adapt marketing processes and adopt new cloud-based IT platforms.

Support the organization’s transformation to a data-driven marketing system by building the following fundamental capabilities:

• Guiding audiences. Shift from counting actions, such as clicks, toward guiding users on their journeys by applying data insights drawn from their past behavior.
• Making real-time data available. Leverage the power of Big Data by making it available in real time and with zero latency.
• Operating in a closed-loop system. Efficiency and effectiveness improvements arise from ongoing efforts to optimize flow and iterate creative ways to attract audiences.
• Mastering the technology stack. The organization’s CMO should invest in Big Data tools and frameworks, marketing clouds, and workflow and planning platforms to achieve the optimal tech stack.
• Running agile. Embrace a “run fast, fail fast” strategy. Employ data to identify failed marketing activations and shift to tactics that feature lower investments and higher returns.
• Enabling the organization. People aren’t robots, so you’ll need to find creative ways to manage their skills and behavior as the organization moves toward a data-driven model.

The businesses that thrive in the future will be those that possess the intelligence to sift through copious amounts of data, deduce which data has relevance to their objectives and glean valuable customer insights. Guesswork has become obsolete, as data, algorithms and an agile target operating model can assist in devising marketing programs that stand a high chance of success.

About the Author

Mathias Elsässer is a partner in the CMO Advisory practice at PwC Germany and holds a degree in physics from Karlsruhe Institute of Technology.

Review

Thank you for entrusting me with the task of providing a comprehensive review of “Intelligent Data-Driven Marketing: When Physicists Start Thinking about Marketing – From Mad-Man to Math-Man Marketing” by Mathias Elsässer. I have thoroughly read and analyzed the book, and I am excited to share my insights with you.

Book Summary

“Intelligent Data-Driven Marketing” is a thought-provoking and insightful book that offers a novel approach to marketing by combining the principles of physics and data analysis. Mathias Elsässer, a physicist turned marketer, argues that traditional marketing methods are no longer effective in today’s data-driven world and proposes a new approach based on the principles of chaos theory, complexity, and network theory.

Elsässer contends that marketers need to move away from the “Mad-Man” approach, which relies on intuition and creativity, and embrace the “Math-Man” approach, which leverages data analytics and machine learning to make data-driven decisions. He emphasizes the importance of understanding the underlying patterns and behaviors of customers in order to create effective marketing strategies.

Key Insights

• The Mad-Man vs. Math-Man approach: Elsässer argues that the traditional marketing approach, which relies on intuition and creativity, is no longer effective in today’s data-driven world. He proposes a new approach based on data analytics and machine learning, which he calls the “Math-Man” approach.
• Chaos theory and complexity: Elsässer draws on the principles of chaos theory and complexity to explain how markets work and how they can be modeled. He argues that markets are complex systems that are influenced by a wide range of factors, including customer behavior, market trends, and external factors.
• Network theory: Elsässer also draws on network theory to explain how customers interact with each other and with brands. He argues that understanding the network effects of marketing is crucial for creating effective marketing strategies.
• Data-driven decision-making: Elsässer emphasizes the importance of using data analytics and machine learning to make data-driven decisions in marketing. He argues that marketers need to move away from relying on gut instincts and instead use data to understand customer behavior and preferences.
• The role of physics in marketing: Elsässer argues that physics can provide valuable insights into marketing by providing a framework for understanding complex systems and behavior. He suggests that marketers can use principles from physics, such as chaos theory and complexity, to better understand customer behavior and create effective marketing strategies.

Strengths

• Novel approach: The book offers a fresh and original approach to marketing by combining principles from physics and data analysis.
• Insights into customer behavior: The book provides valuable insights into customer behavior and preferences, which can help marketers create more effective marketing strategies.
• Practical applications: The book provides practical examples of how marketers can use data analytics and machine learning to make data-driven decisions.

Weaknesses

• Complexity: The book can be dense and complex at times, which may make it challenging for some readers to follow.
• Lack of case studies: The book could benefit from more case studies to illustrate the principles discussed.
• Limited scope: The book focuses primarily on B2C marketing, and may not be as relevant for B2B marketing or other marketing contexts.

Conclusion

“Intelligent Data-Driven Marketing” is a thought-provoking and insightful book that offers a novel approach to marketing by combining the principles of physics and data analysis. While the book can be dense and complex at times, it provides valuable insights into customer behavior and preferences, and offers practical examples of how marketers can use data analytics and machine learning to make data-driven decisions. Recommended for marketers looking to stay ahead of the curve in the rapidly evolving world of marketing.