in 25 Books in 2012

#12/25: Data-Driven Marketing

Data-driven marketing and marketing metrics start with the principle of keeping score for all major marketing activities.

Marketing budget falls into:

  • Demand generation marketing
  • Branding and awareness
  • Customer relationship
  • Shaping markets
  • Infrastructure
  • Low performers invest 4% less than average on marketing
  • High performers invest 20% more than average; more on customer relationship, branding and infrastructure
  • High performers increase their budget in recessions

Framework:

  • Know Yourself: Strategic Objectives
  • Know Your customers: Database & Analysis
  • Segment your Customers: Selection & Targeting
  • Data-Driven Marketing: Campaigns
  • Build Trust: Privacy Issues
  • Keep Score: Metrics

How to start?

  • Why should your customer care about data collection?
  • Start small: Walgreens started with a regional store op VP and found savings of $5m
  • Contential: start with focus groups and find data with high ROI
  • Contential: found out that people don’t like their airline, because luggage misses, flights are delayed – started to sent out apology letters within 12h to these customers
  • B2B market: What is in for your partner? Try to connect directly to the end customer

My point is that if you can measure something, you can control it. In this case, the measurement was the calories consumed and the exercise calories burned. The result was clarity in decision making for what I eat, which meant I lost the weight and ultimately completely changed my diet.

Road map

  1. Design – Objectives, Scope, Metrics, etc
  2. Diagnosis – Balance, Risk, Returns: Insights
  3. Opportunities – for action: quick hits, adjustment
  4. Tools
  5. Process – recurring reviews, etc.

So I asked in my survey research, “Do you outsource the creative component of your marketing?” The answer was that 72 percent of firms surveyed outsource the creative. Insight: The vast majority of marketing organizations are not in the creative content business, but instead manage the process of marketing.

Brand awareness = Ability to recall a product or service

  • Often brand awareness surveys
  • Social media activity
  • Billboards with vanity urls / phone numbers
  • Branded search words

Test-drive = Customer pretest of a product or service prior to purchase

Churn = Percentage of existing customers who stop purchasing your products or services, often measured in a year

Customer Satisfaction (CSAT)

  • Would you recommend this product or service to a friend or colleague?
  • 10 point scale, 9/10 points only count as loyal customers
  • NPS: detractors (0-6) subtracted from promoters
  • You can ask “would you recommend” and “are you satisfied”
  • “How much did you spend in different stores in the last x months?” “How much are you probably going to spend in different stores in the next x months?”
  • “What product or services would you not recommend to a friend?”

Take rate = Percentage of customers accepting a marketing offer (CTR * Transactions CR)

I realized that in marketing it is better to be approximately right than exactly wrong, and I started to appreciate the value of qualitative data.

Financial Metrics

  • Profit
  • NPV (Net Present Value)
  • IRR (Internal Rate of Return)
  • Payback period

ROMI Framework

  • Business Discovery: Understand business and impact of marketing
  • Base Case
  • Costs
  • Upside
  • ROMI impact
  • Sensitivity Analysis

Segmentation

  • Start small and segment
  • Segment customers based on CLTV
  • Compare short term and longterm customer value

WOM = 1 + Number of clicks from recommendations/Number of direct clicks

Agile Marketing

  • iterate fast
  • near real-time data, iterate / measure at least 10 in the campaign period

Analytics Marketing

  • propensity modeling -> what wants the customer next
  • market basket analysis -> what do customers also buy
  • decision trees -> easy to understand

Marketing Campaign Management

  1. Selection of campaigns (scorecards)
  2. Portfolio view
  3. Monitoring
  4. Adaptive learning
  5. Technology

Problems

  1. Lack of top management support
  2. Lack of respect
  3. Lack of cross-functional alignment
  4. Lack of employee skill

Data-Driven Marketing is a pretty robust book. The first 50 pages are a short version of the rest of the book. The rest of the book is filled with case studies and anecdotes. It is written very causally which is pleasant. I think that it is a very valuable book if you are new to the idea of using data or want an overview on data-driven marketing.

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