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.

17 Feb

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

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.