The ROI of Data-Driven Marketing

Before making costly investments, organizations want to know how they will affect their business. Forward-thinking business leaders are leveraging Big Data and analytics to measure the impact of their marketing endeavors.

Organizations want to invest wisely. This isn't only the case when it comes to acquiring new equipment or hiring new people, but transcends through all parts of the organization. The more savvy businesses are tapping into the wealth of existing data to predict the impact of their investments.

This strategy also applies to marketing investments. Not only does data-driven marketing help organizations pick the strategy or campaign that has the most likelihood to work, but it can help marketing departments secure funding for their endeavors by showing the ROI of an upcoming campaign.

Paige O'Neill, CMO at iJento, notes that until a few years ago it was widely believed that one couldn't prove the ROI of marketing. But there has since been a 180-degree shift and marketers have recognized that this isn't only possible but a necessity for their firms.

Kurt Williams, chief product officer at Mindshare Technologies, agrees. "With marketing there's always been the sense that half of marketing dollars are wasted but you cannot tell which [half]," he says. "Today everybody is focusing on ROI." Todd Parsons, founder and CEO of Aditive, agrees. "It's becoming less and less about 'brand awareness' and 'brand equity,' and more about how this investment is paying off," he says.

However, only 40 percent of marketers believe that measuring marketing's value and contribution to the business is either very important or critical, according to research by Forrester, ITSMA, and VisionEdge Marketing. The study, released in June, finds that most marketers are using data and analytics to report on past performance rather than provide predictive insight into their campaigns. Similarly, a global research study among more than 2,200 marketers released by Teradata, shows that almost all large companies are using some data to drive marketing.

Worryingly, Teradata found that almost half of marketers (45 percent) believe that data is the most underutilized asset in the marketing organization. In fact, 40 percent of marketers gave their department an average to failing grade for using data to drive marketing. Similarly, the Forrester, ITSMA, and VisionEdge joint study reveals that more than a quarter (27 percent) of CEOs would give their marketing organizations a top grade for their ability to demonstrate value and contribution to the business.

This is a problem, especially since Gartner research shows that in 2012 the average spend on marketing activities was more than 10 percent of a company's annual revenue, notes Graeme Grant, president and COO of CQuotient. "Being able to validate marketing spend by producing tangible results and measurable ROI is critical," he says. Luc Verbist, CIO at Belgian publisher De Persgroep, agrees. "Campaigns absorb lots of resources of an enterprise and should be managed and measured on their effectiveness as any other resource of an enterprise," he notes. Further, it's only possible to "master what you measure," Verbist stresses. "If one wants to improve the effectiveness of marketing campaigns, measuring them is the only way forward."

One major mistake is that instead of striving to excel in measuring the ROI of their campaigns, marketers are simply "measuring what they can," notes Wilson Raj, global customer intelligence director at SAS. According to Raj, many marketers are taking the easy way out and not leveraging predictive analytics to better understand the impact of an upcoming campaign and determine whether this is worthy of the investment being pumped into it.

The first step in determining the ROI of data-driven campaigns is for organizations to understand the business problem you're trying to solve, notes Lara Albert, vice president of global marketing atGlobys. This, she continues, needs to be tied to a specific business problem. "It can be something as simple as increasing revenue or customer retention," she notes.

Ideally, marketers will be able to determine the ROI of their campaigns before launch, allowing them to secure funding. Albert says a good way of doing this is to run pilots to get an initial read on the ROI of a campaign before making large investments. "This is an easy way for marketing to prove the impact before of a full deployment," she notes. "Once they have proven the ROI, they can feel more confident about the potential impact across the company and getting the internal buy-in and committed resources will be much easier."

Further, determining the ROI of campaigns will help C-level executives be more confident in how they distribute their marketing dollars and focus on campaigns and technologies that will actually produce results, notes Matt Johnston, chief marketing and strategy officer at uTest.

Leveraging the right tools

With data analytics being such a hot topic, there are many tools on the market that allow business leaders to measure different aspects of the business. As Christopher Gooley, CEO and co-founder of Preact, explains, there's a wide variety of tools to help measure the true dollar value of marketing spend. A way to start is by tracking the traffic generated by each campaign by analyzing where each visitor is coming from using tools like Google Analytics or KissMetrics.

Marketers often fall into the trap of focusing their measurements on open and click-through rates. This, Gooley stresses, is a mistake. "Periodic emails to existing customers may or may not lead to a direct click every time," he notes. Instead, organizations can dig deeper into their data and analyze the post-campaign behavior of each customer who received an email to see if there's a significant difference in the following days. For example, a customer might not open an email from a company, but just receiving it might trigger him to open the brand's app and make a purchase. Further, an email might not trigger immediate behavior, but a customer might go back to it after a few days or more. "Tag everything and track everything," Gooley stresses. Such a strategy will allow marketers to track a purchase, even months after a campaign.

Globys' Albert agrees. "You can't just look at one subsequent cycle after a campaign," she notes. In fact, a great marketing campaign attempts to bring a systematic change in customer behavior, which can take time to manifest itself. "Marketers are making the mistake of not looking at campaign data deeply enough," she notes.

Carpet, flooring, and home services company Empire Today is a firm believer in the need to track each campaign. "The biggest challenge is spending the time upfront to make sure there's a measure to track," stresses Keith Weinberger, the company's senior vice president of marketing. In fact, the marketing team will turn down campaigns which aren't trackable. Weinberger admits that tracking a campaign can be difficult since customers tend to use the company's general number rather than specific ones for individual campaigns. The company overcomes this problem by making specific offers only available when calling the associated number or clicking a special link. "We have special URLs designed for specific promotions that won't be accessible though our homepage," he explains. This strategy is allowing Empire Today to measure the impact of each campaign.

Bridging silos is essential

A challenge that many marketers face is accessing the necesary data they need to accurately measure the ROI of their campaigns because of information silos, notes Luc Burgelman, CEO of NGDATA. "Data is both a blessing and a curse," says iJento's O'Neill. While marketers have a lot more data than ever, including information from social media, email, and mobile, this can be overwhelming, especially when it's difficult to access because it's sitting in silos. Eric Holmen, CMO at RingRevenue, agrees. Companies, he notes, are using different tools to show ROI, but different technologies are siloed and marketers first need to bring the information in one place.

A major mistake that marketers make when trying to measure the ROI of data-driven campaigns is failing to understand the complexity of the drivers behind customer behavior, stresses Mark Smith, president of Provenir. Smith notes that another mistake that marketers make is treating campaigns in isolation rather than integrated as part of the full marketing mix.

Further, in order to really understand the ROI of a specific campaign, marketers need to link this to business outcomes, stresses SAS' Raj. "[Marketers] need to broaden their language and not solely report on [customers'] sentiment or preference," he says. Instead, marketers need to look at more substantial KPIs, including economic indicators and market shares. "These are the numbers that the CEO wants to see," he says. He adds that in order to successfully determine the ROI of their campaigns, marketers need to look at the bigger picture of how the overall marketing strategy is impacting the business. "Most CEOs don't care about the ROI of an individual campaign but want to know how the overall category performed," he says.

Finally, organizations need to recognize that there's no one-size-fits-all approach to measuring marketing campaigns, stresses Craig Fitzgerald, editorial director at IMN. "Different industries will have varying approaches to calculating ROI so it's important to really examine the strategic goals of a particular marketing campaign and devise metrics that map to those," he says.