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Chapter 1
Chapter 1
Marketing Analytics
Highly Effective
Marketing Analytics
A Practical Guide to Improving
Marketing ROI with Analytics
Mu Hu
Highly Effective Marketing Analytics:
A Practical Guide to Improving Marketing ROI with Analytics
10 9 8 7 6 5 4 3 2 1
Keywords
Analytics; marketing analytics; business intelligence; omnichannel mar-
keting; data; centralized database; segmentation; customer profile; cus-
tomer personas; the 360-degree customer view; customer journey map;
customer lifestage; predictive modeling; direct mail; catalog; e-mail
marketing; loyalty marketing; loyalty program; Customer lifetime value;
marketing mix modeling; multi-touchpoint attribution; Promotional lift;
marketing metrics; marketing KPIs
Contents
Introduction������������������������������������������������������������������������������������������xi
Bibliography���������������������������������������������������������������������������������������215
About the Author��������������������������������������������������������������������������������217
Index�������������������������������������������������������������������������������������������������219
Introduction
1 Lindzon, J. 2016. “Why Executives Don’t Trust Their Own Data and Ana-
lytics Insights.” November 4, https://fastcompany.com/3065294/why-execu-
tives-dont-trust-their-own-data-and-analytics-insights
2 Peterson, H. 2019. “More than 7,000 Stores are Closing in 2019 as the Retail
Apocalypse Drags on.” May 21, https://businessinsider.com/stores-closing-in-
2019-list-2019
xii Introduction
of their total sales revenue. The fate of multichannel retailers still largely
depends on the growth of their offline sales, which means traditional mar-
keting channels such as customer segmentation, TV ads, direct mail, print
catalog, e-mail, and loyalty programs still play a critical role in today’s
omnichannel marketing environment. However, because these channels
are mature and hard to improve, attention and resources have shifted
from offline to online and mobile where marketers see greater growth
opportunities.
In light of these challenges, I decided to write this book with two
objectives in mind:
First, the mounting pressure to gain deeper insights into their cus-
tomers and improve the effectiveness of marketing programs, especially
in the four traditional marketing channels: direct mail, catalog, e-mail,
and loyalty programs.
Although more attention and resources have shifted to online and
mobile, for most multichannel retailers, traditional marketing programs
still account for more than 70 percent of the marketing budget. How-
ever, in the last decade, ROIs of these programs have plateaued or even
declined year-over-year. While some of the existing known methodol-
ogies still working, overall, they are becoming less effective. Marketers
must explore new ways to improve the performance of these programs.
This book satisfies their needs by focusing on using innovations in analyt-
ics to boost the ROIs of these traditional marketing programs.
Second, the need to find low-cost analytics solutions for small- to
medium-sized companies. Small- to medium-sized companies approach
marketing the same way as their larger competitors do with one disad-
vantage: They have a much more modest marketing budget and a smaller
analytics team. This book proves to them that analytics is not an expensive
cost center. Instead, it is an equalizer that democratizes the competitive
advantages between the large and the small. The book shows how small-
to medium-sized companies can leverage analytics with just a fraction of
the marketing budget of large companies to achieve at least equal if not
better results than their larger competitors.
This book is also relevant to analytical professionals who have two
unmet needs:
I hope that readers find that this book serves not only as a compass
but also a detailed roadmap toward the success of marketing analytics.
CHAPTER 1
Chapter Overview
Why has analytics missed the mark? This chapter first explores the main
reasons responsible for the lackluster performance of marketing ana-
lytics and then introduces three prevailing analytics maturity models
that not only will help organizations to recognize their analytic matu-
rity state but also provide macrolevel solutions to achieving analytic
successes.
This chapter is organized as follows:
1
CMOSurvey.org. February 2018. “The CMO Survey.” https://cmosurvey.
org/wp-content/uploads/sites/15/2018/02/The_CMO_Survey-Highights_and_
Insights_Report-Feb-2018.pdf
2
CMOSurvey.org. February 2018. “The CMO Survey.” https://cmosurvey.
org/wp-content/uploads/sites/15/2018/02/The_CMO_Survey-Highights_and_
Insights_Report-Feb-2018.pdf
3
Simpson, J.E. 2017. “Tracking Your Marketing Efforts: Why It’s Important and
How to Start.” Forbes.com, October 16, 2017, https://forbes.com/sites/forbesa-
gencycouncil/2017/10/06/tracking-your-marketing-efforts-why-its-important-
and-how-to-start/#1e88ba9d31e8
Why Has Analytics Missed the Mark? 3
Data Problems
Data make or break a business because that data fuel marketing analytics.
Commonly seen issues with data are as follows:
1. Poor data quality. Poor quality data include inconsistent data, miss-
ing data, wrong data, duplicate data, and outdated data. Several rea-
sons for poor data quality include:
• Lack of budget for timely data merge and hygiene. For
instance, one customer may have multiple records in the
database under different names;
• Outdated store POS system that is unable to capture key
customer information;
• Human error. For instance, sales rep typed the name wrong
into the database;
• Data value is not consistent across all databases because IT
only updates selected databases;
• External data feeds were not imported into the databases
promptly;
• Data dictionary was created by IT, not by the businesspeople.
2. Scattered and disconnected data. Data are typically owned and main-
tained in separate systems by separate departments across organiza-
tional silos. There is(are) no common variable(s) that can stitch them
together. For instance, the CRM database, social, e-commerce, and
call center data are stored in different databases, and they disconnect
from each other.
3. Inaccessibility to data. Data are not available to all stakeholders.
Because data are isolated in different systems and places, marketers
cannot access some of the critical pieces of information about custom-
ers. A typical example is that e-commerce, call center, and marketing
team are three separate business units, and the e-mail marketing team
typically does not have access to the CRM database, and vice versa.
4. Insufficient data breadth. Many people say we are living in an era of
big data overflow. While companies do seem to have far more data
than they can process, the reality is that due to budget constraints and
technical difficulties, they do not have enough useful data that can
4 Highly Effective Marketing Analytics
be leveraged for analytics and action. Useful data include both struc-
tured data and unstructured data. The structured data are data stored
in a relational database such as customer demographics, behaviors,
campaign responsiveness, product usage, cross-channel interaction,
and so on; the unstructured data are data that aren’t stored in a fixed
record length format. Examples include documents, social media
feeds, digital pictures and videos, call center interactions, on-site
interactions, survey opinions, and so on. Lack of data breadth limits
an organization’s ability to gain deeper insights into its customers.
5. Not using external data. There are two reasons why some companies
are not taking advantage of external data. First is lack of budget.
Companies, especially small- to medium-sized companies, do not
have a budget for purchasing external data such as customer demo-
graphic, geographic, and attitudinal information. Second, although
there are so many data (i.e., economic, job, population, weather,
housing, etc.) available free to the public that can be used for research
and modeling, some analysts are either not aware of them or do not
know where to find them from public domains.
6. Poor data management and governance. Many companies do not have
an effective data governance strategy. There are no good QA and
QC procedures in place to ensure the integrity of the data. Data
dictionary was not created or updated promptly. Data processing
procedures were not properly written and archived; knowledge got
lost in transitions after key personnel left or because of the change of
service providers.
Some commonly seen problems include but are not limited to:
• Outdated and rigid legacy data system. For instance, the outdated
store POS system is unable to store some key customer data.
Replacing such a system requires a lot of money. In some cases,
the database is so old that the database administrator dares not
make any changes to tables for fear that any significant changes
will trigger a collapse of the entire database system.
Why Has Analytics Missed the Mark? 5
Like any other projects, support from executives is critical to the success
of analytics. Organizations need analytical leaders to set and clarify strate-
gic objectives and ensure appropriate project funding. Analytical leaders
help secure resources, provide project governance, create high-level orga-
nizational buy-in from all stakeholders, manage risks, and make critical
8 Highly Effective Marketing Analytics
Company Silos
Metrics are quantifiable measures that are used to monitor and evaluate
financial performance, reveal the truth about performance, and provide
an actionable way to achieve overall business strategies and goals. Key per-
formance indicators (KPIs) are a subset of metrics that provide a simple,
insightful snapshot of a company’s overall performance, as well as reli-
able, real-time information for effective decision making. Continuously
tracking the trends of KPIs for an extended period will help highlight any
issues that might otherwise go unnoticed and discover hidden opportu-
nities for further growing your business. However, in reality, quite a few
companies make decisions without using the right metrics, thus resulting
in low ROI of marketing initiatives. For instance, recently, quite a few
multichannel retailers repositioned print catalogs as a branding tool to
raise brand awareness and drive traffic to other channels. Did all these
retailers make the decision based on KPIs such as customer lifetime value
and incremental margin? Probably not. A couple of them I knew made
that move simply because other retailers did so.
So, how to fix these problems and improve the ROI of your invest-
ments in marketing analytics? The first step, of course, is to identify the
Why Has Analytics Missed the Mark? 11
gap between you and those analytically competitive firms. Below I’d like
to introduce you to four analytics maturity models that will help you not
only recognize where you are at on the analytics maturity curve but also
get you on the right path toward analytical success.
4
Davenport, T.H., and J.G. Harris. 2007. “Five Stages of Analytic Competi-
tion.” Computerworld, September 17, 2007, https://computerworld.com/arti-
cle/2553020/five-stages-of-analytic-competition.html
5
Gartner Press Release. 2018. “Gartner Data Shows 87 Percent of Organiza-
tions Have Low BI and Analytics Maturity.” December 6, https://gartner.com/
en/newsroom/press-releases/2018-12-06-gartner-data-shows-87-percent-of-
organizations-have-low-bi-and-analytics-maturity
Why Has Analytics Missed the Mark? 13
6
Mauschbaugh, P. “Why Analytics maturity Matters.” Thoughtspot.com, https://
thoughtspot.com/fact-and-dimension/why-analytics-maturity-matters
16 Highly Effective Marketing Analytics
• Analytics Marketer;
• Leadership;
• Analytics Scientist;
• Data and Technologies; and
• Analytically Driven Culture.
Davenport, T.H., J.G. Harris, and R. Morison. 2010. Analytics at Work: Smarter
7
Bernie Sensale was my boss when we both worked for Zale Corp
almost 20 years ago. Shortly after Bernie became the chief marketing offi-
cer of Zale Corp, he quickly identified several major analytics issues with
the marketing department:
1. Department silos. Zale Corp once owned six major brands: Zales,
Gordon’s, Bailey Banks and Biddle, Piercing Pagoda, and People’s
and Mappins Jewelers in Canada. Each brand had its marketing
team responsible for doing similar activities such as creating market-
ing campaigns, working with creative vendors and print workshop,
conducting campaign analysis, and so on. The analytical skills of
marketing analysts were different across these different brands, but
they did not share the best practices among themselves.
2. Data were not updated on time. The organization collected customer
and transaction data efficiently, but data were merged, cleaned, and
updated by a third-party vendor every 45 days. Lacking the ability
to update customer data in a timely manner caused many customer
complaints. For instance, a customer requested his or her name be
removed from the mail list, but because the call center rep couldn’t
22 Highly Effective Marketing Analytics
work equally well as those big-name tools and will save a huge amount
of money for the organization. That is why I always say that it is totally
possible that small- to medium-sized organizations can achieve the same
or even greater significant analytics success with just a fraction of the costs
of their large competitors.
Conclusion
The disappointing results of analytics initiatives were typically caused by
one of or a combination of several issues relating to data, technologies,
leadership, analytics people, organization structures, process, and corpo-
rate cultures. To achieve success with analytics, firms need to take advan-
tage of Davenport’s Five Stages of Analytics Maturity Model to recognize
their analytic maturity state and then follow Davenport’s DELTA model
and Wayne’s analytical framework to improve their analytics capabilities.
Sometimes, a fundamental shift in organizational structure, skills, and
culture is required.
Small- to medium-sized companies approach marketing the same way
as large companies do. They have unique advantages and disadvantages
when it comes to analytics. Complementing Davenport’s DELTA model
and Wayne’s analytical framework that is more suitable for large organi-
zations, Mu’s ALADA analytics maturity model was specially developed
for small- to medium-sized companies to break through the budget and
technical constraints and transform their organizations into analytical
competitors as well.
Analytics leaders should also be aware that while these analytics matu-
rity models have revealed the secrets to improving analytics’ capabilities,
they are more a compass than a detailed roadmap. Therefore, in real
life, innovations in analytics at more granular levels are encouraged and
required.
In the rest of the book, we will explore how to leverage marketing ana-
lytics to improve ROIs for a variety of marketing channels and how to use
the right metrics and KPIs to measure the effectiveness of marketing pro-
grams so that marketers can maximize the ROI of their marketing dollars.
Index
ACLTV. See Acquisition customer key performance indicators, 10–11
lifetime value lack of analytics marketers, 7
Acquisition customer lifetime value lack of executive support, 7–8
(ACLTV) right metrics, 10–11
applications of, 183–188 scarcity of analytics professionals
Arthur Hughes’ formula, 180–181 and skills, 8–9
B2B App start-up, 179–180 technology and IT support issues,
business applications, 176 4–5
forward-looking/backward-looking Analytics culture, 14
metric, 175–176 Analytics marketers
group level calculation, 174–175 in ALADA model, 17–20
methodology for business model, lack of, 7
177–186 Analytics professionals and skills,
for specialty sports retailer, scarcity of, 8–9
181–186 Analytics scientists, 23–24
time horizon, 175 Automating triggered e-mail,
Acquisition vs. retention, 211–212 138–139
Active customer segment groups, 45
ALADA model Behavioral segmentation, 32–35
analytically oriented culture, 25–26 Branding tool, 108–109
analytics marketers, 17–20 Business-to-consumer (B2C)
analytics scientists, 23–24
data and technologies, 24–25 business, xv
leadership, 20–23
vs. other analytics maturity models, Catalogers difficulties, 104
17 Chief marketing officer (CMO)
for small- to medium-sized firms, Survey, 2
17 CLTV. See Customer lifetime value
Analytical aspirations, 11 Company silos, 9–10
Analytical companies, 11–12 Compiled lists, 123
Analytical competitors, 12 Contractual continuous purchase
Analytical intelligence, 23 model, 177
Analytical leaders, 20–23 Contractual discrete purchase model,
Analytically impaired, 11 177
Analytically oriented culture, 25–26 Cooperative database, 124–125
Analytical maturity, 14 Creative catalogs, 126–128
Analytical professionals, xiii–xiv Creative intelligence, 23
Analytics CRM. See Customer relationship
company silos, 9–10 management
data problems, 3–4 Cross-channel attribution, 210–211
definition of, 1 Cross-departmental team, 143,
investment decisions, 5–7 166–167
220 Index