What is data-driven marketing? Good question. To understand why it is important, try asking instead: what is marketing without data?
Let’s look at this another way. Which do you prefer: carrying out your marketing activities based on gut instinct, or making decisions based on data rather than intuition or opinion? Not hard to answer, I would imagine. But we can agree that being data-driven is a good thing.
However, I think I am not alone in making marketing decisions based on what others appear to be doing, what I believe has worked in the past and what the boss wanted. In short, making decisions based on a hunch – or other people’s hunches – not detailed data. Or possibly a more insidious marketing crime: cherry-picking data that supports my point-of-view, bias or the fact I have to get a campaign out the door.
In the real world, data-driven marketing starts with a decision: a decision to measure day-to-day marketing activities as accurately as possible and design the process to manage them. In other words, using metrics to measure the results of your marketing initiatives to improve outcomes, so you can make decisions for your brand by backing it up with rational information. Emotions won’t be attached to your decisions because they will be backed by data and logic.
A fundamental problem of being data-driven is defining and identifying both the best metrics and best practice. Easy to write, hard to do. For example, that old chestnut, ROI. ROI is about the cost to do something, and the revenue generated as a result. For marketers, the difficult part is determining what constitutes the outcomes and the true cost
Data-driven marketing can help in several ways, including keeping score of all major marketing activities such as:
- Brand and customer metrics, such as top-of-mind awareness, prompted/unprompted, customer churn rate, customer lifetime-value, net promoter score, revenue per customer
- Financial metrics, such as revenue per customer, profit per customer, average transaction value, market share
- Performance or campaign metrics, such as customer acquisition cost, cost-per-click, conversion rate, website bounce rate, cart abandonment rate, new customer sign-ups, media mentions, number of new blog posts
- Insight metrics relating to attribution, A/B testing
Web-only firms such as direct-to-consumer and ecommerce brands have an advantage over those using retail channels because they have much more visibility into every aspect of their customer interactions.
Why bother will all this data-driven malarkey? First, it drives results and garners better outcomes. The original book on data-driven marketing, called, unsurprisingly, ‘Data Driven Marketing’ by Mark Jeffrey shows firms that master data-driven marketing have a significantly better financial performance, spend more on branding and have a lower cost of customer acquisition.
Being focused on the facts does not mean there is a ‘church and state’ divide between being data-driven and being creative.
The second reason is to apply data-driven marketing is to prove the value of marketing to your organisation. For today’s marketers, the issue is not the lack of marketing measures or data. Quite the contrary. The challenge is to translate marketing activities into financial results that affect the bottom line. Data-driven marketing helps you demonstrate to your team how much marketing is delivering, which, in turn, can certainly help loosen the financial purse strings.
The third reason is to use data to track your work is to learn the art of what really matters: insight. There is a difference between data and insight. Data and metrics are numbers that you see in spreadsheets and are a fixed point in time. Insight describes how those numbers behave to form a trend. Insights are over time, metrics are about a point in time – in the past.
Now, the problem with hearing the word ‘data-driven’ is that we can fall into the trap that creativity is out of the picture. There have been thousands of words written by those who might bristle at the attempt to quantify creativity.
But being focused on the facts does not mean there is a ‘church and state’ divide between being data-driven and being creative. There is, in fact, lots of data to prove that creativity is not just compatible with being data-driven – indeed, data can drive better creative, which in turn, significantly improves marketing performance.
As Paul Dervan, former head of brand at O2, points out: “A lot of wonderful creative starts with data – as in information. What good creatives and planners do is get under the skin of the data: they go beyond it, trying to understand the ‘why’ – the motivations driving the behaviour that is turning up as data.”
A lot of the really creative things we see come from data. Or at least they start with it. Advertising that simply presents facts and figures tends to be less effective. But if we can find the motivations, it can lead to wonderful stuff.
Dervan relays the story told by famous Harvard Professor Clayton Christensen about how McDonald’s data showed high milkshakes sales in the mornings. This seemed odd, so they went to the stores and observed consumers in action. They discovered truck drivers and commuters were buying the milkshakes, but that was not enough data. Digging down further, they realised truck drivers and commuters were using milkshakes as a substitute for a breakfast. They are fast, filling and easy to consume on-the-go.
Once the team realised this, they could explore all sorts of innovative ways to create a real breakfast option that met the same brief. Christensen named this the ‘job-to-be-done’ by the action of buying the milkshake. Using a data-driven insight and applying it, the sales of the milkshakes increased seven time.
There is another aspect to data – this is where it gets more subtle. As marketers we need to know not just our own data, but we need to know the data ‘out there’ in the market that can help us make decisions based on data rather than opinion about creativity itself.
Normally, we disconnect creativity and marketing performance. Creativity is not the language of the CFO or the board. Creativity, insight or marketing metrics are not being used by finance and senior members of management because these measures do not fit with the normal financial language of the firm.
This is no longer the case. Today, we have the data that proves creativity is a factor in driving business performance.
The link between data and creativity has been shown over and over again by Les Binet and Peter Field. They have shown using actual data that “communications models that use emotional appeal (emotional involvement, fame and ‘more complex’ models) are more likely to yield strong business results than rationally based models of persuasion”. This correlates with much historic research on the subject of emotional approaches.
Binet and Field point out that “creative, emotionally-driven campaigns outperform rationally-based campaigns on every single business measure”.
And what best contributes to business measures? Robust data. Maybe it’s time to extend out the question we asked at the outset from ‘what is marketing without data?’ to ‘what is creativity without data’?