12 Sep

Crunch or Be Crunched

90 PERCENT OF THE WORLD’S DATA WAS CREATED IN THE LAST TWO YEARS

Given the sheer volume of marketing data out there, you can’t afford not to have a data-mining strategy. Data are at the core of today’s technology revolution. Every day we create 2.5 quintillion (1018) bytes of data – so much that 90 percent of the world’s data today has been created in the last two years alone–and 90 percent of that data is unstructured. Internet devices, mobile phones, network and satellite television, traditional and satellite radio and other digital media make possible more targeted, frequent contact with the masses. At the same time, whether collected at the cash register or through the Internet, companies are amassing troves of consumer data. This demographic, geographic and psychographic data should be fully exploited to help companies predict consumer behavior and preferences.

The collection and use of customer data to optimize marketing efforts are nothing new. In the 1920s, General Motors discovered that loyalty among Ford vehicle owners was very low—a Ford driver was not likely to purchase his second vehicle from Ford. So General Motors began surveying these drivers to collect data and develop insights into customer preferences. These insights were then used to develop marketing campaigns that targeted Ford vehicle owners. Today, data-centric companies like online retailer Amazon.com in the U.S. and brick and mortar retailer Tesco in the U.K. rely on mathematical modeling to ensure that the right products are offered to the right consumers at the right time. For instance, Tesco’s deployment of its loyalty-card program and the resulting data gathered from its users are credited with helping Tesco fight off Wal-Mart’s entrance into the U.K. market. The data collected is used to tailor marketing programs for its customers. For example, Tesco customers who buy diapers for the first time receive offers for baby wipes, toys and beer—as data analysis show that new fathers are more likely to drink at home. Tesco’s loyalty-card program is so successful that major consumer products companies buy reports based on data collected and analyzed by Tesco.

Companies are also leveraging technology and analytics to target, track and optimize marketing campaigns. For example, Dell uses campaign management tracking software to track near real-time responses to its online, direct-mail and print advertising. Analysis of the data collected allows Dell to continuously optimize its marketing efforts, resulting in a higher return of marketing dollars invested.

By no means are companies the only ones benefiting from today’s data-rich world. Consumers have more data and information at their fingertips than ever before. They are just a few clicks away from the best mortgage rates or the entire collection of the Library of Congress. The last few years have seen the proliferation of Internet companies that provide pricing and product information for millions of items and services in a fraction of a second. Without leaving the comfort of a chair, a buyer can determine which companies offer the lowest prices, free shipping, etc. However, unbeknownst to most consumers, the data flow is often two-way. Most of these companies collect data on site visitors for their own use. Google, Yahoo! and MSN, for example, keep a record of every search ever made through their search engines. The data collected includes the IP address of the person doing the search, keywords entered, results returned by the search engine and websites visited. Other sites, like pricegrabber.com and pricescan.com, play both sides of the fence. They provide product data to consumers and consumer data to companies—by tracking consumer shopping behavior on their websites.

As marketers continue to embrace new technologies and channels such as mobile and IPTV, they will be inundated with even more data. The industry leaders of the future will be those who are able to collect and mine this data to understand and predict individual consumer behavior. However, it seems that many companies still have a long way to go before they fully embrace analytics, CRM techniques and other measurable marketing strategies. In a survey conducted by Epsilon, only 30% of CMO’s said they agree with the statement “You use sophisticated modeling tools to analyze existing customer data (behavioral, preference and demographic).‘’ And this in spite of the fact that almost 70% of CMO’s are generating more data than ever before by increasing their spend on digital advertising and social media.

08 Jul

A Data-Driven Approach to Doing More with Less

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

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

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.