Author: CMO Exclusive : Adobe
In the early 1990s, Todd Morris was the brand manager for Procter & Gamble’s Tide. At the time, he said, the brand ran mass-market campaigns aimed at a huge swath of the country.
However, after parsing the brand’s recent data, Morris said that households in the single-digit percentages actually drive 80% of sales. “It makes me wonder why I was ever trying to find ways to reach 80 million households at a time,” he said.
Morris, now the president of Catalina, said that in 2015 new consumer packaged goods launches derived 80% of their sales from 2.5% of all shoppers. “The data took the guesswork out of that,” he said. “Think of the liberation for the brand manager to see that.” By identifying the bulk of the actual buyers, Morris said, a brand manager can then funnel advertising spending to those customers and lookalike audiences.
Such is the appeal of using data to inform marketing decisions. While getting information about your potential audience has always been a consideration, these days granular targeting options on digital media make data a game-changer. Such precision makes mass-market campaigns seem increasingly wasteful.
Yet recent research has revealed that most marketers are still way behind the curve when it comes to using data efficiently. Most are still in the very early stages of collecting data and haven’t yet used it for targeting.
“There’s certainly a lot more talk than there is action,” said Carlton Doty, an analyst with Forrester. “So far we’ve seen very little actual proof points on success stories.”
The Data Gap
A 2015 survey of more than 100 advertisers by the Interactive Advertising Bureau and the Winterberry Group underscored this contention. Only 34.8% of respondents in the survey said they have used data to help grow revenues. That’s about half the number that said growing revenues was one of the three most important objectives of using audience data.
The report’s author opined that, “Despite the critical role that reporting and attribution play in substantiating the value of various media and marketing investments, efforts to measure the true value of data have generated only modestly useful insights thus far.”
A Forrester study also found that only 25% of data and analytics decision makers said their firms’ business intelligence investments have resulted in consumer satisfaction. And a third survey, from Iron Mountain and PwC, found that only 4% of businesses said they could extract full value from the data they have.
Not surprisingly, perhaps, marketers in the latter survey said their own CRM data was most effective for targeting. However, as Max Kalehoff, CMO of SocialCode, told CMO.com, there’s a large range of data fluency among marketers, in part because of “the generational change that’s going on.”
SocialCode recently conducted a survey with The CMO Club among 80 CMOs looking at how they used data. In particular, the report found 61% of respondents said they didn’t use digital advertising to identify new customer segments. “That’s a pretty big missed opportunity,” Kalehoff said. “With digital advertising on Facebook, you can spend $50,000 and reach a million people, and out of those million people you can use the data back in order to understand who your actual audience is and who responds to different value propositions and creative.”
Kalehoff said another 66% of respondents said they didn’t use results from digital advertising to inform their advertising campaigns including TV, radio and print. “It’s not part of their methodology,” he said.
How Marketers Really Use Data
If marketers aren’t using data to identify new customer segments, what are they using it for? According to December 2014 research from eConsultancy, the most common uses for data were attribution and calculating lifetime customer value.
The focus on attribution makes sense since marketers are under more pressure than ever to show ROI, said Venkat Viswanathan, co-founder of LatentView Analytics. “Now they’re being held more accountable, so they have to necessarily be able to explain their spend and the outcomes they got,” he told CMO.com.
Catalina Marketing’s Morris said many marketers “think they’re using data, but they’re really at step one of a 10-step process.” A lot of marketers say they’re doing targeting, he said, but they’re not taking full advantage of all the advanced data in the market.
For Morris, step 10 is identifying the exact consumers who are actually buying a company’s product and then serving those consumers and their lookalike audiences with ads on all media. Instead, he said, many marketers extrapolate information based on a relatively small sample of an audience, when they could actually look at the entire audience instead and improve accuracy by 60% or so.
Marketers are also prone to get hung up on meaningless statistics. “Why look at click-through rates when you can look at buy rates?” he asked.
Who Is Using Data Well
Some industries are naturally further along in this process than others. Financial services and retail have a natural advantage since both for some time have been able to collect their own data and use it for targeting.
In particular, many point to Amazon as a pioneer of data-focused marketing since the company is known for customizing its home page based on a user’s purchase and browsing history and for offering recommendations based on that data.
In recent years, retailers including Kroger and Macy’s also have revolutionized their businesses using data. In particular, Macy’s uses big data to help analyze behavior patterns, identify hot products, and predict sales based on weather patterns, all in real time.
But not everyone has firsthand access to such data. Consumer packaged goods companies, for instance, sell their goods through retailers, which may or not share data with them.
In 2014, McCormick, a company known for spices, got around this obstacle. McCormick created its own data stream with what Forrester’s Doty calls a “contextual marketing engine.” In this case, McCormick’s engine was FlavorPrint, a site where users could go and discover their unique flavor profiles. Last year, McCormick spun off a tech company called Vivanda that includes FlavorPrint. Vivanda hopes to help consumers figure out what they want for dinner.
Other companies known for creating new sources of data for themselves include Nike, which has used Nike Plus and FuelBand for this purpose, and car company maker Mini, which invests more than 40% of its budget on digital and social marketing, according to Forrester. Mini uses social media to create awareness and maintain a dialogue with customers before, during, and after the buying process.
While such innovative solutions are unusual, outside agencies can cull data from social media. That information, combined with a company’s internal CRM data, can help create data management platforms (DMPs), a database of the company’s customers and audience.
However, most have not done so yet. According to SocialCode’s research, just 24% of marketers surveyed said they manage their own DMPs internally versus half who outsource their DMPs and another quarter who don’t have one.
Among those who outsource their DMPs, the majority said they planned to bring it in-house within the next two years. “The significance of that is we’re at the early stages of a consumer brand seeing and understanding the power of their data and building up the expertise,” SocialCode’s Kalehoff said. “They’re really starting to bring the capabilities in-house.”
Advertising, commerce, and CRM are coming together and becoming business-critical, he added. “It’s only logical that CMOs would want to keep that close to the vest,” Kalehoff said.
More Investment Coming
Even though many marketers are in the early stages of implementing a data program, they are generally aware of its importance and are planning to increase their investment in the next year.
According to the December 2015 “Global Review of Data-Driven Marketing and Advertising” survey, some 68.6% of marketers surveyed said they planned to increase their investment in data in 2016, and 56.3% said they increased their data-driven marketing and advertising expenditures in 2015.
In a recent Forrester report, Doty lamented that data solution providers have been “beating the drum too hard” and predicted that “buyers’ weariness will show.” That said, machine learning may help speed the process of gleaning insights from data in 2016.
Doty, however, pointed out that the main reason many marketers are so far behind on data implementation is that they haven’t formed a close alliance with their IT departments. Despite all the advice to the contrary, he said that’s still the case. “[Marketers] really need to look inward and work closely with their own IT shops,” he said. “They really need to slow down and get their IT folks involved.”