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Marketing Analytics – Promise and Peril

Recently, IT Services Marketing Association (ITMSA) released a research study(ITSMA Marketing Analytics, February 2009), which indicates that systematic usage of analytics within marketing departments is still in its infancy:

• While Analytics is perceived to be a valuable way to connect marketing with business performance-marketing still needs to do more
o Only 50% of respondents have analytics programs
o Of those who do have programs, 80% said they were somewhat valuable or valuable
• While companies have plenty of data, the lack of integrated data and systems for performing analysis are major stumbling blocks to analytics success
Most analytics programs focus on ex-post reporting rather than predicting the future: Few marketers are using analytics to predict campaign effectiveness and customer buying behavior or to drive innovation by entering new markets

One wonders as to why analytics is not more aggressively adopted across marketing. Compared to the procedures for cost accounting, key figure systems for marketing are usually easier to use in the day-to-day business routine. While the calculation & implementation of key figures may be straightforward, often it is not the technical implementation that is an impediment to an analytics program. The challenges instead lie in the initial determination of the key figure systems, as this requires much greater effort and resources as well as precise understanding across Business & IT. The main questions are around which key figure should be used to measure organizational goal, and how these figures are determined correctly. We present one such list below. (“Metrics that matter”, Figure 1).

Figure 1 Possible key figures used in marketing analysis and reporting (Marketing Planning By Design, Ralf E. Strauss 2008. Wiley Publishers)

In our view, it is extremely important to select the right metrics/KPIs carefully and track them consistently. Empirical studies in companies show that defining and tracking 20 different key figures, while useful at least in theory, often transitions quickly from an initial phase of enthusiasm to either being abandoned entirely or to a “natural focus” on a few selected key figures. This happens due to the high degree of complexity of many metrics and the usually limited contribution in providing the rationale of the metric.

The traditional methods for measuring success in accounting or even the use of individual key figures often proves to be insufficient in light of more dynamic markets and more intensive competition. Besides the obvious financial metrics, the impact of marketing activities on customers (such as an improvement in the perceived quality of service), content-related improvement of processes (e.g. a higher degree of transparency), and the effects on the motivation and learning of the employees should also be revealed. This is what the concept of the balanced scorecard seeks to address. The objective of the balanced scorecard is to provide company management a multidimensional control instrument on the basis of a manageable number of key figures: financial key figure systems are supplemented by customer, internal process, and learning/development perspectives. By considering metrics in all perspectives of the balanced scorecard, executives get a link between a fairly abstract marketing strategy on the one hand, and implementation on the basis of specific objectives, on the other. Anticipatory performance indicators that accompany financial results figures (usually ex-post) broaden the narrow focus of individual key figures, and place them in the context of their downstream relationships.

Case studies reveal that with simple dashboards such as those built using SAP BusinessObjects XCelsius can provide full transparency across different categories and dimensions to give a marketing balanced scorecard. While the set-up of these dashboards normally takes only some days, the conceptual discussion around which KPIs to be measured normally requires an intensive discussion across the different organizational entities. SAP also provides pre-built BI content for marketing & other areas of CRM to help catalyze & accelerate these discussions.

Sunil Dixit & Ralf Strauss

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