It's Not the Size of the Data -- It's How You Use It: Smarter Marketing with Analytics and Dashboards

Advance Praise for It's Not the Size of the Data—It's How You Use It

A fascinating combination of rigorous research and methodology with practical insights and implications. Both practitioners and academics can benefit from reading it.

—Don Lehmann, George E. Warren Professor of Business, Columbia University; coauthor of Analysis for Marketing Planning, Managing Customers as Investments, Product Management, and others

Big data in marketing is about looking for rationality to emotional behavior. This book teaches how to do that.

—Stan van den Broek, Shopper Insights Manager, SCA Hygiene Products

Pauwels uses numerous examples to present scientific knowledge in an impressively simple and understandable way. An extremely informative book that will inspire many managers to make immediate changes in handling their data.

—David Geistert, Department of Business Administration—Market-Oriented Media, University of Hamburg

Way more than just metrics and dashboards—this will be a great resource for marketers and business professionals.

—Laura Patterson, author of Marketing Metrics in Action and Measure What Matters, and cofounder of VisionEdge Marketing, Inc.

It's Not the Size of the Data

It's How You Use It

Smarter Marketing with Analytics and Dashboards

Koen Pauwels

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Library of Congress Cataloging-in-Publication Data

Pauwels, Koen

  It's not the size of the data—it's how you use it : smarter marketing with analytics and dashboards / Koen Pauwels.

       pages cm

  Includes bibliographical references and index.

  ISBN-13: 978-0-8144-3395-9

  ISBN-10: 0-8144-3395-2

  1. Marketing research. 2. Marketing research—Data processing. 3. Dashboards (Management information systems). I. Title.

  HF5415.2.P39 2014

  658.8’302855437—dc23

2013031903

© 2014 Koen Pauwels.

All rights reserved.

Printed in the United States of America.

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Contents

Foreword by Laura Patterson

Acknowledgments

Introduction: Decisions That Data and Analytics Can Inform

PART I: WHAT MARKETING ANALYTICS DASHBOARDS CAN DO FOR YOU

Chapter 1: Marketing Analytics Dashboards: What, Why, Who, and How

CASE STUDY The Right Chair #1: Marketing Analytics Gives SMEs a Competitive Advantage

What Is a Marketing Analytics Dashboard?

CASE STUDY Cars: From Begging HQ to Talking Trade-Offs

Why Marketing Analytics Dashboards?

Who Uses Marketing Analytics Dashboards?

How Can a Marketing Analytics Dashboard Help You?

Wrap-Up and Manager's Memo

Chapter 2: Compare the Marketing Analytics Dashboard to Your Current Scoring System

Reporting Versus Analytics in Dashboards

Marketing Analytics Dashboards and Balanced Scorecards

CASE STUDY City Performance: From Charlotte's Balanced Scorecard to Atlanta's Dashboard

Decision Support Tools and Marketing Mix Models

Dashboard Building Blocks: Metrics and Key Performance Indicators

Wrap-Up and Manager's Memo

PART II: PLAN YOUR MARKETING ANALYTICS DASHBOARD

Chapter 3: Start with the Vision

Business Strategy Drives the Dashboard

CASE STUDY Unisys Makes Goal Alignment a Key Priority

How Goal Alignment Increases Performance

Top-Down or Bottom-Up Design?

Communicating Upward: Harnessing Top Management Support

CASE STUDY Dashboards Empower Middle Management: Discover Financial Services

Wrap-Up and Manager's Memo

Chapter 4: Assemble Your Team

Cross-Functional Development Teams

CASE STUDY Not All Fun and EB Games

Team Management Is Ongoing

Sustained Assistance from Top Management

Wrap-Up and Manager's Memo

Chapter 5: Gain IT Support on Big and Not-So-Big Data

IT Is from Jupiter, and Business Is from Mercury

CASE STUDY Inside and Outside Data at a Multichannel Retailer

Moving IT Closer to Business

Moving Business Closer to IT

Wrap-Up and Manager's Memo

Chapter 6: Build Your Database

Planning the Right Database

Building Your Database In-House

CASE STUDY The Right Chair #2: The Longest Journey Starts with the First Database Step

Outsourcing Your Database

Testing and Managing Your Database

Wrap-Up and Manager's Memo

PART III: DESIGN YOUR MARKETING ANALYTICS DASHBOARD

Chapter 7: Generate Potential Key Performance indicators

What Could Make or Break Your Business?

How to Structure Interviews to Generate KPIs and Structure KPIs into Groups

CASE STUDY IT Firm Generates and Organizes 150+ Metrics

Shortcuts? Start with the Competition or with Company Objectives

Clarify for All What Each KPI Means

CASE STUDY The Right Call #1: What Is a Qualified Lead?

Wrap-Up and Manager's Memo

Chapter 8: Eliminate to Select Key Leading Performance Indicators

Why Not Ask Customers What's Important?

CASE STUDY First Tennessee Bank Tests Its Metrics

Which Indicators Lead Peformance? Granger Casuality in Action

CASE STUDY From 99 Metrics to 17 LPIs

Which Indicators Are Key? Vector Autoregressive Modeling

How KLPIs Improve Insights in Different Industries

Wrap-Up and Manager's Memo

Chapter 9: Include Emerging Channels: KLPIs for Online and Social Media

What Is Truly Different Online?

Customer-Initiated Contact Metrics

Capturing Conversation Topic Dynamics in Social Media

CASE STUDY Fashion Retailer Analyzes the Effects of Social Media

Wrap-Up and Manager's Memo

Chapter 10: Emerging Markets Frontier: Metrics Across Countries

The Need for Standardized, Global Metrics

Consumer Protection Lowers Marketing Responsiveness of Consumer Awareness

Individualism Increases Marketing Responsiveness of Brand Consideration and Liking

Income Increases the Sales Conversion of Brand Liking

CASE STUDY How Advertising Effects Differ in an Emerging and a Mature Market

Wrap-Up and Manager's Memo

Chapter 11: Design the Layout and Dashboard Prototype

Dashboard Structure: Seven Must-Haves

Data Display on the Dashboard

Data Visualization

CASE STUDY Data Visualization at Procter & Gamble

Wrap-Up and Manager's Memo

PART IV: LIVE YOUR MARKETING ANALYTICS DASHBOARD

Chapter 12: Launch and Renewal of the Marketing Analytics Dashboard

Dashboard Implementation Roadmap

Execution Challenges

CASE STUDY The Right Call #2: Implementation Challenges

Key Implementation Success Factors

Renewing the Marketing Analystics Dashboard

Wrap-Up and Manager's Memo

Chapter 13: Change Your Decision Making: From Interpretation to Action

Adapt the Dashboard Output

Decide on Rules for Setting Marketing Budget and Allocation

CASE STUDY Online Marketing Effects: Shifting Euros Away from Last-Click Misattribution

Addressing Implementation Challenges

Wrap-Up and Manager's Memo

Chapter 14: Nurture the Culture and Practice of Accountability

Organizational Culture Is Crucial to Dashboard Success

Motivating Employees to Use the Dashboard

The Practice of Accountability

How to Support Accountability Throughout the Organization

Wrap-Up and Manager's Memo

Conclusion: Call to Action

Notes

Index

About the Author

Free Sample Chapter from Wiki Management by Rod Collins

Foreword

REGIS MCKENNA is attributed with saying that marketing represents the ongoing effort to keep products and services in touch with evolving conditions. As the pace of change has accelerated, so have the degree of choices and point of control—choice of product, choice of brand, choice of channels, and choice of touch points. The customer, as they say, is firmly in the driver's seat. As a result, marketers and marketing have evolved from selling products and building relationships to creating compelling customer experiences. This in turn has led to a proliferation of content, and a focus on segmentation, customization, personalization, and engagement.

This multichannel, customer-driven dynamic environment presents increasing challenges. There are more claims on your customers, your company, and your attention, time, and energy. Every day more opportunities present themselves to marketing, such as new online communities, new channels of communication, and new markets and customer segments. So how do you decide where to make your investments? It's often a tough choice—one that can be made easier if you have the right insights from the right information, organized in the right way. That's why the principles in this book are applicable to every marketer everywhere.

I first met Dr. Koen Pauwels in 2007 when we were both attending a marketing conference. It wasn't long before we recognized that we were kindred spirits in our dedication to enabling organizations to use data, analytics, process, and metrics to improve marketing alignment and accountability. Since then, we have continued to help each other's efforts and those of marketers who want to operate centers of excellence.

I believe every marketing professional is committed to generating value. But let's face it; every marketing investment is under intense scrutiny. The need for a good rationale to invest the resources you have available was never more of a prerequisite than it is today. One of the quotes in this book I encourage we all commit to memory is Gut decisions, which were once seen as inspired (if they succeeded), are now viewed as rash. To command authority, you need the numbers to back you up. That's why I encourage you to move this book to the top of your pile.

The basic idea behind this book seems rather obvious. By using data, analytics, modeling, data visualization, and dashboards, marketers can make better strategic and tactical decisions and investments. If only it were that simple. Koen Pauwels is clear right out of the gate—it may not be simple but it is essential. The Advertising Research Foundation's fortieth annual conference in 2001 was among the first to boldly address the topic of marketing measurement and accountability. And it's likely to remain a top-of-mind topic—a topic that has remained among the headlines ever since marketers started scrambling to crack the code, some more successfully than others. But all of us are exposed. What we can measure, the data we can collect, has exploded as quickly as the channels and technologies we have at our fingertips.

What Koen Pauwels has brought into focus is that, at a time when we have more marketing data and technology than ever before, we must undertake an immense effort to transition from activity-based to outcome-based marketing. This transformation involves embracing the science, and thus the difficult and what may at first glance seem like the dry side of marketing.

How can marketing prove and improve its value? That's the question that has driven VisionEdge Marketing since its inception. We know from our work in hundreds of engagements that marketers who create alignment, leverage data and analytics, identify and select the right metrics, and employ an effective dashboard are more successful, more confident, and more credible. This is the beauty in science side of marketing.

Through this book Koen Pauwels makes his extensive experience within the reach of us all. He outlines steps, shares case studies, and provides end-of-chapter guidelines that make it possible for marketers to create and utilize dashboards as a way to both monitor progress and facilitate decisions. He designed this book to help marketers use data and metrics to better understand the effect and impact of marketing investments.

For any marketer who wants to generate value, enable his or her company to compete successfully, and prove its value, read on. If you want to avoid swimming aimlessly in a sea of data and metrics, then this book is for you. If you want to better understand how to select metrics and present data, then start by turning the page.

Acknowledgments

AMONG THE MANY WONDERFUL PEOPLE that helped me throughout my professional development, I especially want to thank my advisor Dominique Hanssens, who continues to be an inspiration and a mentor. Likewise, I thank my academic colleagues at the Tuck School of Business and at Ozyegin University for their support. The scientific evidence for this book's insights comes from studies with several co-authors, including Shuba Srinivasan, Martin Lautman, Gokhan Yildirim, Marc Yanhuele, Amit Joshi, Evert de Haan, Jorge Silva-Risso, Sunil Gupta, Thorsten Wiesel, and Pavel Kireyev. Laura Patterson and Guy Powell both inspired me by their books on marketing performance management. Laura wrote the foreword to this book, and Guy Powell was so kind to give most useful and detailed comments. My colleagues at Marketing Productivity Group, including Craig Stacey, Stephen Dubuque, and Todd Kirk, provided contacts and empirical data for many of the U.S. case studies in this book. European and Asian case studies appear thanks to colleagues Joep Arts (Oxyme), Joris Merks (Google), Alfred Dijs, and Bernadette van Ewijk (AIMark). The ideas in this book were discussed and refined with dozens of managers, including the participants in the (executive) MBA programs at Tuck and Ozyegin University, and the annual Marketing Performance seminars of the GfK Academy in Mainz and of HEC Geneva. Especially important, Olena Svatko did a fantastic job drafting sections of this book, and motivating me throughout the process.

INTRODUCTION

Decisions That Data and Analytics Can Inform

Gut decisions, which were once seen as inspired (if they succeeded), are now viewed as rash. To command authority, you need the numbers to back you up.

—ANINDYA GHOSE, 2013

I know that I ought to be looking at big data, but I am not quite sure why, how, and what decisions I would be making differently as a result.

—ANONYMOUS DESPERATE MANAGER, 2013

MARKETING IS AT A CROSSROADS. Managers are frustrated by the gap between the promise and the practice of effect measurement, between big data and online/offline integration. Caught between financial accountability and creative flexibility, most chief marketing officers don't last long in their companies. Their bosses have woken up to the fact their companies make million-dollar decisions based on less data and analytics than they devote to thousand-dollar operational changes. Customer and market data management, product innovation and launch, international budget allocation, online search optimization, and the integration of social and traditional media are just some of the profitable growth drivers that greatly benefit from analytical insights and data-driven action.

Such data-driven action typically involves the following four questions¹:

What happened?

Why did it happen?

What will happen if?

What should happen?

Better, faster, and more transparent answers to these questions help establish marketing accountability.

Yet marketing accountability—let alone the accurate calculation of return on marketing investment (ROMI)—remains an elusive goal for most companies, which are struggling to integrate big and small data and marketing analytics into their marketing decisions and operations. In their March 2013 article, McKinsey experts share that in our experience, the missing step for most companies is spending the time required to create a simple plan for how data, analytics, frontline tools, and people come together to create business value. The power of a plan is that it provides a common language allowing senior executives, technology professionals, data scientists, and managers to discuss where the greatest returns will come from and, more important, to select the two or three places to get started.²

The benefits of getting started and marketing smarter are huge in both academic studies and business cases. Even a small improvement in using marketing analytic dashboards brings companies on average 8 percent higher return on assets compared to their peers.³ This benefit increases to 21 percent for firms in highly competitive industries. Organizations of any size and in any industry have seen sustainable competitive advantage from using marketing analytic dashboards. However, only 16 percent of large international companies use marketing analytics.⁴ In my experience, this percentage is even lower for small and medium-sized firms across America, Europe, and Asia. I see similar issues across multinationals and companies with a few dozen employees and in industries ranging from business-to-consumer, government, and business-to-business. The next three short stories illustrate the issues that have inspired this book.

In early 2012, I found myself at the U.S. headquarters of a fast-moving consumer goods multinational. I had been called in to moderate the discussion between the chief financial officer (CFO) and the chief marketing officer (CMO) on marketing effectiveness. The CFO insisted on measuring all main activities either by ROMI or by return on marketing objective (ROMO). The list of activities included market research, marketing data management, offline marketing communications, online marketing communications, promotions, and direct marketing. Across all activities, the CFO was unhappy and had three concerns: objectives were not clearly defined, the timing of expected returns was not specified, and the marketing department showed resistance to measurement. I helped the CMO to:

Clarify marketing objectives and align them with the business strategy.

Overcome marketing's resistance to measurement.

Obtain excellent and relevant data.

Develop the analytics that showed not just the size but also the timing of the profit returns to marketing investment in all categories.

The second illustrative tale took place in an executive meeting at a European-based business-to-business manufacturer. Country managers were accustomed to obtaining a certain percentage of their revenues to spend on marketing. Faced with new competitive threats, all decision makers felt that this rule was far from optimal and needed to change—but how? Some countries asked for more money for joint promotions with their customers—to then sell more of their product to end consumers. Others considered this simply giving away money to the customers, and instead advocated a direct-to-consumer campaign to create awareness and preference for their product. Still a third group believed the firm should target policy makers directly with sustainable business credentials, pointing to huge successes of having a prime minister come talk at the company's trade shows. Unfortunately, the lack of before/after measurement of sales lift left country managers unwilling the change their positions. In this case, I worked in three steps. First, I ensured that each campaign had a stated, measurable objective that was defined in place and time and had a before/after measurement as backup. Second, after collecting data across years and countries, I categorized all campaigns by objective and ran analytical modeling to quantify the link between each objective and profits, accounting for country differences. Third, I recommended an improved allocation in the direction of the findings.

The third story I want to share involves an Asian manufacturer of consumer durables who had only sixty employees and nobody in charge of data maintenance, let alone of the analytics to make them actionable. Managers were overwhelmed by the hundreds of online metrics regarding their paid, earned, and owned media, and had little insight in the exact costs or returns of their offline marketing, which makes up 85 percent of their budget. When sales quotas loomed, they would often shoot from the hip—doubling spending on marketing actions that were untargeted and probably inefficient. A nagging feeling was telling them they might be increasing sales, but at the expense of profits. Moreover, several customers told them they put in an offline order based on online marketing touch points. Should online be credited for offline sales? The offline marketing manager definitely did not think so! I worked with both the offline and the online marketing manager to discuss how both channels contributed to sales. Based on this framework, the company put in place the right metrics and collected the data over time. A marketing analytics dashboard allowed both managers to play around with spending scenarios and observe the projected size and timing of profits, not just sales. They agreed on dramatic budget shifts and saw their company's profit—and their reputations—greatly increase!

Across these cases, we see the same three issues:

Unclear vision on how objectives relate to company performance.

Uncertainty on the size and timing of expected returns to marketing investment.

Resistance to measurement.

Sound familiar? Wouldn't it be great to have a comprehensive set of steps that can help you improve marketing decisions at your company? How about a book that is steeped in both scientific research and practical applications to guide you along?

This book is all about marketing analytics dashboards, what they are, how you can develop, use, and renovate them—and how they help you make better decisions. This book guides