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.
March 6th, 2014
Marketing budgets are rebounding. They are expected to increase 6.7% in the next twelve months according to the February 2014 edition of The CMO Survey. This is a sizable increase over projected increases of 4.3% in August 2013 and a massive boost over the 0.5% increase reported in February 2009. Bounce!
To put these figures in perspective, The CMO Survey reports that marketing budgets represent approximately 10.9% of overall firm budgets. These figures have hovered around this average since this question was first asked in February 2011. On the other hand, marketing budgets as a percent of firm revenues improved to 9.3% from 7.9% in 2013 indicating that marketing budget growth outpaced revenue growth. One question that survey users often ask about these figures is whether or not they include salaries for marketing employees. Analysis indicates that these marketing spend estimates include both employee and non-employee investments in marketing.
I examined all three marketing spending metrics across several firm and industry characteristics. These are summarized in Tables 1-3. As shown in Table 1 across these three indicators, B2C-Product companies have the largest marketing budgets (as a percent of budgets and revenues) and the largest expected growth in marketing budgets across the four economic sectors. I expected a large increase over the B2B companies which may be reaching customers with their own or their channel’s salesforce. However, I did not expect to find B2C-Product companies also dominating B2C-Service companies by 20-30% differences. Would love to hear from marketing leaders in this sector about this differential.
February 24th, 2014
This post was co-authored with Evgenia Barkanova, Irina Kudryashova, and Irina Melnik, all MBA students at the Fuqua School of Business, Duke University.
Winston Churchill said, “Russia is a riddle wrapped in a mystery inside an enigma.” This becomes clear when thinking about U.S. companies marketing in Russia (more properly called the Russian Federation). Results from the last CMO Survey indicate that Russia is the international market with the highest sales growth rate. Sales are reported to have grown an average of 57% for U.S. companies that designate Russia as their largest international market. This compares with India at 38%, China at 26%, and Brazil with 19% growth.
Where is the enigma inside the Russian marketing mystery? Consider these facts. Russian is the world’s 6th largest economy. A member of G8 and G20, identified among the BRIC economies, and a recent entrant to the WTO, Russia is an emerging economic powerhouse. Strong earnings from the oil/natural gas industry have grown the overall economy and allowed the country to diversify its economy while retaining an above average GDP growth rate of 4.1 % from 2010-2012 according to the World Bank (compared to 2.4% for the USA). Even with these impressive credentials, Russia remains a difficult market for many foreign companies for a variety of reasons. What should U.S. marketers know about this Russian riddle? We collected the following case studies involving non-Russian and Russian companies as well as several interesting facts to offer these insights.
1. Sochi 2014: All eyes on Russia: The 2014 Winter Olympics in the Black Sea resort of Sochi promise a wealth of opportunities for foreign firms and investors. An estimated $50 billion will be spent on more than 40 transport, housing, stadiums, and other modernization projects along with upgrades in telecom, energy, and environmental protection to convert Sochi into a winter sports wonderland. Participating in this important international event could help non-Russian firms make inroads for future projects. Official sponsorships as well as using the Olympics for independent marketing events that piggyback on individual events and athletes could help build brand awareness among Russian customers. One threat is that the games may not go off as well as sponsors hope. The opening ceremony glitch with the Olympic rings is well-known by now and public perception of the games is so bad that @SochiProblems has already racked up ten times the followers compared to @2014Sochi—the official Twitter account for the games. The Olympic experience may serve as a metaphor for doing business in Russia … full of opportunities, but one is wise to prepare for more than the usual amount of the unexpected.
February 19th, 2014
Results from the February 2014 edition of The CMO Survey, a biannual survey of marketing leaders, offer strong evidence that markets are on solid footing. CMO optimism for the U.S. economy reached its highest point in five years. Asked to rate their optimism about the overall economy on a 0-100 scale where 100 is most optimistic, CMOs reported an average score of 66.1 which is nearly 20 points higher than a low score of 47.7 in February 2009 (see Figure 1). This optimism occurred across all sectors, ranging from manufacturing to biotech and consumer packaged goods.
Figure 1. How optimistic are you about the overall U.S. economy on a 0-100 scale with 0 being the least optimistic and 100 the most optimistic?
Underlying this optimism are improvements in key customer metrics such as increased entry of new customers into the market, increased customer acquisition, increased purchase volume, and increased customer retention. These top marketers also predict that customers’ top priority over the next twelve months will be a focus on product quality, not on low price. This shift indicates a belief that consumers are ready to spend again and are less interested in cost savings.
November 21st, 2013
Two-thirds of all top marketers feel pressure from their CEO or Board to prove the value of marketing according to August 2013 results from The CMO Survey. Of those, 60% describe that pressure as increasing. These numbers are consistent with the fact that most CMOs continue to find proving the value of marketing elusive. Survey results indicate that only 36% of top marketers report being able to prove the value of marketing quantitatively in the short-run and 31% in the long-run. Demonstrations of the value of social media are even more elusive with only 15% able to offer quantitative evidence for the value of social media spending.
A key question that needs to be asked is whether pressure on CMOs to prove the value of marketing helps or hurts company performance. These are reasonably good arguments on both sides. On the positive side, increasing pressure might make marketers work harder. On the negative side, increasing pressure could make marketers focus on strategies that are easily measured or that only provide short-term boosts so that proof is in hand when the CEO or board comes knocking. This means that instead of designing and selecting strategies that are optimal for company goals, strategies are selected to help marketers defend their spending decisions.
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.