5 Obstacles to Marketing Intelligence What Stops Us From Achieving Marketing Greatness
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In the first 2 lectures, I gave you an i introduction to what marketing d i h k i intelligence is and how it can change the way marketing is done in our companies.
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Now, we will start to look at what keep Now we will start to look at what keep organizations from achieving greatness through marketing intelligence through marketing intelligence
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I am sure you are starting to wonder why I haven’t defined marketing h h ’ d fi d k i intelligence, metrics or any other terms related to the topics we are discussing?
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Examples and understanding is a ays be e a a de always better than a definition. o
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A small test for you working professionals: f i l Talk to your marketing department about how they do their marketing…
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Then ask them about marketing Then ask them about marketing intelligence and analytic marketing and watch their eyes glaze over watch their eyes glaze over.
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While most marketers can easily explain what they are doing in terms of what they are doing in terms of marketing activities, very few can explain what intelligent marketing or explain what intelligent marketing or analytic marketing would look like.
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In the process, 5 key roadblocks or obstacles were identified that keep obstacles were identified that keep marketers and organizations from adopting a marketing intelligence adopting a marketing intelligence position.
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What Are The 5 Obstacles?
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Obstacle 1: Obstacle 1 Getting Started g
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We don’t know how.
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We don’t have the right metrics.
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The problem is not too little Th bl i t t littl data, but too much that isn’t , useful.
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We don’t know where to start.
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Obstacle 2: Ob t l 2 Causalityy
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There are too many confounding f t factors – meaning that too many i th t t campaigns overlap making cause p g p g and effect impossible.
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There is a time delay between y the marketing campaign and a customer action. i
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Awareness campaigns do not p g directly results in sales, but our CFO CFO wants to see a financial ROI. t t fi i l ROI
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Obstacle 3: Ob l 3 Lack of Data Lack of Data
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We are a business‐to‐business (B2B) (B2B) company and sell d ll indirectly. As a result, we don’tt indirectly. As a result, we don know who our customers are.
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We can’t collect customer data W ’t ll t t d t due to privacy issues. p y
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Obstacle 4: Ob t l 4 Resources and Tools
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We don’t have the time and/or it W d ’t h th ti d/ it costs too much.
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We don’t have the tools and/or / systems to support analytic marketing. k ti
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We are marketers and can’t communicate with information t h l technology (IT) people. (IT) l
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IT builds systems, but they are y , y not the resources and tools we need. d
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Obstacle 5: Ob t l 5 People and Change p g
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We don’t measure because we W d ’t b don’t want accountability. y
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Our incentives are all for O i ti ll f marketing activity, not results. g y,
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We don’t have a culture of W d ’ h l f measurement.
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We don’t have the skills for W d ’t h th kill f analytic marketing. y g
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Our organization is resistant to g new ideas, such as analytic marketing. k ti
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Marketing is creative; imposing g ; p g metrics and process will kill creativity and innovation. ti it di ti
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Breaking Down the 5 Obstacles
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Obstacle 1: G tti St t d F Getting Started—Focus on Collecting the Right Data and g g Create Momentum
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Royal Bank of Canada started th i j their journey toward marketing t d k ti intelligence by working with their g y g own resources.
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“You have to look at what you do t d today and think… “How can I do d thi k “H Id this better, cheaper, faster and this better, cheaper, faster and smarter?”
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Every year around IRA yy contribution time, the sales force at RBC was given a list to call. t RBC i li t t ll
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The average yield per sales person was 1 – 1 2 people out of 2 l t f 10 accepting the offer accepting 10 accepting the offer accepting the offer being made by RBC.
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The RBC marketing team built a Th RBC k ti t b ilt model to rank and score the list based on the potential to contribute more than US$ 5,000 ib h US$ 5 000 to an IRA. to an IRA. http://emagine‐group.com
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The model involved analyzing y g more than 1 million customers, f 12 for 12 months of data, and score th f d t d t e to d t e top 50,000 them to find the top 250,000 that would potentially contribute. ib http://emagine‐group.com
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While the size of the dataset seems intimidating, possibly i ti id ti ibl solving the problem for 10, you solving the problem for 10, you can solve the problem for 1,000.
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At RBC, collecting the relevant At RBC ll ti th l t data to do the scoring required a g q great deal of manual legwork, 6 months of effort and h f ff d approximately US$ 100,000. approximately US$ 100,000. http://emagine‐group.com
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The goal was to generate a g g targeted list of the top 25 customers to call. ll
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The results were impressive. 8 out of 10 customers called accepted the offer.
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But….
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IIt took time for the sales force to k i f h l f realize the value of the new list. realize the value of the new list.
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IIn the first year, only 25% of the th fi t l 25% f th sales force participated. p p IIn the third year, 75% were h hi d 75% participating. http://emagine‐group.com
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Due to the success of this small D t th f thi ll experiment, RBC was able to p , build a business case that b brought them a US$ 4 million h h US$ 4 illi marketing initiative. marketing initiative. http://emagine‐group.com
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Wh t did What did we learn? l ? You don’t need 100% data and a multimillion dollar infrastructure l i illi d ll i f to get started. to get started. http://emagine‐group.com
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The key question: What 20% of data will give you What 20% of data will give you 80% impact?
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Walgreen’s Pharmacy
Walgreen’s Pharmacy is a US$ 59 billion annual $ revenue pharmacy company with 6,850 stores across the United States
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Walgreen’s Geo‐Spatial The geo‐spatial picture shows dots that are customers and where they live and are coded by shape live and are coded by shape depending on which of the three Walgreen’s stores they shop. ¾ The The “Diamond” Diamond customers shop at customers shop at Store 1 ¾ The “Square” customers shop at Store 2 ¾ The “Star” customers shop at Store 3 ¾
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Walgreen’s Marketing Strategy Walgreen’s has always marketed using flyers in newspapers ¾ They pay based on zip codes (the They pay based on zip codes (the dashed line in the map) ¾ The marketing manager noticed something very interesting – the something very interesting the circle is two miles in radius and after looking at the pictures, he noticed that there are no dots for a store more than two miles from any store. ¾ The conclusion – if you live two miles from a pharmacy store, you probably don’t shop there. ¾
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At this point, Walgreen’s treated each locale equally – hl l ll equal dollar l d ll amounts in each zip code across amounts in each zip code across the United States.
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But the data shows that if there i is no store within two miles of t ithi t il f the zip code, customers do not the zip code, customers do not shop at the store
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Based on this understanding, B d thi d t di Walgreens stopped spending g pp p g advertising dollars in all zip codes without a store within two miles ih i hi il of the zip code of the zip code http://emagine‐group.com
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Total cost of collecting the data g and creating the plots – US$ 200 000 US$ 200,000.
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Impact to sales revenues – 0
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Impact to marketing was a cost p g savings of more than US$ 5 million illi
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“We started with simple Excel p spreadsheets that contained the advertising circulation d ii i l i distributions by zip code. It was distributions by zip code. It was not hard to get the advertising data into the software.” http://emagine‐group.com
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The technology – gy a PC, ESRI map , p and graphing software and a d t data set of Excel spreadsheets t fE l dh t
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The bigger challenge was changing Walgreens’ business h i W l ’b i p process to use analytic marketing y g insights
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The mistake they made was too y many changes too quickly that made people uncomfortable. d l f bl Within a few weeks, things had Within a few weeks, things had returned to the old way of doing things. http://emagine‐group.com
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So they started small….
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They found one Store Operations VP d di t i t VP and a district manager that th t were willing to try doing things were willing to try doing things different.
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They showed them the pictures y p and explained that it didn’t make sense to spend US$ 80,000 in t d US$ 80 000 i ad e t s g a p code e advertising in a zip code five miles from a store to generate US$ 20,000 in sales. $ i l http://emagine‐group.com
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After 5 experiments, Walgreens’ cut US$ 300,000 off the bat in t US$ 300 000 ff th b t i advertising cost and showed that g the approach really worked.
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With the win, they set up a process to review the marketing process to review the marketing spending with each district manager throughout the United States. States http://emagine‐group.com
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Overcome Obstacle 2: Causality— Conduct Small Experiments
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There are too many possible causes There are too many possible causes of anything you measure to identify a single cause and effect; o e app g a e g ca pa g s overlapping marketing campaigns makes it impossible to tell what’s working and what’s not working! working and what’s not working! http://emagine‐group.com
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The “answer” is one of taking a systematic and disciplined i d di i li d approach to marketing campaign approach to marketing campaign execution.
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Conduct small experiments, i l ti isolating as many variable as i bl possible to see what works and possible to see what works and what does not.
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While we know that most marketers are aware of this approach, you will be shocked to h ill b h k d t learn that almost 70% do not use ea t at a ost 0% do ot use experiments to pilot test marketing campaigns k i i http://emagine‐group.com
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Why?
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Most marketing organizations’ g g reward systems are based on activity, not results. ti it t lt
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Harrah’s Entertainment regularly g y designs experiments to quantify th i the impact of its marketing. t f it k ti
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It designed an experiment t targeting two groups of frequent ti t ff t slot machine players in Jackson, slot machine players in Jackson, Mississippi.
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The experiment had two groups Th i th dt – a control group with a standard g p marketing offer and a test marketing offer called “The k i ff ll d “Th Challenger Challenger” http://emagine‐group.com
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Harrah’s Offers Control Group
“The The Challenger Challenger”
A $125 package of a free room, $60 in free casino chips, no two steak dinners and $30 in two steak dinners, and $30 in hotel room and no steak hotel room, and no steak free chips at the casino dinner Gaming Activity unchanged
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Gaming Activity Significantly Gaming Activity Significantly Higher
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Harrah’s Entertainment tested the experiment across other US geographies. hi
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As a result, Harrah’s was able to A lt H h’ bl t cut the budget for this type of g yp marketing by more than 50% and i increase the performance of the h f f h marketing. http://emagine‐group.com
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Why does this Wh d thi experiment work? p
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By limiting who gets the experimental offer addresses the i t l ff dd th causality issue and there is a y minimal time delay between executing the campaign and ti th i d obtaining the results of the obtaining the results of the campaign. http://emagine‐group.com
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