Campaign India Team
Jun 27, 2013

Marketing analytics: It's now or never

The author offers some good reasons to take full advantage of analytics, and a framework to help get started

Shankar: robust analytics systems still rare
Shankar: robust analytics systems still rare

"Half the money I spend on advertising is wasted; the trouble is I don't know which half."

I am sure that most of you have heard this age-old saying from John Wanamaker, which is easily one of the most timeless and truthful statements in the history of advertising.

Why is it timeless and truthful? Because in today’s world of multiple screens, networking and content proliferation, compounded by the intricate interplay of cross-world channels, platforms and technologies, the topic of marketing analytics and measurement is intimidating to most, if not all, marketers.

In other words, in today’s world of marketing measurement, all one finds is an exceedingly and unnecessarily complex array of tools and systems—hybrids of the old-world legacy systems and half-crafted versions of today’s so-called leading measurement and analytics platforms and tools.

These systems not only project a partial picture of the real performance, but also fail to give valuable in-depth, cross-channel insights and intelligence for better decision making—not to mention the often futile efforts required to try to provide some semblance of unification between these parallel yet disparate systems.

But what does marketing analytics stand for in today’s context and how important is it for us collectively as an industry to muster all our energies to bridle this untamed beast?

The marketing analytics framework

We all deal with data daily, albeit in different dosages. But what does measurement and analytics really comprise? I believe it is only fair for us to revisit what analytics stands for in today’s context so that we may set some basic framework on how to go about treating the colossal volumes of data that we have at hand today. Here is a quick review of the analytics spectrum that will hopefully set the right context and set the ball rolling inside your organisation, whether you are an enterprise or an SME:

1. Descriptive analytics: This is the body of analytics that deals with the broad question “What happened”. This also forms the largest body of marketing analytics that is in vogue today across verticals and organisations. This comprises of a set of technologies that gathers, consolidates, characterises, classifies and describes data and understandably includes dashboards, reporting tools and the like.

2. Diagnostic analytics: Effectively an extension of descriptive analytics, this body of analytics delves into the "Why what happened, happened" part of the equation, and hence includes studies toward understanding the structured data set that was formed by descriptive analytics. Everything related to understanding a certain outcome or incident (for example, a spike or slump in sales or conversions, a spike in CPC/CPA, or user attrition) on the website or otherwise can therefore be brought under the umbrella of diagnostic analytics. As this is an extension of descriptive analytics, most marketers today are dabbling with bits and pieces of this, using the mish-mash of tools and platforms that make up their analytics organisations.

3. Predictive analytics: This is the body of analytics that remains largely untouched by the marketers of our age, and the body that deals with the "What will happen" part of the equation. This discipline of advanced analytics deals with not only understanding what happened, but also uses tools to derive an understanding of the potential outcomes on a dependent variable, given an array of independent variables. When the body of descriptive analytics data reaches a certain critical mass ('big data', if you must) where anticipatory studies are possible, then we pass over into the domain of predictive analytics. Thus, predictive analytics can be used to both validate a hypothesis and generate a hypothesis. For example, an ideal candidate for predictive analytics would be: Will demographic factors such as age, income, gender or life stage have a bearing on the type of travel being planned?

4. Prescriptive analytics: If predictive analytics is just the tip of the iceberg, then prescriptive analytics is the iceberg (or glacier) itself. This body of analytics deals with the optimisation question or the "What will happen when, why and how" question—thus pushing the outer perimeters of analytics into the hardly known territory. When the "What will happen" question has been answered by predictive analytics, then it is time to look at "What is the ideal response that an enterprise should make, given the set of outcomes and/or dependent variable reactions that have been predicted using historical independent variable data?” This is the area of deciphering unstructured and often tough-to-predict arrays of multiple independent variables on possible outcomes and taking business decisions that are best suited for the situation.

The importance of marketing analytics

A relatively recent Adobe Asia-Pacific digital marketing maturity study found that most Asia-Pacific marketers surveyed had a great mindset about marketing performance and measurement, but when it came to organisational alignment and skill sets, the scores looked very sorry indeed. The study also reported that Asia-Pacific marketers surveyed are still looking at plain-Jane myopic short-term metrics such as customer acquisition costs and campaign ROI, as opposed to forward-looking metrics such as return on advertising spends, cross-media value and impact, customer lifetime value, online versus offline revenue, and so on. 

Contrast this with the latest report by Strategy Analytics, that reported that 2012 ad spends touched US$462 billion and were expected to grow further by 4 per cent in 2013. The Global Advertising Forecast also predicts that online ad spending will increase by 14 per cent in 2013 to $102 billion, accounting for 21 per cent of global ad spending, while traditional advertising spending is expected to remain largely unchanged from 2012.  While the US still retains its position as the largest market globally, at 34 per cent share, Japan and China are snapping at its heels and it is only a matter of time before the tide starts turning.

Without embarking on yet another reverie on the stratospheric growth of the Asia-Pacific region in the mobile, social and overall digital space, does it not suffice for me to say that the importance of understanding the real impact of the marketing dollars has reached dizzying proportions already?

Is it not time for large and small enterprises alike to put some serious thinking caps on toward overcoming the factors that make up this Achilles heel—strategy, budgets, policies, talent gaps and, above all, a willingness to embrace change—and establish unified and robust measurement and analytics systems?

Hari Shankar is director of client services and director of Perfomics APAC.

The article first appeared on Campaign Asia

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