Harvard Business School Professor Sunil Gupta joins host Chris Linnane to unpack data analytics' pivotal role in digital marketing and offers strategies for optimizing marketing efforts across different consumer engagement levels.
Sunil Gupta, Edward W. Carter Professor of Business Administration and Co-Chair of the executive program on Driving Digital Strategy
HBS Online's Digital Marketing Strategy course (https://hbs.me/2p8t69bv)
Gupta’s latest book, Driving Digital Strategy (https://hbs.me/5n8pyvd4)
Related HBS Online blog posts:
Editor's Note: The following was prepared by a machine algorithm and may not perfectly reflect the interview's audio file.
Chris Linnane:
The Parlor Room is an official podcast of Harvard Business School Online.
Sunil Gupta:
The basic fundamentals of marketing haven't changed. The tools and options to execute them have actually exploded, and new options keep coming up. Today is TikTok and Facebook, and tomorrow there'll be something else. But the fundamentals of marketing, are we creating value for customers? Those won't change.
Chris Linnane:
Welcome to The Parlor Room where business concepts come to life. My name is Chris Linnane and I'm the creative director at Harvard Business School Online. Today we have an insightful discussion on the evolving landscape of digital marketing. I'm pleased to be joined by HBS Professor Sunil Gupta, creator of the popular Digital Marketing course with HBS Online. Professor Gupta's Research examines how innovative companies are leveraging new technologies and data analytics to transform their marketing approaches. In our conversation, he'll share frameworks and case studies that illustrate both opportunities and challenges in the digital space. He even puts me in charge of a $30 million budget and I blow it. I mean, I sink the ship really fast. I know you'll find the perspective shared to be highly relevant, whether you're developing a strategy for an established brand or a disruptive new startup. So without further ado, let's dive right in. So let's start with the evolution of digital marketing. How has it changed in the last few years?
Sunil Gupta:
So I think there are a few fundamental shifts that happen if we think about before TT and before digital marketing, if you want to launch a new brand, you faced big challenges. And the challenge was that you don't know how to reach people because you need millions of dollars to advertise on tv. So that was a barrier to entry. The other big barrier was Walmart or any big retailer will not give you a shelf space, right? So as a result, big companies had a huge advantage and entrepreneurs could never get in their new product into the marketplace. So those two fundamental barriers that we had before, which is how do we get access to customers and how do we get access to shelf space? Those are both gone because now distribution is not a barrier. I can directly do e-commerce and I can reach directly to the consumers through social media, through digital marketing and other means.
And that has fundamentally changed the nature of competition. That's why you see a lot of direct to consumer brands. That's why you see millions of beauty brands, for example. And that's fundamentally so that's one part that has fundamentally changed. The second part that has changed is there is a two-way interaction. It used to be brands will always talk to the customer, and this is a one-way voice. Now you have also engaging. So brands are not built by companies. Brands are co-created between the customer and the company, right? So customers tell you what the brand is not the other way around. So social media has become a big mechanism for companies to find out what consumers really think. So that two way interaction changes the way we think about marketing. The third big shift is personalization. That I can actually talk to each individual customer rather than talking into a segment or to a mass customer.
So now I can dig down deeper with the data availability and I can look at your browsing history, for example, which might change going forward. So I can actually give you the specific content. I can create a specific campaign for you, and AI will accelerate that for sure. And the fourth thing that has fundamentally changed is the ROI and the measurement, because it used to be the good old is that 50% of my advertising doesn't work. I just don't know which 50%. But now with the tools that we have available, we can actually do much more tracking, much better measurement, and the return on investment is much more visible to the marketing people, so they know where to allocate the budget.
Chris Linnane:
So talking specifically about data and being able to retrieve it and work with it now, what are some examples of how data has impacted what's going on right now with companies and how they choose to use their digital marketing?
Sunil Gupta:
So data is the big, as everybody says, data is the new oil. So everybody's getting customer insights right From the innovation part as to how do I think about new product launch, you get customer insight, you can do a lot of experimentation. In fact, a lot of the startups, they create a fake website to sort of test and learn as to whether this product will actually work with the customers.
Chris Linnane:
Can I ask them about that? I've heard this a few times. So they make an actual fake website to test, but isn't that a letdown for the customer?
Sunil Gupta:
No. They basically tell the people that we are testing this. So Harry's Razor for example, they did that. They created a website and based on this they say, Hey, are you willing to buy this? I mean, this is what we do in market research traditionally. So now people are willing to give them the email address. People are willing to say, yes, I'm interested. So this is almost as close to the actual purchase as possible. And once they get good feedback, then they say, okay, we will actually get into this particular product launch. I think this is getting closer to the actual launch of the product without creating the product,
And that helps them test different concepts. That's the one example of getting customer insights from that, for creating new products for innovation. As we already said, that there's a way to personalize the communication part in terms of what message do I send to which people? I can get that particular part interesting. I can even personalize the product a lot of times. And a lot of companies are saying, I can actually change the formulation of the product based on the nature. Precision medicine is one example where I can actually start thinking about medication that is good for you, may not be good for me, so I can look at your DNA and a molecule structure and all those kinds of things. So I think there are lots of insights that come from data, and that is the new competitive advantage for most companies.
Chris Linnane:
It's amazing with what's going on with the data. I was talking to some other people and just a little bit of time on TikTok now, and all I see are videos about chiropractors and back cracking and stuff. And I've been told that it's just because I'm old.
Sunil Gupta:
Oh yeah, that must be you. They're targeting you.
Chris Linnane:
Yeah.
Sunil Gupta:
You must have searched for back pain/
Chris Linnane:
Stayed too on that and it knows it. And now all it's sending me are chiropractor videos, which I strangely enjoyed for a little bit, and then I found 'em really disturbing and I don't want to watch 'em anymore. So there are so many options, so many choices now for digital marketing and data playing in and all these things. How do we avoid making mistakes? How do you know what to do? You can test like crazy, but when do you know when to actually turn it into something?
Sunil Gupta:
So again, the basic fundamentals of marketing haven't changed. The tools and options to execute them have actually exploded. So if I want to do advertising, I can have hundreds of different options and new options keep coming up. So today is TikTok and Facebook, and tomorrow there'll be something else. So I think the tools and techniques will change, but the fundamentals of marketing. Are we creating value for customers? Do we know exactly who our customer target customer is? Do we know what is our key value proposition? Those won't change. So you always got to start from there. And then of course, if you don't know a new channel, let's say in a few years ago people didn't know how to use social influences, then you experiment with that, but you need to have a clear metric as to how do we actually measure the impact of this? What part of the entire customer journey we are trying to impact, where the persuasion is most likely to happen. That part, those fundamentals don't change in business and certainly don't change in marketing elsewhere as well.
Chris Linnane:
Now with social influencers, do you think that's going to be something that's going to always be as popular as it is now? Or will it start to become so saturated that it's all back down to just people?
Sunil Gupta:
I think it's already saturating for any new tool or any new mechanism. There is an initial excitement, there is initial novelty, and that becomes an initial competitive advantage for the companies. But over time, everybody starts doing it, and then again, you get lost into the noise. So now every brand is using social influencers as a consumer. You sort of say, how many social influencers can I follow and do I trust those social influencers? These are again, just like any celebrity promoting or endorsing a product. So the impact of that goes down, the cost of social influencer goes up. So you start doing the trade off between cost benefit and suddenly you'll sort of say, look, the balance has tipped over a little bit more against them. I
Chris Linnane:
Saw a video recently where someone claimed they were a social influencer and I think it was based on yard equipment. So I feel like at that point it's no longer a really standout position.
Sunil Gupta:
Everybody's using them, everybody's using them.
Chris Linnane:
As AI continues to grow, how do you think this is going to impact digital marketing?
Sunil Gupta:
So I think the biggest use case of especially generative AI is in marketing.
So companies are already using generative AI to create content. You can create blogs, you can write stories, you can create ad copy, you can create. And not only that, I can create hundreds or thousands of different versions very quickly. So as a result, experimenting with different copy, different ads, different mechanisms is very, very going to be very easy. So test and learn will be that much faster. There is also automation of budget allocation. So Facebook, for example, has a program called Advantage Plus, and what they're saying is you don't need to worry about budget allocation as to where to advertise within Facebook ecosystem, whether Instagram or WhatsApp or other places. You tell us how much budget you have, you tell us what your objective is and target audience is, we will create hundreds of different ad versions, experiment with it, learn from that, and automatically using our AI and machine learning tool, we'll automatically allocate the budget to the most optimal channel and the most optimal budget. So you just sit back and enjoy the right, you don't only have to do anything. So that's an advantage of saying the machines learn automatically and they can create lots of different versions to test as to what might appeal to one group of customers versus another.
Chris Linnane:
Sticking with the AI topic and how this affects things, not just for the content that's created, but the people who are making things, the people who are marketing things, analyzing things, how does this change what they're doing? I'm hearing a lot about the phrase that makes me uncomfortable. It feels not great. What's the big concern or what can people do to prepare themselves to be in the world of marketing with AI being part of the picture?
Sunil Gupta:
So I think if we think about, just go back in time and say, when Google came in, what happened to marketing? And what happened is lots of small brands who couldn't afford the large budgets can suddenly now do advertising on Google. As a result, the competition increased dramatically. The same is going to happen with AI. If I'm a small brand, I could not hire a large advertising agents to build with fancy ads for me. But with generative ai, I can just talk to open AI or charge g, PT or Clot or whatever else software I use to create this wonderful ad copy. So you will see a lot more competition that will be there in the marketplace than we ever saw before. What that means is the people have to be that much more skilled to sort of say, how do we navigate the brand when everybody can do the basic stuff that we thought we only had the right to do. So I think the skill will be much more on understanding the competition, understanding your target audience better than before. So those fundamentals will become far more important than just the creation of the ad.
And you don't need large budgets for doing that part.
Chris Linnane:
So it's not just about learning how to prompt chat GPT the right way. It's still something that's human there that needs to be developed.
Sunil Gupta:
Those fundamental traits are human as to ask the right questions will never go away. It
Chris Linnane:
Makes me feel better. Thank you for saying that.
Sunil Gupta:
I think the best way to understand digital marketing is through a mini case study.
Chris Linnane:
Yeah, I agree.
Sunil Gupta:
So let's play the scenario where we talk about a company in a course also, which is a footwear company called OOFOS. It's less than $200 million in revenue. It's a private company. They make sandals, slippers. They're now beginning to make shoes also. And the unique thing is they have a technology called, they call it OOFOS technology, and basically it's shock absorbing. So it's good on your feet if you get too much stress on your feet, especially after athletic activity or if you have foot pain, then it sort of helps with that kind of story. That's the unique advantage. So let's think of a scenario where the marketing director, OOFOS comes to you and says, Chris, here's 25 million. Help us grow. Whatcha going to do?
Chris Linnane:
Oh my gosh, 25 million. I think I would probably just, are we in the research? Are we trying to spread out?
Sunil Gupta:
Do what? About 25 million for digital marketing for you? Tell me what you're going to do.
Chris Linnane:
I think you potentially get to athletes, people that are dealing with injuries maybe that we know had big comeback stories. Something that feels a little bit more about, we're not competing directly with Nike and performance. We're talking about comfort and health, I guess, of your feet,
Sunil Gupta:
Whatever you want to talk about.
Chris Linnane:
Yeah, so let's do that. That's where do it. We're going to spend 29.5 million on that and then 0.5 million on snacks, things like that to keep the team going.
Sunil Gupta:
So you hire these athletes and you give them the money, and then what are you going to do with them?
Chris Linnane:
Oh yeah, I need to make an agreement with them. They need to go out on social media and have enough of some kind of post agreement with me, maybe even or us. It's not my company, it's our company. They need to also make appearances, endorsing the brand. And yeah, that's all I can think of. I think I might be wasting our money already.
Sunil Gupta:
No, but again, so what are you trying to achieve? What is your goal here?
Chris Linnane:
My goal here, I think is just to know that it's a very crowded market and I want to make a dent in that market. And I'm not sure how you make that dent without connecting with people that have an audience already.
Sunil Gupta:
So I think in any digital marketing, before you jump into tactics, like I hire social media experts or endorsement, you've got to figure out what is your goal? What is your objective? So ultimate objective is always sales, more revenue. Can there be any other objective?
Chris Linnane:
I don't think there can be.
Sunil Gupta:
I really made a bad plan. I don't know, but maybe you're on the right side. So supposing I tell you that not many people know even OOFOS exists, like everybody knows Nike. In fact, OOFOS did market research and they found that unaided awareness. In other words, if I ask you think of the top shoe brands or slippers, OOFOS names comes up only in one or 2% of the time.
Chris Linnane:
Sure.
Sunil Gupta:
People don't even know. Even if I tell you, have you heard of OOFOS? Only eight 9% of the people say, yeah, they ever heard of OOFOS.
Chris Linnane:
Really? Okay.
Sunil Gupta:
So you can't buy a product if you don't even know that. So if I tell you that awareness is so low, does that change anything?
Chris Linnane:
It does. I dunno how to solve the problem, but I know that that's not my plan anymore because I've got to get the name out there. I got to get the recognition out there in a way that people, when they see things, they can connect it to a brand that they know exists, but I don't know what to do.
Sunil Gupta:
I think I need to get promoted. We'll get there. But the first thing is to think about what is the goal or objective of the brand. And one way to think about is the customer journey or the funnel as we call it, marketing funnel. And the three broad components of the marketing funnel is, are you aware of this or not? If you're not aware, I need to do something to make you aware. The second part could be maybe you're aware but you're not thinking about it. So maybe you're aware of OOFOS, but you're not even thinking you're comparing Nike with Adidas or something else. It doesn't even enter your consideration. That's a different problem. The third part in the funnel at the bottom of the funnel is you are thinking about it, but you didn't buy it because you bought somebody else. And the activity that you need to do at each stage is very different. If you're not aware, I need to do something to build awareness, maybe good old television may be fine because that teaches lots of people just to say, you exist. But if I want to convert you, then my message is very different. My message maybe is price, maybe it's a unique product or whatever it is. So the first part is to sort of say what problem you're trying to solve. And usually companies try to solve all these three problems. Let's say I tell you that look, yes, I have problems in all three stages of the customer journey, awareness, consideration, as well as conversion. And you need to have goals as to I want to increase awareness from 1% unaided awareness to 5% or whatever it is. What else would you do? What is the next step?
Chris Linnane:
Well, if I'm thinking about awareness, which is giving me a better idea of what I should do, maybe I'd partner up with fitness chains so that it was part of all these people that are interested in fitness and taking care of their bodies. They'd be aware, they'd see posters, they'd maybe have some kind of discount when they sign up and you try to spread with massive change. So awareness goes up?
Sunil Gupta:
And who are you trying to influence there?
Chris Linnane:
I'm trying to influence...
Sunil Gupta:
Which are the customers you're trying to influence.
Chris Linnane:
I'm trying to influence customers who I think are athletes, probably.
Sunil Gupta:
Why?
Chris Linnane:
Because they the ones who would be running and need the software.
Sunil Gupta:
So I'll give you a little bit more information, which is before you put money into some channel, whether it's social media or whatever, you got to find out, you got to decide who are the customer you're trying to influence. In other words, who's your target audience? And the spectrum for OOFOS is on one extreme end is the young athletes. So these are 25 to 30 5-year-old people who are very active and they play for professional or otherwise. And if you're running a marathon after a marathon, your feet are sore. Maybe you want to give some rest, right? That's one group of people. You can certainly do that. Always a coveted segment. But then on the other extreme is the older 55 plus or pain sufferers.
Chris Linnane:
The people who are getting chiropractor videos on TikTok.
Sunil Gupta:
Yes. People who are getting chiropractic visits who are old and they're literally in pain and they need some support for their feed. They go to the podiatrist, they go to all these specialty stores. They really need that. Athletes don't even think about that. And suppose I also tell you, the majority of the sales for OOFOS today comes from 55 plus, although they want the brand to go towards younger people, but the current sales actually come from people who actually suffer from
Chris Linnane:
Wow. Were they surprised by that? Because I'm a little surprised by that. I wouldn't have thought that first.
Sunil Gupta:
Well, I mean, they know that based on their sales data. So the debate that is going on in the company is, should we focus on the older people who actually currently buying our product? Or should we try and reorient the company towards the younger people who are aspirational customers for us, although they're not thinking of our brand because the foot pain is only after heavy duty exercise or athletic play or what have you, this is not a normal thing for them. That's much harder to convert as compared to people who are literally suffering for foot pain. So you have the choice. So that's also, you have to decide because you can't spend money on any digital media channel without knowing who are you trying to influence. And you have clear choices here.
Chris Linnane:
So I think the first instinct would be to not go to the overcrowded younger market and play against some of these established brands and go to the people that naturally need it.
Sunil Gupta:
And that has nothing to do with whether you spend money on TikTok or wherever.
Chris Linnane:
No, they're not there.
Sunil Gupta:
That's a strategic decision the company has to make before you spend money, which is saying, should I spend money on the young people? Because that's the coveted market, but it's very crowded. Nike and IRA spend millions of dollars there and I'm a small player, I won't be even noticed. Or should I go with my niche, which is the older people where people really, I'm literally solving a pain point.
Chris Linnane:
Literally, yeah.
Sunil Gupta:
But then I'm associated with an older customer group. So that you need to decide that before you start me. Alright, so the third question in that domain. So first you need to decide what your goal is, whether it's awareness or consideration or conversion. The second you need to decide who you're trying to influence. The third thing you should think about is what do you want to tell them? What is your value proposition? And I can give you two different ways to think about it. One is you say, I'm comfort, or you can say they call it recovery. Recovery is more towards I'm after athletic actor, I'm recovery. Whereas if you target the pain sufferers, the older people, maybe comfort is the way because they're never going to recover from the foot pain. It's just comfort for them. So what exactly are you trying to position? The challenge here is every shoe company calls themselves, my shoe is comfortable. So if you call it comfort, you're lost in the crowd. If you call it recovery, it's unique, but nobody knows what recovery is. So what is the message you're going to tell and how you want to position yourself in the marketplace? It's also a question for you.
Chris Linnane:
For me. Oh boy. See, my brain already went to a different place. It's orthopedics, but that's a crowded market as well for people I would think.
Sunil Gupta:
It is. But if you are focusing on the older group, maybe orthopedics is the right segment, not the social influencers.
Chris Linnane:
Yeah, yeah. So that's a tough one. I wouldn't know which way to go with that. Because like you said, you can go into the crowded market of saying comfort. Every shoe says they're comfortable. Recovery. The older people are not thinking, well, what am I recovering from? It's constant pain I'm trying to avoid. I dunno.
Sunil Gupta:
And then the final thing is, even if you spend all this 20, $30 million, how do you know you're successful?
Chris Linnane:
Just trying to sell enough to make it back, I guess. I don't know.
Sunil Gupta:
And then it goes back to the objective, right? If your objective is sales, then yes, that should be the goal, but it could be something else. So OOFOS not only sells through e-commerce, but they also sell in retail stores. So what if you don't sell enough on e-commerce, but you send a lot of foot traffic, literally foot traffic to the stores, right? It'll never show up in e-commerce. Would you call it lack of success?
Chris Linnane:
No.
Sunil Gupta:
So now you need to measure that also. And then the question is, how do I measure whether the traffic in the retail store is because of my digital advertising or something else?
Chris Linnane:
Oh my gosh, this is getting very confusing. How do they measure that then?
Sunil Gupta:
Well, that's called the attribution problem. How do you separate out the effect cause and effect? So I think that's what the complexity in digital marketing is. It's not simply, Hey, should I spend money on TikTok or Google Ads or Instagram? It's thinking through the entire process of what is my objective? And there could be more than sales, depending on the customer journey. Who do I want to influence the target market? What is my value proposition and what is my metrics of success? That is a strategic way of thinking before you go to the channel. And of course the channel you choose, the media channel you choose is a function of all those decisions. So if you choose, for example, in your case the young athletes, your channel will be very different then if you choose 55 plus years, right? You're not going to probably choose TikTok for 55 plus, maybe you choose 60 Minutes.
Chris Linnane:
Or Walker Texas Ranger or one of those things. Yes.
Sunil Gupta:
So the thought process is there is a strategic thinking before the allocation to the tools that we always, almost always a associated with digital marketing.
Chris Linnane:
That's fascinating. Side question of this. With the marketing funnel, I've always wondered this, does it have to be this staged step down or can you kind of hit three things at one time? You walk into a store and you're like, oh, I'm aware, I see it, I buy it, I'm gone. Is that measurable enough to factor in or...?
Sunil Gupta:
Yeah. So sometimes it happens simultaneously and then a lot of people say it's not linear, it's circular and all that stuff. So it can happen simultaneously. So again, it depends on whether it's a level of involvement of the customer. So broadly speaking, we divide this into high involvement versus low involvement products. High involvement product typically are more expensive. If you're buying a refrigerator or a dishwasher or a washing machine, you are going to think you are going to do some research. If you're not even familiar with a new brand, you're going to find out who makes it, et cetera, et cetera. So there's a lot more research you're not going to instantly buy, but if you're buying a chewing gum, maybe it's not a big deal. It's a low involvement. You see something for the first time you say, let me try it. So I think it depends on whether those three stages take time sequentially versus they're done in one shot. That
Chris Linnane:
Makes complete sense. Ready to move to some questions?
Sunil Gupta:
Yep. Alright, this one's from Elara. What are some examples of how digital and physical marketing can most effectively integrate?
So I think this is an interesting question because for a long time, companies have been keeping them in silos. So there's somebody, they have an agency which does only digital marketing. There is an agency that only looks at the offline channel, but consumers mix and match, right? So you might start your search online and they go offline. So I think there's a lot more effort on company's part to integrate these two components. And the challenge also becomes that you start the search on online because you're affected by digital marketing on online, but you actually end up being in the store. And that creates a challenge of how do you measure this? So a lot of people are trying to do test and control that in one market you only spend money in digital channel. On the other market you don't and see the traffic in the store and you start measuring those components. Sometimes the online channel does one job, offline channel does another job. So online channel may be simply to create awareness. The offline channel may be for actual conversion where you can talk to a salesperson. So I think the best way to think about is through entire customer journey, how the customers go through one step to the next step and then manage that process. Sephora does a fantastic job of doing that. Exactly that.
Chris Linnane:
This one is from Noah. What's one metric or KPI that more marketers should pay attention to, but often overlook?
Sunil Gupta:
I wouldn't call them people overlook. I think increasingly companies are looking at return on investment, or sometimes they call it return on advertising spend or roas, but that's the ultimate metric, right? As a chief financial officer, you always want to know what is the return on the investment that I'm making, whether this marketing or something else. But I think there is hardly one single metric that marketing people care about because they look at what stage of the customer journey I'm trying to influence as we discuss in the OOFOS case, if you are not, even if you have very low brand awareness, maybe that's what you want to focus on. So it depends on the objective of the brand. If the objective of the brand is create awareness, then that should be the metric. If the objective of the brand is to get more traffic into the stores, let's say I'm introducing a new car. I know people are not going to buy car online, at least not right now. So my goal there is to send more traffic into the showrooms, and that's what becomes my metric. So I think the metric usually depends on the objective of the campaign, but ultimate objective of course is to have a higher ROI.
Chris Linnane:
This one is from Maeve. What emerging skills and job roles do you think will be most important for digital marketing teams going forward?
Sunil Gupta:
So I think that technology will continue to evolve. It was Facebook and Instagram before then, is TikTok tomorrow is AI. So I think the basic and fundamental skills that we also try to teach to all our MBA students is learn how to learn because you have to be good in terms of learning new things and being curious. But in marketing, one of the fundamental things that will never change is to be focused on the end consumer and think about how do you create value for the consumers. But adaptability and flexibility in terms of learning new skills, I think that's the key advantage and key strength that we all need. So there's no one particular thing, but it's being flexible enough to say, I learned something new. I experiment and I'm being able to adapt as the market moves.
Chris Linnane:
That was great. Perfect. If you'd like to learn more about Professor Gupta or his course digital marketing, please visit theparlorroompodcast.com. You can also follow HBS Online on Facebook, LinkedIn, TikTok, Instagram, and X. My name is Chris Linnane. Thank you for listening. If you are enjoying the part of the room, please share the show with your friends and subscribe, rate, and review it wherever you get your podcasts. Thank you.
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