Why the Traditional Marketing Funnel is Actually Broken
Episode #008: Shawn Schwegman, Co-founder and Chief Strategy Officer at DemandJump
Episode #008: Shawn Schwegman, Co-founder and Chief Strategy Officer at DemandJump
Most of us were taught about the traditional marketing funnel in college that consisted of stages such as awareness, interest, consideration, preference, and purchase. And, this marketing funnel was an accurate depiction of how consumers typically made purchase decisions in the past. However, our shift to a multi-device and multichannel world has lead to a new set of challenges for us in how we market to consumers and how we need to think about our marketing funnel. In our eighth episode of Mobile Matters, we talk with Shawn Schwegman, co-founder and chief strategy officer at DemandJump, about how we’re now living in a multi-device world, how attribution is an ongoing problem, and why it’s time to accept that the traditional marketing funnel is broken.
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Stephanie Cox: I'm Stephanie Cox and this is Mobile Matters. Today I'm joined by Shawn Schwegman from DemandJump. Shawn is the Co-founder and Chief Strategy Officer at DemandJump, which is a customer acquisition platform that helps brands align marketing with dynamic internet behavior. Shawn is a data-driven marketer with a history of shaking up markets at companies such as ChaCha, V-commerce, and Overstock where he held a pivotal role in helping bring that e-commerce company from 10 million in revenue to 800 million in annual sales in less than 5 years. And this episode is Shawn and I are talking a lot about the fact that given a large amount of data available for marketers it's easy for us to feel data-rich, but insight poor how the multi-device explosion has truly transformed the landscape of digital marketing, and why it might be finally time to admit that the marketing funnel is in fact broken. And make sure you stick around to the very end where I’ll give my recap and top takeaways so that you can not only think about mobile differently but implemented effectively. Welcome to the show, Shawn.
Can you talk to me a little bit about what it was like to get into this market and really how you made the decision to be where you are today?
Shawn Schwegman: Sure, it's been a long, wild chaotic ride but I actually started my career on the IT technology side of the house. So I was in Information Technology, in development and engineering, a lot of data warehousing projects for about a decade and went to Overstock really to be the CTO. But, about a year and a half into it our CEO asked me to take over marketing and I had never done marketing before. And never studied it in school. And so I think my immediate response was no. I was afraid of breaking it. But we were at a very tough time then. Having big challenges with our biggest competitor who was about 50 percent bigger than us. And they were growing faster, we were being outmaneuvered in the marketplace. So I ultimately took over marketing and then, it was pretty interesting when I attacked it, I attacked marketing much like I had attacked data warehousing, right? Very data-centric, data-driven approach. I studied the numbers and did a ton of testing and I kinda learned marketing, I'd say the nontraditional way through the data. So yeah that's not the traditional marketing story, I think.
Stephanie Cox: No, definitely not, I've not met a lot of people that started in IT and moved into marketing.
So when you think back to your career right and what you've seen, especially the last 15 years or so, how much has the business changed in terms of digital marketing?
Shawn Schwegman: You know, that's a great question. There are some things that still haven't changed and I scratch my head and ask why every day. And there are other things that are so different now. I still can't believe it. So like as an example, the quantity of data that's being produced in the world today. The last stat I read was 90 percent of the world's data has been created in the last 24 months. Think about that, right? Two years to create 90 percent of the world's current data. It's just a ridiculous amount of data. I think there's a data explosion but marketers are data-rich, but insight poor. Right, with all of that data, you need machine learning and AI to help make sense of it. I don't think AI will ever replace marketers, it should help do a lot of the heavy lifting, right? And service insights that a marketer can act upon. That is what I say is one of the biggest things. The other thing that was, I mean, obviously, mobile is exploding. I was fortunate enough to work at Cha-Cha, where we got about 3 million questions a day on text message, in the Cha-Cha, a Q & A service. But we put a lot of that content on the web. And we became over the two years that I worked there, I think we went from about US rank of 600, all the way up to a U.S. rank of 36. So the 36th most trafficked website here in the United States. And we were top 5 in mobile. So really, really, really strong on the mobile site. And mobile, we've gone big, giant desktop PCs to now mobile, multi-mobile, wearables. And so, it's a device explosion from a user standpoint. That's put a lot of challenges on digital marketing. The other thing I'd say is just targeting, in general, I think Internet advertising was born from offline advertising concepts. And a lot of it doesn't apply. So I mean we tried to fit a square peg into a round hole when it comes to trying to make digital marketing perform. And so, that's one of the things that I think hasn't really changed, but needs to.
Stephanie Cox: I think that's a really great point because I do think when we, as marketers, start moving into a new channel. Our first reaction is well, it's like the one we've currently done so let me take my print ads and make my email look like them or make my landing pages that way, instead of kind of rethinking it all. And one of the things that you mentioned around mobile, I think is really really impactful that people don't realize. It's that mobile is not just your phone anymore. I think that's sometimes the way marketers think about it, is that mobile is my smartphone. It's really things like wearables like you were talking about and it's really the way I consume content, not necessarily just a channel anymore.
Shawn Schwegman: That's right. That's right. You have to be. They used to say oh, you have to be mobile-first everywhere for years I've been hearing mobile-first. And the truth is, it's not mobile-first. And there isn't a shift from desktop to mobile. It's a tectonic shift to multi-device, meaning customers are still using their desktops and laptops. But in addition to that, they're now using their mobile phones, tablets, wearables. So you have to be everywhere they are. And that puts a big burden on development, on marketing. You have to really think about each piece of content you create, what is the right way across every single device to display that information for your consumers. To appeal to consumers, regardless of the device that they're on. It's not a mobile-first world. And it's not a desktop-first world. It's a multi-device first world.
Stephanie Cox: Well, and especially when you start thinking about chatbots, coming to that voice as an activation point, we're going to start thinking about it as multi-experience. It's really a ton of different ways we can even interact with brands moving forward. So when you think about this big shift to this multi-device or multi-experience world, what impact have you seen that have on brands, in regards to things like digital advertising or how they think about their web traffic and their sources from it?
Shawn Schwegman: Well, there's a couple of things I say. One of the myths or the trend I typically see is like, everybody thinks they need a mobile app. And the truth is the stat that I read, I'm sure this is outdated and there is probably better data out there, but all the mobile apps that are ever downloaded, only 25 percent of them are ever opened again. Oh, when you think about that, right? You don't necessarily need to have a mobile app, you just need to have a mobile experience. When you think about it through the lens of digital advertising, people have to think about when they're designing a web page, what that webpage looks like on desktop, what it looks like on tablet, what it looks like on phone. Different sizes of each of those, so responsive design and really thinking through conversion optimization for each device for each page you create. It's no longer. No longer can it be an afterthought, you have to design that way. I think the other thing that that has caused. Really, it's wreaked havoc. And if you think about CMOs today, I was at a shop talk. In the last couple of years or whenever Shop Talk is one of the bigger eCommerce or retail-focused events now and I can't remember if it was this year or last year, but probably 80 percent. So four out of five CMOs or heads of marketing were on different panels throughout the entire show. When asked what their greatest problem was, four out of five were saying attribution. So, what is attribution? If you see an ad on display, you click it, you come to a site but you don't buy it and you leave. And you do a search and then you click on a search ad and you come to the site and you don't buy and you get an email from that brand. You click on an email, go to a site, and buy. How do you attribute that sale to those three or four different touchpoints along that journey? What's made matters really complicated now is that one of those touchpoints, a user might have been on mobile, the next touchpoint it might have been on tablet, next touchpoint, they might have been on their laptop. And so, combining all of that cross-device activity for a given user so that you can make really the right decisions about what the impact each marketing touchpoint had along the journey. It's a massive data science challenge and it's one of the greatest problems that's never been solved until DemandJump, so that's what I think is. The last thing I'd say is, I think wreaking havoc now is that there's a lot of accidental clicks and click fraud on mobile, right? Meaning and you've seen this before, you pull the open app out and right as you go to click something and pass out and you accidentally click that ad and you know, you go over to whatever site that ad takes you to and then you kind of scramble to the app and try and close the ad. It's a very frustrating experience for users. And what makes it even more frustrating is, the ads today are totally irrelevant to the content or to the journey that the consumer is currently on. Right? If you think about marketing at the highest level it should be about serving the right offer to the right person at the right place and time. Yet online and digital, all marketers really think about is the right offer to the right audience. Right offer to the right person. We don't really think about as much as we should about where to place that ad, right? We let it happen quote programmatically.
Stephanie Cox: I think that's really interesting because I see your point a lot of people think about what they're doing like overall. But they don't think about how it's different on each of the different devices some may interact with right? What I want to do on my mobile smartphone is very different than how I may interact with the same e-commerce site on my desktop.
Shawn Schwegman: That's exactly right. I find my own behavior when I go to a certain website on my mobile phone. And then if I can't easily get to it, sometimes they have certain brands will strip out all the content that you're really after to try and make it a smaller experience for mobile, and that's kind of frustrating, right. Then, I have to pull out my laptop and attack it from that way, it's just a tough mobile experience. It's tough to get right. And it takes basically triple the amount of development work that has to occur because you're not developing just desktop now. You're developing for desktop and tablet and mobile and other form factors that I'm sure are on the way.
Stephanie Cox: One of the big news for me in 2018 that I think was a little shocking, was when P&G announced that they had cut their digital ad spend by 200 million dollars. And I think that caused a lot of waves through the market around like, well if they're doing that, what does that mean? And they were talking about how they got some better results by making that cut, but I think there's more to that story. So can you talk to me about what you're seeing brands do to really attack some of these changes that we've seen in consumer behavior on different devices we're on? And how we really just buy and engage with brands that have been successful, in your opinion?
Shawn Schwegman: Yeah I think there is. I mean this is the age of who was it? John Wanamaker back over a century ago said I know that half my marketing works and half my marketing doesn't work. But I don't know which half is which...that in my mind is a summation of the greatest problem that today has not been solved. And it's how do you measure marketing when some things aren't easy to measure? And sometimes it takes many different touchpoints to build your brand and be top of mind. But if you think about the funnel today. I think what marketers are starting to wake up to is that a funnel is broken. We used to believe and many marketers still do believe today that the funnel has broken up into four layers and at the highest level, you have awareness and then you have consideration then decision and a purchase. And so they build campaigns to target users at each layer. But, what we've realized is at the bottom of the funnel, you get awareness, consideration, decision, and purchase. You get it all. At the top of the funnel and you only get awareness. Said another way, if you're spending money on awareness campaigns to build the brand and when that user is ready to buy, they don't see you. You just wasted your spend, right? So we believe marketers are waking up to the fact that they have to fill the funnel from a budget standpoint, from the bottom up. Until they don't have any more money. It makes no sense to waste money on pure-play awareness campaigns for this, just branding for the sake of branding. And while branding is important, it's more important that your branding from the bottom of the funnel all the way up. And I think that's what P&G and others are waking up to. They've spent a lot of capital and wasted a lot of capital by blasting ads all over the place to everyone. There was a great article in The New York Times in April of last year that talked about Chase Bank. Chase Bank was serving display ads on 400,000 websites. And for brand safety reasons, they curated a list of 5000 Web sites. And the same budget, they got the same budget, the same reach, the same frequency. But they focused their budget from 400,000 to 5000 Websites so they cut out 395,000 web sites from their focus. And they saw zero difference. And the thing that I believe Chase missed is, those 5000 websites weren't necessary, while they're brand-safe and they might have been big brand-safe sites. They were not necessarily bottom of the funnel focused. Meaning they might have been big news sites, generic sites where the bulk of their consumers go, but they would have probably gotten that double or triple, in terms of result. Marketing results by focusing those Web sites along the dynamic customer journey.
Stephanie Cox: So when you talk about a dynamic customer journey, can you just for the audience explain a little about what you mean? Because I think you give a different take on it than what people traditionally think about when they talk about the customer journey?
Shawn Schwegman: Sure, sure. I mean when we typical marketers I think, when we think about the customer journey, when they get to my website, what pages do they navigate, what products do they look at? What do they add to their cart, and do they ultimately buy, right? That's the customer journey. But that's really the customer journey, only when they're on my site. If you think about that, that's really the last step of the customer journey. So, let's look at a use case there. Let's say if I'm buying a new TV, well I'm going to go to Google. To start my journey. It probably started because I got sick of not having the latest and greatest technology or my old TV died. And so, my journey begins and I typically will go to a different technology website, a c-net or Tom's Hardware or whatever. Or I might go to Google and I start doing some searches, I might go to Best Buy or some other electronic site Amazon. And start looking at products and then I get confused because there's so many options. Now I start Google search for, should I buy an HDTV or 4K or this or that. Or what are these different specs that I should be looking at? Is plasma better than LED? So there's just a ton that goes into that journey. I've already been to multiple different Websites. I've done multiple different searches and consumed information everywhere. I'm starting to hone in now on, OK, I want a 65 inch 4K TV and I'm starting to look at different brands and I might go to a TV reviews site to look at different reviews. And all along that journey, what I typically see are ads that are totally irrelevant. That's what I mean when I say marketers aren't targeting that dynamic journey. They might be targeting search terms, but they might not necessarily know the right search terms to target. The amount of new searches Google sees every year is somewhere between 15 to 20 percent of searches that occur on Google are net-new. They've never seen them before. And that's that keeps increasing. And so I think marketers think, we do what we know. We kind of think inside out. I have a product here. Here's what I think people will be searching for this product. Here's some ad copy, now I push it out there in the hopes that people will find my product. But the reality is, you have to start with a customer and you have to look at how are they actually behaving and then work backwards. That's a pretty big shift.
Stephanie Cox: Especially when you realize, it's to your point earlier, it's not a traditional funnel. Like I don't go in a straight line as a consumer. I actually go in this weird squiggly line that sometimes goes backwards and forwards and crisscrosses itself ten times, before I make a decision.
Shawn Schwegman: That's absolutely right. And the other big myth that is out there is a lot of people think I think display is top of the funnel, and search is at the bottom of the final, and social is middle of the funnel. And the reality is every marketing channel technically operates at every level of the funnel, right? Meaning there are broad search terms around TVs. If I just do a search for 4K TV, that's awareness. Right. That's pretty high up the chain. But down at the bottom, what is the best 4K TV to buy. That is showing intent. Now I'm closer to the bottom of the funnel but the same can be said for literally every marketing channel there is. They all operate at every layer of a funnel and you have to think about it that way as you build campaigns.
Stephanie Cox: So, recently I was reading the Gartner report for CMOs and it was talking about where they plan on spending their budget in 2019. And one of the stats that really caught my attention and I think it goes back to a point you made earlier, was the number one metric for the top result for all CMOs surveyed that they cared the most about was awareness. Which to me is interesting because it's to your point earlier, that's the very top of the funnel and the funnel is different today. So how do you think about getting your C-level and even just your marketing leaders to start thinking about this in a really different perspective to your idea of a dynamic customer journey? And what have you seen be successful in companies that have tried to take that concept on?
Shawn Schwegman: Sure, so I think the last year I was at Overstock we spent 96 million dollars on marketing. In a single year or so, Overstock went from, I don't remember which year it was, but we went from about 16 percent unprompted brand recognition to 43 percent in one year. And. I believe that was the year that I spent 96 million dollars and we spent zero dollars on awareness. On pure-play awareness campaigns meaning, we focused on the bottom of the funnel and worked up. And we got awareness at those lower funnel stages and so much so, that we built the brand. Overstock is a household name and it is a great brand and they have great products and still today. But we didn't really just do awareness for the sake of awareness. If you think about that TV example and this one is so top of mind for me because I literally just bought a new TVs for this size. But I was looking at a blog that was all about TV reviews and they had all these different reviews for all these different TVs. And I was seeing fashion ads, and travel ads, and ads for cars. Not a single time did I see an ad for a TV. And I was in buy mode and that had I seen a Best Buy ad talking about one of their promotions on their TV or something like that at time. That would have built their awareness far greater than if I'm on a fishing website and I see a Best Buy ad. Like I'm not paying attention and that when I'm going fishing, you know what I mean?
Stephanie Cox: Thinking about the digital ad strategy today and what brands should be doing. What are the recommendations you give people about how they should rethink their go to market ad strategy?
Shawn Schwegman: So, back to that attribution challenge. Attribution in and of itself is a challenge, understanding multi-device behavior is an even bigger challenge, as it relates to attribution. And when you really have to understand is, you start with your customer in mind, when someone comes in and they buy. How many more purchases do they have over the leftover the next 12-18 months? And if you can, you have to use that to think about what you're willing to spend for a customer. And it depends on the model. Every business is different. Some businesses have a single sale like a mattress as an example and I'm going to buy one mattress and hold onto it for five years or something. Versus other companies, where I might buy once a month or once every couple of months. So you have to understand what that lifetime value is. And then you have to understand, really, you want to know that, so you know what you're willing to pay for someone. But then the next thing that you have to understand is, where am I getting the best customers? When I know where I had my highest LTV, my highest long term value customers. I want more of those, I don't want customers that are one and done, or what I would perceive to be lower value, based on my business metrics. So, shifting your marketing budget to align to higher-quality customers. It's very difficult because that then might mean that you focus on a different set of marketing channels. And it's really a data science and math problem.
Stephanie Cox: Well I think it also causes a little bit of apprehension, too, to other people in the organization when you say I'm going to focus more on people that look like this, that have this type of LTV and I'm not going to blanket the world. I like to use the old adage, right? Sometimes people say well the answer is just to send more emails. Well, that's not the answer.
Shawn Schwegman: Yes, it's funny you say that because we do encounter a lot of customers that they focus too heavily on a single channel and you know, there is a better play to identify the right mix of channels. And the right mix of campaigns across those channels to achieve a dramatically better result.
And the other thing I'd say is don't believe everything that you see. Every single marketing channel from email to paid search to Facebook. They will claim revenue now if they were ever involved, or ever had involved with that customer along their journey. They might have clicked on our page search and not clicked on a social and not on an email. And yet all three of those systems will now claim revenue. And so, that tends to wreak havoc in the numbers. And I could tell you some horror stories on that front, but I know one very large enterprise that added up all of the revenue that was claimed cross all the different marketing channels. So from paid search, paid social, email, affiliate marketing, etc. And the revenue number was two and a half times larger than the actual amount of revenue they had.
Stephanie Cox: Wow. And then you wonder like well where did all that revenue go. Well nowhere really.
As you can tell Shawn’s career is extremely impressive and he’s helped some of the biggest retail brands think differently about their digital marketing strategies. One of the comments he made that really hit home for me was how we have access to so much data, but it's almost created this analysis paralysis and AI’s really going to be needed to truly make sense of all the data made available to us, which means we're going to have to be strategic about how we consume data, how to utilize it to make quick results and trying not to feel overwhelmed by the sheer volume of it. Now, let's get to my favorite part of the show where we take the education and apply it to your business. There's so many great insights from my conversation with Shawn that can really help you transform how you think about mobile marketing. Let's dive into my top three takeaways.
First, the idea of a multi-device world is becoming more and more of a reality and its ties nicely with his previous idea that we’ve talked about on the show about how mobile is more than just your mobile phone. This is putting a lot of challenges on digital marketing because we now need as markers to think strategically through everything we do in the lense of multiple devices which means we have to be everywhere on every device that our consumers are on.
Gone are the days of just thinking about desktop and mobile phone. I think sometimes we're going to miss those days you guys. Now, we’ve got to think about digital experiences for every device. What conversion is going to look like on each device? It can no longer be an afterthought and we no longer can assume that it's going to work the same way. Let's take a look at digital ads as an example. We’ve been running digital ads for numerous years and results vary a great deal based on not just the channel whether it's paid search, display, Facebook Twitter, etcetera, but also on the device those ads are being viewed on. Take a look at some of the issues brands have seen with mobile ads; while we've always had a problem with accidental clicks and frauds on desktop ads, it doesn't seem to have been as big of a problem as it has been on mobile. Think about accidental clicks for a second. How many times as a consumer have you done a normal mobile gesture and it accidentally caused you to click on a mobile ad that you never intended to click on? It happens to me tons and results inf me getting frustrated and then try to go back to that previous page almost immediately. And with more than forty-nine and a half billion dollars spent on digital ads in the first half of 2018 in the US, 3 percent of those ad dollars being spent on mobile and it really has an opportunity to seriously inflate click-through rates and have a really big impact on the bottom line. Now, don't get me wrong. It's gotten tremendously better in recent years and some of the big ad platforms have made significant improvements to combat these types of issues, but it's still an ongoing problem that we face on mobile that's different than we might face on desktop or on wearables. That's why you really need to think about what you're serving up from an ad perspective and just content in general across every channel on device and know that your conversion path is going to be different for each one; with more devices and channel options for marketing comes more benefits but at the same time more challenges.
Next, the multi-device world we live in combined with the multi-channel marketing we're doing now is creating this ongoing nightmare for all of us. How many of you have been there? But especially in regards to attribution. In the past, it was so easy for us as marketers to determine which channel drove a conversion because we weren't doing a ton of them. So if someone clicked on an email and bought something we knew that came from the email. Now, we don't know because it’s harder because we have these super-complex customer journeys that involve multiple channels, multiple devices, and our efforts to market to a single person and that's changed how we need to think about combining all this cross-device and cross-channel activity so we can correctly determine the channels that are truly driving results. Let's look at Shawn’s example of an enterprise organization where multiple channel owners are all claiming attribution for the same revenue. This is a problem that happens in a lot of organizations, especially when those channels are siloed and 54 percent of marketers are saying that multi-touch attribution is still one of their biggest gaps in marketing analytics. It's going to take time for us to figure out how to best account for attribution in our organization and it's likely going to be different by company. So we need to accept that there's likely no single channel driving customer acquisition repeat purchase because of this multi-channel world we're living in today. So we need to figure out how to measure the impact each channel is having on sales to determine which channels are actually driving or influencing the higher customer lifetime value. So think about lifetime value, that's super important. This is going to help us figure out where to allocate more of our spend and impact our bottom line, but remember don't get overly excited. You can't put all of your eggs in one basket or one channel for that matter, or even a handful of channels. You have to have a mix of channels and campaigns across those channels to really drive the impact you want to see.
Finally, if you haven't realized it already, it's probably time for all of us to admit that the traditional marketing funnel we all learned about in college is finally broken. We need to start thinking about this dynamic customer journey concept that Shawn talked about the implications it's going to have on the funnel. As Shawn explained, the dynamic customer journey doesn't involve a linear path was purchase, instead of this weird, knotted ball of yarn that is slightly different for each person, comes in a different color, and is unwound in a completely different way and that may mean that a prospect never comes to your website until they're about ready to make a purchase decision. That's totally different than how we would have thought about marketing a decade ago or even five years ago. And the example we talked about with a TV as a perfect representation of how we’ve got to start thinking differently about marketing throughout the journey. We need to think about the various paths consumers can take when they're considering a purchase and how we can make sure we're not just providing the right offer to the right person, but we're doing it in the right place and that's going to impact your ad strategy and even your device strategy. The behavior I, as a consumer have on my desktop, is different than what I do on my mobile phone and that's different than how I behave and interact with Alexa and that's something we need to take into consideration. We need to make sure all of the content that we're putting in front of consumers is relevant to where they are in their journey with us as a brand in our purchase process and where they're actually seeing that content.
Now for my mobile marketing challenge for the week, I talked to so many marketers about the belief that they need a native mobile app, Shawn even mentioned it, and they're planning to invest in building one...that conception and idea of needing a native mobile app is so old and outdated with all the advancements have happened in mobile web, you can deliver a stellar mobile web experience without dealing with any of the baggage of a native mobile app. In fact, Progressive Web Apps or PWAs for short, are a great example of providing app-like functionality without the need for a download or the need to build it across multiple devices. You build at once and it works the same on Android and iOS, and if you haven't heard of PWAs yet then it's time to get well-versed in this emerging Google technology that's been adopted by all the big tech players like Microsoft, Firefox, Apple...it's being is by numerous consumer brands such as West Elm, Pinterest, Spotify, and Starbucks just to name a few. So if you don't know about PWAs, it's time to do your research. It's time to get plugged in to really what's going to fundamentally change mobile tech, mobile web, and mobile apps moving forward.
I’m Stephanie Cox and you've been listening to Mobile Matters. If you haven't yet, be sure to subscribe, rate, and review this podcast. Until then, be sure to visit Lumavate.com and subscribe to get more access to thought leaders, best practices and all things mobile.