Remember Amara's Law When Thinking About Generative AI

The outpouring of enthusiasm for ChatGPT, and the flurry of recent AI-related product announcements from tech companies indicate that generative artificial intelligence will soon play a much larger role in marketing.

But the specific path forward for generative AI in marketing isn't clear. So, how should marketing leaders be thinking about - and, more importantly, what should they be doing about - generative AI over the next 6-12 months? Here's one principle to keep in mind.

November 30, 2022 is likely to be remembered as a date on which marketing was profoundly changed.

That's when OpenAI released ChatGPT to the public. Within five days, it acquired more than one million registered users, according to Greg Brockman, President & Co-Founder of OpenAI. Analysts have estimated that it reached 100 million monthly active users in January of this year.

Most of you already know that ChatGPT is a generative artificial intelligence application. To use ChatGPT, you enter a prompt in natural language, and it will generate a response to your prompt. The kicker is, the response composed by ChatGPT reads as though it was written by a human being.

The explosion of interest in ChatGPT has ignited an arms race among technology companies to develop and roll out new or enhanced applications featuring generative AI capabilities. Product announcements from tech industry heavyweights, including Microsoft, Google, Salesforce, Adobe, and Hubspot, have been coming at a rapid pace for the past several weeks.

The reaction of the marketing community to ChatGPT has also been quite dramatic. There are already dozens, if not hundreds, of articles, blog posts, videos, and other materials describing the potential implications of ChatGPT and other generative AI tools for marketing and marketers.

There's little doubt that the appearance of generative AI applications like ChatGPT is a pivotal moment for marketing. But, there are still many unanswered questions about how the use of generative AI in marketing will evolve and how quickly the evolution will occur.

So, the most important issue facing marketing leaders today is:  How should we be thinking about - and what should we be doing about - generative AI over the next 6 to 12 months? To address this issue, marketing leaders need to think about generative AI in the context of Amara's Law.

Remember Amara's Law

Amara's Law is an adage named for Roy Charles Amara, an American scientist and futurist. The law states:  We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.

Some marketing pundits have already made extravagant claims about how generative AI technologies will transform marketing. Some of these claims will probably turn out to be accurate, but generative AI is unlikely to have a transformational impact on the real-world practice of marketing in most companies over the next year or so.

The story over the long term is quite different. I've been experimenting with ChatGPT and Bard (Google's generative AI chatbot) for the past several weeks, and I've been amazed by their capabilities. 

As I noted earlier, established tech companies like Microsoft and Google, are making substantial investments in generative AI. Equally important, venture capital firms have been actively funding generative AI start-up companies.

According to PitchBook (a research firm and publisher that covers venture capital and private equity), between 2018 and 2022, natural language interfaces like ChatGPT captured about 29% of VC-backed deals and about 24% of the total dollars invested in the generative AI space. PitchBook estimates that the market for generative AI applications will reach $42.6 billion this year.

In The Innovator's Dilemma, Clayton Christensen argued that the first generation of a disruptive technology often has substantial flaws and limited capabilities. The technology then undergoes successive improvement cycles that reduce or eliminate its flaws and add to or expand its capabilities. Generative AI is likely to follow this path, especially given the huge investments being made in the space.

The bottom line here is that advances in generative AI capabilities are likely to come at a breakneck pace over the next few years. The generative AI tools available today aren't likely to immediately transform how marketers produce most content and otherwise perform marketing activities, but the tools that will become available over the next couple of years are very likely to be transformative. It's a classic example of Amara's Law at work.

Therefore, generative AI is a capability that marketing leaders should begin to focus on now. They should designate a member of their team to closely monitor developments in the generative AI space. Given the pace of development, that won't be a trivial task. Equally important, marketing leaders should also selectively invest in generative AI tools and begin experimenting with those tools to determine whether and/or how they can be used in "live" marketing activities and workflows. 

To paraphrase Amara's Law, we are probably overestimating the short-term impact of generative AI on marketing, but we are almost certainly underestimating its impact in the slightly longer term. So, the time to begin evaluating generative AI in marketing is already here.

Top image courtesy of deepak pal via Flickr.com (CC).

Increase "Mental Availability" To Boost B2B Marketing Performance

Earlier this month, I published an article discussing the importance of the 95:5 rule for B2B marketing. This rule states that up to 95% of business buyers are not in the market for many goods and services at any given time.

The 95:5 rule isn't meant to be interpreted literally, but it's valid in a general sense. At any point in time, virtually all B2B companies have many more out-of-market prospects than in-market prospects.

In a 2021 paper published by The B2B Institute, Professor John Dawes with the Ehrenberg-Bass Institute for Marketing Science argued that the 95:5 rule has major implications for B2B marketing. He wrote:

"To grow a brand, you need to advertise to people who aren't in the market now, so that when they do enter the market your brand is one they are familiar with. And that they mentally associate your brand with the need or buying situation that brought them into the market."

The rationale for marketing to out-of-market prospects is ultimately based on the importance of the initial consideration set in B2B buying.

In most cases, a B2B buying process begins when an event (a trigger) causes a business person (the potential buyer) to perceive a need or desire to potentially buy something.

When such a need or desire arises, a potential buyer will quickly create a mental list of companies, products, or services (which I'll refer to collectively as brands) that he or she feels are worth considering, i.e. an initial consideration set.

This initial consideration set is based on the mental impressions of brands the buyer has already formed through a variety of touchpoints, such as his or her experience with a brand, marketing messages, news reports, and conversations with colleagues and friends.

Research has shown that companies in a potential buyer's initial consideration set are more likely to win business from the buyer than companies not in the initial consideration set. (See, for example, this study by WSJ Intelligence and B2B International.)

The immediate goal of B2B marketing programs designed for out-of-market buyers should be to build and refresh memory links to your brand in the minds of your potential future buyers. Your ultimate objective is to be included in your potential buyers' initial consideration sets. However, not all memory links are equally effective for this purpose.

When marketing to out-of-market buyers, your most important objective should be to increase the mental availability of your brand.

The concept of mental availability was developed by Byron Sharp and his colleagues at the Ehrenberg-Bass Institute. Many B2C marketers are familiar with the idea of mental availability, but it hasn't been used widely in B2B marketing.

In his landmark 2010 book, How Brands Grow, Byron Sharp provided a simple definition of mental availability:  "Mental availability/brand salience is the propensity for a brand to be noticed or thought of in buying situations."

Sharp also described the importance of mental availability in clear terms:  "The key marketing task is to make a brand easy to buy; this requires building mental and physical availability. Everything else is secondary."

Mental availability is different from general brand awareness. Mental availability describes the likelihood that a potential buyer will think of your brand in the context of a specific buying situation.

As I noted earlier, when a potential buyer perceives a need or desire that might require buying something, the buyer will use his or her memories to create an initial consideration set of brands that might be able to address the need or fulfill the desire.

This initial consideration set will include brands that the potential buyer mentally associates with the specific need or desire he or she is experiencing. It's these associations - based on memories - that create mental availability.

When marketing to out-of-market buyers, therefore, your job is to build and refresh the memory structures that connect your brand to the specific needs or desires your potential buyers are most likely to experience.

My use of the plural (needs and desires) in the preceding sentence was intentional. Many B2B companies offer products or services that can address several needs. For example, a B2B technology solution may enable a buyer to reduce or eliminate several kinds of costs and improve the speed or efficiency of several work processes.

A potential buyer will create his or her initial consideration set based on the specific need the buyer is experiencing. Different needs or desires (and the context in which they arise) will evoke different initial consideration sets.

You can't predict what specific need will cause a particular buyer to move into the market for a product or service like the one your company offers. Therefore, to increase mental availability, you need to build and refresh the memory links that will connect your brand to all of the important buyer needs that your product or service can address.

With broader mental availability, you increase the likelihood that your brand will be included in the initial consideration set of a larger number of your potential buyers.

Increasing mental availability and being included in the initial consideration set of a larger number of potential buyers won't guarantee success. The rest of the B2B buying process still matters. But being included in more initial consideration sets will help.

As I wrote in my earlier article:  You have to be invited to the party before you can be asked to dance.

Image courtesy of Erdonzello via Flickr (Public Domain).

[Book Review] An Essential Guide to Artificial Intelligence for Marketers

Source:  Trust Insights

The marketing world has been going gaga over ChatGPT for the past four months. 

The generative AI application from OpenAI was released to the public on November 30, 2022, and analysts have estimated that it reached 100 million monthly active users in January of this year.

The capabilities of ChatGPT have amazed many users, including me. More importantly, the buzz surrounding ChatGPT has ignited an arms race among tech companies to develop and roll out new or enhanced applications enabled by artificial intelligence. 

For example, Microsoft - which had already invested $1 billion in OpenAI - recently confirmed that it will invest an additional $10 billion in the company, and announced that it is incorporating some ChatGPT-like functionality in its Bing search engine. Google, Salesforce, Hubspot, and a host of other firms have also recently announced new or enhanced applications featuring generative AI capabilities.

The application of artificial intelligence to marketing isn't new, but the intense reaction to ChatGPT by both the public and tech companies suggests that we are on the cusp of a step change in the use of AI in marketing.

Until now, many marketers have been able to function effectively with only a superficial understanding of artificial intelligence. But, as AI becomes increasingly integral to marketing at more and more companies, it will be imperative for marketers to have a better grasp of AI principles and techniques.

Christopher S. Penn, the co-founder and Chief Data Scientist of Trust Insights, and a recognized authority on analytics, data science, and machine learning, has written a book that will help marketers begin their journey toward a better understanding of artificial intelligence.

AI For Marketers:  An Introduction and Primer (Third Edition, 2021) provides a sound introduction to basic AI techniques and illustrates how AI can be used to improve marketing performance.

What's In the Book

AI For Marketers contains 18 chapters, but the book's content falls into four broad topic categories.

In the opening two chapters, Penn discusses the importance of AI in marketing and explains why marketers often struggle with AI. He argues that one reason marketers find AI challenging is that, " . . . AI and its prerequisites are deeply entrenched in mathematics and statistics - two fields which are not strong points for most marketers." (Emphasis in original)

Penn devotes four chapters to an explanation of the basic techniques of artificial intelligence. He defines AI and explains algorithms, models, and types of machine learning. He also covers the vital importance of good data and provides a useful data quality framework.

The third major topic category in AI For Marketers is a description of several practical applications of AI in marketing. Penn places his discussion in the context of problems that AI can help marketers address. For example, he explains how attribution analysis can help marketers forecast what strategies, tactics, and tools will deliver the best results, and how dimension reduction and feature selection can help marketers identify which data points are important.

Lastly, Penn discusses how companies can successfully incorporate artificial intelligence in their marketing efforts, and how marketers can prepare their careers for AI. He lays out seven steps that describe the process of becoming an "AI-first company," and he covers the people and process governance capabilities that companies need to be successful with AI.

My Take

Writing a book about the use of artificial intelligence in marketing is a daunting task because the field is evolving so rapidly that a book can easily become outdated soon after it's published.

Writing a book about AI for marketers is even more challenging because most marketers have little, if any, education or training in statistics or computer science, both of which are essential components of artificial intelligence.

Christopher Penn does an admirable job of addressing both of these challenges in AI For Marketers. He focuses on the core fundamentals of artificial intelligence and on the basic applications of AI in marketing. He also explains AI concepts and techniques in an informal, easy-to-understand way, making the subject accessible to marketers who haven't been trained in statistics and computer science.

In the book, Penn argues that marketers don't need to become practitioners of AI in the sense of learning statistics, data science, and machine learning. He uses the analogy of "chefs and farmers" to illustrate his argument. He wrote:

"Talented chefs take great ingredients and, using the right tools and skills, transform those ingredients into delicious food . . . However, what's the likelihood that the chef is also a farmer . . . Almost none . . . [Chefs] may have some sense of what's gone into an ingredient, but they're not the ones to focus on the details of the ingredient's creation . . .

The typical outcome of an artificial intelligence platform is a model that creates insights or makes decisions. The software . . . plugs into our marketing infrastructure and spits out highly refined products from the raw ingredients - data, algorithms, and analyses. The machines are the farmers, and we are the chefs." (Emphasis in original)

I would contend that Penn's argument goes a little too far. I believe that many marketers - particularly those in more senior roles - will need to delve a little deeper into artificial intelligence than Penn suggests.

Penn wrote that marketers ". . . should know what great data, algorithms, models, or decisions look like . . ." It's difficult - probably impossible - to determine whether an algorithm is "great" and fit for purpose if you don't know how the algorithm works and what its strengths and limitations are. While AI For Marketers is a solid introduction to the topic, it doesn't go quite deep enough to provide this level of information.

Even with this one caveat, I strongly recommend Chris Penn's book. AI For Marketers is a great resource for marketers who are beginning their journey toward a greater understanding of artificial intelligence and its expanding role in marketing.

One final point. The third edition of AI For Marketers was published in 2021 and therefore doesn't capture the tsunami of developments in AI that have occurred over the past few months. I subscribe to Chris Penn's Almost Timely Newsletter, and he has already provided numerous valuable insights regarding the recent developments in AI.

I have no inside information, but I suspect that a fourth edition of AI For Marketers is already in the works. In other circumstances, I might recommend that you wait a bit for the new edition of the book. But artificial intelligence is poised to become so important for marketers that I think you should read the third edition now and be prepared to read the fourth edition when it appears. 

[Research Round-Up] B2B Highlights From "The CMO Survey" - March 2023

Source:  "The CMO Survey" (Christine Moorman, 2023)

(This month's Research Round-Up is devoted entirely to the March 2023 edition of "The CMO Survey." This research has been conducted semi-annually since 2008, and it consistently provides a wealth of valuable information about marketing trends, spending, and practices.)

The findings of the latest edition of "The CMO Survey" were released late last month. "The CMO Survey" is directed by Dr. Christine Moorman and is sponsored by Deloitte LLP, Duke University's Fuqua School of Business, and the American Marketing Association.

The March 2023 survey results are based on responses from 314 senior marketing leaders at for-profit companies based in the United States. Over six in ten of the respondents (61.8%) were affiliated with B2B companies, and 97% were VP-level or above. The survey was in the field from January 10-31, 2023.

Dr. Moorman and her colleagues typically produce three reports for each U.S. edition of the survey.

• "Highlights and Insights Report" - This is a relatively brief and graphically-rich report that provides mostly overall survey results and analyzes those results and major marketing trends.
• "Topline Report" - This report provides response data at the aggregate level for all survey questions.
• "Firm and Industry Breakout Report" - This report provides response data by four economic sectors (B2B product companies, B2B services companies, B2C product companies, and B2C services companies), 15 industry verticals, company size, and volume of internet sales. This report is lengthy but provides the most detailed view of the survey data.

In this post, I'll be discussing the responses of B2B marketers exclusively, unless otherwise indicated. The percentages and other numerical values in this post are the mean of applicable survey responses, also unless otherwise indicated. 

Marketers' Views On the Economy

For the past several years, "The CMO Survey" has asked participants for their views on economic conditions, and the March edition of the survey was no exception. It asked participants to rate their level of optimism regarding the overall U.S. economy on a 100-point scale, with "0" being the least optimistic, and "100" being the most optimistic. The following chart shows how B2B marketers rated their optimism in the six surveys conducted since June 2020.

As this chart shows, B2B marketer optimism reached a post-pandemic peak in the August 2021 survey and has declined slightly since. The chart also shows that marketer optimism has changed very little since the September 2022 survey.

The March survey also asked participants if they were more or less optimistic about the U.S. economy compared to the previous quarter. The following table shows how B2B marketers responded.

The results in this table suggest that B2B marketers have become more optimistic since last fall. In the March survey, 32.0% of respondents with B2B product companies, and 24.7% of respondents with B2B services companies said they were more optimistic compared to the previous quarter. In the September 2022 survey, only 14.7% of respondents with B2B product companies, and 13.1% of respondents with B2B services companies reported being more optimistic.

Marketing Spending Trends

The March edition of "The CMO Survey" found that the growth of marketing spending by B2B companies over the preceding 12 months was slow and that B2B survey respondents expect the growth of their marketing spending to be anemic in the year following the survey.

The March survey asked participants by what percent their marketing spending had changed in the prior 12 months and by what percent they expected their spending to change in the next 12 months (relative to the prior 12 months). The following table shows how the B2B survey respondents answered these questions.

The results in this table are substantially different from the comparable results in the September 2022 edition of the survey. In September, respondents with B2B product companies said their marketing spending had grown 12.78% in the preceding 12 months, and respondents with B2B services companies reported spending growth of 13.78% over that period.

In September, expectations for future spending growth were also very positive. Respondents with B2B product companies expected their marketing to grow by 8.06% in the 12 months following the survey, and B2B services respondents expected spending growth of 15.41%.

***

The March edition of "The CMO Survey" includes data regarding several other topics, and, like earlier editions, it provides a wealth of valuable insights for B2B marketers. In particular, the March survey contains several findings about brand management and brand marketing that I plan to discuss in a future post.

What the 95:5 Rule Means for B2B Marketing

In a 2021 paper published by The B2B Institute, Professor John Dawes, Associate Director at the Ehrenberg-Bass Institute for Marketing Science, described what has come to be called the 95:5 rule. The rule states that up to 95% of business buyers aren't in the market for many goods and services at any one time.

Professor Dawes illustrated the rule with this example:  "Corporations change service providers such as their principal bank or law firm around once every five years on average. That means only 20% of business buyers are 'in the market' [for a new bank or law firm] over the course of an entire year; something like 5% in a quarter - or put another way, 95% aren't in the market [in any given quarter]."

In his paper, Professor Dawes wrote that the percentages used in the rule aren't meant to be interpreted literally, and I discussed some other limitations of the rule in an earlier article. But the rule is accurate in a general sense:  Virtually all B2B companies have far more out-of-market prospects than in-market prospects.

The main focus of Professor Dawes' paper was a discussion of how advertising works given the existence of the 95:5 rule. He wrote, " To grow a brand, you need to advertise to people who aren't in the market now, so that when they do enter the market your brand is one they are familiar with. And, that they mentally associate your brand with the need or buying situation that brought them into the market. That way, you increase buyers' purchase propensity. And if you do that across enough buyers, your market share will grow."

So should B2B marketers follow Professor Dawes' advice and market to potential buyers who aren't in the market? The answer to this question is "yes," and the reason becomes clear when we examine how people make buying decisions.

McKinsey's Consumer Buying Journey Model

A few years ago, McKinsey & Company introduced a new model of the consumer buying journey, which is shown in the following diagram:

Source:  McKinsey & Company

In McKinsey's model, a consumer buying journey begins when an event or condition triggers a perceived need or desire to potentially buy something. When a trigger occurs, most consumers will quickly create a mental list of companies or products they believe are worth considering.

This initial consideration set is based on the mental impressions they have formed from a variety of touchpoints, such as their prior experiences with a company, brand, or product, advertisements, content resources, news reports, and conversations with family, colleagues, and friends.

The next step in the buying journey is an active evaluation process, during which consumers gather information about potential solutions and may add or remove companies, brands, or products from their consideration set. After this evaluation process, consumers select a product or service to buy, or they may decide not to buy anything.

The main point here is that most consumers create their initial consideration set before they begin their formal evaluation process.

Research by McKinsey has shown that being included in a potential buyer's initial consideration set can produce a significant competitive advantage for B2C companies. The firm found that brands in the initial consideration set are more than two times as likely to be purchased as brands that aren't in it.

Does This Apply In B2B?

McKinsey's buying process model focuses on consumer buying decisions, but there are several reasons to think the buying process in B2B is similar. For one thing, most business buyers are generally aware of the major companies or brands offering products or services that are relevant to their jobs. Therefore, when something triggers a perceived need to buy something for their company, many business buyers will find it easy to identify an initial consideration set of potential vendors.

McKinsey's research on the impact of being (or not being) in a potential buyer's initial consideration set was also focused on B2C buying decisions. And while I'm not aware of any directly comparable research in the B2B space, several studies suggest that B2B is similar to B2C

The WSJ Intelligence/B2B International Survey

For example, in a 2021 survey of business decision makers by WSJ Intelligence and B2B International, the researchers divided the B2B customer buying journey into three stages - Pre-Decision, Search, Evaluation and Shortlisting, and Final Decision.

The study defined the Pre-Decision stage as ". . . the time between when they had selected a supplier for the given [product/service] category and when the 'trigger' occurred that prompted them to actively begin searching for and deciding on a new supplier."

This survey contained several questions about a recent purchase decision and asked survey participants to reflect on the vendor that was ultimately selected (the "winning vendor") and on a vendor that was considered but not selected (the "losing vendor").

The findings of this study clearly demonstrate that familiarity and emotional connections that exist at the Pre-Decision stage have a significant impact on purchase decisions. Survey respondents were more than twice as likely (79% vs. 33%) to report they were very familiar with the winning vendor versus the losing vendor before the active buying process began.

The survey results also showed that, at the Pre-Decision stage, respondents had a higher level of trust (57% vs. 37%) and confidence (52% vs. 37%) in the winning vendor than in the losing vendor.

One of the most interesting findings in this research was the small number of potential vendors that were included in the initial consideration set for most potential purchases. Eighty-three percent of the survey respondents said they usually identify only two to four potential vendors at the first stage of their buying process.

Marketing To Out-of-Market Buyers Needs to be Different

If you decide to market to out-of-market prospects, the question then becomes:  What kinds of marketing programs will be most effective with these prospects? The key to answering this question is to understand the vital role that triggers play in the buying process.

A trigger is an event or condition that causes a potential buyer to feel a need or desire to potentially buy something. Most marketing thought leaders agree that a trigger is a necessary catalyst for virtually all B2B buying processes. The important point for marketers to recognize is that marketing messages alone are rarely sufficient to trigger the start of a B2B buying process.

This means that the objectives of marketing programs used with out-of-market buyers should differ from those of programs directed toward in-market buyers.

Mathew Sweezey captured the essence of the difference in The Context Marketing Revolution when he wrote, "Instead of trying to force change as we once did, by trying to get people's attention and make them want something, context marketing harnesses and guides an existing desire, one that springs from the trigger." (Emphasis in original)

The primary objective of B2B marketing programs designed to reach out-of-market buyers should be to build and sustain memory links to your company, brand, or product in the minds of your potential future buyers. Byron Sharp and his colleagues at Ehrenberg-Bass refer to these memory links as mental availability, and I'll be discussing this concept in more detail in a future article.

When you're successful at building and sustaining a high level of mental availability, you have a much better chance of being included in a buyer's initial consideration set when the buyer moves into the market.

Being included in a buyer's initial consideration set is not a guarantee of success, but it sure helps. Remember:  You have to be invited to the party before you can be asked to dance.

Illustration courtesy of Abhijit Bhadurl via Flickr CC.