This post was co-authored with Shiwani Kumar and Sylvia Yang, both MBA students at the Fuqua School of Business, Duke University.
Marketing analytics involves the creation and use of quantitative data to derive consumer insights and make decisions. It is often heralded as a critical resource necessary for effective marketing. So it is no surprise that marketing analytics continues to grow as a percentage of overall marketing budgets, with investments expected to nearly double over the next three years even after years of similar increases (Figure 1). However, returns from those investments are less clear: survey respondents’ view on the degree to which marketing analytics contributes to firm performance has stayed average and flat since it was first examined by The CMO Survey in 2012 (Figure 2). We interviewed experts in the area to better understand the challenges and the strategies that improve a firm’s return on marketing analytics. This is what we found.
Figure 1. Percent of marketing budget spent on marketing analytics (February 2016)
1. Don’t build a fun facts factory.
Marketing analytics should resolve key questions—not produce a collection of fun facts. To this end, it is important for marketing leaders to begin with the questions in mind and build the analytics strategies to answer them. That is how the insights produced from analytics investments find their way into plans, strategies, and decisions. At any given time, marketing leaders should be able to look at their analytics output and know for what purpose it was designed. Of course, when analyzing data, new insights can be uncovered, but this is a bonus from the process, not the main objective.
2. Nest analytics into marketing decisions.
Using marketing analytics shouldn’t be a choice. It needs to be embedded into the marketing decision making process. For this to happen, capabilities need to be designed that point marketing executives to the right data at the right time. As analytics-informed decisions are realized, usage will shift from occasional to habitual. Jeff Simpson, Principal at Deloitte Consulting LLP noted, “Once analytics becomes embedded into the fabric of the business, companies will never be able to live without it.”
3. Crawl, walk, and then run to better analytics.
For analytics to make a true impact, companies must build strong foundations of trust so that bigger leaps of faith can be taken. Baby steps to build data with integrity allows organizations to trust information about the past. Basic descriptive analyses give companies a clearer view into the factors driving the present and lay the foundation for planning the future. The ideal end-state is to develop advanced analytics such as predictive algorithms that contribute to the choice of strategies and tactics to achieve desired outcomes. “You have to be able to crawl before you walk before you run” said Pete Weir, Director at Red Ventures.
4. Manage analytics for a multidimensional view of the customer.
The brass ring in marketing analytics is a 360 degree view of the customer that is rich in insight and packed with growth opportunities. Getting to this view requires knocking down silos between marketing, operations, and sales data that contain glimpses of the customer at different stages of the purchase journey. It also means knitting together complex databases filled with results from experiments, unstructured observations and interviews, and surveys. When analytics draws from a wide range of customer data points, the insights produced offer companies the strongest path to excellent marketing strategies.
Figure 2. To what degree does the use of marketing analytics contribute to your company’s performance? (1 = Not at all, 7 = Very highly)
5. Build a marketing analytics culture.
Integrating analytics into decision-making requires new investments, behaviors, mind-sets, capabilities, employees, and groups. The seeds for the successful adoption of analytics must be planted deep within the company’s culture and people. Like many innovations diffused through the company, analytics can be a disrupter and not enthusiastically accepted by everyone. In particular, top managers need to buy in and nurture champions across the organization. These champions are part teacher, cheerleader, and counselor. They model the right behaviors, create strong processes, and problem solve when the company hits inevitable hurdles in the analytics journey.
6. Develop and hire talent that appreciates the art and science of marketing analytics.
Marketing analytics operates at the intersection of analytical thinking and creativity. The output from statistical models is not useful until it is translated into action steps. Talent that can blend the science and art of analytics is one of the most sought after skillsets and hardest combinations to find. The CMO Survey reports that only 3.4% of marketing leaders believe they have the right talent to fully leverage marketing analytics and 65% of them report a challenge finding marketing analytics talent (August 2014). Given this, the ability to develop and retain employees with both skills—those who can bridge between raw data and pure creativity—will likely determine how much a company can get from its analytics investments.
7. Organize marketing analytics to fit your organizational structure.
If marketing analytics is to become part of the decision making process, its operating model should mirror the way decisions are made within a company. For example, if marketing decisions are made by brand, dedicating analytics resources to each brand manager makes sense. On the other hand, if a centralized marketing function makes key decisions, housing analytics resources in separate product lines may prove redundant and a single analytics center of excellence would fit the company structure better. There is no “one size fits all” best practice for an analytics operating model.
8. Direct marketing analytics to new opportunities.
Analytics can get caught in an “exploitation cycle” where the focus is on helping the firm perform better on current strategies. This is important. However, companies also need to figure out how to use marketing analytics to create new growth for their companies, including new markets, new products and services, new marketing strategies, and new business models. This requires predictive analytics, data mining, and the use of text, numerical, and pictorial data. These multiple forms of data offer pathways to the possible futures for the firm.
9. Invest in “time to knowledge.”
The fast-paced, dynamic nature of consumer data requires acting quickly on insights. This is a concept that Jim Figura, former vice president of global customer insights at Colgate-Palmolive, and I have been talking about for years. For many companies, the issue is not running the right analytics, but the amount of time it takes to convert data and information into actionable knowledge and insights. Therefore, it may be worth investing in improving time to knowledge given that competitive advantage often lies in how fast a company can act on marketing analytics.
10. Know when to measure and when to act.
Analytics allows the firm to measure and evaluate its actions. This precision is a key reason analytics drives better marketing. However, not all decisions require a high level of precision. Further, precision takes time and opportunities may require acting without this high level of certainty. As Will Sargisson, Director at Citi Cards told us, “Determining ROI requires a balancing act between wanting to measure everything and missing out on potential opportunities.” Finally, companies should be careful not to turn analytics into a false idol that mandates stringent accuracy requirements. There are times when accuracy is not possible or getting it requires too much time. In this case, managers should be use the data they have to make their best decisions.