Marketing leaders report that their companies are spending 7.1% of their marketing budgets on marketing analytics and expect to spend 12.3% in the next three years. These spending levels may be the long-awaited coming of what Bob Blattberg, Rashi Glazer and John Little called “the marketing information revolution” almost 25 years ago. However, it turns out that this revolution is plagued by the same fundamental questions that marketing information has been subject to for decades. In particular, there is quite a lot of information out there, but making it contribute to company performance is a challenge.
The CMO Survey has included a section on marketing analytics since August 2012. Examining responses to the question, “To what degree does the use of marketing analytics contribute to your company’s performance?” on a seven-point Likert scale where 1 is “not at all” and 7 is “very highly,” we see no change in this contribution level over the last two years. As shown in the chart below, the contribution level is modest and not changing over time. More spending with no increased contribution for marketing analytics is not sustainable, from an investment perspective. Here’s what companies can do to improve their return on marketing analytics:
1. Think of the user of marketing analytics as a customer of information. Deshpandé and Zaltman, the earliest scholars in marketing to examine why companies were not fully utilizing marketing research, conclude that a key reason is the lack of “user” focus in the management of marketing research. Think of your users as your customers, and ensure that marketing analytics answers their questions and leads them to ask even better questions in the future.
2. Evaluate the quality of your marketing analytics. Only one-third of companies in the CMO Survey formally evaluate this important aspect of marketing. Evaluation should reflect users’ perceptions.
3. Appreciate that the production and utilization of marketing knowledge are separate activities in companies. In fact, a better way to think about marketing analytics is that it represents an innovation that must be diffused throughout organizations. This requires building awareness and knowledge, and persuading potential adopters of the value of unlearning old ways of making marketing decisions and learning new ways. As with any innovation, there are costs and benefits that must be managed.
4. Garner top management support. Kohli and Jaworski’s foundational work on market orientation shows that top managers must line up behind the organization’s efforts to acquire, disseminate and use information about customers and competitors. Marketing analytics is no different, except that now marketing leaders also may have to develop the required technical skills. I’m reminded of an old Marketing Practice Prize video in which the CEO of the company said, “I had to learn regression.” Leaders may now need to learn propensity score matching and regression discontinuity models, but the point remains: Line up your leaders and help them see the value of doing the math.
5. Experiment. Only 11.9% of companies in the CMO Survey use experiments to measure marketing return on investment. There are many ways to use observational data to make inferences about the effect of marketing spending, but experiments offer companies the best insight into how returns vary by types and levels of spending.
6. Invest in “time to knowledge.” This is a concept that Jim Figura, former vice president of global customer insights at Colgate-Palmolive, and I have been talking about for years. The issue is how long it takes your company to convert its data and information into knowledge and insights that the company can act on. It may be worth investing in the development of a capability in this area given that competitive advantage may lie in how fast your company can act on your marketing analytics.
7. Lead on. Marketing leads marketing analytics in only 68.3% of companies surveyed. This means that marketing leaders often need to cooperate with other key leaders, such as the CIO or CTO, in the analytics area. Building credibility by building technical skills is important in this regard. However, it is equally important to ensure that technology does not dominate insight or that systems do not crowd out the focus on the customer. If customer insight is a key objective, marketers must bring that to the table.
8. Build analytic-savvy human capital. Only 3.4% of marketing leaders stated unequivocally that their companies have the right talent to fully leverage marketing analytics. On a seven-point scale where 1 is “does not have the right talent” and 7 is “has the right talent,” the mean score in the August 2013 survey was 3.4. Furthermore, when asked, “How challenging was it to find the right marketing analytics talent?” 83% reported a score of 4 or higher on a seven-point scale, where 1 is “not challenging” and 7 is “extremely challenging.” One solution is to identify managers within the company who can be trained to serve in marketing analyst roles. If companies use this approach, they will need to boost marketing training budgets, which are expected to grow by only 2.5% in the next year.
9. Think human capital = financial capital. Earlier analyses of survey results show that companies with above-average marketing analytics talent experienced significantly higher marketing return on investment rates than companies with below-average analytics talent (+4.18% vs. +2.51%). When it comes to profits, the same pattern emerged: Companies with above-average analytics talent experienced profitability increases of +4.69% compared with +2.71% for companies with below-average analytics talent.
10. Focus analytics on key marketing assets. When asked what areas of their companies use marketing analytics to drive decision making, fewer than one-third of companies report using marketing analytics to drive decision making in customer acquisition (31.7%), customer retention (27.6%) and branding (22.0%). Given that these activities lie at the core of marketing’s contributions to the company, it is imperative that marketing leaders focus on these areas.
If marketing leaders want marketing analytics to be a part of their role and to contribute meaningfully to their company’s performance, they must take proactive steps to manage marketing analytics as an innovation that can be diffused throughout their organizations. This includes actively promoting the value of marketing analytics’ insights (especially to top management). If not, analytics ultimately will migrate to another area of the company, or it will be viewed as the purview of a few scientific types and not as a key tool in the firm’s arsenal of strategic marketing activities.
For a complete set of findings related to the August 2014 CMO Survey and for all past surveys, visit CMOSurvey.org.
This was originally published in the October 2014 issue of Marketing News.
About the author:
Christine Moorman is the T. Austin Finch Professor of Business Administration at Duke University’s Fuqua School of Business.