Pedro Laboy Page 4

08 Jul

A Data-Driven Approach to Doing More with Less

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By Pedro Laboy
Comment

In today’s highly competitive landscape, marketers are under pressure to do more with less and make every dollar count. As demand for accountability increases, marketing programs built solely on beautiful creative or humor are unlikely to make it pass the drawing board. CEOs and CFOs are asking marketers to implement programs based on demonstrable ROI models—however, this can only be achieved by leveraging technology and mining data in order to understand and predict purchase behavior.

Contrary to common belief, an ROI driven approach to marketing is no longer a strategy exclusive to large organizations with deep pockets. Increasingly, marketers at smaller companies are overcoming their fear of numbers and technology in order to follow a metrics approach to customer acquisition. This has been made possible by advances in technology and an array of low cost—and sometimes free—data collecting and mining tools.

Making marketing more effective and efficient requires more than simply collecting more data or purchasing data mining software. Having the right mindset and knowing what to do with the data collected are just as important. Marketers should adhere to the following strategies as they shift their marketing approach from one that speaks to a broad market to one that engages, acquires, and retains profitable customers.

Defining success

The cornerstone of a solid ROI-driven marketing strategy is a clearly defined set of goals or measures of success.

• Organizational alignment—Key players in sales, marketing, finance, IT, and HR should be aligned behind a common definition of success and a set of business goals. Goals must be specific, measurable, achievable, realistic, and time-bound (S.M.A.R.T.).

• Strategic alignment—All marketing tactics should support specific strategies and all strategies should drive defined business goals.

• Measurement—Define a starting point by benchmarking business goals. Establish milestones to ensure that strategies are on track, and progress is being made towards achieving the desired outcome.

Closing the loop

It is essential for companies to establish a measurable link between marketing initiatives and financial results.

• Targeting—Marketers should start by combining marketing strategies with data-gathering and analysis techniques to develop highly targeted campaigns based on customer insights and behavior.

• Close the funnel—Campaign results should then be tied to demand generation, sales conversion, and brand experience. This closed-loop funnel system creates a common view of the demand-to-sale-to-experience continuum across marketing, sales, and customers.

• Optimize—Closed-loop marketing allows companies to innovate value propositions and fine-tune marketing initiatives in order to continuously and efficiently acquire and retain valuable customers.

Collecting the data

Before companies start collecting data they should determine what, where, and how products are being sold, and who is buying them. Data gathering can be a daunting task. But costs and effort can be kept to a minimum, if companies follow a systematic and targeted approach.

• Profiling—Start by developing profiles that paint a demographic, geographic, psychographic, and behavioral picture for each customer—and assigns a monetary value to him or her. If individual profiles are not possible, break down your segmentation into as many groups as is feasible.

• Secondary data sources—Secondary data and information can be obtained through government reports, academic research, data brokers, and libraries.

• Primary data sources—Primary data and information can be obtained through interviews, focus groups, surveys, and customer transaction data.

• Become data-driven—From the Web all the way to the cash register, every customer point-of-touch should have a data collection component.

Eliciting a response

Companies should shun marketing strategies that rely solely on mass advertising. Rather, they should embrace a customer- and data-centric marketing approach that delivers the right value proposition, to the right customer, and at the right time.

• Call-to-action—If possible, all marketing initiatives should include a call-to-action that directs customers to purchase, visit a Web site, call a toll-free number, or otherwise interact with a brand’s many points of touch.

• Marketing mix—Call-to-action messaging combined with tracking technologies allows companies to determine which marketing initiatives are most effective in delivering the desired results—and thus, allocate resources accordingly.

Developing actionable insights

Mountains of data alone cannot guarantee business success. Often, those who “own” the data within an organization are either unable or unwilling to share and mine the data. Data collected must be mined and synthesized, in a timely manner, into relevant actionable insights. These insights should be put in the hands of decision-makers across the organization. Information should be grouped into four categories: customer, brand, effectiveness, and efficiency.

• Customer—Data collected should be used to determine which customers present the highest lifetime monetary value. Insights should be developed to identify how to best acquire and retain these customers.

• Brand—It is essential for a brand equity index to include measures that go beyond brand associations. Understanding how employees embody the brand is as important. Also, an effort should be made to quantify the impact of brand assets, such as patents or proprietary processes.

• Efficiency—Data and analytics should be leveraged to help companies stretch their marketing dollars. A key measure of efficiency is cost-per-acquisition (CPA). Marketers should track CPA and related metrics to ensure that the return marketing investment is maximized.

• Effectiveness—Just because a program is low-cost and efficient does not mean that it is effective. Metrics such as click-through rates and impressions are meaningless unless they can be linked to specific business goals. Rather, marketers should focus on measures that show that effective initiatives are resulting in growing sales and building long-term financial value.

Choosing the tools

Data-centric marketing strategies do not necessarily require heavy investments in hardware or software. Today, the right set of tools exists for companies both large and small.

• Database—Volume and scale allow larger companies to purchase enterprise-level databases and customer relationship management (CRM) systems from IBM and Oracle. Smaller companies can rely on relatively inexpensive, simpler tools. They can start by creating a database using Microsoft Access or MySQL, for instance.

• Lead management—For basic lead management, a product from Act! might suffice. Mid-size companies might choose to move one step up and purchase one of the many products offered by Salesforce.com.

• Web metrics—For most companies, Google Analytics is all they need to track and analyze Web traffic. There are a number of more advanced Web analytics tools in the market, with Omniture being the most dominant.

• Ad serving— Given the complexity and scope of ad placements made by large companies, they are likely to continue to rely on media agencies to handle ad planning and placement. Smaller companies can rely on a variety of tools to place and manage their media assets. Google’s Adword allows companies to place and manage both print and online media. A service from Spotrunner provides thousands of customizable TV ads, which can be bought and placed at a fraction of the price charged by advertising agencies.

• Data mining—For consumer companies with millions of customers, mining data collected might require advanced analytics tools such as SAS or MatLab—but these are fairly expensive and require special training and programming skills. Open-source business intelligence tools such as Pentaho provide a low-cost alternative, but require advanced programming skills. For companies with a small database, Microsoft Excel might be all they need. A popular alternative would be to outsource the data mining overseas.

As you can see, company size and budgets are no longer a roadblock to implementing data-centric customer engagement strategies. Start small, and scale up as business growth justifies larger investments in data systems and analytics. Remember, though, that being data-centric is not about implementing systems or tools; being data-centric is a mindset and business philosophy that marketers at all levels should embrace.

05 Jun

The Eight Major Hurdles to Marketing Measurement

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By Pedro Laboy
Comment

Whether you are trying to determine customer lifetime value or put in place a media mix model, marketing measurement can often be a complex and daunting task.  There are, however, some steps marketers can take to improve the efficiency and effectiveness of their marketing metrics programs

Alignment – In my experience, this is one of the biggest challenges to putting in place an effective measured approach to marketing. That is, lack of alignment behind the need to weave metrics into marketing initiatives. Furthermore, lack of alignment among key departments—finance, technology, sales and marketing—on how measurement initiatives should be deployed and who is responsible for what.

Defining Success – How do we define success? What are the right benchmarks? Should we look at short-term gains in sales or an increase in customer lifetime value? Do we confuse efficiency with effectiveness, and vise-versa? In our industry, talk of ROI or ROMI is ubiquitous. However, marketers manipulate and redefining this term to demonstrate success where none exists.

Data – Data gathering can undoubtedly be a daunting task—tracking codes, DNIs, unique 800 numbers, surveys, POS results, etc. Even if there is a mechanism is place to gather both customer and marketing data, there must be a sufficient sample and enough observations. Furthermore, in order to draw actionable insights, data must be collected, cleansed and mined in a timely manner.

Technology – Even if the will to embrace metrics is there, must companies are constrained by their technology infrastructure. This is specially the case for SMBs. Technology consulting, as it relates to marketing measurement, could be one of the services offered by the new agency.

Attribution – This is a challenge that we faced when working with Dell and other companies. Today’s multi-channel marketing initiatives can be fairly complex—often reaching consumers simultaneously through many points-of-touch. How exactly do we know which ad pushed a consumer from consideration to purchase? We used a variety of methods to deal with the problem of attribution: from the often overused fairness approach to the last touch-point approach to developing RFM models that helped weight results.

Lag – Arguably, most marketing vehicles have a short-term effect. However, there is a residual value that should be taken into account. Often consumers get sold on products and services through long-term brand building initiatives that can be hard to track and measure. How do we account for this lag? As challenging as it may be, it cannot be ignored. Metrics strategies must include long-term equity building initiatives into ROI models.

Methodology – Marketers tend to apply simplistic models to complex measurement challenges. Statistical methods will vary depending on goals defined and data available. For example, media mix models will often involve some type of multivariate regression analysis—linear or logistic. These multivariate analysis should look at a number of dependent and independent variables. For instance, for certain initiatives it might make sense to go beyond the obvious  look at the weather or search engine volume or the consumer confidence index. Furthermore, cost of creative production should be included in these models–but often is not. Ultimately, methodologies used are a factor of data available and measurement goals.

Staff – In my experience, the staff needed to provide marketing metrics services to clients cannot have a background on data analytics alone. It is important to also hire staff with an in-depth understanding of how business models work (i.e. MBAs, etc). Furthermore, it is important for staff to be familiar with account planning techniques as well as advertising models.

22 May

Notebook Thoughts: Marketing and the DCF Trap

In
By Pedro Laboy
Comment

The need for publicly traded companies to deliver quarterly results—and therefore take mostly a short-term view to marketing investment—often leads to them falling into a discounted cash-flow trap. That is, the believe that cutting marketing investment will not affect projected cash inflows. In fact, the opposite is true. The more they cut the lower the future cash-flow. The leads to them cutting even further; falling into cash-flow trap that spirals out of control.

17 Feb

New Data Rules for ISPs: How the FCC’s Ruling Will Change the Data Market—and Marketing

In
By Pedro Laboy
Comment

Data has become the lifeblood of advertising.

In the hectic global marketplace, it provides the insight and context to deliver individualized content that stands out from the crowd; messaging that is personal, meaningful, precise, and germane.

Conversely, it also enables the big picture; a view of trends, markets, wants, and needs.

With the right data and analytics, marketers can see both the forest and the trees.

Data-driven marketing is either embedded or strategic for 78% of today’s marketers1. And 64% of marketing executives “strongly agree” that data-driven marketing is crucial to success in a hypercompetitive global economy2.

All of that online data isn’t just sitting there. It’s aggregated, shared, sold, and traded by Internet service providers (ISPs), data brokers, and edge providers. Most commonly, they collect information about user’s operating system, the URLs they visit, the search terms they use, what they post about on social media, and the items they look at and purchase.

Location and loyalty card, mobile, and Wi-Fi use are also often tracked, and data brokers may additionally compile data on consumer’s age, race, address, occupation, education level, hobbies, vehicles owned, marital status, and the age and gender of children in the household.

It’s this deep, rich pool of consumer data that makes omni-channel digital advertising possible. Using analytics programs like Hadoop, which ingest and process large amounts of raw data, marketers can develop a deep understanding of their audience, and create consumer-centric, interest- and location-based advertising. The more consumer data a company has to work with—and the more sophisticated the analytics used—the more customized and relevant the messaging becomes.

This value exchange—the trading of data for rich customer experiences—between brand and consumer has long been a fundamental of modern marketing. In the digital world, it’s what empowers brands to deliver the true value prop of advertising: the right ad, to the right person, at the right time, in the right place.

The exchange rate may be changing, however, as consumer concerns about privacy spur new regulations.

Privacy and regulation (or lack of)

While the European Union has a unified data protection law, the Data Protection Directive, the United States follows a “sectoral” approach to data protection legislation. That means the collection and use of personal data is constrained by a combination of legislation, regulation, and industry self-regulation. Federal and state legislation is typically adopted on an ad hoc basis, as circumstances require.

Most recently, privacy advocates have been advocating for stricter regulation around the amount and quality of data that can be seen and collected by ISPs, such as Verizon, AT&T, Optimum, and Comcast.

ISPs do have a unique window into user behavior. Every page request and every email sent travels through ISP routers. Also, when users visit an unencrypted website, the ISP can see both the full site URL and the content of each page. Internet of Things (IoT) devices also often transmit unencrypted data which can be collected and aggregated.

However, more than half of all web traffic is now secured and invisible to ISPs, and by the end of 2016, the percentage is expected to climb to 70%. The majority of email is also encrypted, as are Skype communications4.

Additionally, as pointed out in Advertising Age5, online data is used in bulk, by automated marketing systems. It’s not scrutinized, line-by-line, by people. It’s strictly utilized to better target groups of consumers online, not single out individuals in the physical world.

Nonetheless, as hacking and data breaches become more frequent, and sales of smart devices, like connected thermostats and refrigerators, continue to grow, concerns about data privacy also increase.

The new FCC privacy ruling

On October 20, 2016, the Federal Communications Commission (FCC) delivered a landmark ruling that severely limits ISPs’ ability to use or sell customer data for marketing purposes.

Under the new rule, which takes effect in late 2017, ISPs are required to obtain explicit consent from customers before using, selling, or trading what the FCC defines as “sensitive” data. They must also provide “clear, conspicuous and persistent notice about the information they collect, how it may be used and with whom it may be shared. 6”

That means customer opt-in will be required for ISPs to use or share:
* Social Security numbers
* Precise geo-location
* Information about children, health, and finances
* App usage and web browser history
* Content of any online communication, including emails

ISPs will still be able to use and share “non-sensitive” data, such as email address, service-tier, IP address, and bandwidth use, unless the customer opts out.

Though ISPs are far from the only players in the targeted-ad industry, they are the only ones affected by the new ruling. Search engines, web publishers, social networks, and other “edge providers” are not affected, as they are governed by the Federal Trade Commission, not the FCC.

On an apples-to-apples basis, the new privacy regulation on ISPs are more stringent than those imposed on edge providers like Google, Facebook, Amazon, and Netflix, who also have broad access to user data. The disparity is a result of the FCC’s classification of broadband providers as Title II-regulated communications public utilities, like the phone companies of yesteryear. Consumers can choose whether or not they go on Facebook or use Google, contends chairman of the FCC Tom Wheeler, but wherever they go, they require an ISP to get there.

Advantages, fair and unfair
Many in the advertising industry, as well as the ISPs themselves, feel that the ruling gives unfair advantage to Google, Apple, and Amazon, even as those companies encroach into the ISP’s TV and internet space, with products like Chromecast, Apple TV, and Fire Stick.

And online advertising is already dominated by Google and Facebook which, together, claimed the lion’s share (64%) of the $59.6 billion online advertising revenue in 20157. ISPs are, in fact, relative neophytes in the digital marketplace, holding none of the industry’s top 10 places.

ISPs are already held to an industry code that enables users to opt out of targeted ads based on their web-surfing behavior. And the advertising industry’s self-regulatory code requires companies to seek opt-in consent from consumers before using sensitive data, including geolocation, healthcare, and financial data.

Interestingly, there are no federal privacy laws governing data brokers, such as Acxiom and Intelius, though they collect, sell, share, and trade a wide range of personal data—including family status, Social Security numbers, financial and health information, and web browsing and app history. (Unless the data broker itself uses the information to make eligibility decisions, in which case Fair Credit Reporting Act [FCRA] obligations apply.)  

And, unlike ISPs, edge providers, and the advertising industry, data brokers have no self-regulation and often provide no means for consumers to opt out or limit how their personal information is collected, shared, sold, or published.

Ripple effects of the ruling

While consumers will have the option to opt in and allow their data to be shared, there is concern among the ISPs—and the third parties who rely on their data—that most will not.

It is a valid concern. The FCC ruling will most likely impact the quantity and quality of available consumer data. And 54% of companies already say that their biggest challenge to data-driven marketing success is the lack of data quality and completeness.1

That could lead to higher advertising costs, as marketers either become first-party data collectors themselves or seek out new sources. There will also be increased investments in technology that will help to optimize data value.

On the consumer side, the legislation gives only fragmented protection. According to Ajit Pai, an FCC commissioner who voted against it: “Nothing in these rules will stop edge-providers from harvesting and monetizing your data, whether it’s the websites you visit or the YouTube videos you watch or the e-mails you send.”

Consumers are also likely to see an increase in broadband rates, as the ISPs attempt to make up for lost income. At the same time, online advertising quality is likely to go down overall, as marketers struggle to provide meaningful content, while drawing from suddenly shallow data pools.

These are just a few of the ripple effects that will likely come of the FCC ruling. There will be others, as the decision will affect not just ISPs and marketers, but also companies that rely on consumer data for forecasting, fundraising, credit scoring, calculating insurance rates, and background checks, etc.

It should be noted, however, that that the FCC ruling appears to allow ISPs to still utilize sensitive data if it’s first anonymized. That means they will be able to continue to use and sell grouped data segments.

Moving forward
Though the FCC’s decision is causing consternation among the ISPs and much of the marketing ecosystem they feed, data-driven marketing will continue to flourish. It will just take a little ingenuity and planning on the part of both the ISPs and marketers.

Marketers, as noted above, will need to develop alternate sources of quality data, whether by gathering it themselves or partnering with new vendors. They’ll also need to make better use of audience insight tools, opt-in strategies, and alternative targeting methods.

Success will additionally lie in the ability to execute and use advanced modeling, as data scarcity pushes the industry into a more probabilistic space. And in continuing to innovate, while balancing the privacy interests of consumers.

It’s imperative, too, that marketers and ISPs alike work with consumers to update and address the terms of the value exchange. As the FCC notes, the new rules “do not prohibit ISPs from using or sharing their customers’ information—they simply require ISPs to put their customers in the driver’s seat when it comes to those decisions.6”

Consumer concerns about privacy should be respectfully addressed. And all players in the space—ISPs, data brokers, edge providers, and marketers—need to be transparent about how they collect and use data.

At the same time, consumers need to be educated about how they, too, benefit from sharing their data, by receiving timely, relevant, and engaging content that brings value to their lives.

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