MarTech Basics #1: What is MarTech?
MarTech Basics #1: What is MarTech?
Explained by Selling Coffee
Taking a bit of a break from the math-heavy Marketing Analytics series, here is the first post in the MarTech Basics grouping.
Expect more Marketing Analytics posts coming up to finish out the series!
Overview
In this article, we’ll go through:
an overview of the motivations of customers in the real world
a framework for understanding what the Marketing Technologies field (MarTech) is
what MarTech is useful for
and how MarTech differs from traditional Marketing
By the end of this article, you’ll understand:
The value prop for MarTech as a field
How to fit business operations into a marketing framework
And see how MarTech and Marketing can be very different fields
Think of Your Local Coffeeshop
If you’re a regular at a business (doesn’t have to be a coffeeshop), think about why that place is your most attended. Is it because it’s convenient, because you know what to expect, because you’re recognized, or something else?
Most people who are regulars at a business are not all that cost-conscious. Take my grandfather for example: For years, he has gone to a breakfast joint every day to have a black coffee, a meal, and read the paper.
Even if he were to drink just the black coffee for a single day per week, his routine would cost about as much as an entire week’s worth of breakfast eggs at the grocery store1.
No matter how low you make your prices, the cost of becoming a regular at a business will always be more than not.
Wait, Cost Doesn’t Drive Habit?
Well, it does at first (during the Consideration stage of a sale).
Cost is also important to consider when changing prices to make sure you’re not going to throw your existing customers off2.
What’s often more important than price is that customers have their wants and needs met.
Your job as a marketer is to ensure that customers perceive your product (or service) to be worth more than the sum of:
Nominal Cost: the cost of the service itself3
Opportunity Cost: the cost of not doing the alternative (e.g. going to a coffeeshop means you probably can't go to a donut shop for your morning routine, a hefty cost if you like donuts)4
Habit Cost: the cost of changing a habit (in difficulty and actual cost)5
Below is the key equation that a marketer must optimize to sell their product.
How Does The Coffeeshop Do This?
One of my friends, Christina, owns Pull-Through Coffee in Dallas. With her years of selling coffee she’s learned a few ways to maximize our Golden Equation without any formal marketing training.
She’ll greet all guests with a smile and good mood (raises Perceived Value)
She’ll help explain what on her menu is most similar to what a customer likes at another shop (reduces Habit Cost)
She works to make her processes more efficient and lower costs, and consequently prices (reduces Nominal Cost)
She caters to runners and cyclists on the attached trail where the alternative is to get back in a car to go to the next nearest shop (raises Perceived Value and reduces Opportunity Cost)
By selling a good product (it’s great coffee) and pushing the equation in her favor, she’s able to run a profitable business.
But she’s just one person, so she can only do all of these things when she or another employee is physically at the business during operating hours.
What if she wanted to scale massively?
Enter MarTech
MarTech allows for personalized interactions at scale.
MarTech (Marketing Technology) is a pretty broad field of tools and systems that were originally intended to streamline what marketers already did (create, execute, and measure campaigns), but have come to change the role of marketers significantly.
By bringing real-time or near-real-time information about campaign performance back to the marketer, a company can generate much clearer idea of what performs well with customers than from traditional mass media marketing.
So for a business, MarTech allows for customers to feel like they’re at home and individually seen, even when there are millions of them at a time.
MarTech can replicate much of what Christina's customer interactions6, but at larger scale.
Greeting all guests personally → Personalized communications on preferred channels
Menu recommendations → Lookalike audience product recommendation
Catering to high-value audiences → Segmentation and analysis for campaign targeting
MarTech can give the shopping experiences that only the very rich or very regular customers had in the past:
personalized recommendations
for the right things
at a good time
How Is This Different From Marketing?
A traditional marketing team for a travel agency might set up a campaign to sell a cruise vacation. The plan to target customers who fly much more in one month than the previous 36 months.
The goal might have been to capture people who recently got a big bonus or promotion, but traditional marketing misses the mark. Their campaign will also—unfortunately—send tone-deaf cruise advertisements to a family who is flying back and forth making funeral arrangements for a recently-deceased family member.
Using MarTech, we can make sure that audiences that might be insulted by the tone of an advertisement can be dropped out of a campaign. By using technology, you can follow Rules 2 & 3 above—getting the right message at the right time.
With Marketing, the goal is more—more impressions on more channels to get more attention across more audiences.
With MarTech, the goal is (sometimes) less7—fewer (but right) impressions orchestrated across the minimum (but relevant) channels to the smallest (but most likely to convert) audience.
Recap
Marketing across all industries works to make the Perceived Value for a product greater than the sum of the associated costs
Traditionally, this has been done by either having very human relationships or painting with broad strokes across big audiences
MarTech allows for more granular personalization to happen at scale
MarTech can allow for different goals from Marketing while still optimizing the same fundamental equation
In the next post in this series, join me discussing what kinds of customer data are out there, what they’re useful for, and some common mistakes people run into.
If you know anyone who could benefit from this information, feel free to send them a link to the article.
For reference, my local Target’s generic 12 white eggs cost $2.59 as of the time of writing
See Price Elasticity for more info: Price Elasticity—Investopedia
Nominal Cost (how much it costs in dollars): See Nominal Value in Economics
Opportunity Cost: Opportunity Cost—Investopedia
Habit Change Cost includes cognitive costs (e.g. having to look up a route to a new store, learning a new menu) and effort costs (e.g. harder to park at new location, having to tell them your name, etc). Yes, technically this could be included in opportunity cost, but its worthwhile to consider this value separately to ensure it’s actually taken into account
Assuming good data and tools
The goal is often to achieve the same ROI as currently exists with less ad spend or with faster turnaround. Of course, the same budget can be used with a higher ROI if the company goals are aligned with the strategy