August 17th, 2016
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 business 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.
September 4th, 2013
Companies are spending big dollars on big data. Approximately 5.5% of marketing budgets currently are spent on marketing analytics and this is expected to increase to 8.7% in the next three years as reported in The CMO Survey. Expectations are running high and many companies are trying to figure out how to crack the code to generate good strategic insight from the data.
I’m in favor of the trend to capture and use data to drive decisions. However, that is where the problem lies. As the stash of data grows, companies are using a smaller percentage of it. I first asked the question, “In what percent of projects does your company use available or requested marketing analytics before a decision made” in February 2012 and the result was 37%, which I thought was the bottom. However, when asked that same question in August 2013, the percentage dropped to 29%. Figure 1 shows the continuous decline over the last 18 months.
Figure 1. Percent of Projects Using Requested or Available Marketing Analytics
This finding is not completely unexpected, however. Reviewing the thirty-year history of research on this topic, usage rates have always been low for many types of marketing information—marketing research, advertising research, and, now, social media research. This marketing analytics utilization gap is a challenge to big data’s contribution to the bottom line.
March 19th, 2013
Big data’s the buzz. It’s in the press, all over the web… heck, it even has its own hashtag– #bigdata. CMOs recently reported that the percent of their companies’ marketing budgets devoted to big data will increase from 6% to 10% over the next three years. Multiply this 66% increase across all of the other areas Big Data is showing up in companies (e.g., supply chain management) and you have a sizable strategic expenditure. The bigger the company, the larger this increase. In data collected from The CMO Survey, companies with sales revenue of $10B or more will spend 13.7% of marketing budgets on marketing analytics in three years while companies with sales revenue of $25M or less will spend 9.2%.
Despite this big spend, there are reasons to worry that Big Data is not delivering its full strategic wallop. When asked to report the percentage of projects in which their companies use marketing analytics that are available and/or requested, CMOs report a dismal 30% usage rate. This number has decreased from 37% a year ago. So while companies are spending more on Big Data, less of it is being used. (more…)
May 25th, 2012
“What gets measured, gets managed” is a well-known management maxim. However, for marketing analytics, results from The CMO Survey suggest a slight twist on this adage to “what gets evaluated, gets used” (see cmosurvey.org/results/ for a complete set of reports).
To look into this topic, I asked top marketers two questions. The first was “In what percent of your projects does your company use available or requested market analytics* before a decision is made?” The average score was 37.2% of the time. The more important point is that 62.8% of the time managers are not using marketing analytics that are available or that have been requested!
To understand how the use of marketing analytics is related to the quality of marketing analytics, we could ask managers to rate the quality of marketing analytics and examine whether this is correlated with use of marketing analytics. However, if most managers are not using marketing analytics, measuring quality impressions is problematic—specifically, we would only be examining users of marketing analytics, which is not a representative view of what all potential users think about the quality of marketing analytics.
Given this, I took a different approach and asked top marketers to answer a second question, “Does your company formally evaluate the quality of marketing analytics?” 67% of top marketers answered “no.” To examine the relationship between the evaluation and use of marketing analytics, I calculated the mean marketing analytics’ usage level for companies that do and do not evaluate marketing analytics. As shown in the Figure 1, this difference is substantial, with marketing analytics used only 32% of time in companies that do not evaluate marketing analytics and rising to 49% of the time in companies that do evaluate marketing analytics. This difference is also statistically significant. There is no way, of course, to determine the causality of these two indicators—greater use is likely to affect the propensity to evaluate marketing analytics and greater evaluation of marketing analytics is likely to improve its use. Regardless, what gets evaluated, gets used.
May 19th, 2012
I recently reported that The CMO Survey found companies expect to increase the marketing analytics portion of their marketing budgets by 60% from 5.7% to 9.1% in the next three years. This is a monumental increase especially given that marketing budgets overall have grown only 8.3% over the last two years. While impressive, the true mark of whether marketing analytics is going live up to its expected role as a critical strategic asset cannot be measured by spending. Instead, we have to consider how marketing analytics affects what managers do and think and how well they perform.
To gauge this impact, the February 2012 CMO Survey asked top marketers to answer this question: “In what percent of your projects does your company use available or requested market analytics before a decision is made?” The average score was 37.2% (95% confidence interval: 31.5%-43%). This means that 62.8% of the time, managers are not using marketing analytics! By this measure, marketing analytics must do more. If not, its funders will place bets on other strategic weapons they believe will allow the company to serve customers better and to pull ahead of competitors.
Company Use of Marketing Analytics in Decision Making