In the past few years, big data has become a buzzworthy term. With e-commerce giants such as Target and Amazon leading the way, data analysis and predictive algorithms have been instrumental in helping marketers figure out their next moves.
But while data-driven marketing is on the rise, marketers have been slow to adapt.
To better gauge where the average marketer stands, Retention Science recently surveyed marketing executives at 139 retail and e-commerce companies. We found that while most companies seem to realize the rising importance of data in marketing, very few have taken full advantage. Even more surprisingly, we found that companies with annual marketing budgets over $1 million only had a slightly more sophisticated approach than those with more limited resources.
Personalization: More Than Just A Name
Our research found that 32 percent of marketers don’t personalize their Web sites at all. This means that nearly one-third fail to incorporate even customers’ names or locations; without this basic but crucial information, marketers end up losing shoppers from reasons as simple as advertising snow supplies to people who live in tropical climates.
The companies that do personalize Web site content also stick to the basics: Product recommendations (45 percent) and customer name insertion (32 percent) were the top tactics used. These results show that marketers are mining and incorporating data on a very shallow level. Advanced tactics, such as personalized incentives and dynamic pricing, were rarely implemented, clocking in at 19 and 8 percent, respectively.
Email marketing fared better in personalization: Eighty-one percent of companies reported including some sort of personalized content in emails. That said, advanced tactics were again left by the wayside, and dynamic pricing was the most underused, at just 5.6 percent. Six out of 10 marketers (60 percent) reported simply inserting the customer’s name into the email subject line.
Inserting names into the subject lines undoubtedly seems like a tried-and-true tactic to the average marketer. After all, studies ranging as far back as 2004 showed that personalized email subject lines meant higher open rates.
However, it’s crucial to note that what was effective 10 years ago doesn’t pack nearly the same punch today. Indeed, in 2004 personalized subject lines led to a 33 percent open rate, but that percentage dropped to just 5 percent in 2012. As customers’ inboxes ballooned with spam and junk mail, they adapted by becoming pickier in choosing what emails to open.
That marketers still depend heavily on this dated tactic is telling; it indicates a reliance on intuition over data. In other words, marketers favor the tactics they believe are most effective, instead of the tactics proved effective by analysis and testing.
With Insufficient Testing, Marketers Fly Blind
In a similar vein, our study showed that most marketers fall short in testing and optimization. A/B and multivariate testing provide valuable information on campaign performance and what tactics work best. Optimization uses the collected data to figure out the best time and method to reach customers based on their behaviors. Both allow marketers to plan and execute campaigns with confidence in their methods.
More than one-quarter (27 percent) of marketers said they do no form of testing at all; those that did report testing only do a minimal amount. Email subject lines are once again the most popular, reported as being tested by 58 percent of marketers. This is still a surprisingly low percentage considering marketers’preference for this particular tactic.
In addition, 52 percent of companies don’t test content or offers in their emails, and 65 percent don’t test which offers work best on their Web sites. And since optimization depends largely on data from testing, it’s unsurprising that only 20 percent of marketers optimize the timing of their email campaigns.
These findings are consistent with the overall trend: Marketers aren’t adapting quickly enough, and are only hurting themselves in the process. Testing and optimization help build solid foundations, providing insight on how to invest marketing dollars for maximum ROI.
Apparently, Size Really Doesn’t Matter
Perhaps most surprisingly, our study revealed that a bigger budget does not automatically translate into a more sophisticated marketing approach. Our data set for the study was split into two groups of marketers, with annual budgets less than or in excess of $1 million. Although those with over $1 million budgets did show a degree of higher sophistication, the divide between the two was much narrower than expected.
Our premise going into this study was that marketers with more resources would show higher adoption of data-driven marketing. The reason: Simply, data science is considered an expensive investment. According to Glassdoor, the median income for data scientists nationally was $115,000 as of August 2014, with annual salaries that can climb as high as $300,000.
And though results showed a lead in sophistication for the groups with $1 million-plus budgets, the difference was negligible. For instance, 33 percent of marketers with sub-$1 million budgets said they don’t personalize their Web sites in any way. Thirty-one percent of marketers with over $1 million budgets reported the same.
Similarly, as mentioned before, only 20 percent of marketers, overall, optimize campaign timing. When looking at the companies with over $1 million budgets, this percentage only rises to 25 percent.
These findings show that even marketers with larger budgets and considerably more reach are leaving valuable tools and information on the table–proving that smart marketing is ultimately not about size, but strategy.
Overall, the study indicates that marketers still rely heavily on intuition over data when targeting their customers. Technology and rise of e-commerce has changed the rules of merchant-shopper relations; it’s time for marketers to start strategizing accordingly.
