In a recent conversation with a chief technology officer, he asserted all digital technology changes in his organisation were being led by IT and not by marketing. It made me wonder: How long a marketing function like this could survive?
Many companies are ramping up their big data initiatives in areas like sales, marketing, customer service and R&D and claiming returns of at least 25 per cent.
TCS surveyed 1,217 large enterprises in nine countries and four regions (US, Europe, Asia-Pacific and Latin America) in December 2012 and January 2013 about their big data initiatives for its The Emerging Big Returns on Big Data report. Fifty-three per cent of the companies surveyed had undertaken big data initiatives in 2012 and 43 per cent predicted an ROI of more than 25 per cent. About a quarter or the respondents projected a negative return or didn't know what their return was.
The 643 respondents that had undertaken big data initiatives represented a broad range of investment. Seven per cent had invested at least US$500 million and 15 per cent spent at least $100m on big data initiatives. Nearly a quarter (24 per cent) spent less than $2.5m. The industries that spent the most included telecommunications, travel-related, high tech and banking. The industries spending the least included life sciences, retail, and energy/resources.
Perhaps unsurprisingly, 55 per cent of all big data spending goes to four business functions that generate and maintain revenue: sales (15.2 per cent), marketing (15 per cent), customer service (13.3 per cent) and R&D/new product development (11.3 per cent). Ramaswamy notes three non-revenue-generating functions get less of the big data spending pie: IT (11.1 per cent), finance (7.7 per cent) and HR (5 per cent).
But while sales and marketing get the lion's share of the big data budget (30.2 per cent), the highest expected ROI came from the logistics and finance functions. Those functions together only constitute 14.4 per cent of the big data budget, but logistics managers said they expected their big data initiatives to generate a 78 per cent return, while finance managers expected a return of 69 per cent. In comparison, marketing executives expected an ROI of 41 per cent on their big data initiatives.
Using Big Data in Marketing
Marketers identified two areas that benefitted the most from big data initiatives: determining campaign effectiveness and channel effectiveness. Marketers also identified tailoring marketing campaigns and promotions offers and determining customer value as areas representing high potential benefit.
"Tailoring marketing campaigns can begin with figuring out which prospects should be targeted in the first place," TCS writes in its report.
"An auto insurance company that we spoke with found that over 80 per cent of the over 100,000 households it sent direct mails to had the wrong demographics and would never buy insurance from the firm. In fact, only 1 per cent bought policies as a result of these campaigns. After using analytics to determine the right demographics, the company conducted a more targeted direct mail campaign and increased its response rate tenfold. That boosted revenue and cut marketing costs," the reports says.
TCS also found marketers feel their biggest challenge in implementing big data is technological. Marketing is typically the least automated function in many companies, and so they struggle to handle the volume, variety and velocity of the data they have.
Using Big Data in Sales
For sales executives, big data's greatest potential is in identifying the most valuable customers for the organisation. Finding opportunities to cross-sell products and services came was second on their list.
TCS pointed to Dell as a textbook case of companies using big data to better identify their best prospective customers. Dell began working with a provider of cloud-based analytics for software in 2007 in an effort to help the Dell sales force pinpoint its best prospects. By identifying the types of customer behaviour most likely to lead to the purchase of different products, Dell's sales productivity, efficiency and revenue in Europe nearly doubled. TCS attributes at least part of this success with the halving of the number of leads that marketers forwarded to the sales organisation.
The sales function also has its challenges with big data. Sales executives say their biggest challenge is data silos, according to TCS. They find it difficult to get business units to share information with the sales function that could prove valuable in identifying trends and making decisions.
Using Big Data for Customer Service
Customer service executives told TCS they saw the greatest benefit from big data in identifying customers that were at risk of discontinuing use of the company's offerings. Analysing the way customers use the company's website also received high marks from customer service executives.
However, it should be noted that even the lowest-rated activity on the list-monitoring products as customers use them to detect manufacturing or design problems-was considered to have more than moderate potential.
TCS pointed to Xerox as an example of the latter. The company gathers terabytes of data from the 1.2 million devices it has at customer sites and uses predictive algorithms to determine which ones may stop operating.
Like sales executives, customer service executives see data silos as their biggest challenge.