Marketing Trends 2015: O-Sources vs. P-Sources

Marketing Trends 2015

There’s this book called Absolute Valueco-authored by Itamar Simonson and Emanuel Rosen. They’re both professors at Stanford; there’s an article up now at the Stanford GSB website on how “the digital age rewrote consumer behavior,” which is something I think everyone inherently knows/understands, but most companies are pretty slow to act on for various reasons. (In essence, organizational change is hard.) It’s literally impossible to look at “the sales/marketing funnel” someone was taught in B-School in 1990 and even remotely think it’s similar to today’s funnel, but for many people, it’s still taught the same way and conceptualized the same way — even though everything about it is different.

The Stanford GSB article, which is somewhat excerpted from their book but also features a Q&A at the end, makes a couple of good, different points. One of the most interesting is about O-Sources and P-Sources. 

Sounds dirty, right? It isn’t.

An O-Source just means information you get from other people — so like, for example, third-party reviews or friend opinions.

A P-Source is information based on prior preferences, beliefs, or experiences.

One of the biggest shifts that’s happened with consumer behavior and marketing/sales in the past 15 years is simply this: we went from a world more focused on P-Sources (which marketers can more easily control) to a world focused on O-Sources (where opinions are readily accessible, both from your friends and others).

You could argue that the first thing we should do is blow up market research as a concept, because in the modern age, people are going to search for information on a product literally while standing right in front of the product — which they couldn’t do even 10 years ago.

That’s a narrow thing to think, though, for a couple of reasons:

  • Firstly: different verticals and industries are different. Market research means more in some than others.
  • Secondly: the world is still run by people that came up when marketing was old-school marketing. They may be changing quickly on the topic — good for them! — or they may be looking at it like they did in 1992. Radically changing everything — “Let’s get rid of market research!” — would be really hard for people. It would be too jarring for a conventional workplace. You don’t just up and do that.

The bigger point you should take away from this P-Source vs. O-Source context is this:

Marketing is changing.

For example, for years — up to this present moment, and well into 2015 and 2016 — the gold standard was getting into someone’s e-mail. That’s a great place to reach someone with a message, and the margins on it are really good! But in just a few years, maybe SMS will be where you need to be — based on the generation coming up. That’s a huge-ass shift. I’ve been to a ton of marketing conferences in the past year. You know what? I’ve heard SMS mentioned maybe twice. No one’s thinking about it (well, some are, but not a lot). Instead, people are worried about their day-to-day current deliverables. But this change will come, and it will hit them.New Marketing Sales Funnel

That’s what happened with O-Source and P-Source.

When you can literally go into an electronics store and compare three cameras via your smartphone, you can make a small argument that salespeople in the retail space aren’t even necessary. You just need security. Let consumers judge the product and do their own checkout. Bam. (Of course, this would destroy a major economic engine of America.)

When P-Source gave way to O-Source, a lot of marketing executives weren’t ready for that shift. The whole concept is different. It’s so much easier, and faster, to get the opinions of your friends and others online than it ever was.

Simonson even argues this shift means the relevance of “brand” and “customer loyalty” is fading:

Simonson: It should lead us to reevaluate everything we know about marketing. When consumers have easy access to nearly perfect information about product quality, things work differently. Yet we keep hearing that brands are more important than ever or that investing in customer loyalty is the best long-term strategy. We argue that the opposite is true. In an increasing number of categories, brands are losing their role as proxies for quality. Consumers’ loyalty is declining and is a weaker driver of future purchases. Positioning and persuasion techniques are less effective than in the past. Sales tactics that try to capitalize on consumer irrationality don’t work as effectively as they used to. Again, the shift from relative to absolute has far-reaching implications for managers and the practice of marketing. The marketing textbook needs to be rewritten.

Again, I feel like that’s a big jump — as soon as you say something like “… we need to re-evaluate everything we know about marketing,” you just put 10,000s of people on the defensive trying to justify their jobs/existences and tell you why this is “new-fangled hocus pocus” (I heard that in a meeting once). Incremental, micro-level change works better.

So what can marketing do in that regard?

Rosen: The first step is to understand the mix of information sources that consumers use in assessing quality. With some products, consumers still use old proxies, and in those cases, marketers can use some traditional marketing. The shift in decision-making does not apply in the same way to toothpastes as to cars, to less-connected versus well-connected consumers, and to decisions made with versus without time pressure. We present in the book a new framework called the Influence Mix to help managers identify the mix of sources that influence their customers, and plan their marketing strategies around these sources. More specifically, we offer a tool we call the O-Continuum. O stands for “Other” information sources (as opposed to prior preferences or marketing information). O includes user reviews, expert opinions, advice from people you know on social media, etc. The key question marketers should ask is: To what extent do the customers we try to reach depend on O in making their decisions? If customers depend on O, this should affect everything from a company’s market research program to its communication strategies.

At the end of that, there was a bit of an “upsell” — “We offer a tool…” Ignore that and focus on the idea.

For a long time, I always used to wonder this: Why don’t companies ignore social media as a traffic/engagement thing and just make social media a complaint channel or customer service avenue?

Then I realized that was stupid: a ton of people aren’t on social media. My parents aren’t. How would they complain about a product or ask a question, then?

It’s a little bit the same case here — in some product lines, consumers use “the old proxies” (P!) and in some, they use the new ones (O!). You still need a blend.

But as marketers, you need to figure out the mix of information sources. That’s the real trend line here.

Based on what you sell / are trying to sell, what is a consumer likely to do? Is it a spot where they’d use more “other” ideas, or more prior experiences and marketing content?

Here’s one such study on these ideas.

TL:DR — Marketing has changed, and we need to adjust/change with it. Blow everything up? No. That will confuse people and make it hard to get anything done. But stop and think and realize things are different? Yes.

Ted Bauer