Big data analytics: The new black magic of marketing?
- 24 October, 2013 12:43
In the realm of marketing, data is definitely the new black. But to hear it spoken of at conferences, you might also assume it is the new black magic, capable of doing everything from enabling accountability of every marketing dollar spent through to predicting customer behaviour.
Either concept would be considered fantastical, were they also not increasingly becoming true. In a world where products and services can be literally replicated at the speed of light, data is emerging as many organisations’ most precious asset, or at least the one enabling them to differentiate themselves in an increasingly globalised market. For some ecommerce-based organisations, it is pretty much their only asset.
The interest consumer-facing organisations are placing in data was highlighted in May when Woolworths purchased a 50 per cent stake in the data analytics company, Quantium, for a reported $20 million.
In July, Wesfarmers chief financial officer, Terry Bowen, told The Australian that the group, which owns Coles supermarkets and the extensive FlyBuys loyalty program, was keen to work more closely with its suppliers on using data analytics to better target customers and make more efficient use of inventory. Bowen said Wesfarmers remained on the lookout for potential acquisitions of data mining and other e-commerce businesses.
Telstra also announced in August that it would double its data marketing investment over the next 18 months, at a cost of up to $60m, and bring its IT and marketing departments together in a ‘Virtual Marketing Technology Unit’, with assistance from IBM.
Despite these tent pole announcements, many organisations are still a long way from harnessing the power of the data they hold. With limited skills available in Australia today, most organisations are choosing to build up their internal data capabilities, with mixed results. What is clear is that those organisations that fail to harness their data will fall increasingly behind those that do.
“A great product or service is still the starting point,” says Oliver Rees, chief executive officer of boutique data marketing services company, Torque. “But as many things become somewhat commoditised there is no question the collection, analysis and actioning of data and insights from data is becoming probably the biggest differentiator for commercial success.
“Data can be the catalyst which, when leveraged correctly, allows a business to outperform the competition. The key is not just collection, but leverage. Size doesn’t matter, insight matters.”
When it comes to effectively deriving value from data, insight at speed is the critical requirement. According to Emma Lo Russo, CEO of customer data specialists Digivizer, the winners will be those who build real-time responses to real-time customer intelligence, and invest in the algorithms that give them actionable insights.
“The companies who turn their data into a source of customer delight will be the ones who win,” Lo Russo says. “This requires a customer engagement strategy, supported by marketing, customer service and personalisation of product.”
This has required some rethinking by IT departments. Whereas historically IT has seen data as a risk and a cost, those that can draw insights from data will outperform in all areas. This covers everything from general business strategy and product development to marketing strategy and tactical direct marketing.
“We’re already seeing the impact: Companies that grew revenue in the past year are significantly more likely have above average data analytics capabilities than marketers at companies that lost revenue,” Rees says.
Even for those that have invested in data, there is a large gap between their intention to build a data analysis capability and their ability to implement it. According to MD of marketing data consultancy Emerge Digital Group, Willie Pang, there’s plenty of discussion around the importance of data, digital footprints, mobility and the cloud, but most companies are struggling with the first step – creating a single customer view.
“Sophisticated technology exists today to track and extract user data,” Pang says. “It is the integration of the data into tactical execution that poses the greatest problem. The ability to offer it pervasively to users across the country is largely limited by skill set and resource.
“The other challenge is that most organisations are housing different parts of their user data in disparate databases and technology platforms. The greatest challenge is to find an elegant solution to centralise, organise and de-duplicate the data.”
That means bringing together data residing in different parts of an organisation and harmonising it, so different data elements relating to the same customer can be easily compared.
“Every major website operator, including big retailers and banks in Australia has a ‘single customer view’ project of some sort in operation,” Pang says. “They are working on creating linkages between the disparate data warehouses and efficiently store the data in one central location.
“The good news for business owners all across the world is that in the world of big data, it has become exponentially easier to match user data despite it not conforming to one singular structure.”
According to Pang, the road to success requires skills in extracting data effectively, organising it into a single source of truth, and then making use of it by integrating with customer-facing systems. To make such a strategy work effectively, he says it is important to be able to capture data about users at all interactions, which requires eliminating those interactions where the customer is anonymous.
“The key to ‘matching’ is creating and extracting data signals,” Pang says. “The golden principle of success in matching this data is to create a ‘log in’ environment. Over the coming 24 months, we'll be seeing an explosion of websites incentivising users to log in or register to view content, receive a service or manage an account.”
Pang has seen progressive corporate marketing organisations take telephone transaction data and match it back to online user log-ins and behaviour. “A marketer today can track an online user searching for a pair of shoes on Google, see that they came to the site but did not buy, logged in to review their shopping cart on their mobile, redeemed a coupon to buy the shoe in-store and then called the call centre with a query regarding product returns,” Pang says.
“Organisations such as Axciom, Veda and Experian are utilising their enormous databases to link offline and online data. There are a number of technology options but the principles are the same.”
The increasing realisation data has value is leading to some strange behaviours by organisations, as they seek to on-sell what they know. According to Dr Rami Mukhtar, a senior researcher at NICTA, while data products are nothing new, there is now an increased focus on them.
“Supermarkets have directly or worked with third parties to produce a range of data products that helped FMCG manufacturers better tailor and market their products or better manage stock consignment,” Mukhtar says. “These products generate a good revenue line distinct from the revenue collected from selling products on supermarket shelves.”
The new capabilities of data analytics mean more sophisticated data products are now being created. “For example, one particular telco generated heat maps of people movements at various hours of the day in a large city to assist a convenience store chain to determine the optimal locations for opening new stores,” Mukhtar says.
“Additionally, diversified companies are using granular view-of-customer data obtained through low margin products to drive sales of other company products through granular direct marketing. This in some cases is sponsoring companies to maintain low margin products.”
New data extraction and handling capabilities are also leading to new services being created, Rees says. Geographic data in particular is creating a raft of options built on the concept of ‘geofencing’, where location, communication and payment technology merges into one. Torque for instance works with the Israeli company, trendit, which has developed a real-time demographics statistics tool through which you can track people traffic and trends.
But organisations that are simply trading data are often doing so because they are limited in their ability to themselves use the data they have. “At the moment companies are typically much better at collecting data than they are at using it, so trading it becomes the highest value proposition,” Rees explains.
“As companies get better at using the data to drive strategic business decisions and tactical marketing activities, proprietary data will become a key differentiator, so companies will derive much greater value from owning and using data versus trading it.”
But no option exists in those instances where organisations do not yet have their data house in order. Only then can they start to think about reaching the nirvana state of customer data management – personalisation.
Pang says it is important not to confuse the segmentation and customisation work many organisations undertake today with true personalisation.
“The difference between the two is that customisation is a superficial marketing tactic based around changing names, colours, fonts, whereas true personalisation is driven by data driven selective presentation of content, products, offers and messaging,” Pang says.
“Within the realms of digital marketing, personalisation has been well documented to lift response rates, brand recall and so on by several hundred percentage points for many brands and campaigns. At this point, it has still not reached true pervasiveness in the marketplace, as the technology that allows for the easy extraction, organisation and implementation of data is still a fairly new phenomenon.”
But it is a goal many organisations are striving for, and some are even finding success. Rees says one project his company worked on for a client in the financial services sector used customer data to identify those types of individual mostly likely to respond to a particular offer and built a targeting model around it.
“When that model was used to drive a multi-channel marketing campaign, the company had a nine-time increase in the response rate when compared to the control group,” Rees says.
But while data is a crucial element of success, it will not be the only element of success. As CEO for the Association for Data-driven Marketing and Advertising (ADMA), Jodie Sangster is a strong advocate for the importance of data.
But she cautions organisations not to put all their eggs in a data basket, as creativity will remain a source of competitive advantage. A recent study conducted by ADMA into creativity and business effectiveness that showed that companies that invested in creative campaigns had increased profits after a six month period.
“Data may not play a role in developing big or creative ideas either and won’t transform every industry,” Sangster says. “There’s data for the sake of it and that’s where many people are at the moment.”