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Read Professor Moorman’s analysis of key survey results.

Using Marketing Analytics: I Do, Therefore, I Think

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

Which firms are using marketing analytics? B2B-Services companies report the lowest levels (31.4%), followed by B2C-Services (36.9%) and B2B-Product companies (37.2%). B2C-product companies dominate this metric (45.3%). Companies with 10% or more of their sales coming from the internet use marketing analytics to drive 46.3% of their decisions, while companies with less than 10% use marketing analytics only 34% of the time.

There are many potential explanations for this lack of use. First, managers don’t want to know the answers marketing analytics provides. This could be because of their own problem-solving or information-processing style which makes them less open to new information or because they have not been trained how to use analytics. It could also be because their organizations do not have a culture of turning to marketing analytics for answers to important questions. Most importantly, if top managers aren’t using marketing analytics, no one will. Second, marketing analytics doesn’t offer sufficient insights to managers; it tends to confirm what they know. In this case, managers do not believe that marketing analytics offers any value to decision making. I’ll come back to these latter two reasons in subsequent blogs.

Another reason managers may be reporting lower usage levels is that they are discounting an important impact marketing analytics can have on companies—it can change the way managers think. Let me explain. There are three ways managers use any type of marketing intelligence, including marketing analytics—instrumental use, conceptual use, and evaluative use. Instrumental use means that marketing analytics is used to develop or implement strategy. Conceptual use means that marketing analytics affects managers’ beliefs, knowledge or the mind-sets they bring to their work. Evaluative use means that marketing analytics is used to evaluate marketing actions.

Unfortunately, companies tend to spend most of their marketing analytic investments on evaluation. How did we do? How was our ROI? Instrumental use is often next in line with analytics focused on strategy execution rather than strategy design. The effect of marketing analytics on how managers think, the conceptual use, is perhaps the most profound influence, but it is also harder to measure and therefore often overlooked when reporting usage levels. For example, if analytics examines the effect of marketing on customer-focused metrics, such as NPS or loyalty, instead of sales or ROI, managers should, over time, think more carefully about the impact of their strategies on these types of customer metrics. This subtle effect will likely produce stronger performance but the role of marketing analytics in creating this effect will be hard to discern. Conceptual impacts can also be longer run. For example, if marketing analytics shows how a specific marketing action was affected by a competitor’s counterstrategy, managers may, over the long-run, begin to think about planning their strategies to withstand these effects. If marketing analytics shows that marketing actions have huge effects on how quickly consumers progress through intermediate stages of the funnel and not just on final purchase, this will change managers’ beliefs about the value of marketing investments. Studies I have done examining these types of usage activities demonstrate that conceptual use is where all the action is for key strategic outcomes, such as level, speed, and financial performance of firm innovation.

Key takeaways are, first, the usage of marketing analytics is too low. Professors should be teaching how improve this and managers should be reaching for marketing analytics when they are available. However, second, don’t overlook the softer effects that marketing analytics can have on your business. Yes, sure, marketing analytics evaluates marketing performance and helps make marketing decisions. Marketing analytics’ bigger contribution is how it changes the way managers conceptualize their worlds and the marketing actions that can transform them.