Don Schultz shakes up Summit audience by exposing the antiquity of marketing models (first of three parts).

Don Schultz is Professor Emeritus-in-Service of Integrated Marketing Communications at the Medill School of Journalism, Northwestern University.

He is an expert on consumer behavior and has written or co-authored 13 books on marketing, from branding to direct marketing. He recently traveled to Beijing, where consumer behavior is driving tremendous changes in a society where only six percent of the population is online. Those hundred million people who represent the six percent are rapidly changing how the rest of the society operates. So Schultz’s current focus is on analyzing what consumer behavior does to the whole media planning processes.

Schultz spends a great deal of time using cognitive psychology to examine what consumers are doing and how they are consuming media. At the iMedia Brand Summit in Deer Valley, Utah, in September, he explained why our antiquated marketing models need to be changed.

Here's the text of his address…

Schultz: Thank you. This is really a tough, tough slot. I am the only thing between you and a box lunch. Think about that. And I’m also the only thing between you and whatever this feedback noise is that I’m getting. I’ve got to get things arranged here so I can make some sense of … Can you take this mike off? Because I think that’s what’s causing the trouble.

This will make an interesting morning, for me, because I started this integration stuff in the late 1980s. And I have -- until this morning I didn’t realize what an impact I’ve had …

[LAUGHTER]

Schultz: … because Neil Perry said the research shows that 89 percent of the 300 marketers that he surveyed are doing integrated programs and integrated campaigns. And I am damn sure going to get that list because I’d like to go find those folks, because I can’t find them, quite honestly on my own. But it’s an interesting area to talk about. The thing I want to talk about this morning -- I do a lot of work in branding; I do a lot of work in consumer behavior; I do a lot of work in trying to put attitudinal behavioral data together and all those kind of things. I think this is a major issue. But the first thing that I have to do: Would the media players and media buyers please identify themselves? One down here, one here … Oh, God there’s some in the front row. That’s bad news for me because I know you guys are loaded up with brick bats because based on what I’m going to say -- I’m essentially going to say what you’re doing is kind of irrelevant. It’s interesting, but it’s kind of irrelevant today. Other than that, I have you know, nothing but complements for you.

But let me show you where we’ve got to go, basic premise, very simple … a very, very simple premise. Most of the stuff we’ve got; most of the stuff we’re using; most of the stuff we’re planning; and all of the stuff we’re buying with was all done in the '50s and '60s and nobody’s changed a damn thing sense. What we’re using are models that were not developed for your parents. We’re using models that were developed for your grandparents. And we haven’t changed them. We haven’t challenged them. Everybody said, oh they’re okay so let’s leave them like they are. 

Well what we’ve been doing for the last two or three years is trying to rethink what media advertising is. And what is media advertising doing? And how relevant is media advertising in terms of what we’re trying to accomplish with the money? 

The thing that was said just a moment ago, I think is the most telling issue in everything that we think of. The only people who have these things are consumers. You get nothing back from buying media. You get nothing back from media investments. You only get money back from consumers, people who reach into their pockets, pull out some money, put it down on the table and give it to you. So all of this stuff of media frequency and all of this foolishness about you know, media fusion and all that sort of thing, it's interesting … but it doesn’t have anything to do with the people who’ve got this stuff. And this is where the game is. And this is what lots of organizations have a great deal of difficulty with.

Well, I’m going to start with a three-part proposition. I think you need to understand that what I’m going to talk about essentially is I’m going to challenge the marketing advertising model that was developed interestingly in 1961. How many of you were alive in 1961? About a third of this audience. The rest of you had not even been born. Okay. We’re using this model from ’61.

The second thing I’m going to talk about is some observations about what’s going on. Charlie Buchwalter alluded to some of those and that sort of thing.

And a third thing I’m going to talk about is a first-stage conceptual media advertising model. 

I am not here to talk about solutions. I am here to talk about challenges. And quite honestly, I am here to ask for your help. We’ve got to redo this thing. Universities seem to be the most logical and likely place to do it. But we’re going to need your help to be able to do that. And so I don’t bring you a solution. I bring you a lot of challenges and a lot of problems. And what I want to do is hopefully generate at least one or two people who say, I will help you on that. Because what we need are data and some other things to make some of these things work.

So this is what we’re going to talk about. The basic problem here is the lack of proof requires the use of derived assumptions. We have no proof really about how media advertising works, with the exception of online and direct. We don’t really have any direct relationships. We hypothesize that television works. We hypothesize that magazines work. We hypothesize that outdoor works, but we don’t really know. So we derive these assumptions.

Okay, here are the derived assumptions. These are really neat. This is the U.S. view, but I just came back from five weeks in Asia. I will tell you I think it’s probably the same in Japan, the same in Australia and the same in China. I’m on my way to Europe next week and I suspect I’ll find the same thing there. 

The Assumption Number 1 is a stimulus response model. That is that we send stuff out and people respond. And that stimulus response model is really under great challenge.

How many of you have read a book called “How Customers Think" by Gerald Zaltman? Anybody here? My God, you’re further out of touch than I thought you were. No, I’m joking. I’m joking. I would suggest, though, to get the book, it’s called “How Customers Think" by Gerald Zaltman at Harvard. 

And what he does is he talks about the demise of this concept of stimulus response. His premise is that it’s all cognitive psychology. And I think he’s exactly right. Cognitive psychology says you don’t push things and get people -- you don’t send things to people and they respond. What really happens is they aggregate and they accumulate, and they build a network in their head.

His other argument is that 95 percent of all human processing, information processing occurs at the subconscious level. Which simply means what? Our research techniques are not very good. Because we go out and ask people questions, they give you an answer, they don’t know. 

How many of you have woken up one morning and said I think I’ll go do so-and-so? Something you hadn’t even thought about? We all do that. That’s what the subconscious is. Zaltman’s premise is that we have learned more in the last four to five years about how the human mind works than we learned in the previous 500. The problem we have is we’re using a stimulus response model and that assumes that the marketer controls the ad input and the impact. That is, you guys manage customers. You don’t manage customers anymore. Customers manage you. So this idea of CRM, customer relationship management, we’re going to manage customers … you can’t manage customers. It's like herding cats, only not that easy.

[LAUGHTER]

Schultz: It’s all based on “the four Ps.” We still are teaching at the university a concept which was developed in 1957 called “the four Ps of marketing”: product, price, placement, promotion. If you use those four things what will happen? You will magically create customers. Remember marketing never has, and never will, talk about customers or consumers. We talk about what? Product, price, placement, promotion.

Now, Assumption Number 2 is that as people change results of behavior will change. There’s absolutely nothing behind that. We have after 75 years found no direct connection between attitudinal change and behavioral change. People will change their attitudes, yes. But you can’t connect that to their behavior. But every marketing model is built on what? It’s built on a model that assumes attitudinal change will result in behavioral change. You’ve got lots of people out there who hate you who still do business with you. You’ve got lots of people out there who love you, but don’t do any business with you.

Well, let me try this simple test. It may or may not work. It’s the altitude and I have a cold so the test may not work. 

How many of you know of a company called Boeing? Hold your hands up. How many of you plan on buying an airplane in the next three months?

[LAUGHTER]

Schultz: Okay there’s one person back there. What are you going to buy, a triple seven or are you going to wait for the luxury?

[LAUGHTER]

Schultz: The problem here is awareness … what good does it do Boeing that you know all about them? You’re not going to buy an airplane. So part of the problem here is all of the things that we’ve kind of built into this is based on some kind of behavior of psychology. And the behavior of psychology is all based on what? 

Two basic premises. How many of you remember Pavlov? And what was he doing? He was training dogs.

[LAUGHTER]

Schultz: How many of you know Skinner? How many of you remember Skinner? What was Skinner doing? Training pigeons.

Now, either consumers are dogs or pigeons, because that’s where all this stuff came from.

How many of you remember Maslow? Oh… no, that’s not the hierarchy of effects. It’s the hierarchy of human needs. I’m going to show you the hierarchy of effects in a minute.

How many of you have ever been in a brand presentation where there was a pyramid? 

[LAUGHTER]

Schultz: Where do you think that came from? Oh my God … That’s right, it’s all Maslow. 

So what we’ve got here is a lot of misused and misconstrued psychology that’s all tangled up and we’ve adapted and followed in marketing. Neat stuff, but not fairly relevant. 

Well, underlying everything is some form of hierarchy. Now, media planners, media buyers… every media planning process, every algorithm used to buy media or select media, is all based on some kind of an algorithm that looks like this. That is, the marketer puts in money and then we have awareness. And they move up to knowledge. And then they move up to preference. And then they move up to conviction. But we never get to sales. We stop there because what do we say? Oh, we’re only measuring communication effects. But every media optimization model is based on that. The premise is it’s all linear. It’s one-way. And the more money you put in the faster you move people along, and the faster they should, at some point, consider the purchase of your product.

This was developed in 1961. It has never been proven in the marketplace. Intuitively it looks really good. But there is no evidence that there’s a process that people go through. Maybe they do for some products, but there is nothing here that says that’s how you ought to plan media.

Now there’s another little thing in media planning. Every media model is based on optimizing on a Frequency of Three, right? Anybody know where the Frequency of Three came from? I’m looking for volunteers who know where the Frequency of Three came from … yes, ma’am, where? 

Audience: I think it’s the … that’s the way our brain processes the information.

Schultz: That’s a good idea, but it’s not right. 

[LAUGHTER]

Schultz: Frequency of Three was developed in 1965 by Herb Krugman who was the Research Director of General Electric. Herb was sitting in front of his television set in Schenectady, New York in 1965. And he sat there and he said, I wonder how television advertising works? And he came up with a concept. He hypothesized that we see the commercial. The first time we say what is it? The second time we look at it we say well I think I understand that. And the third time we say I fully understand it and don’t need to see it again. 

He wrote one article, published in The Journal of Public Opinion in 1965. It was picked up by the media community and that’s where your Frequency of Three came from, friends.

And it’s all based on the learning curve. That is, we are teaching people things about products. We assume that we are teaching people with advertising. Today almost every model that you look at in almost every research study that is done is a convex curve. It’s not a Sigmoid curve. A convex curve says the first impression is the most important and is the most valuable. That’s why Larry Light at McDonald’s says, we want to be brand storytellers. Because Larry understands that the first exposure is the most important and that’s where he gets the most benefit, so he wants to tell lots and lots and lots of stories about McDonald’s. 

Now the people who don’t like that are the positioning folks who come in and say, there is a slot in your head for this particular product and if it’s there it will stay there and no one else can take it’s place. Not necessarily true.

Assumption Number 3: We have a supply chain model of media message distribution. It looks like this. We’ve got marketers. We’ve got agencies that put stuff together. They do media planning, media buying, media measurement. And we send all this stuff out here and we throw it at consumers. You know that’s exactly the same model that WalMart uses? Because the model is: How do you squeeze costs out? Customers are at the end, not at the beginning, of this process. Once we’ve done all this stuff then we’ve got to go find some people to throw it at. And that’s the model we use, by-in-large -- supply chain.

Assumption Number 4: Each media works separately and independently of any others, therefore, each is and should be planned and measured separately and independently. We talk to -- the people over here were talking about silos this morning. The biggest silos are in media, because we plan in media separately and independently. We plan the advertising. We plan the promotion. We plan the PR. We plan the direct marketing. All planned, all developed separately and independently … and then all measured separately and independently. This is what we do: separate and independent use of media communication and planning and distribution and management … and vision. So we’ve got media advertising, PR, direct marketing, sales promotion, event symposiums, whatever you want. Put them altogether and throw them all out there against the consumer, making the assumption that they’re really interested.

Our media systems are approved based on still unproven hypotheses, discounted models, out-of-date methodologies, intuition and tenuous associations. Other than that, we’ve really got this thing nailed down.

Tomorrow: What marketers should be learning from consumers.