How Big Data is Transforming Marketing into a Strategic Function

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1 How Big Data is Transforming Marketing into a Strategic Function The challenges are equal only to the opportunities. Savvy companies that capitalize on big data and change the way they sell can earn more profits more effectively. Tel Highview Terrace Hawthorne, NJ

2 Table of Contents Contents Executive Summary 1 The Marketing Landscape Has Changed 2 The Roles of CIOs and CMOs are Shifting 3 Big Data is Accelerating Change 4 The New Model of Marketing is Clear 5 To Learn More 6 Company Information 6

3 Pg. 01 Executive Summary Marketing is a strategic function that provides a high-roi opportunity to accelerate sales and profits Executive Summary It s getting harder and more costly to acquire customers Increasing print and media costs, shifting customer behavior, the rise of social media and growing privacy concerns are all making it more difficult and expensive to target, acquire and retain customers. Savvy firms that want to grow profitably need to look beyond traditional marketing efforts. The roles of the CIO and CMO are converging Firms increasingly demand a real-time, 360-degree view of their prospects and customers. In support of this, CIOs are increasingly looking for greater insights and CMOs are increasingly in search of greater analytical grounding. Firms serious about growth encourage and support the partnership between these two roles. Big data is accelerating the pace of change Big data is real, and it is here to stay. Companies that are able to harness the power of big data outperform those who fail to take action. Big data is transforming data analysis from a backward-looking statistical analysis to understand what happened into a forward-looking predictive analysis to forecast what will occur. A more holistic approach to marketing is required Marketing is transforming from a service group into a strategic function that offers a high-roi investment opportunity for savvy players. In order to exploit these opportunities, firms need to ensure that every marketing effort is designed and implemented with the appropriate metrics and with input across the organization. Jonty Yamisha Principal, The Kabardian Group Q3, 2013

4 Pg. 02 The Marketing Landscape Has Changed It s getting harder to reach customers, more expensive to acquire them, and less profitable to retain them. But this need not be the case. Marketing used to be a cost-center. It is turning into a high-roi growth opportunity. The Marketing Landscape Has Changed Marketing is more challenging, time-consuming and (for some) expensive than it s ever been. Print costs for marketing are growing $0.50 $0.45 $0.40 $0.35 $0.30 The costs of printing direct mail pieces has been increasing over the last decade. From , the average cost of a simple postage stamp has increased by 39.4%. These cost trends are expected to accelerate, even as 2000 Source: US Postal Service 2013 response rates for direct mail remain relatively flat. Direct mail is still a valuable part of the marketing mix, but business that want to add more customers and earn more profits need to expand into digital channels. Social media is on the rise More and more companies are including social media as part of the marketing mix. Social media provides a relatively inexpensive channel through which to engage customers and prospects in a twoway Twitter LinkedIn Facebook 74% 71% 70% dialogue. It is also a great channel to cultivate YouTube 56% brand awareness and get people talking about your Google+ 13% business, but social media is difficult to monetize. 0% 20% 40% 60% 80% Source: emarketer, % of firms using social media At the same time, customer behavior is shifting and their privacy concerns are growing. Increasingly, prospects and customers are concerned about sharing their personal data, and regulatory shifts are making it harder to share such data even as digital channels makes it sometimes easier to gather such data. The simple fact is that the days of discrete marketing campaigns are coming to an end. Today s firms need to engage prospects and customers in a constant campaign that targets people based on their personal preferences not mere interests. This shift means that companies serious about growth need to bring a holistic approach to their marketing efforts. This includes multi-channel marketing efforts that allow prospects and customers to engage seamlessly through any medium they chose, whenever they want. Responding to the challenge means transforming the marketing function from a simple cost center into a high-roi investment in growth. Sadly, few companies have the organizational or technological capabilities to capitalize on these emerging opportunities.

5 Pg. 03 The Roles of CIOs and CMOs are Shifting Responsibilities of the CIO and CMO are increasingly converging. These actors are in the driver s seat to lead organizational change. Roles used to be uncoordinated support functions. The Roles of CIOs and CMOs are Shifting CIOs have historically served as business enablers, taking responsibility for the enterprise technologies that allow firms to manage their businesses. CMO s have historically been tasked with designing, implementing and managing marketing efforts that support sales. The former has traditionally been a more analytical role, while the latter has traditionally been more creative. Those days are over. In today s data-rich digital marketing eco-system, both CIOs and CMOs need to move beyond these stereotypical role definitions in order to develop and manage a holistic, real-time, 360-degree view of prospects and customers. For the CIO, this requires an understanding of the customer insights necessary to make sense of data. For the CMO, this means turning these insights into informed decisions about where and how to invest marketing dollars so as to generate more sales and profits. Data-rich environments sit at the center of these two vectors and provide a great means by which the CIO and CMO can partner and support each other. In partnership, the CIO and CMO can share the roles of designing the user experience most likely to yield the greatest insights and / or sales outcomes given each of their respective areas of subject matter expertise. These roles are increasingly highly coordinated partnerships that are leading organizational growth and transformation. Benefits when CIOs and CMOs collaborate This, in turn, requires more than collaboration. It requires the organizational will to support this partnership, the willingness to take guidance from insights delivered as a result, and the platforms necessary to harness and interrupt the data necessary to facilitate all of the above.

6 Pg. 04 Big Data is Accelerating Change Big data is an investment firms can t afford to avoid. Big data opportunities are not just for big business. Smaller firms can benefit as well. Data analysis used to be a topdown, backward looking exercise to understand what happened. Big Data is Accelerating Change Big data was little more than a theoretical concept just a few years ago. Since appearing on the scene, spending on big data has grown in the high double digits; according to Gartner, spending on big data grew to $13.1BN in Companies large and small are increasingly looking to harness big data in order to lower the costs of acquiring, converting and retaining customers. Big data refers to a data set so large and complex that it stands just beyond the ability of most analytical tools, methods and instruments. The definition is fluid there is no magical number that qualifies as big data because technology is always evolving. As long as there are more ways to collect data, and as long as computer processing power and storage capacities are growing, there will be big data. Big data is valuable for several reasons Big provides greater insight into a given phenomenon (i.e. customer acquisitions) that informs investment decisions over marketing and other resources. Big data also allows for real-time monitoring, simulations and relatively inexpensive experiments. Tracking, analyzing and responding to customer behavior in realtime allows organizations to fine-tune how they interact with prospects and customers nearly instantly. At the Source: Gartner same time, this same data allows for testing hypotheses and the rapid introduction of new services, offerings and promotions with relative ease. Big data allows for bottom-up, forward looking predictive models that improve the efficiency of sales, marketing and retention efforts. Finally, big data provides a complement (not a replacement) for human-based decision-making. The art of management is to make informed decisions with imperfect information. Big data helps close the gap, but with every answer, there are always more questions, and automated data analysis will never be a substitute for good judgment. Companies that understand this and leverage big data can achieve better ROI and stronger customer retention than companies that fail to grasp these implications. All of these factors underscore two undeniable facts about data: It is Source: Gartner here to stay, and firms that leverage the power of big data enjoy greater growth and profitability than those that do not.

7 Pg. 05 The New Model of Marketing is Clear Firms can no longer afford to view marketing as a support group. The New Model of Marketing is Clear Just a few short years ago, marketing was a function that was handed orders and asked to deliver. In today s world of big data, and the shifting roles of CIOs and CMOs, this model just won t work any longer. Today s firms need a more holistic approach whereby marketing is a process in which every part Marketing is a strategic function that requires a holistic process that spans the organization. Investment decisions, goals and metrics need to be harmonized across product, finance, IT and operations. Firms that adopt this approach will be able to improve the efficacy of their existing marketing efforts, do more with less and ultimately achieve greater profitability. of the firm engages. In order to meet a company s strategic and financial goals, firms need to ensure that marketing is a function that includes: Product development Customer Relationship Management (CRM) Brand management & brand equity Short-term financial metrics (cash flow, revenue & profit) Longer-term ROI metrics like the NPV of a campaign or customer over time Marketing is increasingly turning into a strategic function at many firms, and one where decisions are less about look and feel and more about hard financial metrics. Companies that heed the trends and advice described in this paper are already one step ahead of the competition. The next step is to revamp the process by which marketing efforts are designed and the metrics by which they are evaluated. An illustration of our model on how to accomplish this is provided in the figure below. Purchasing frequency Low High Revenue Long Short FACT: Most firms are struggling to maintain campaign-level ROI Product Financial Maximize ROI of campaign Maximize customer LTV Customer Campaign t Promotional considerations Acquire new Retain existing Grow (cross sell) Campaign Cost / lead Cost / sale Sales / customer (products) Sales / customer (revenue) Revenue / customer Profit / customer Direct response Sale Delayed response Consideration Brand awareness Loyalty FACT: Smart firms are investing to maximize customer life-time value Response Text / search Display Sponsorship Rich media Social media Mobile Traditional media

8 Pg. 06 To Learn More About the Kabardian Group We help clients achieve profitable growth. Short, simple and to the point. Our clients include companies large and small and at every stage of development, including startups. To Learn More Does your firm have a clear sense of the metrics is should be using to evaluate its marketing investments? Are these metrics short-term (e.g. cash) or longer-term (e.g. NPV of a cash outlay)? Are these metrics evaluated by geography, product set or customer segment? How involved is finance in the marketing process? How coordinated are your firm s CIO and CMO? If your firm lacks one or both of these functions, what are you doing to take advantage of big data opportunities? If you would like to discuss any of this, feel free to contact us this paper s author. Jonty Yamisha Principal, The Kabardian Group Tel We specialize in the following areas: Research & customer insights Company Information [Company] 150 Highview Terrace Hawthorne, NJ Tel Strategy, innovation & growth Digital marketing & sales

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