Four Questions to Test Your Preparedness and get Rolling on Your Marketing ROI
Sometimes the best answers are uncovered by asking more questions. This is certainly true whenever the CEO asks marketing, "What's the ROI on that?" And it's especially true when the ROI in question refers to a proposed marketing expenditure. Before we can answer the ROI mandate, we need to deeply understand the problem our proposed solution is trying to solve. We also must have a firm grasp on the potential difficulties associated with demonstrating a return on the investment. To fully comprehend both of these, we must do a little probing ourselves…and ask more questions.
Such is the case with customer analytics. Marketers identify access to advanced analytics as the greatest barrier to their success. Yet, because advanced customer analytics likely requires additional investments in technology, data and talent, it's not an easy conversation to have with the CEO. Sure, the "spend money to make money" argument still applies, but it's wearing thin. The CEO is looking for ROI on what marketing has already spent. Why should the company shell out more for customer analytics?
When I pose this question to Nipa Basu, Chief Analytics Officer at Dun & Bradstreet, her answer is matter-of-fact: If you're looking for ROI, good customer analytics is a must. In fact, traditional business analytics are becoming table stakes; the number of companies reporting a competitive advantage with business analytics has declined significantly over the past two years.
While you sit on the fence, analytics technologies and methodologies are advancing and early adopters are refining the practice. If you don't want to be a marketing laggard, advanced analytics are non-negotiable.
"There's only one situation in which a company wouldn't need to do customer analytics," Basu says, "and that's if it can get all of the marketers in its industry to agree not to use them."
But before marketers go for the gusto with analytics, they should get a pulse on their readiness. Are you really ready to embrace customer analytics for business growth? You'll get a better idea after answering four simple questions.
Is Your Data Ready for Analytics?
Simply using customer analytics doesn't mean you'll be able to demonstrate ROI. First, you need to ensure your business and contact data quality are good. Performing analytics on a spotty, inaccurate and/or inconsistent database leads to results that are, at best, second-rate.
Marketers should also keep in mind that different kinds of analytics lead to different results, so we must make smart, strategic choices to see a payoff.
"Proper problem formulation is essential to get the biggest bang for your buck," says Basu.
Ask what analytics can do to help your business, and practically everything can look like an analytics problem. Accordingly, when you're identifying the marketing problem you want analytics to solve, it's best to start with your overall business goals. Do you want to reduce costs? Reduce customer churn? From there, determine how your customer analytics can help you achieve these goals.
Are Your Targets Aligned With Your Goals?
Today, the hot goal many marketers are chasing after is business growth. Often, these marketers target high-value prospects who are most likely to: 1) convert and 2) spend a lot of money.
"There's an inherent contradiction in asking for both of these characteristics. Everyone is reaching out to big spenders, so your conversion rates go down just by targeting them," Basu says.
A better approach is to clarify your marketing goal before segmenting your prospects. What does "grow the business" actually mean? If you want to increase your market share, then the buyers you want may not be the highest-end customers. From there, consider whether these prospects have brand awareness and use analytics to find your sweet spot.
On the other hand, if the growth you're shooting for is revenue per customer, then it probably won't make sense to target another population of high-value prospects outside of your primary market.
Is Your Segmentation Criteria on Target?
First, it's important to understand that B2B segmentation and firmographics are not the same thing, any more than demographics are interchangeable with B2C segmentation. As McKinsey's John Forsyth points out, a B2C demographic segment might specify buyers who are 65-70 years old, British citizens and of royal lineage. Both Prince Charles and Ozzy Osbourne would fall into this segment, but we wouldn't market to them the same way.
Next, consider whether the market segments you've prioritized are the best fit for your product. For instance, if you offer an affordable Web hosting service, it may not be the best decision to go after buyers with big budgets, as you'll be going head-to-head with high-end service providers.
Something else to think about: Are you rejecting prospects because of seemingly "undesirable" characteristics? This could be a mistake, Basu says.
"Quite often, I see Chief Risk Officers prohibiting CMOs from targeting businesses in financial stress, even when these companies are a match for their product," Basu says. "For example, let's say a company has a high delinquency score. Instead of rejecting this prospect immediately because it pays late, marketers should take a look at the company's (business) failure score.
"If that score is reasonable, then the prospect may pay late, but it will survive. It just might be worth targeting this prospect because it's not being targeted by others and the company's loyalty can be built over time."
This doesn't mean every business score or bit of prospect data is relevant in your prospecting. More data doesn't necessarily translate into better business value. For example, if you sell paper clips and most purchases are made with credit cards, you probably don't need to invest in a delinquency score.
Do You Have the Right People?
There's no reason why marketers shouldn't pursue customer analytics with confidence. They aren't difficult, Basu says, despite many marketers' beliefs to the contrary.
"Marketing is as hard for an analytics team as analytics is for a marketing team," she says.
That said, it's wise to have in-house expertise. "Hire at least one experienced analytics employee. If you need to outsource some work, give your on-staff expert the liberty to choose which firm to use," Basu says.
Research indicates that marketers are bullish on beefing up their analytics talent. In fact, a C-level marketing study from Black Ink ROI finds that about 40% of marketers plan to increase their marketing analytics staff this year.
Basu reminds marketers that while analytics vendors are good at doing customized work, they can help in-house teams in other ways.
"At Dun & Bradstreet, we have clients that purchase analytics-infused data with specific attributes off the shelf. From there, they build their own custom models in-house," she says.
For clients who want help with larger customized analytics projects, Basu says her team regularly provides a "proof of value," which involves running small tests using a prototype.
"This way, our customers can see the value our analytics provide. It instills confidence that we can deliver the specific results they're looking for," Basu says.
Bonus Question: Is Your Team Ready for Analytics?
Results are great, but when you don't know what to do with them? Not so great. You can build amazing models and insightful outputs, but if your team can't tie analytics back to your marketing goals, they won't know how to use them. Remember, data alone can't solve all of your problems.
Make sure everyone in marketing knows, lives and breathes your goals. Urge everyone to keep C-suite-approved metrics top-of-mind. Instill a deep team commitment to using data in decision making. And don't forget to support your team with the skills and training they'll need to access and act on your customer analytics.
Once you ask (and answer) the questions in this post, you'll be better equipped to have a conversation with your CEO because you'll have solid reasons for saying "yes" to customer analytics…
- Your data quality is in great shape, so the customer insights surfaced by analytics will be accurate.
- The buyers you're targeting are aligned with your marketing goals, so you won't be wasting effort.
- You've revisited and refined your segmentation criteria, confident that customer analytics will uncover additional opportunities.
- You have the right talent (in-house and/or outsourced) to get the most out of your analytics.
- Your team knows how to access and use analytics - and is ready to act on them.
The next time your CEO asks, "What are you doing to drive ROI?" you'll be ready. As long as you remember the answer can't be found outside the problem, but rather, in thoroughly understanding the nature of the problem itself, you'll be prepared.