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Data-driven marketing: What speedbumps are slowing our progress?

13th Apr 2015
Managing editor MyCustomer.com
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Marketing has become an increasingly data-driven discipline over the past decade. In fact, data’s importance is such that when Columbia Business School polled marketers, 100% of respondents stated that successful brands must use customer data to drive marketing decisions.

It’s little surprise, then, that the GlobalDMA’s Global Review of Data-Driven Marketing Advertising found that nearly three-quarters (74%) of marketers expect to increase their data marketing budgets this year.

“There’s an overwhelming abundance of data available today. Through virtually every digital process and exchange, data is being created at an alarming rate,” notes Jessica Cross, director of marketing at Fliptop. “It was only a matter of time before marketers started to leverage this data to drive better engagement, personalisation and messaging. While the sheer volume and velocity of data once made analysis challenging, a convergence of tools and technologies has enabled marketers to derive insights that are constantly improving the way we connect with prospects and customers.”

Research by the GlobalDMA suggests that the biggest factors encouraging marketers to capitalise on this data are the need to become more customer-centric (cited by 53% of respondents), to maximise effectiveness/efficiency of marketing investments (49%), to gain more knowledge of customers and prospects (33%) and to align with digital customer preferences (20%).

Much of this reflects the changing demands being placed on the marketing department by the board, in response to the changing financial landscape, according to Barry Smith, senior consultant at Ikano Insight.  

“The climate has changed over the last seven years and the economy, by way of tightening its belt has led to a greater focus on shareholder value and with that comes a greater scrutiny from the boardroom on the profit and loss of the organisation,” says Smith. “Marketing budgets need to deliver results and we all know it is more cost-effective to focus on developing your existing customers versus trying to generate new ones right.

“Data tells us how much Mr Smith has spent, what he spent it on, when he last spent, etc. This data can then help us to create triggered campaigns that are going to drive frequency and consistency of spend and start engaging with our customers in real-time just by a customer changing their behaviour beyond their normal behaviour, without knowing all of this transactional information linked to our customers we aren’t able to confidently measure the success of our marketing spend. 

“If the board do not understand it properly they will not invest, so as marketers our challenge is to get a programme in place that starts delivering measurable results. For every £1 marketing spends, we can now tell our boardroom what return we can deliver – that’s the beauty of data-driven marketing.”

Rob Fenton, UK MD of data agency fifty-five, adds: “Marketing has far more of an investment approach now. For example search, the most prominent data-driven media, is now a £4 billion market in the UK, and much of Facebook advertising is bought on their marketplace and optimised against acquisition cost. With so much marketing investment being placed in media that has many targeting parameters, and where cost-per-click and cost-per-acquisition is quantifiable but also inflationary, marketers have to use every data-set available to them to more accurately value and price each marketing interaction.

“This applies to the lower funnel and demand-based media like search but also brand awareness marketing like programmatic display where audiences are packaged and priced too. These marketplaces are competitive so the use of data to accurately price and measure the business benefit is critical.” 

Data in action

So what does it mean to be ‘data-driven’? Lisa Arthur, author of Big Data Marketing, defines it as: “the process of collecting, analysing and executing on insights from unstructured and multi-structured data that’s integrated from across the enterprise.”

To get a good idea of what this means in practice, we can take a look at research by the Global Review of Data-Driven Marketing and Advertising, which has summarised what actions are most commonly executed by data-driven marketers:

  • Targeting of offers, messages and content (69%)
  • Data-driven strategy or product development (52%)
  • Customer experience optimisation (49%)
  • Audience analytics/measurement (44%)
  • Predictive analytics (44%)

What’s more, the success reported by organisations conducting these activities is such that a gulf is opening up between those brands that are data-driven, and those that are yet to embrace data.

“To put it bluntly, marketers who’ve hesitated to adopt data-driven practices are already getting left behind,” warns Cross. “A recent Forbes study found that leaders in data-driven marketing are more than six times more likely than laggards to report achieving competitive advantage in increasing profitability (45% vs. 7%). Consumers have been conditioned to expect highly personalised, engaging experiences when interacting with brands. The companies able to deliver on consumers’ expectations - utilising data to provide outstanding customer experiences - are winning.”

In its survey of 300 executives, Forbes also revealed that data-driven organisations are five times more likely to report a competitive advantage in customer retention compared to those yet to become data-driven (74% vs 13%); three times more likely than laggards to say they have achieved competitive advantage in customer engagement/loyalty (74% vs 24%); and almost three times more likely to have increased revenues (55% vs 20%).

Data challenges

But the study also found that while data-driven marketing is on the rise, around half of executives believe their efforts are lagging, either as a result of siloes within their enterprises, or a failure to capture most types of customer data beyond demographics.

These concerns reflect the findings of a New York American Marketing Association study, which noted a range of shortcomings that are undermining efforts to become data-driven:

  • Companies failing to use data to personalise their marketing communications (reported by 45% of respondents)
  • An inability to link data to an individual customer (42%)
  • Infrequent or slow collection of data (39%)
  • Lots of data but a lack of understanding what to do with it (36%)
  • Not enough customer data (29%)

Indeed, becoming data-driven is no easy journey.

“Data collection and integrity of that data across channels is a major challenge,” suggests Fenton. “By this I mean recognising the customer, knowing when you have, and haven't communicated with them and tracking their action that results from your marketing on any device. Technology solutions are emerging, as are new people-based (rather than device-based) targeting capabilities like Facebook Atlas. So it is improving, but there is a long way to go before marketers can confidently say they recognise their prospects and customers across channels and devices.”

Smith adds: “The biggest obstacle facing marketers when it comes to being successful at data-driven marketing is assessing the value of a single piece of data through insight to determine its actionability to drive incremental revenue. There are so many opportunities to collect so many different types of data from our customers from each of the multitude of touchpoints that they engage with us. It is challenging to map out a customer journey and work out what pieces of data are important or not.  Every one of these engagements or footprints can give us some sort of insight, determining the true value of this piece of data is another story.”

Statistics reported by Monetate indicate that a range of obstacles are confronting marketers as they seek to capitalise on data, ranging from insufficient executive support (quoted by 9% of respondents), lack of necessary tools/tech (10%), wrong organisational structure (14%), lack of budget or resources (32%) and a lack of skills or training (32%).

“Many of today’s marketers, whilst digital natives, are not data analysts,” says John Fleming, marketing director at Webtrends EMEA & APAC. “This makes it difficult for them to release insight from Big Data, let alone action the insight in their marketing campaigns. The sheer volume of data that is available makes it difficult to ascertain what data is the right data. Analysing Big Data can seem daunting and many marketers may find their first challenge is what to capture and where to start. Ideally there needs to be a realignment of the marketing department towards marketing technologists (who are few and far between at the present time).”

A data-driven future

Nonetheless, irrespective of these obstacles, the move towards data-driven marketing is inexorable.

“Data will never be less important than it is today, there will always be more data tomorrow than today as our lives and actions become more and more digitised and as we use more and more internet-enabled devices, and the business world will continue to be faster and more competitive globally,” says Fenton. “So data-driven marketing will continue to be at the forefront of marketing and media innovation, and will continue to play an important role in the way that businesses operate in our increasingly digital world.”

Fleming adds: “The future of data-driven marketing is very rosy. With new technologies such as wearable devices and beacons emerging every day, there will be many more customer interaction touchpoints, both online and offline, where there will be an increased opportunity to get an even deeper understanding of what makes a specific person tick. More data means better marketing insight, which means messages can be more focused and therefore more successful in delivering greater return on investment.”

Indeed, data’s role in driving marketing decisions will only become more decisive in the future. And while there are obstacles to overcome, none of these are insurmountable.

With this in mind, MyCustomer will be exploring how brands can become more data-driven in the coming weeks, sharing advice on topics including how to build a data-driven team, how to create a strategy and how to negotiate the thorny issue of customer privacy. By the end of the series, we hope that you’ll be prepared to take the next step to becoming a fully data-driven organisation. 

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