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OPINION4 June 2013

Analytics: the next generation

Opinion

CMOs and CFOs need to leave behind old, siloed approaches to measuring marketing performance to reach a better understanding of the key drivers of consumer purchase behaviour, says MarketShare’s Hilary Perkins.

But how? In recent years, there’s been a ‘swim-lane’ approach to marketing mix measurement – or marketing analytics 1.0 – which had varying levels of success. Marketers were able to showcase how effective different individual channels (digital, PR, direct mail etc.) were and, for a time, this was enough to satisfy the C-suite and drive investment in channels that were working well.

However, this approach is heavily outdated since we know that consumer behavior is a response to all of the many messages received from companies about their brands or services. In addition, there is now a plethora of new media channel opportunities, which have increased the complexity of modelling immensely.

“Both the CMO and CFO need to move away from the old, siloed techniques of the past to true second-generation analytics and modelling in order to drive businesses forward”

The solution proposed was last click attribution, but this often misattributes effects to the last interaction the consumer has, therefore underestimating prior effects. For example, imagine that while viewing a TV spot for a new car (Brand X), a consumer uses her mobile device to Google “cars.” Up pops a paid search link for Brand X, as well as car reviews. She clicks through to Auto Trader’s website to read some reviews, and while perusing, she notices a display ad from a local dealership but doesn’t click on it. One review contains a link to YouTube videos people have made about their Brand X cars. On YouTube she also watches a Brand X Super Bowl ad from a few months earlier.

During her commute to work that week she sees a Brand X billboard she hadn’t noticed before and then receives a direct-mail piece offering a time-limited deal. She visits local dealerships’ websites, including those promoted on Auto Trader and in the direct-mail piece, and at last heads to a dealer, where she test-drives the car and buys it.

There are two questions to be asked by the car company’s chief marketing officer: How did this combination of advertisement exposures interact to influence this consumer? Is the company investing the right amounts at the right points in the customer-decision journey to spark her to action?

Analytics 2.0
In times of austerity and a challenging business environment, marketing and finance need to be speaking a common language. Marketers who decide to stick with traditional research and analytics approaches do so at their own risk. Those methods are dangerously outdated as they only look backward a few times a year to correlate sales with a few dozen variables.

A holistic measurement which provides robust financial and brand return on investments (ROI) on all marketing spend allows development of a common understanding about what is important to the business – in both the short and long term. Financial ROIs are easy to understand – Company A spends £1 on Brand X and gets back, for example, £0.70 or £1.10. Where the payback is less than the investment, the Brand ROI provides the context, i.e. has it cost £0.30 to increase consideration or trial?

Big multinational companies are now deploying a set of capabilities that can chew through terabytes of data and hundreds of variables in real time, which we’ll refer to as Analytics 2.0. By using this type of analytics, companies can create a detailed picture of their marketing performance, enabling them to run scenarios and change advertisement strategies on the go.

It’s been enabled by the latest leaps in computing power, cloud-based analytics and cheap data storage, which make it possible to measure the interaction of advertising across media and sales channels, and identify precisely how exogenous variables (such as the broader economy, competitive offerings, and/or weather) affect advertisement performance. The resulting analyses are able to reveal what really works. By using these data-driven insights, companies can maintain their existing budgets, while achieving improvements in marketing performance of 10% to 30% (and sometimes more).

Both the CMO and CFO need to move away from the old, siloed techniques of the past to true second-generation analytics and modelling in order to drive businesses forward. It is essential that both understand how investment is working, and identifying the key drivers will aid future discussions through a common language.

Hilary Perkins is vice president of MarketShare EMEA

2 Comments

6 years ago

When will analytics take into account the years of brand investment that create the returns being experienced by a company? I suspect ROI on this years investment is affected far more by legacy investment. Marketing has become a short term discipline as fast as it has become more digital. Do not fall into the trap of thinking that what you see happening now is because of what you have just done in the last campaign. What really works for brand is consistent investment over the longer term, not short term spend and returns...regardless of how much it makes the finance men feel comfortable. ROI needs to be assessed over different timescales.

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6 years ago

Martin - I couldn't agree more and analytics can handle longer term investment as well. Underlying brand equity is an outcome of the consistent investment you cite and with good tracking measures this too can be factored into Analytics 2.0 so that the immediate impact and longer term impacts can be balanced to achieve the optimal strategic outcomes which balance today's immediate sales and marketing goals with the longer term brand health aims.

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