Big data holds out big promises for marketing. Notably, it pledges to answer two of the most vexing questions that have stymied marketers since they started selling: 1) who buys what when and at what price? and 2) can we link what consumers hear, read, and view to what they buy and consume?
Answering these makes marketing more efficient by improving targeting and by identifying and eliminating the famed half of the marketing budget that is wasted. To address these questions, marketers have trained their big-data telescopes at a single point: predicting each customer’s next transaction. In pursuit of this prize marketers strive to paint an ever more detailed portrait of each consumer, memorizing her media preferences, scrutinizing her shopping habits, and cataloging her interests, aspirations and desires. The result is a detailed, high-resolution close-up of each customer that reveals her next move.
But in the rush to uncover and target the next transaction, many industries are quickly coming up against a disquieting reality: Winning the next transaction eventually yields only short term tactical advantage, and it overlooks one big and inevitable outcome. When every competitor becomes equally good at predicting each customer’s next purchase, marketers will inevitably compete away their profits from that marginal transaction. This unwinnable short-term arms race ultimately leads to an equalization of competitors in the medium to long term. There is no sustainable competitive advantage in chasing the next buy.
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