Analytics is Sexy: Let’s Make It Work!

I wrote earlier about this huge gap between talking about analytics and being able to actually make a large impact on business. I also wrote earlier about analytics being a sexy and much-hyped area, but it needs a lot of “hard work” to make it happen on the ground.

I wonder how analytics professionals can help in transforming this. How can analytics play a bigger role? I clearly see analytics as the heart, but definitely a part of a bigger CRM engagement within companies. Unless companies take the insight & begin to take action on it, there will never be impact!

Even more critically, it needs marketing leaders to start articulating this vision with the CEO & gain support at that level.

Christine Moorman is the Director of The CMO Survey and the T. Austin Finch, Sr. Professor of Business Administration, The Fuqua School of Business, Duke University. She runs an annual CMO survey to guage Marketer trends. To evaluate the impact of marketing analytics, the 2012 CMO Survey asked top marketers to answer this question:

 “In what percent of your projects does your company use available or requested market analytics before a decision is made?” The average score was 37.2%. This means that 62.8% of the times, managers are not using marketing analytics! By this measure, marketing analytics must do more. If not, its funders will place bets on other strategic weapons they believe will allow the company to serve customers better and to pull ahead of competitors”

I looked at another metric. I am convinced that analytics can make a difference only when it starts getting embedded into the Operational IT layer within the company. Unless the algorithm helps make a decision its true impact will never be felt. In fact, Gartner analyst Laura McLellan recently predicted that by 2017, CMOs will spend more on IT than their counterpart CIOs.

But this does require stronger conversations between IT & marketing. Both these functions don’t often talk & don’t understand each other’s point of view well enough. Strangely both these functions should be natural allies, because they struggle to show business impact of the large $ investments they both make. In 2003, for example, Nicholas Carr, a leading commentator on technology and business, argued that “IT doesn’t matter” because the strategic and competitive advantages of IT spending quickly dissipate.

Here is an extract from a McKinsey report that I found useful:

From 2006 to 2010, Amazon spent 5.6 percent of its sales revenue on IT, while rivals Target and Best Buy spent 1.3% and 0.5%, respectively.  The results of this spending and focus include:

• Sophisticated recommendation engines that deliver over 35 percent of all sales
• Automated e-mail/customer service systems (90 percent are automated, versus 44 percent for the average retailer) that deliver best-in-class customer satisfaction (Amazon’s American Customer Satisfaction score is 87)
• A sophisticated and highly efficient supply chain that has reduced Amazon’s cost of goods sold by 3 to 4 percent  
• Dynamic pricing systems that crawl the Web and react to competitor pricing and stock levels by altering prices on Amazon.com, in some cases every 15 seconds  

The CMO Survey results indicate that companies currently spend an average of 5.7% of their marketing budgets on marketing analytics and that this number is expected to grow to 9.1% in the next three years. This 60% increase represents a large shift. Also when one connects this to enterprise IT investments that Analytics can generate-it becomes sizeable. Of course this data is from North America & the situation for India will be vastly different.

This does require a range of different skills within Marketing. It evens needs IT people to be staffed within the Marketing function. It needs analysts with a different mindset. Analytics as a function needs to be transformed!