Tuesday, 30 October 2012

Advertising missed the point, it was never about analysis.

I reviewed the book Moneyball ages ago. It's great. Read it if you haven't already.

I'd like to revisit that book today, even though it's old news now and we've all moved on to talking about new shiny things from Apple and forgotten why a small baseball team from Oakland keeps beating bigger baseball teams. I'm going back to it, because it seems to me that advertising spectacularly missed the central point of the book. And the central point of Moneyball is potentially incredibly valuable to what we do.

When it read Moneyball, the advertising industry heard: "Analyse lots. If you do lots of analysis, you'll win more." After all, the Oakland A's baseball team hired a team of analysts and then they performed much better.

Which is wrong.

That's like saying if you want to go to Edinburgh, drive your car around a lot, because it's possible to drive to Edinburgh. It's not a massive amount of help until you work out which way you're going and just driving in circles will cost you a lot in petrol.

It's all about the question again. It's always all about the question.

The early analysis done by the Oakland A's was really nothing special - almost back of a fag packet stuff - but they'd asked the right question. That question was, "how do we compete, when we have less money than other teams?", which is itself too general to guide an analysis and quickly moved towards, "which players are undervalued, in terms of their ability to win us a baseball game?"

From there, your analysis lines up very quickly:

Which attributes of players help you to win baseball games?

Which players are good at those things?

So, which players have a cheap price tag, that doesn't reflect their ability to help win games?

Moneyball is all about looking for market inefficiencies. It's about discovering factors that are important in winning a baseball game, but which your competitors undervalue and then buying up cheap players who are good at those things.

We don't do that type of thinking very often in advertising.

We assume, over and over again, that the way to stay ahead of the competition is to innovate first and to be the first into an emerging media channel. Mobile, social, video pre-rolls... whatever is flavour of the month. The trouble is, with everybody doing that, demand for emerging channels will be higher and the price will be pushed up. It's basic supply and demand.

With lots of companies chasing after emerging media channels, their price is almost certainly inflated vs. their effectiveness. If you consider that new channels are risky because we don't know if they work yet, the problem gets even worse.

So where would the advertising market inefficiencies be, if you went looking for them? Which channels work better than their price suggests? I'm willing to bet those inefficiencies are in the same place as they were in baseball - they're in older, unfashionable channels just like they were in older, unfashionable players.

Players who can't do every job, but are still very, very good at one job. Other inflexible players can then be brought in to cover their deficiencies and overall, you'll have a very effective team. Or, alternatively you can go for a very focussed game-plan, based around the limited skills that your players do have.

I'd be willing to bet that it's the unglamorous media channels, which are undervalued in marketing. Leaflets... emails... daytime TV... You know, the channels that tend to get used by companies with small advertising budgets, who punch above their weight and who keep a very close eye on marketing efficiency. The companies with 'limited' but very focussed media plans.

This article from a few weeks ago also pointed out that in the US, the over 50s control 75% of financial assets and yet we pay a premium to target younger consumers with advertising. Yes, younger people are harder to reach, but they're so much less valuable in terms of spending power that I'd be amazed if there isn't an inefficiency here for somebody to exploit.

It's hugely cheaper to market a product to the over 50s and they're the ones with all the money. It's not glamorous advertising, but then the Oakland A's didn't have glamorous players.

They had effective ones.


Anonymous said...

Thanks Neil. Have you thought about a career at the Telegraph?

Love said...

wow, well said!