I have been asked so many times "what is marketing analytics?" (My mom would typically ask me the same question albeit in a different form: "So what exactly do you do? What do I tell my friends when they ask me what you do in Singapore?")
Here is my stab at trying to define what exactly (the keyword) I do.
If you have any thoughts, opinions, suggestions, objections - feel free to leave a comment. I will try my best to respond.
What is marketing analytics?
Marketing communications analytics - simply put - is all about knowing "which half of your advertising investments are working" and making this "working half" work even harder.
Marketing analytics is aimed at understanding how each aspect of the marketing mix - from communications (including advertising, digital, and media planning), pricing, distribution, branding and brand heritage, target audiences - works in order to deliver sales, revenues, and profits.
Using advanced statistical techniques - such as econometric and statistical modeling; marketing investment risk analysis, simulation, and mitigation; behavior- and financial-value-based segmentation of audiences - marketing communications analytics aims to answer questions that marketing directors, CMOs, and even CFOs may have about the effectiveness of their investments in advertising, promotions, pricing tactics, distribution and retailer drives, and customer relations.
It is quickly emerging to be on the top of the Chief Marketing Officer's to-do list as marketing costs are being (rightly) categorized (and recognized) as "financial investments" that therefore require to generate returns.
The demand for analytics is also emerging primarily because marketing discussions are beginning to be linked with strategic corporate and finance objectives of creating short- and long-term wealth for shareholders.
Simply put, CMOs are now being demanded to quantify their team's contributions to the company's bottom-line.
So what does marketing analytics encompass?
A rather good question - because I think this is where a lot of divergence happens, specially amongst companies that are seeking to establish their analytics practice internally. Here are my thoughts:
1. Investment effectiveness analysis -
How much of the current sales/profits of the brand can be attributed to the investments made by the brand in marketing, including advertising and non-advertising efforts? How much sales/profits are generated per dollar-spent on marketing? What is the best way to invest across different kinds of marketing activities - TV advertising, press, promotions/discounts, price-cuts? How do competitive investments affect levels of investments? How do other external variables - socio-demographic changes, consumer moods, seasonality, temperature and rainfall, financial liquidity - affect the effectiveness of investments?
2. Investment optimization -
Given the historical performance of the brand's investments, what are the best ways to deploy marketing moneys in future campaigns? What are the optimum levels of investments in each of the different aspects of marketing - TV, press, price-discounting, PR-buzz generation, digital, distribution-drive, retailer-push - to deliver an objective? How can competitive pressure be managed
3. Investment simulation and scenario planning -
If marketing budgets were cut by 10%, what would the impact be? If marketing budgets were increased by 10%, what would the impact be - and how should that additional 10% be used to further the brand's goals? If competitive pressure increases by a commensurate 10% increase, what would the impact be? If consumers' preferences changed due to changing economic environments, how can a company prepare?
4. Consumer Segmentation and Engagement -
Prior to preparing the budgets, which socio-demographic groups are most likely to be the "valuable" targets of the brand? What kinds of brand communications best work with these segments? How do we manage segments that are valuable but vulnerable to poaching by other brands/switching? How can we attract other brands' high-value/highly-vulnerable target segments to our own brand?
Is marketing analytics new?
Marketing Communications Analytics is not new. Some have called it "marketing mix modeling" - since it deals with the 4/5/6 P's or marketing. Some have called it marketing sciences. Some call it evidence-based marketing planning.
It is however re-emerging as a practice because the demand
amongst CMOs to measure and get their department's contribution to shareholder wealth and value creation measured is real.
Given the economic crunch, it is quickly becoming an area of urgency. Because companies are pressured to account for their investments more effectively to their boards and their shareholders, the demand for analytics is even going to increase more in the months to come.
Ad and media agencies believe that this is something that will propel their services to a higher level. Some companies have succeeded in doing so. However, one thing is certain: the traditional way of doing business - from hiring and training talent to actual operations - is not going to be sufficient and will not guarantee success.
Agility is critical - and "financial- and political-will" are necessary to effect changes in how agencies think.
What is the future of marketing analytics?
Marketing Communications Analytics will pave the way for new remuneration models for communications specialists - from brand consultancies, media companies, creative agencies, and digital agencies to CRM.
We have seen in the last several years the inclusion of procurement companies in the agency pitch processes. This is only the first step.
The next step - where marketing analytics will play a significant role - will be when finance executives start getting involved in the marketing business.
Finance executives have a different language - they will talk about NPVs, discounted cash-flows, IRRs, ROIs, risk-management, and value-at-risk. It will probably take them some time to deeply understand the value of brands and brand strategies - but they will get there.
This is where marketing analytics comes in - because marketing analysts will be able to speak these same language (or at least, approximate the language of finance executives) through their use of hybrid techniques - techniques from statistics, econometrics, and finance.
What do you think? Any opinions or thoughts on these?