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It's Not the Size of the Data It's How You Use It
Smarter Marketing with Analytics and Dashboards
By Koen Pauwels AMACOM
Copyright © 2014 Koen Pauwels
All rights reserved.
ISBN: 978-0-8144-3395-9
CHAPTER 1
Marketing Analytics Dashboards: What, Why, Who, and How
Data is prolific but usually poorly digested, often irrelevant and some issues entirely lack the illumination of measurement.
—JOHN D.C. LITTLE, 1970
LITTLE'S QUOTE RINGS AS TRUE TODAY as it did more than forty years ago, reflecting the tension between the abundance of marketing data at our disposal and the lack of actionable insights that derive from it. The advent of the Internet and recent availability of "big data" have only increased the need to distill relevant information from a wealth of data. Don't get me wrong: I love big data, but, as with other things in life, it's not about size, but what you do with it. Managers I've worked with across industries and countries know that more data does not mean more insights for action. While many feel overwhelmed by big data, others feel they don't have enough of the right data to connect each marketing action to profit outcome. For example, a bricks-and-clicks client contrasted the wealth of information provided by Google Analytics with its inability to match direct mail lists with sales or to attribute a purchase to a specific marketing action (see the case study "The Right Chair #1" later in this chapter). They wanted a marketing analytics dashboard that connected online and offline marketing, metrics, and profits, and allowed the decision makers to run easy what-if scenarios. Feeling comfortable with comparing different plans, they ran a field experiment proving a fourteen-fold increase in profit—as promised by the analytics behind the dashboard.
Wouldn't it be great if you could drive your company like a car or a plane? Thousands of bits and pieces of potentially important information feed into the few metrics that show up on your vehicle dashboard. You don't need to know everything that is under the hood to drive the vehicle!
In the last decade, the implementation of data analytics and dashboards has generated and saved millions of dollars at hundreds of firms, some of which I was fortunate to work with. Firms are using dashboards to track marketing effectiveness and guide decision making in industries as disparate as business communication (Avaya), online services (Google), financial services (Ameritrade, Morgan Stanley), systems integration (Unisys), technology and electronics (SAP, Lenovo), fast-moving consumer goods (Heineken), and manufacturing (Timken).
SAP and Vanguard provide excellent video case studies on the benefits of dashboards—and the currently unfulfilled opportunities they present. Their dashboards measure outcomes important to each business, intermediate funnel metrics, their marketing campaigns, and other activities that drive them. The SAP video shows how an individual decision maker uses the dashboard, while the Harvard video case on Vanguard4 shows how the dashboard is used in group decision making, in this case an executive meeting. As a result, marketing has moved from an expense to an investment with measurable returns.
Still, most current dashboards fail to leverage data analytics to provide the needed insights for action. Vanguard CMO Sean Hagerty acknowledges: "What is missing is the connection between the individual activities and those outcomes. The next question is: how do you link the long-term measures to the short-term measures? So do awareness and image attributes translate to sales? And I don't know how to answer the question. That I think is the Holy Grail. We have not really solved that." Indeed, many managers continue to be disappointed with their ability to connect marketing actions to key performance indicators and ultimately to the financial outcomes (sales, profits, stock market capitalization) that matter to the company and pay the bonuses of C-level executives. The current frustration or fatigue rests with "reporting dashboards." Reporting dashboards simply track metrics without showing which matters most to performance, and they don't permit the user to shift marketing budgets around and compare the predicted outcome in what-if analyses. Enter "marketing analytics," which provides the backbone of the visually attractive dashboard face.
Marketing analytics translates rich data into actionable insights and what-if analyses to test different scenarios. The case study below illustrates that analytics can yield a huge competitive advantage even for small and medium-sized enterprises (SMEs).
Answering questions like these can lead to an improved understanding of the role of marketing communications activities and planning of appropriate strategic actions. Throughout this book, you will learn about how Inofec overcame obstacles along the journey, including database creation, dashboard implementation, and the design of a field experiment that demonstrated a fourteen-fold profit increase over the status quo.
WHAT IS A MARKETING ANALYTICS DASHBOARD?
Just like your car's dashboard, a marketing analytics dashboard brings the firm's key market-based metrics into a single display. It provides a concise set of interconnected performance drivers to be viewed in common throughout the organization.
Inofec's dashboard is shown in Figure 1–1. It is but one example of what a dashboard might look like. Hundreds of alternative designs are available at dashboardspy.com, and Chapter 11 helps you to choose among them to fit your needs best.
Let's break down the key elements of the dashboard definition:
* Concise set: A dashboard's purpose is to help users focus their attention on a few metrics. However, different users often focus on different metrics (typically the ones they can influence and/or that they are evaluated against), and some people are comfortable with more metrics than others, much like an airplane pilot navigates a bigger dashboard than a car driver does. Dashboards solve this issue by allowing users to customize the display to the user's preferences and to "drill down" to different page views with more detailed metrics.
* Interconnected: A simple scorecard of metrics does not make a marketing analytics dashboard: The dashboard should help users understand how the business works and how their (proposed) actions can change the (predicted) performance! To this end, a dashboard needs an underlying (back-office) model that connects the metrics. In the Inofec dashboard shown in Figure 1–1, the user changes the marketing inputs and watches the projected profits (based on the analytics) change in real time. The next case study, "Cars: From Begging HQ to Talking Trade-Offs," illustrates the importance of the analytics dashboard for a major car company. Just like car drivers, dashboard users need to know what happens when they hit the brakes or shift gears, but they don't need to know exactly how the engine operates under the hood. Still, the existence of the engine is crucial.
* Key performance drivers: The presented metrics have been shown to be important, leading indicators of performance, either by experience and/or by scientific testing in the underlying model. We have seen many cases in which managers got obsessed with metrics that did not drive results. A good dashboard refocuses its users on the metrics that truly matter.
* To be viewed: Dashboards visualize information through devices such as gauges, charts, and tables, often color-coded for easy summarization.
* In common throughout the organization: A dashboard makes it easy to share information and to get all stakeholders on the same page (often literally). There's still plenty of room for discussion on how to interpret the facts and what to do next, but at least it is clear what the facts are. Many companies also share dashboard views with partners such as suppliers, agencies, and customers, which helps to align the supply chain around common goals.
Integration Is King
Integration is key to each of the elements above, and is the clear but tough-to-achieve answer in today's challenging times. Organizations need integration on at least three levels:
1. Data. Understanding the firm's market and its position within the market requires information and data from diverse sources at different levels of aggregation and covering different time periods. The dashboard provides a common organizing framework.
2. Processes. The dashboard helps management relate inputs, such as marketing expenditures, to measures of market performance, such as market share and sales and ultimately of financial performance, such as profits, cash flows, and shareholder value, thus building a bridge between internal and external reporting.
3. Viewpoints. Whether assessing the market, performance, or planning, a dashboard allows different executives, in different departments and locations, to share the same, equally measured input (i.e., to view the firm's market situation in the same light).
Why Integration Is Lacking in So Many Organizations
At one extreme, different systems and departments often use their own metrics, based on their own data, processes, and viewpoints. How can marketing and finance agree if they don't speak the same language? At the other extreme, some companies wrongly believe in one "silver bullet" metric that captures all that is important. A single metric may have worked, for example, for an encyclopedia salesman, selling a single durable product on commission while facing little local competition. For organizations, however, the evidence is clear: The silver bullet metric is an illusion. Organizations have both short-term and long-term interests; they need to consider both qualitative and quantitative information and must be able to differentiate the performance impact of their own actions from the influences of the environment.
In sum, a marketing analytics dashboard:
* Offers integration of diverse business activities, some of them qualitative, with performance outcomes.
* Measures both the short-term results of marketing and the long-term health of the marketing asset.
* Isolates the effects of marketing actions from the other influences on corporate performance.
WHY MARKETING ANALYTICS DASHBOARDS?
Marketing analytics dashboards respond to the increasing complexity and diversity of marketing data faced by senior management in the information age—of which the Cars case study is just one example. In our experience across industries and firms, managers mention at least four factors driving the need for dashboards: poor data organization, managerial bias, increasing pressure on marketing, and the need for cross-departmental integration.
Poor Organization
Data overload is obvious in the fragmentation of media, multichannel management, and the proliferation of product lines and services. Information technology makes it possible for firms to collect and analyze data on customer activities across touch points and channels.
Unisys, for example, gathers hundreds of metrics generated by brand tracking, CRM programs, tradeshows, media reports, satisfaction studies, and blogs. Service- and contract-based markets always give firms individual-level data, but online tracking of browsing use now does so for virtually any company. This proliferation requires greater data organization as indicated in the successful examples of the "information-based strategy" at Capital One or "information-based customer management" at Barclays Bank.
Managerial Bias
Human processing capacities remain limited, and research has demonstrated the presence and danger of managerial biases arising from shortcuts in information processing and decision making. For example, managers anchor their new decisions based on old decisions and do not adjust enough based on incoming information. The result is that brands and regions that got large marketing budgets in the past will continue to get large budgets, even if the money is now more useful elsewhere.
Firms that see analytic capabilities as a key element of their strategy outperform their peers since they know what products their customers want, what prices those customers will pay, how many items each will buy, and what triggers will make people buy more.
Increasing Pressure on Marketing
CEOs, CFOs, and CMOs demand more accountability from the marketing department. Marketing is challenged both to drive growth and to keep costs under control, with the immediate focus on either objective swinging with the business cycle. Broad surveys of marketing and nonmarketing professionals consistently reveal increased expectations regarding marketing accountability as well as its effect on the marketing department's influence within a company.
The goals of the typical marketing department have been revealed as disconnected from companies' leadership agendas. As a result, CMOs are advised to agree on a "marketing contract" with the CEO that specifies exactly which metrics marketing is supposed to improve. In this regard, a dashboard helps ensure everyone is "on the same page" to detect and discuss marketing successes and failures.
The Need for Cross-Departmental Integration
The ability of marketing to reach across functions to accomplish company goals is an increasingly important determinant of its success. Many firms have integrated marketing, innovation, and strategic growth leadership into a single corporate function. Companies facing disruptive cross-national mergers and global expansion especially need integration. This brings together marketing departments with different values, performance metrics, and reporting practices. Standardized tools and processes for efficiency are key to driving growth in such organizations.
WHO USES MARKETING ANALYTICS DASHBOARDS?
The benefits of marketing analytics dashboards are relevant to companies of any size and in any kind of industry. This book provides dozens of case studies in companies ranging from sixty employees to hundreds of thousands and in industries ranging from fast-moving consumer goods to online travel. In the broader area of dashboards (not necessarily connected to analytics), the footnotes for this chapter list over 200 companies, including:
* Business communication (Avaya, Cisco)
* Consumer credit (Capital One)
* Education (Montgomery County Public Schools of Rockville, Maryland)
* Fast-moving consumer goods (Heineken)
* Gaming (Harrah's)
* Government (Connecticut Economic Dashboard, Atlanta Dashboard)
* Hospitality (Hilton)
* Investment banking (Morgan Stanley)
* Mutual funds (Vanguard)
* Online services (Google)
* Systems integration (Unisys)
* Technology (SAP)
* Transportation (Virginia)
* TV broadcasting (British Sky)
As to who within these companies uses dashboards, users come from all management levels. We have seen dashboards used by CEOs, CMOs, CFOs, and COOs; by brand managers, marketing specialists, production managers, and R&D managers; by the sales force, you name it.
HOW CAN A MARKETING ANALYTICS DASHBOARD HELP YOU?
A marketing analytics dashboard can help you in several ways. In particular, they help you provide better and faster answers to typical management questions:
1. What happened? Dashboards enable consistent measurements and regular monitoring.
2. Why did it happen? Analytics dashboards relate management action to key performance indicators and hard performance.
3. What will happen if? Analytics dashboards enable what-if analysis to predict the perfomance outcomes of alternative scenarios and plans.
4. What should happen? Analytics dashboards allow you to optimize or at least improve decisions and communicate this process more transparently.
Several well-known companies have experienced these benefits.
A dashboard enforces consistency in measures and measurement procedures across departments and business units. For example, Avaya operates in over fifty countries and diverse markets, with varying marketing tactics. Before the dashboard project, the company had no commonality of systems around the globe (limiting data gathering), different definitions of what constitutes a "qualified lead" (a key performance metric in the hand-off from marketing to sales for business-to-business companies), and a lack of regional interest in gathering metrics.
A dashboard helps to monitor performance. Monitoring in turn may be both evaluative (who or what performed well?) and developmental (what have we learned?). Google provides a good example: Dashboard metrics are early indicators of performance, and if a dip occurs in, for example, the "trust and privacy" metric, the company takes corrective action.
A dashboard may be used to plan (what should our goals and strategies be for the future given where we are now?). For example, Ameritrade started with corporate scorecards from the strategic planning department to develop a dashboard that plugs in to the planning cycle and is tied to quarterly compensation.
(Continues...)
Excerpted from It's Not the Size of the Data It's How You Use It by Koen Pauwels. Copyright © 2014 Koen Pauwels. Excerpted by permission of AMACOM.
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