Data-driven decision making in business has been drawing a lot of attention. McKinsey and IBM are both doing work in this area, and recent work at MIT has shown that productivity improvements on the order of 5 percent to 6 percent result from adoption of data-driven decision making.
Exploration of data-driven decision making in marketing, where there is more data than ever before, has been much more limited. While considerable work is being done in marketing measurement, the impact on business results of data use in marketing decisions has not been addressed.
With this backdrop in mind, in March 2011 Patricia Seybold Group and the Information Technology Services Marketing Association (ITSMA) invited their members and subscribers to participate in an online Web-based survey, asking that the questions be answered by a person in the organization who manages one or more marketing functions. Our hypothesis was that data-driven marketing yields business performance improvements.
A total of 107 representatives from 71 companies responded to the survey. We conducted 30-minute follow-up telephone interviews with 17 respondents. Respondents included marketers from professional services firms, software solutions providers, computer systems and solutions providers, network systems and solution providers, and telecommunications services providers. All of the respondents sell to businesses; close to 15 percent also sell to consumers. More than half of the respondents have more than $1 billion in services revenue.
Correlation Between Data-Driven Marketing And Business Performance
The survey yielded hard data associating leadership in data-driven marketing with increased sales productivity and market share. The leaders, whom we refer to as data-savvy, shared three characteristics. All had:
- written procedures for collecting data and clear expectations for analyzing data;
- a culture that places importance on making decisions based on data and analysis and
- leading-edge or above-average data usage to support marketing activities.
Data-savvy organizations outstripped the others “significantly or somewhat,” improving their average time to revenue, sales-costs-per-order dollar, and market share during the past two years. Though we found no such relationship to indicators of overall business performance, such as revenue and profitability, these might develop in time as marketing data gets more widely used in organizations.
Becoming A Data-Driven Marketing Organization
We found no magic that catapulted the data savvy to their position of having achieved business impact. They struggle with the same issues as the other companies in our survey--but have been working on them for a longer period of time. We see leadership as a critical factor enabling organizations to move forward in data-driven marketing. It won’t happen without executive sponsorship, clear objectives, and ways of measuring success.
The survey showed that data-savvy organizations have had a marketing technology strategy and road map in place for a longer period of time than other organizations. More than half of the data-savvy organizations have had a strategy and road map in place for more than a year, compared with only 12 percent of the other marketing organizations. They also have made more progress in addressing data governance issues--one of the top challenges identified by all respondents. In addition, most of them have established a dedicated analytics group.
Two Surprises In The Results
We expected, based on the research done by IBM, to find organizations hanging back from adopting a data-driven approach for cultural reasons--that is, senior management not supporting a culture of experimentation. In fact, we found the opposite: Less than 20% of the respondents reported that senior management does not embrace a test-and-learn approach to marketing. Moreover, all marketers recognize that data-driven marketing is important. Despite these endorsements, very few marketing organizations consider themselves to be leading-edge in their use of data and analysis. Improvement takes time, focus, and investment.
We also expected that, at least in data-savvy marketing organizations, senior executives in other functions would rely on marketing data to make decisions. While the data-savvy marketers have higher quality data that management has more confidence in, marketing data is still not widely used to make decisions that impact the business. For this reason, and because the survey showed that a large number of marketers don’t know how other functions want to use marketing data, we see organizational outreach as a key component of a data-driven marketing program.
To learn more about survey findings, read the full report.