In an era where customer behavior in offline channels can be seen: Finding new winning strategies by utilizing data

This article was published in the June 2022 issue of the monthly magazine "Sendenkaigi."

Until a few years ago, it was difficult to visualize customer behavior in offline channels, but with the spread of payment platforms, the granularity of data that companies can use for marketing has increased dramatically.

How can we use data to optimize our overall advertising investment, including offline advertising?

The discussion was held between Hirofumi Fujii of PayPay, who also acts as an advertiser and provides marketing support services to companies, and Takuya Furukawa of XICA, which supports optimization through the use of data at each phase from promotion design to execution.

The business phase is moving to the next stage and cost-effectiveness is becoming more critical

-Please tell us about PayPay's latest advertising policies and strategies.

Fujii: Three and a half years have passed since the launch of PayPay, and the number of users has exceeded 3 million, the number of participating stores has expanded, and the platform has become a payment platform of a certain scale. The company's business revenue has also gone through a period of expansion, and we are now at a turning point where we are moving towards a return on investment, so in terms of marketing, we are shifting to a strategy that can measure the effectiveness of measures while looking more closely at the cost-effectiveness aspect.

For existing customers, naturally, an approach through owned channels is effective, and by collaborating with affiliated stores, communication is also possible offline, such as at stores. On the other hand, when it comes to developing new customers, an approach that is mindful of segments is necessary. The current number of users, 4700 million, accounts for roughly half of Japan's smartphone users. In order to approach the remaining people, the same methods as before will no longer work.

I spoke to a global payment platform provider, and they told me that when they doubled their users, they divided them into smaller segments and steadily built up each approach to achieve this. We also plan to take more steady steps from here on out.

The more we subdivide segments and consider individual approaches, the more resources we will need. We are currently exploring ways to automate and streamline this process.

Furukawa: One of our clients, a company that boasts the top domestic market share, often speaks to a company that is facing challenges in acquiring new customers that are different from those faced during the initial vertical start-up period.

That's why we often suggest analyzing data from various marketing initiatives to uncover connections between previously unseen data and discover new things that can emerge from them. We believe that data is not only useful for understanding the effectiveness of advertising investments, but also serves as an important key to generating new marketing hypotheses.

Fujii: Our company's data utilization is currently in the trial and error stage, and we are gradually making improvements. However, we would like to introduce more MMM analysis and visualize the contribution of marketing measures and promotions, but with the business environment changing rapidly, the number of variables required for analysis is increasing rapidly, and we are facing the challenge of not being able to keep up with the analysis.

In particular, our biggest challenge right now is measuring the effectiveness of TV commercials. We are taking a relatively primitive approach here, creating areas where commercials are aired and areas where they are not, and analyzing how much difference there is in effectiveness. At present, we believe this is the most easily understood and effective method.

Clear rationale and winning patterns required for creativity

- In addition to planning, creativity is also an important element, but how do you use data to develop and improve it?

Fujii: We conduct follow-up surveys with the advertising agency, break down the creative into its elements, and steadily visualize what was communicated to consumers and how. Just like the regional differences mentioned earlier, we air commercials with slightly different creatives using a similar framework, and analyze the differences in effectiveness.

Furukawa: The method of understanding the effect from the difference in creative is practiced by many companies because it is easy to understand when it comes to gaining internal consensus. In order to create creatives more strategically, our company is working on analyzing the causal relationship between creatives and elements, such as elements that lead to increased awareness and elements that increase favorability.

We measure reactions while watching videos by wearing brainwave sensors, and simultaneously conduct questionnaire surveys. By combining and analyzing these data, we are able to identify and create creative elements that will most likely produce the desired results.

Fujii: It's true that we have one winning formula in place, and we're getting results by fine-tuning it and using it to our advantage. However, as a comprehensive Fintech player rather than a payment platform, we need to think of new creative axes to move forward to the next phase.

New data business makes offline purchases visible

-PayPay is an advertiser that implements marketing strategies, but it also acts as a player that provides data that contributes to companies' marketing activities.

Fujii: As regulations on third-party cookies become stricter, the importance of first-party data is increasing. Companies that do business online are likely to be managing their own data, but for manufacturers that sell products offline, it is still difficult to organize such data.

In order to contribute to solving these issues, we are working on creating a new scheme together with our affiliated stores and group companies such as Yahoo and LINE. We don't have a concrete solution yet, but for example, if we could act as a hub and connect multiple affiliated stores, we could visualize the number and frequency of product purchases, which are difficult to grasp offline. This would enable us to provide new value to loyal users even offline, so we would like to make such a world a reality.

- Mr. Furukawa, please tell us about your future prospects.

Furukawa: We have been a data analysis company for 10 years now. We have accumulated knowledge and know-how through data analysis of various companies, so we believe we can provide optimal measures and strategies for each business phase and purpose.

I think advertisers are probably aiming to achieve data-driven marketing right now. As Fujii mentioned at the beginning, the more you subdivide segments and get closer to one-to-one communication, the more resources you need, which is a dilemma. I feel that it is necessary for partner companies like us to support these areas. Currently, we are strengthening our human resources, such as analysts and customer success, and we would like to expand this system.