Harnessing the power of behavioural economics


Consider the following puzzle:

A bat and ball cost £1.10.
The bat costs one pound more than the ball.
How much does the ball cost?

The number that many people arrive at is 10p, dividing up £1.10 neatly into £1 and 10 pence. However, the correct answer is 5p (if the ball costs 10p then the total cost will be £1.20 – 10p for the ball and £1.10 for the bat).

Now consider another question:

How many animals of each kind did Moses take into the ark?

This question is commonly referred to as the ‘Moses Illusion’. Moses took no animals into the ark; Noah did.

The incorrect answers many people give to these questions offers just a glimpse into the overwhelming evidence that indicates that one of the underlying assumptions of social science, that humans are generally rational and their thinking normally sound, is flawed.

Many of us believe that we know how our mind works, which often consists of one conscious thought leading in an orderly way to another. However, according to the social psychologist Daniel Kahneman, most impressions and thoughts arise in our conscious experience without knowing how they got there. Therefore, the mental processes that produces impressions, intuitions and many decisions goes on in silence in our minds.

The judgements, choices and decisions we make are therefore not always in our complete control. Sometimes we make decisions in the blink of an eye, whilst on other occasions we follow the crowd or co-operate rather than compete. Recent studies have suggested that over 90% of our decision-making takes place in the subconscious mind.

The mental shortcuts people use to form judgments and make decisions are called heuristics and whilst they work under most circumstances, they can lead to systematic errors known as cognitive biases. The theories of heuristics and biases have been used widely and productively in many fields, including government policy, legal judgement, medical diagnosis and finance. However, for a number of years marketers have been experimenting with behavioural science and economics to better understand and change consumer behaviour.

Introducing behavioural economics

The concept of behavioural economics has grown in popularity and prominence over the last decade. Books including Daniel Kahneman’s ‘Thinking, Fast and Slow’ and Richard Thaler and Cass Senstein’s ‘Nudge’ have captured the public’s imagination.

Many of the theories of behavioural economics can be applied to marketing in a different ways and is something Smart Insights have covered before. Ogilvy have even established a specialist behavioural economics practice called Ogilvy Change which employs ‘Choice Architects’ “to investigate and apply principles from cognitive psychology, social psychology and behavioural science to create measurable behaviour change in the real world”.

5 top nudges

Choice architecture is the practice of designing different ways in which choices can be presented to consumers to ‘nudge’ or steer them towards better decision-making. As mentioned above, many of principles choice architects apply have worked in other fields so we thought we’d pick out five nudges, along with examples, that can be applied within a digital marketing context:


What is it?

This is based on the theory that people tend to value things more highly when they believe they are scarce.

Following the lead of many luxury good marketers, Apple, creates the illusion of scarcity to build up the hype of many of its products to fuel desirability and demand. The stories of limited supplies of iPhones and people queuing for days to get their hands on the latest model live long in the memory.

How is this applied in digital marketing?

Scarcity and urgency is a tactic that’s commonly used within eCommerce, using messages such as ‘limited availability’ or ‘only X left in stock’:


Using the fear of scarcity to drive demand and sales can be considered to be an unethical and manipulative tactic when used irresponsibly. Scarcity should therefore only ever be used in a transparent and positive way, for example by being honest about what stock is left and whether any more is likely to be made available.

The anchoring effect

What is it?

The value of something is often set by anchors or imprints in our minds, which we use as mental reference points that influence our decision-making. The anchors can be completely arbitrary and still have an impact.

Anchoring is particularly common in situations that involve negotiation. For example, when valuing a house, experiments have shown that the listing price, regardless of the ‘real’ value, can have a powerful effect on someone’s own perception of the value.

How is this applied in digital marketing?

In a digital marketing context, anchoring can be seen in the use of subscription plans:


In this example, we can see the different subscription options for Crazy Egg’s heatmap tracking software. There are two factors at play here:

  1. The ‘Pro’ plan is listed on the left where visitors are likely to see this first
  2. The ‘Pro’ plan is priced at $99, setting the anchor against which the value of all the other plans (including ‘Plus’, the ‘most popular’ plan) is compared.

Loss aversion

What is it?

We will often go to greater lengths to avoid the loss of something we already have rather than to gain something new. People can find it twice as painful to lose something they own in comparison to how enjoyable it was to acquire it in the first place.

How is this applied in digital marketing?


It’s no surprise that many companies, such as Netflix, Moz and Dropbox, offer free trials in order to leverage loss aversion.

By giving prospective customers the opportunity to use a product or service for free for a decent period of time, they begin to feel a sense of ownership. Once the trial period has expired, the thought of losing the product, plus the minimal effort it often takes to sign up and pay, means that many people are convinced to commit to a purchase.


What is it?

Years of societal convention have led us to place an often irrational trust in the judgment of experts, even if their judgements are not always correct or moral. A famous example of the obedience of authority is the Milgram Experiment, where 65% of people were prepared to administer a 450-volt electric shock to another person hidden from them just because a doctor told them it was OK.

How is this applied in digital marketing?

The practice of brand endorsement by well-known figures such as sports stars, musicians and other celebrities is a perfect example of how authority can be used to influence customers’ decision-making. Much of Nike’s success within the golfing arena is credited with their decision to associate themselves with Tiger Woods, who at the time was the best golfer in the world.

Digital marketers can use authority through the use of thought-leadership, content collaboration and expert analysis to build credibility. As a digital marketing thought leader, Click-Through Marketing utilise Dave Chaffey’s authority on a range of topics.

The paradox of choice

What is it?

Offering customers more choice is not always the best course of action. When we’re paralysed by too many options, the likelihood that we pick the ‘most suitable’ choice is reduced and we procrastinate for fear of making a bad decision. Therefore, when fewer options are presented, there is less chance of making a mistake and decisions are speeded up.

How is this applied in digital marketing?

From an eCommerce perspective, companies like Amazon, Etsy and House of Fraser implement effective filtering techniques to provide the most suitable choices to customers.

A good use of filtering to optimise relevant results can also be seen in this example from Lloyds:



The bank offers nine different credit cards although a consumer arriving at the site might be a little overwhelmed as to which to choose from. Filtering by the cards by different needs states, in this case Balance Transfer, Large Purchase, Everyday spending and Rewards helps to simplify the number of options and help the consumer choose the right option.

Social proofing/ herding

What is it?

The concept of ‘social proof’ was made famous 30 years ago by psychologist Robert Cialdini’s in his book Influence. Social proof describes our tendency to run with the herd and make decisions based on what those around us are doing. We often validate our choices on whether others were following a similar course of action, which is why books are marketed as ‘bestsellers’.

How is this applied in digital marketing?

There are many different ways to leverage social proof online and data from Smart Insights from 2014 indicates that there is a purchase uplift from tactics such as social sharing and reviews.

Ratings and reviews are an excellent way to aggregate sentiment from past purchasers and give prospective customers confidence in the products they’re browsing online. They’re particularly effective when sourced from a large population and managed by a third-party, such as this example from travel site On The Beach, which uses reviews from Trip Advisor:


Another popular social proof tactic uses numbers to convince people that a product or service is popular. Moz makes it very clear that their software is used by tens of thousands of companies:


And this popularity is backed up by massive following some of their guides are receiving which supports the authority they have built up in their field of expertise:


Closing thoughts

Many of the principles of behavioural economics can have a powerful and profound impact on consumer decision-making so it’s therefore essential that the nudges highlighted in this post, and the many others that haven’t been covered, are used ethically. There are examples of websites that use manipulative UX practices that exploit consumers’ cognitive biases and this will only ever erode the relationship between the consumer and the brand in the long run. When Richard Thaler signs copies of ‘Nudge’, he always writes “Nudge for good” next to his name and explains that nudging is like giving people GPS: “I get to put into the GPS where I want to go, but I don’t have to follow her instructions”.

Nevertheless, behavioural insights should be considered by digital marketers when crafting strategy as the practices we’ve covered illustrate how marketers can improve the content and overall user experience to improve consumer decision-making and provide better digital experiences.
Marketers can take inspiration from the public sector in how to nudge for good. The government utilised status quo bias, the theory that people prefer to carry on behaving as they have always done, for the UK workplace pensions scheme. Nest automatically enrols employees in a workplace pension yet gives them the opportunity to opt out, resulting in a greater take-up than if employees were required to opt in, which takes more time and effort. Through a subtle change in how the choice is presented, the output results in a win-win for everyone concerned.

Deliver results with anchor content

Screen Shot 2016-06-17 at 09.47.21

Content now forms an essential element of nearly everything we do as marketers. Planning, creating and distributing great quality content is not just the domain of content marketers; it covers email, advertising, CRM and just about anything else we’re involved in. Content excellence is now so crucial to how we communicate and gain traction with consumers that it’s become an important priority for many marketers in 2016 and beyond.

Yet, despite its importance, gaining consumers’ attention is becoming more and more difficult. In an attention economy, that’s become increasingly competitive, ‘content shock’ the incessant deluge of mediocre content that is blinding audiences to brands’ content efforts – means that content has to have genuine quality and relevance to achieve cut-through.

The rise of ad blocking software, the decrease in organic reach on social platforms such as Facebook and declining referral traffic for many brands are all signs that the bar for quality content has been raised. And this impression is backed up by data from Chartbeat and Buzzsumo that indicates that much of the content being produced is not being read, shared or linked to:

slide 7

Source: Chartbeat, 2016

The chart above indicates that there is no relationship between how much a piece of content is shared and the amount of attention an average reader will give that content.

slide 8

Source: Buzzsumo, 2016

The chart above shows that the vast majority of posts receive very few shares or links, two metrics that indicate proactive engagement.

Build your content plan around an anchor

Let’s consider a publication such as Wired. What is it about the content that Wired produces that keeps people reading and subscribing? Although Wired offers many different articles every month, there are often one or two stand-out features, as well as regular features, that grab people’s attention and keep them engaged.

This is also true for services like Netflix. Whilst there are hundreds, even thousands of different series and movies to choose from, it’s the flagship shows such as ‘House of Cards’‘Making a Murderer’ and ‘Orange is the New Black’ that gets people hooked and encourages them to keep on watching and, more importantly, subscribing every month.

These features are authoritative, data-driven and remarkable. They’re different from everything else and can be described as anchor content. Like a real anchor, this content has weight, substance and connects everything together.

The concept of anchor content was first explored by Eric Enge in his excellent post for Marketing Land in March. The methodology that works so well for Wired and Netflix can be applied by marketers and provides a useful framework for anyone involved in content planning across different channels.
The figures below illustrate the positive impact of anchor content on a regular email programme:

Anchor content in action (1)

The graph above shows the decrease in engagement over time once the initial buzz and interest of the campaign dies away. The content being produced (the green circles) is useful, relevant and seasonal, but without anything remarkable to spark interest the brand is left with dwindling engagement levels.

Anchor content in action (2)

The second graph, however, shows how the inclusion of anchor content (the orange circles), including key features and high-quality evergreen content, can boost engagement over time and keep the audience motivated to keep clicking through and reading. The brand has identified what resonates with the audience and has planned in advance where to include anchor content to maintain interest.

Three key principles of anchor content

The principles of anchor content are not new but they are useful for reminding ourselves and clients of what makes an effective content campaign. Three principles that stand out for me include:

1. Start with a weighty anchor

A piece of solid, authoritative anchor content can form the centre point of a campaign, from which less detailed, more supplemental content can be added.

In the email campaign example above, the spikes in engagement were the result of strong anchor content that introduced a theme for the quarter. In the following weeks and months, other pieces of supplemental content ‘riffed’ on the main theme, building on the interest the initial piece generated until the next quarter.

2. Quality beats quantity

An endless stream of ‘OK’ content is unlikely to have a positive impact. The days when large quantities of content could achieve results, particularly in search, have long gone as a result of advancements such as Google’s Panda algorithm update. Audiences are busy, distracted and have more choice than ever before so they expect better.

However, it’s impossible for everything to be ‘hero’ content, there just isn’t the time, resource or audience appetite. But that’s not the point of the anchor content approach. Instead, content planners should consider how different campaigns or programmes can be structured in a way that uses key features at certain points in time to anchor interest and generate buzz.

Some of this type of content was explored in our post on ‘10x content’.

3. Focus on what your audience finds fascinating

Data is you friend! With so many analytics tools and resources available, there’s really no excuse for not measuring activity to identify what is resonating with your audience.

Look at the trends and patterns between the different pieces of content that generate high and low levels of engagement. What is it about each that works well/ not so well? What can you take from the data and apply to your next piece of anchor content? This insight will help you to narrow down the content themes, formats and distribution channels that work.


The sheer deluge of content consumers receive today means that brands and marketers must work increasingly harder to achieve cut-through and generate engagement. The anchor content approach is based on the concept that specific pieces of high quality, authoritative content can be used as part of a new or existing campaign to spark interest and keep audiences engaged.

Anchor content is about producing content that stands out from the crowd to help you establish yourself in an increasingly noisy mediascape. The goal should not be about producing large quantities of content but creating content that is remarkable, adds value to those that are listening (i.e. not always the mass market) and is data-driven.

The politics of persuasion


The fallout of Britain’s decision to leave the EU following the referendum on the 23rd June has caused shockwaves around the world. The value of the pound has tumbled, markets have been in turmoil and other European countries are now calling for votes on independence of their own.

I’m not a professional forecaster or pundit (as evidenced by my dismal prediction that Remain would win by ten points!) so I won’t begin to attempt to dissect the reasons behind Britain’s decision to leave the EU. Many knowledgeable and informed experts will no doubt provide in-depth analysis over the coming days, weeks and months. However, I would like to address one aspect that I believe was crucial to the final result: persuasion.

Ancient tools in a modern world

In the construction of an argument, Aristotle described three models of persuasion:


The Remain campaign focused very heavily on facts, data and statistics, arguing that if Britain were to leave the EU the economy would be damaged, the cost of living would rise and even peace and national security would be at risk. Nine out of ten of the country’s top economists predicted that a vote to leave would be detrimental to the UK economy, whilst many business leaders voiced their concerns about negative growth and employment prospects.

In response to what some branded ‘Project Fear’, many commentators suggested that Leave had lost the economic argument, thus proving Bexit would not be a legitimate option for the UK. However, with their focus instead on immigration, border control and sovereignty, Leave crafted an argument that seemed to resonate and generate a groundswell of support.

Hearts and minds

In terms of ethos, both Remain and Leave leveraged personality and authority by recruiting politicians and celebrities who they believed would connect with the public and convey their respective messages.

However, whilst the Remain camp relied very much on logos and the rational reasons for staying within the EU to appeal to voters’ heads, Leave employed ethos and used emotional reasoning to appeal to voters’ hearts. The emotive issue of immigration and the impactful slogan of ‘Take Back Control’ struck a chord with many people to create a momentum that resulted in the vast majority of districts across England outside of London opting to leave the EU.

In his book ‘Start With Why’, Simon Sinek argues that business and political leaders that communicate using emotional messaging are often more successful because biology is on their side:

The newest part of the homosapien brain, the neocortex, is responsible for all of our rational and analytical thought and language. The Limbic system, on the other hand, is responsible for all of our feelings, such as trust and loyalty. It’s also responsible for all human behaviour, all decision-making and has no capacity for language.

By communicating on an emotional level we can talk directly to the part of the brain that controls behaviour. This is where ‘gut’ decisions come from. Despite all the facts and figures thrown at people, sometimes they still ‘go with their gut’ if it doesn’t feel right. I would argue that the Leave campaign were more successful at articulating a message that triggered people’s emotions around the key issues of immigration, sovereignty and control. Regardless of all the facts and figures Remain used to try and convince voters about the risks, clearly many people’s feelings outweighed anything the experts were telling them otherwise.

History and behavioural science indicated that in such a close fought referendum the status who would prevail. But as the final outcome proved, the status quo was trumped by an alternative vision that clearly inspired over 17 million people to go out to the polls and cast their vote that Britain’s future should no longer be within the EU.

The principles of information architecture

wireframe working

The way in which a website is structured is a hugely important factor in determining how people find, understand and engage with content. In the absence of a sound structure, problems related to usability, content management and multiple re-designs can cause problems for both users and webmasters alike.

The process of planning and defining a website’s structure is known as information architecture (or IA for short) and it’s a practice that’s most often associated with user experience. However, an understanding of website structure and how different content elements relate to one another means that IA impacts digital marketing at a wider level and is therefore something many of us can use when strategising and planning.

Defining information architecture

The Information Architecture Institute offers the following definition:

“Information architecture is about helping people understand their surroundings and find what they’re looking for, in the real world as well as online”

IA is essentially about organising, structuring and labelling content in a way that enables users to find the information they need to complete a task.

One of the leading pioneers of information architecture is Peter Morville, who along with Louis Rosenfeld in their book Information Architecture for the World Wide Web (affectionately known as the ‘Polar Bear Book’) outlined the main components of IA:

  • Organisation schemes and structures – how information is structured and categorised
  • Labelling systems – how information is represented and defined
  • Navigation systems – how users browse and navigate through information
  • Search systems – how users look for and find information

As part of an ‘information ecology’, users, content and context work interdependently. The following Venn diagram illustrates how IA sits at the intersection of these three areas:

IA Venn Diagram

Through evidence gathering, IA allows us to organise content and design users flows based on a target audience and the technology and data related to the website. Research, which may include competitor analysis, card sorting or usability testing, sits at the heart of IA and informs the actions and decisions to be taken.

The opportunity for digital marketers

The process of information architecture allows all of us as digital marketers to take a step back and consider how the different pieces fit together as part of the bigger picture. We’re often so focused on our specific areas and disciplines (for example within paid, owned and earned media) that we take a siloed rather than holistic approach to how we build and structure websites.

Information architecture gives us the opportunity to consider cross-channel experiences. Digital display, social media and search means that there are now multiple ‘front doors’ to a website. Users rarely enter a website through the homepage and navigate using pre-defined journeys. As a result, we must map the customer journey across multiple touch points and design sitemaps, wireframes and taxonomies to meet user needs and ultimately what they expect from a website or app.

Key tasks of Information Architecture

The key tasks and deliverables associated with information architecture are not the domain solely of UX or IA professionals. Digital marketers working across many different disciplines can benefit from practising IA. For example, when an SEO looks at how products on a search page should be ordered, he is practising information architecture. Likewise, when a content strategist groups and categorises content, she is also practicing information architecture.

Some of the IA tasks that can add value to the work of any digital marketer include:

User research and analysis

Information architecture involves putting the user at the centre of the design process (an attribute of a user centred design (UCD) framework) to ensure that their backgrounds and goals are considered as early in the process as possible. As such, user research involves gathering data about user behaviours, needs and motivations to understand how people use information and applications.

User research is typically conducted using a number of different techniques and analysis, all of which provide insight to inform further IA enhancements:

Card sorting

Card sorting is a user-centred technique that enables you to label content elements onto cards from which users can then group and organise based on the site structure that makes sense to them.

There are two types of card sorting techniques – open (users organise topics based on categories that make sense to them) and closed (users organise topics based on pre-defined categories).

Interviews and discussions

Interviews can be conducted formally or as more of a casual discussion to go into more detail about someone’s attitudes, beliefs and experiences to really understand the users visiting your site.

Interviews should take place early on in the website creation phase so that users research can be incorporated into the objectives and goals for the site.

Focus groups

A focus group, which is a moderated discussion with between 5 and 10 participants, typically enables users to talk through how they use a website and explain their attitudes, motivations and beliefs.

The benefits of a group discussion is that ideas can bounce off one another and you can begin to see patterns in terms of what users expect from the information they encounter on a website.


Surveys are typically conducted online and include a series of questions aimed at the target audience of your site.

Online surveys enable you to collect data at scale at very little cost from which you can gather insights into who your users are, what they want to accomplish and the information they’re looking for on your site.

Task analysis

Task analysis enables you to learn about users’ goals and expectations by observing them in action.

The benefit of task analysis is that you can identify the information your site must support to help users achieve their goals, where road block are hindering journeys and where you can refine or redefine your site’s navigation and search functionality.

Use cases

A use case is a written description of how users interact and perform tasks on a website. The goal is to outline how a system’s behaviour will respond to a particular request from a user’s point of view.

Use cases are particularly useful because they define who is using the website, what the user wants to do, the user’s goal, the steps they take to accomplish a task and how the website should respond.

For a definitive list of user research methods check out usability.gov.

Navigation and hierarchy

A website’s navigation and hierarchy is related to how information should be displayed and accessed. The user research process will help inform how different pages and content should be connected with one another and how they should be organised to enable users to get to the information they need.

This process will be a balance between what the user expects to see and how the organisation wants to group information and the output of this process will influence how the structure for the rest of the site will be created.


Nomenclature/ labelling

The labelling or nomenclature of a website refers to how different sections and pages are named. This activity can fall under the remit of many different disciplines, including design, content strategy and SEO. What a page or section is called will inform how the website’s navigation and hierarchy is titled and how users will find information across the site.


Wireframing can be regarded as the blueprinting of digital design. It’s a primary way of defining the information hierarchy of a web page and the connections between different screens and content elements.

Wireframing allows you to plan the layout of a page and define how users should process information. Like an architectural blueprint, it outlines the structure of a page visually and illustrates where information and content must go.

Wireframe example copy

Taxonomies and metadata

Taxonomies are about how information is grouped, categorised and organised. Metadata is about how the information is described to ensure content can be found and understood.

As with all the IA tasks, user research will play a leading role as it’s important that everything makes sense from the user’s perspective. Choosing the right taxonomy will underpin the structure of the site whilst the metadata will ensure that users can navigate and search intuitively.


During the creation of a new website or the evolution of an existing one, the structure and organisation of information across the site is an essential element to success.

Crafting content and structure with the user in mind should be the primary objective and it’s surprising how often this isn’t the case. Many websites are built around an organisation’s corporate objectives as opposed to the users’ and information architecture is about putting the user at the heart of the design process.

Whilst IA is often seen as a user experience task, it’s something that all digital marketers should be aware of and practice. For example, a good website structure that intuitively works for users is much more likely to be valued by Google and other search engines. And an understanding of user research and analysis can help content marketers to use the right terminology during content brainstorming sessions and host the content across the site where it makes most sense to users.

Presentation tips from a first-time TED speaker


Speaking and presenting forms a big part of what we do as marketers. The ability to articulate an idea that generates interest, enthusiasm and unity is a skill that is often underrated but is nonetheless hugely valuable and can pay huge dividends when executed well.

For anyone that isn’t aware, TED is a conference held in North America every year that covers big topics related to technology, entertainment and design. Speaking at TED isn’t easy – it’s often by invitation only and the audience have very high expectations (past speakers include Al Gore, Seth Godin and Bono!). So when the writer Tim Urban was invited to speak at TED he panicked – and then blogged about his experience in the run up to the big day.

Tim’s talk on procrastination proved to be a hit and it was delivered in the same tone, verve and humour as his blog. Tim’s presentation looks so casual, when in reality he spent many months crafting and editing to get it just right.

Whilst you can read about Tim’s experience yourself, I thought I’d summarise some of the nuggets of wisdom that I took away from Tim’s approach which I believe offers some great advice for anyone preparing to stand up in front of an audience and give a presentation.

Tim’s top three presentation tips

1. When asked to speak in public we generally have three main options:

Screen Shot 2016-05-01 at 22.56.50

2. Each method has its own pros and cons but for a big presentation (such as a TED talk or a pitch) a well-memorised script is probably the best bet for most of us:

Screen Shot 2016-05-01 at 22.57.09

3. However, beware: if you choose to go with a script, the risk of disaster increases unless you go all out to memorise, practice and refine what you’re going to say!

Screen Shot 2016-05-01 at 22.57.26

Of course, every speaker is different and will have their own preferences as to how they should deliver a particular talk or presentation. However, it’s nevertheless interesting to get an insight into how a real-life TED talker planned, procrastinated and then ultimately delivered a talk that has generated over 4 million views to date!

A quick-fire guide to Programmatic Marketing

Programmatic robot

Programmatic is a very hot topic in the world of marketing right now. As Ad Age points out, the advertising industry is on a march toward automation, and programmatic marketing gives marketers the opportunity to purchase advertising more efficiently and – given the right data – more effectively, too.

As a relative newcomer to the world of programmatic marketing, I was overwhelmed by the amount of information out there. Trying to get to grips with programmatic can really make your head spin! I therefore thought I might be an ideal person to provide an introduction to programmatic for anyone tackling this area of marketing for the first time.

Rather than producing a lengthy guide, I thought it might be useful instead to provide a quick overview of the key principles of programmatic marketing and a glossary of some of the main terms (jargon?!)

Introduction to programmatic

So, what exactly is programmatic marketing?

Programmatic marketing is essentially about using real-time technology (the majority of the time) to deliver the most relevant messages to targeted consumers in order to maximise response. Through audience insights, messages are tailored to the right person, at the right moment, in the right context, usually via display ads, although increasingly through other formats such as video, too.

Data is key

Data is becoming increasingly important to marketers and programmatic marketing thrives on quality data.

Effective programmatic marketing combines data from the audience (including demographics, location, interests and behaviour) and the environment to provide a more engaging, relevant experience. This data can be first, second or third-party, with first-party data (gathered from owned channels) providing the greatest insight into customers.

The opportunity: personalisation

Programmatic marketing gives marketers the opportunity to personalise at scale and to reach different customers with different creative messaging across media channels and partners.

Because advertisers buy impressions individually (not grouped by thousands or millions), each ad marketplace allows an advertiser to serve one specific ad to one single consumer in one single context.

Programmatic technology therefore offers the promise of ‘life-pattern marketing’, enabling marketers to reach consumers at key moments in their days with powerful messaging. Along with a response signal, this technology can identify what resonates with individuals at the moment-to-moment level to optimise the timing, relevance and effectiveness of the ads they see.

The business case

Programmatic marketing is growing at an incredible rate, with eMarketer estimating that it’s on track to make up 59% of total US digital display advertising spending in 2016 – $15.43 billion (over $5 billion from 2015), prompting many to suggest that programmatic is the future of online advertising.

The chart below from BI Intelligence summarise some future projections:

Programmatic projections copy

Whilst there are a number of potential downsides to programmatic that marketers must consider (including inventory quality, cost implications, and fraud), it nevertheless offers some major benefits for marketers, including:

  • Pay only for the consumers you want, in contexts that generate impact
  • Enrich the consumer experience with more first-party data
  • Increase reach across many more properties than just a handful of sites
  • Scale campaigns up to very large volume
  • Show maximum campaign effect, with the best return

A glossary of top programmatic terms

A Forrester study from 2014 that found that only 23% of marketers understood programmatic buying, a clear indication that this is an area many still find confusing:

Programmatic Buying Still a Mystery to Most Marketers copy

Part of the confusion is no doubt due to the terminology involved and I’ve therefore picked out some key terms and phrases. This is by no means an exhaustive list (others are much more comprehensive) but will hopefully give you a primer before delving into more detail:

Programmatic buying

Programmatic ad buying refers to the use of automation software to purchase digital advertising on a web page. Ad space can be bought in two ways: directly or through real-time bidding.

Programmatic direct

Programmatic direct (aka programmatic guaranteed, programmatic premium, programmatic reserved) is where automated software is used to buy guaranteed ad space (impressions) in advance from specific publishers. This approach does not involve an auction and the benefits relate to a more efficient ad buying process (the automated process is quicker, offers more pricing control, faster access to ad inventory and provides analytics).

Real-time bidding (RTB)

The process of buying digital inventory from multiple publishers on an impression-by-impression basis, typically involving an auction pricing mechanism and bidding strategies determined by pre-defined rules or algorithms.

Ad exchange/ marketplace

An ad exchange or marketplace is an auction-based platform that enables multiple parties, including advertisers, publishers and ad networks, to buy and sell advertising inventory to the highest bidder. Prominent ad exchanges include Google’s DoubleClick, Microsoft Media Network and OpenX.

Private exchanges

This is an ad exchange that is open to an invitation-only group of buyers. Private exchanges are typically run by individual or groups of major publishers and allow brands and publishers to work with the partners they choose.

Advertising inventory

Ad inventory is the ad space (calculated in terms of the number of page impressions) a publisher has available to sell to an advertiser.

Demand-side platform (DSP)

A demand-side platform is a system that enables advertisers, agencies and networks to automate the purchase of ad impressions (including display, video, mobile and search) across multiple ad exchanges.

A DSP uses sophisticated targeting and optimisation algorithms to assess the attributes of every ad impression and assigns a bid based on those attributes to get the most value for each individual impression.

Supply-side platform (SSP)

A supply-side platform is the publisher equivalent of a DSP that enables publishers to automatically sell ad impressions for the maximum price they can charge.

An SSP allows publishers to connect their inventory to multiple ad exchanges, DSPs and networks to access a large pool of potential buyers in real time.

Data management platform (DMP)

A data management platform is essentially a data warehouse used by agencies, publishers and marketers to manage and merge data such as cookie IDs. This enables advertisers to use a variety of other data sources to generate audience segments for improved understanding and targeting.

Programmatic Creative

Digital ad creative that contains design elements, which integrate with programmatic and real-time bidding strategies to enable advertisers to deliver a message that’s tailored to the audience viewing it and the environment on which it’s being viewed.