The power of data analytics
Small businesses vary in usage of big data
Increased access to Big Data has impacted small businesses in many ways, but when it comes to marketing analytics it has thrown the door wide open. Marketing gurus generally think this is a good thing and enthusiasm for using analytics to shape marketing strategy has skyrocketed — though voices of reason caution against headlong flight into complete reliance and the costs that come with it.
According to the February CMO Survey, which measures marketing industry trends, companies are currently spending just under 7 percent of their marketing budgets on marketing analytics, but expect this to rise to more than 11 percent in the next three years. This also comes in conjunction with a trend that sees marketing budgets becoming a bigger part of companies’ overall budgets, currently about 12 percent on average, up from 8 percent five years ago.
The big ones — IBM, SAS and Google to name a few — have all jumped into marketing analytics and offer services for both big and small businesses alike, but there also are numerous startups that offer services that can fit specific niche markets or smaller budgets. These companies include Nanigans, Resonate and Viralheat.
Put into practice, marketing analytics help small business in a number of ways, including maximizing online marketing, keeping better track of customer sentiment and buying patterns, as well as providing a more effective way to figure out what marketing strategies work the best.
They also are changing the role of marketing within companies.
David Edelman, a principal with McKinsey & Company in Boston, says that the rise of marketing analytics has caused more of an emphasis on customer experience than in the past when the main focus was getting products out into the market, promoting them and steering customers to buying products.
“Now we are seeing more focus on the broader customer experience — thinking about the whole end-to-end journey of what the brand is presenting to the customer,” Edelman said.
One of the reasons for this is that marketing analytics have shown that keeping customers engaged with a brand is more valuable than just focusing on that one purchase, because brand loyalty will lead to more purchases in the future.
This has pushed the role of marketing up the business priority ladder.
“Marketing is taking on a way more expansive role than just getting messaging out the door or just narrowly managing advertising. They are really stepping forward and saying ‘How can we drive growth?’ They are looking at the top line. They are looking across all the different ways to engage customers, and they are trying to mobilize across a broader range of functions than they controlled before to get a growth agenda going,” Edelman said.
Tracking data use
National small business support organization, SCORE, which works very closely with the U.S. Small Business Administration, recently released its own report on how small businesses are using marketing analytics to track business growth and increase opportunities. The intent was to show how and why small businesses are using marketing analytics.
The data SCORE collected highlighted:
Small businesses that use marketing analytics show increased profits and marketing return on investment. Their top three priorities include:
- 73 percent: To find new customers
- 67 percent: To retain existing customers
- 65 percent: To improve the current customer experience
Just over half of small business owners believe that marketing analytics are critical and use the following types of analytics:
- 83 percent: Email marketing reports
- 64 percent: Website analytics
- 52 percent: Social media analytics
The most commonly used metrics to track and measure the efficacy of their marketing efforts are:
- 52 percent: Email clicks, response and conversion rates
- 51 percent: Website page views, time on site/page and registrations
- 42 percent: Volume, quality and origin of web traffic
However, it is also interesting to note that the SCORE report also found that only 45 percent of small businesses track marketing analytics. Those that don’t cited the following reasons for not doing so:
- 42 percent: Time restraints
- 28 percent: Lack of knowledge
- 22 percent: Prohibitive costs
Like Edelman, fellow McKinsey executive Matt Ariker, chief operating officer of the company’s Consumer Marketing Analytics Center, has been vocal about the impact of marketing data on current practices. Ariker and other marketing analysts worry about the kind of pattern that the SCORE report highlights in finding that close to half of the business that use marketing analytics don’t even track the impact. While the positives of using marketing analytics abound, it still breaks down to two important questions: Does marketing analytics improve profits or return on investment? And are companies using marketing analytics effectively?
Ariker voices a word to the wise about marketing analytics strategies by cautioning against what he calls a “peanut butter” approach — spreading the data around to change all aspects of marketing strategy.
According to Ariker, this often results in a poorly-defined strategy of how to use marketing analytics throughout the company, lack of focus on what works the best and how to apply that successfully to company practices. His best bet is to use analytics for one or two marketing activities at first, and expand from there.
He suggests the best way to choose where to start is to focus on areas that have the highest expected impact, the time necessary to develop and put changes in place and fit in with current business strategy. It is also important to consider potential impact on customer perception, the internal capabilities to handle marketing strategy changes and the potential obstacles to using analytics successfully.
Ultimately, he concludes that marketing analytics can have a big impact on a company’s growth, but if owners and executives cannot figure out how to use them effectively for their business they can end up being just another expense eating into the bottom line with little pay off at the end.