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Ken Magill

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The FTC's Warped View of Marketing

3/19/13

By Ken Magill

Federal Trade Commissioner Julie Brill made a deeply troubling, and very revealing, remark in her keynote speech to attendees at the Direct Marketing Association’s DMA in DC conference last week.

The statement reflected how little she knows about how marketing actually works.

“One area of growing concern is discriminatory marketing offers—qualifying some consumers to be eligible for discounts or other benefits, based on behavioral data, and disqualifying others, all without giving consumers the opportunity to ensure that the information on which these decisions are based is accurate,” said Brill.

There are two troubling aspects to that statement. The first is the implication that discriminatory marketing offers are bad.

Marketing offers are inherently discriminatory, just not in the way Brill implies.

In order to stay in business, companies must avoid wasting ad dollars by making distinctions between groups and individuals to determine who is likely to buy.

In some cases, such as credit-card and mortgage offers, these distinctions are made to determine eligibility in order to mitigate loss.

There is nothing wrong with avoiding extending credit to people who are likely to default.

The thing Brill apparently doesn’t understand is that when a marketer wants to determine the viability of a product or service, a question they often ask is: “How big is my universe?” With that question, they’re asking: “How many potential sales are out there?” not “Who can I withhold this from?”

No sane marketer wants to disqualify anyone from buying their wares. They want to sell as much of it to as many people as they can. They simply want to avoid spending money on advertising that will likely reach people who are unwilling or unable to buy.

The other troubling aspect to Brill’s statement is the part where she calls for consumer access to information stored on them so they can ensure the data used to make marketing decisions concerning them is accurate.

As I’ve noted here before, my wife is a media buyer. Among her many successes in buying behaviorally targeted ads for her clients was a campaign for a financial product where she spent $45,000 and generated $3.5 million in new accounts.

Neither she nor her vendor could allow the people targeted access to the information attached to them even if they wanted to. Why? Because it’s anonymous.

Her behaviorally targeted ad vendors don’t need names and addresses for their ads to work because they’re not deployed based on names and addresses. They’re deployed based on behavior.

In order to give people access to their marketing attributes, vendors who don’t currently use names and addresses would have to start collecting them and publishing them in a publicly accessible online database.

What could possibly go wrong?

The problem with the Julie Brills of this world is they have no private sector experience to speak of and yet they presume to have the knowledge to dictate how the private sector should work.

Here is Brill’s work experience.

After failed presidential candidate George McGovern left public life, he opened a bed and breakfast. He was bankrupt in less than a year.

Later, he famously said: “In retrospect, I wish I had known more about the hazards and difficulties of such a business. … I wish that during the years I was in public office I had this firsthand experience about the difficulties business people face every day. That knowledge would have made me a better senator and a more understanding presidential contender. … To create job opportunities, we need entrepreneurs who will risk their capital against an expected payoff. Too often, however, public policy does not consider whether we are choking off those opportunities.”

Commissioner Brill could learn a lot from former Sen. McGovern—that’s if he was still alive, of course. Brill clearly has no idea of the opportunities she threatens because she has no idea how sales and marketing actually work.

Maybe Brill should open a bed and breakfast and report back to us in a year or so.

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