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Highly Effective

Marketing Analytics
Highly Effective
Marketing Analytics
A Practical Guide to Improving
Marketing ROI with Analytics

Mu Hu
Highly Effective Marketing Analytics:
A Practical Guide to Improving Marketing ROI with Analytics

Copyright © Business Expert Press, LLC, 2020.

Cover image licensed by Ingram Image, StockPhotoSecrets.com

All rights reserved. No part of this publication may be reproduced,


stored in a retrieval system, or transmitted in any form or by any
means—electronic, mechanical, photocopy, recording, or any other
except for brief quotations, not to exceed 400 words, without the prior
permission of the publisher.

First published in 2020 by


Business Expert Press, LLC
222 East 46th Street, New York, NY 10017
www.businessexpertpress.com

ISBN-13: 978-1-95152-708-2 (paperback)


ISBN-13: 978-1-95152-709-9 (e-book)

Business Expert Press Big Data, Business Analytics, and Smart


Technology ­Collection

Collection ISSN: 2333-6749 (print)


Collection ISSN: 2333-6757 (electronic)

Cover and interior design by Exeter Premedia Services Private Ltd.,


Chennai, India

First edition: 2020

10 9 8 7 6 5 4 3 2 1

Printed in the United States of America.


This book is dedicated with all my heart to my parents and my wife.
Abstract
Highly Effective Marketing Analytics infuses analytics into marketing to
help improve marketing performance and raise analytics IQ for compa-
nies that have not yet had much success with marketing analytics. The
book reveals why marketing analytics has not yet kept the promise and
clarifies confusion and misunderstanding surrounding marketing analyt-
ics. Highly Effective Marketing Analytics is a highly practical and prag-
matic how-to book. The author illustrates, step by step, many innovative,
practical, and cost-effective methodologies to solve the most challenging
real-world problems facing marketers in today’s highly competitive omni-
channel environment. Marketers, business analysts, and college students
will learn the following from this book:

• Why marketing analytics initiatives have not yet kept the


promise? How organizations can take advantage of Analytics
Maturity Models to become analytically competitive?
• How small- to medium-sized organizations can overcome
budget constraints and achieve analytics success?
• What are the different levels of segmentation and how to
develop strategic, managerial, and tactical segmentation
strategies?
• How to build the customer profile, develop customer perso-
nas, map out the customer journey, and create a 360-degree
customer view?
• How to use multilevel segmentation, predictive modeling,
personalization, and testing strategies to improve the effective-
ness of direct mail campaigns?
• How to quantify the real contributions of print catalogs and
make print catalogs profitable again in the digital era?
• How to take e-mail marketing to a different level of sophisti-
cation and success?
• Why loyalty programs failed and how to revamp a failed or
low-performing loyalty program?
• How to calculate and apply different customer lifetime values
to solving real-world problems?
viii Abstract

• How to use attribution methods such as marketing mix mod-


eling, multi-touchpoint attribution models, and lift analysis
to measure the real return on investment of different mar-
keting channels and better allocate marketing budgets into a
wide range of marketing mediums?

Written in plain English and requiring no programming knowledge,


this book is an easy read for both marketers and analytics practitioners
who want to compete more effectively in the workplace.

Keywords
Analytics; marketing analytics; business intelligence; omnichannel mar-
keting; data; centralized database; segmentation; customer profile; cus-
tomer personas; the 360-degree customer view; customer journey map;
customer lifestage; predictive modeling; direct mail; catalog; e-mail
marketing; loyalty marketing; loyalty program; Customer lifetime value;
marketing mix modeling; multi-touchpoint attribution; Promotional lift;
marketing metrics; marketing KPIs
Contents
Introduction������������������������������������������������������������������������������������������xi

Chapter 1 Why Has Analytics Missed the Mark?������������������������������1


Chapter 2 Developing Actionable Segmentation�����������������������������27
Chapter 3 Gaining Deeper Insights Into Customers������������������������63
Chapter 4 How the 541-Rule Has Changed the Game of
Direct Mail���������������������������������������������������������������������81
Chapter 5 How to Make Catalog Profitable in the Digital Age������103
Chapter 6 Integration Between E-mail, CRM, Google,
and Social���������������������������������������������������������������������131
Chapter 7 How to Revamp Your Underperforming Loyalty
Program������������������������������������������������������������������������147
Chapter 8 Customer Lifetime Value Demystified��������������������������173
Chapter 9 Measuring Success With MMM, MTA, and
Promotional Lift�����������������������������������������������������������193

Bibliography���������������������������������������������������������������������������������������215
About the Author��������������������������������������������������������������������������������217
Index�������������������������������������������������������������������������������������������������219
Introduction

Why I Wrote This Book?


I wrote this book to address two challenges facing today’s marketers and
analytics practitioners.
The first challenge is that the return on investment (ROI) of market-
ing analytics is low. Although analytics is widely acclaimed as the new sci-
ence of winning, and the application of analytics is becoming commonly
accepted in marketing, analytics has not lived up to the promise. A 2015
Forbes Insights Report indicates that only 22 percent of marketers have
data-driven initiatives achieving significant results. That is startling, con-
sidering the importance and prevalence of analytics in marketing success.
To add insult to injury, many executives say that they don’t trust their
own analytics team. According to a survey of more than 2,000 data and
analytics decision makers in 10 countries by KPMG and Forrester Con-
sulting, only 38 percent of respondents have a high level of confidence in
their customer insights, and only one-third trust the analytics generated
from their business operations.1
The second challenge is that the outlook for multichannel retailers
seems to get bleaker and bleaker. According to Business Insider “the stag-
gering rate of store closures that have rocked the retail industry over the
past couple of years is expected to continue in 2019” and “more than
7,000 stores are closing in 2019 as the retail apocalypse drags on.”2
Although online sales increase every year, the reality is that for most
multichannel retailers, online sales only account for less than 25 percent

1  Lindzon, J. 2016. “Why Executives Don’t Trust Their Own Data and Ana-
lytics Insights.” November 4, https://fastcompany.com/3065294/why-execu-
tives-dont-trust-their-own-data-and-analytics-insights
2  Peterson, H. 2019. “More than 7,000 Stores are Closing in 2019 as the Retail
Apocalypse Drags on.” May 21, https://businessinsider.com/stores-closing-in-
2019-list-2019
xii Introduction

of their total sales revenue. The fate of multichannel retailers still largely
depends on the growth of their offline sales, which means traditional mar-
keting channels such as customer segmentation, TV ads, direct mail, print
catalog, e-mail, and loyalty programs still play a critical role in today’s
omnichannel marketing environment. However, because these channels
are mature and hard to improve, attention and resources have shifted
from offline to online and mobile where marketers see greater growth
opportunities.
In light of these challenges, I decided to write this book with two
objectives in mind:

1. I wanted to join forces with many other analytics experts to demon-


strate that analytics can greatly improve the effectiveness of market-
ing if done correctly. And the best way to achieve this objective is
to show both marketers and analysts how to make breakthroughs
in some of the mature marketing initiatives such as customer seg-
mentation, direct mail, print catalog, e-mail, loyalty programs, and
measurement, thus, regaining marketers’ confidence and trust in
analytics.
2. I wanted to improve the analytics IQ of marketers. To compete with
marketing analytics, companies need to bring the left-side and the
right-side brains together. The convergence of marketing and ana-
lytics once nice to have is now becoming a new trend and business
critical. “Analytics Marketers,” individuals who both understand the
analytics and speak the language of business, are critical to improv-
ing the competitive advantages of a company. This book aims to
develop and transform more people into “Analytics Marketers”—
making marketers analytically smarter and analytics practitioners
more business savvy.

Who Should Read This Book?


This book is primarily geared to marketers who are seeking answers to
these two major challenges:
Introduction xiii

First, the mounting pressure to gain deeper insights into their cus-
tomers and improve the effectiveness of marketing programs, especially
in the four traditional marketing channels: direct mail, catalog, e-mail,
and loyalty programs.
Although more attention and resources have shifted to online and
mobile, for most multichannel retailers, traditional marketing programs
still account for more than 70 percent of the marketing budget. How-
ever, in the last decade, ROIs of these programs have plateaued or even
declined year-over-year. While some of the existing known methodol-
ogies still working, overall, they are becoming less effective. Marketers
must explore new ways to improve the performance of these programs.
This book satisfies their needs by focusing on using innovations in analyt-
ics to boost the ROIs of these traditional marketing programs.
Second, the need to find low-cost analytics solutions for small- to
medium-sized companies. Small- to medium-sized companies approach
marketing the same way as their larger competitors do with one disad-
vantage: They have a much more modest marketing budget and a smaller
analytics team. This book proves to them that analytics is not an expensive
cost center. Instead, it is an equalizer that democratizes the competitive
advantages between the large and the small. The book shows how small-
to medium-sized companies can leverage analytics with just a fraction of
the marketing budget of large companies to achieve at least equal if not
better results than their larger competitors.
This book is also relevant to analytical professionals who have two
unmet needs:

1. The need to improve the effectiveness of marketing analytics. Because


analytics performance has not yet lived up to the promise, analytics
professionals must seek and learn new ways to enhance their analyt-
ics capabilities. Excellent analytics capability requires many years of
real-world practice and business acumen, which often are what many
statisticians and analysts are lacking. This book introduces multiple
innovative analytical solutions to solving marketers’ problems in the
context of business. These solutions were developed based on the
author’s two decades of practices and consulting experiences in both
marketing and analytics. Analytical methodologies and techniques
xiv Introduction

introduced in this book are empirical, practical, and pragmatic.


Business analysts can borrow these ideas and apply them to solve
their problems immediately. This book will refine analytical skills for
both new and experienced analytics practitioners and help them to
compete more effectively in the workplace.
2. The need to sharpen their business acumen and effectively and
efficiently communicate with businesspeople. Executives hold the
impression that analytics experts are speaking a language of their
own, not the language of business. The book not only offers analyt-
ics experts practical analytical solutions but also equips them with
fundamental business knowledge that is crucial for them to develop
the right analytical strategies and better communicate actionable
insights gleaned from data to their business partners.

As the demand for analytics continues to increase year-over-year, more


colleges and universities are offering business analytics programs to their
students. This book provides college students a peek into how analytics
works in the real business world, giving them a feel of what marketers are
struggling with, and how marketing analytics can help resolve their prob-
lems. This book can be used as an excellent complement to their academic
textbooks and will significantly shorten their learning curve after they
become a junior analyst.

What’s Special About This Book?


It is a handy and pragmatic book. The practicality of this book manifests
in three ways:

1. The book focuses on solving marketers’ real-world problems. This


book does not tell you glorious stories of analytics, but rather, it
offers very detailed solutions to addressing marketers’ pain points
at a very granular level. For instance, how to better identify hid-
den opportunities and threats through market segmentation; how to
increase ROIs of direct mail, catalog, e-mail, and loyalty programs;
how to measure marketing with the right metrics; and so on.
Introduction xv

2. The analytical solutions introduced in this book are very applicable


to most business-to-consumer (B2C) businesses. This book presents
many original and new solutions to address some of the most chal-
lenging business problems, especially those current methodologies
have little effect on. Since these techniques and approaches are very
applicable, most B2C companies can quickly tweak and apply the
methods and techniques to solve their business problems.
3. Analytical methods and techniques contained in this book are finan-
cially feasible. They are very cost-effective and doable; using them
will not cost marketers extra marketing budget. All methodologies
shared in this book can be done by using free analytical tools such
as R or low-cost tools such as Base SAS along with Microsoft Excel,
enabling small- to medium-sized companies to achieve at least equal
if not better results than their larger competitors with just a fraction
of the marketing budget of large companies.

I hope that readers find that this book serves not only as a compass
but also a detailed roadmap toward the success of marketing analytics.
CHAPTER 1

Why Has Analytics Missed


the Mark?

Chapter Overview
Why has analytics missed the mark? This chapter first explores the main
reasons responsible for the lackluster performance of marketing ana-
lytics and then introduces three prevailing analytics maturity models
that not only will help organizations to recognize their analytic matu-
rity state but also provide macrolevel solutions to achieving analytic
successes.
This chapter is organized as follows:

• Why Has Analytics Not Yet Lived Up to the Promise?


• Davenport’s Five-Stage Analytics Maturity Model
• Davenport’s DELTA Model
• The Gartner Continuum Model
• Wayne Eckerson’s Analytical Maturity Model
• Challenges and Opportunities Facing Small- to
Medium-Sized Companies
• The ALADA Model—Five Pillars of Analytics Success for
Small- to Medium-Sized Firms
• Conclusion

Why Has Analytics Not Yet Lived Up to the Promise?


Analytics is the scientific process of transforming data into insight for
making better decisions. Since Professor Tom Davenport published
his breakthrough book—Competing on Analytics: The New Science of
2 Highly Effective Marketing Analytics

Winning, more leaders see analytics as a new wave of competitive advan-


tage. The application of analytics is becoming commonly accepted in
marketing.
Investments in analytics have been increasing steadily. The 2018
chief marketing officer (CMO) Survey conducted by Duke Universi-
ty’s Fuqua School of Business reports that the percentage of marketing
budgets companies plan to allocate to analytics over the next three years
will increase from 5.8 percent to 17.3 percent, a whopping 198 percent
increase.1
However, in the same CMO Survey, top marketers also report that the
effect of analytics on companywide performance remains modest, with an
average performance score of 4.1 on a seven-point scale, where 1 = not
at all effective and 7 = highly effective. It is bothersome that the analytics
performance impact had shown little increase over the last five years when
it was rated 3.8 on the same scale.2
A 2015 Forbes Insights Report indicates that only 22 percent of
marketers have data-driven initiatives achieving significant results.
According to ITSMA and Vision Edge Marketing, 74 percent of mar-
keters can’t measure or report how their efforts impact their business.3
These numbers are startling, considering the importance and preva-
lence of analytics in marketing success and proving return on invest-
ment (ROI).
So, why has analytics missed the mark? Below are eight of the most
common reasons:

1
 CMOSurvey.org. February 2018. “The CMO Survey.” https://cmosurvey.
org/wp-content/uploads/sites/15/2018/02/The_CMO_Survey-Highights_and_
Insights_Report-Feb-2018.pdf
2
 CMOSurvey.org. February 2018. “The CMO Survey.” https://cmosurvey.
org/wp-content/uploads/sites/15/2018/02/The_CMO_Survey-Highights_and_
Insights_Report-Feb-2018.pdf
3
  Simpson, J.E. 2017. “Tracking Your Marketing Efforts: Why It’s Important and
How to Start.” Forbes.com, October 16, 2017, https://forbes.com/sites/forbesa-
gencycouncil/2017/10/06/tracking-your-marketing-efforts-why-its-important-
and-how-to-start/#1e88ba9d31e8
Why Has Analytics Missed the Mark? 3

Data Problems

Data make or break a business because that data fuel marketing analytics.
Commonly seen issues with data are as follows:

1. Poor data quality. Poor quality data include inconsistent data, miss-
ing data, wrong data, duplicate data, and outdated data. Several rea-
sons for poor data quality include:
• Lack of budget for timely data merge and hygiene. For
instance, one customer may have multiple records in the
database under different names;
• Outdated store POS system that is unable to capture key
customer information;
• Human error. For instance, sales rep typed the name wrong
into the database;
• Data value is not consistent across all databases because IT
only updates selected databases;
• External data feeds were not imported into the databases
promptly;
• Data dictionary was created by IT, not by the businesspeople.
2. Scattered and disconnected data. Data are typically owned and main-
tained in separate systems by separate departments across organiza-
tional silos. There is(are) no common variable(s) that can stitch them
together. For instance, the CRM database, social, e-commerce, and
call center data are stored in different databases, and they disconnect
from each other.
3. Inaccessibility to data. Data are not available to all stakeholders.
Because data are isolated in different systems and places, marketers
cannot access some of the critical pieces of information about custom-
ers. A typical example is that e-commerce, call center, and marketing
team are three separate business units, and the e-mail marketing team
typically does not have access to the CRM database, and vice versa.
4. Insufficient data breadth. Many people say we are living in an era of
big data overflow. While companies do seem to have far more data
than they can process, the reality is that due to budget constraints and
technical difficulties, they do not have enough useful data that can
4 Highly Effective Marketing Analytics

be leveraged for analytics and action. Useful data include both struc-
tured data and unstructured data. The structured data are data stored
in a relational database such as customer demographics, behaviors,
campaign responsiveness, product usage, cross-channel interaction,
and so on; the unstructured data are data that aren’t stored in a fixed
record length format. Examples include documents, social media
feeds, digital pictures and videos, call center interactions, on-site
interactions, survey opinions, and so on. Lack of data breadth limits
an organization’s ability to gain deeper insights into its customers.
5. Not using external data. There are two reasons why some companies
are not taking advantage of external data. First is lack of budget.
Companies, especially small- to medium-sized companies, do not
have a budget for purchasing external data such as customer demo-
graphic, geographic, and attitudinal information. Second, although
there are so many data (i.e., economic, job, population, weather,
housing, etc.) available free to the public that can be used for research
and modeling, some analysts are either not aware of them or do not
know where to find them from public domains.
6. Poor data management and governance. Many companies do not have
an effective data governance strategy. There are no good QA and
QC procedures in place to ensure the integrity of the data. Data
dictionary was not created or updated promptly. Data processing
procedures were not properly written and archived; knowledge got
lost in transitions after key personnel left or because of the change of
service providers.

Technology and IT Support Issues

Some commonly seen problems include but are not limited to:

• Outdated and rigid legacy data system. For instance, the outdated
store POS system is unable to store some key customer data.
Replacing such a system requires a lot of money. In some cases,
the database is so old that the database administrator dares not
make any changes to tables for fear that any significant changes
will trigger a collapse of the entire database system.
Why Has Analytics Missed the Mark? 5

• Lack of IT support. IT team does not allocate enough people


to support the marketing and analytics team.
• Lack of effective communications. Marketing treats IT as a
back-office function. There is no consistent and meaningful
communication between IT and marketing, marketing and
analytics, and analytics and IT. For instance, marketing and
analytics decided to purchase a new analytics software without
consulting IT. Later, they found out that additional servers are
required to host it, but neither the marketing nor the IT side
had the extra budget for purchasing the servers. That analyt-
ical software ended up sitting idle for several months until
marketing secured the additional funds in the next fiscal year.

Poor Investment Decisions

Poor investment decisions waste your limited marketing dollars, which is


one of, if not, the biggest reasons why your analytics ROI was unsatisfying.

• Assuming the wrong approach to tool and software selections.


Companies with low analytics IQ tend to choose tools and
software not based on their capabilities but rather based on
how the vendors claim their tools can solve companies’ pri-
mary problems. Often, these companies do not have proper
protocols, standards, and procedures in place to compare and
evaluate tools from different vendors. Therefore, they cannot
objectively compare the pros and cons of each vendor and
make the right purchase decisions.
• Buying vanity software and tools that add little value to the busi-
ness. A good example is the multichannel campaign manage-
ment system, which could easily cost retailers half a million
dollars every year. For instance, many retailers believe that a
campaign management system is a must-have to pull cam-
paigns, but indeed, it is not, especially for companies that do
not have many customer records. You may use free tools such
as R or the Basic SAS to create an in-house campaign man-
agement system that will cost you nothing or only cost several
6 Highly Effective Marketing Analytics

thousand dollars a year. The in-house campaign management


system not only can save you up to quarter million dollars a
year, it will also significantly improve the work efficiency and
shorten the turnaround time of campaign creation by at least
a day or two.
• Overspending on tools and data not on people. Some compa-
nies spend more than 80 percent of their analytics budget
on tools and data, and less than 20 percent on people and
training. They tend to buy tools and technologies that have
way more functions than what they need. For instance, data
vendors like to pitch two sexy things to marketers: First, data
must be comprehensive, which means that to develop a true
360-degree customer view, you must capture every touch
point and every nuance of a customer crossing the entire cus-
tomer journey. Second, you must capture data in real time so
you can respond to their behavior promptly. Both sound very
attractive and seem to make perfect sense. But the problem
is that capturing every touch point is highly expensive and
arguably unattainable. Data are only as good as you use it. If
you don’t use it, you waste your time and money big time.
• Letting IT, not the business, lead the software search. IT project
managers usually do not quite understand what the business
side wants. They tend to choose products based on technical
requirements rather than business requirements.
• Not getting IT involved when selecting tools. When selecting
analytical tools, ignoring IT partners’ opinions or even totally
not getting IT involved will cause problems, too. For instance,
the analytics team of one of my clients decided to purchase
an analytical tool without consulting the IT team; only later,
they found out that the IT side lacks the knowledge to main-
tain and support that device.
• Falling into the trap of “User-Friendly.” Software vendors like to
pitch user-friendly features to executives, and that trick always
works like a charm. Don’t get me wrong; we all want user-
friendly tools. The problem is that more often than not, you get
these so-called user-friendly features at the expense of sacrificing
Why Has Analytics Missed the Mark? 7

much-needed functionalities and flexibilities. Even worse, many


so-called user-friendly tools are not so user-friendly at all. Also,
a genuinely user-friendly tool does not always guarantee that
users will use it. For instance, many companies purchased the
expensive Tableau viewer licenses for their executives, hoping
that they would pull reports every day by themselves. However,
what we’ve found out was that only a small number of execu-
tives would do that. Most executives still prefer the marketing
or analytics team pulling the reports and presenting them the
insights instead of doing the job by themselves.

Lack of Analytics Marketers

To compete on analytics, companies desperately need to bring the left-


side and the right-side brains together. The convergence of marketing
and analytics, which was once nice to have, is now becoming a new trend
and business-critical. Analytics marketers are individuals who know ana-
lytics and can also speak the language of business. They translate business
requirements into terms that analytics and technologists can understand.
Conversely, they can also use plain English to show business the value of
data, justify investments in analytics, and translate insights gleaned from
data into easy-to-understand stories for better decision making. Analyti-
cal marketers are critical to improving the competitive advantages of the
company. The more analytics marketers a company has, the more likely
the company is to adopt an analytically oriented culture and use analytics
to make better decisions than the competition. Many companies do not
have qualified analytics marketers; they are not yet ready for the era of
insight-driven marketing.

Lack of Executive Support

Like any other projects, support from executives is critical to the success
of analytics. Organizations need analytical leaders to set and clarify strate-
gic objectives and ensure appropriate project funding. Analytical leaders
help secure resources, provide project governance, create high-level orga-
nizational buy-in from all stakeholders, manage risks, and make critical
8 Highly Effective Marketing Analytics

decisions. Leading analytically oriented companies often have a couple of


senior executives sponsor analytics initiatives; they raise the awareness and
analytics IQ within the organization and create and maintain a culture of
excellence.

Scarcity of Analytics Professionals and Skills

The shortage of analytics skills means several things:

1. Lack of experienced analytics professionals. An analytics team con-


sists of several types of analytics professionals, such as data scien-
tists, data developers, statisticians, and business analysts. As more
organizations embrace artificial intelligence and machine learning
technologies to achieve competitive advantages, good analytics peo-
ple, especially those who have deep knowledge in data and statistics
and also have excellent SAS/R/Python programming skills, are in
high demand. Finding the right analytics talent is challenging for
all companies.
2. Lack of business domain knowledge and experience. Most analytics pro-
fessionals come from math and statistics background and have little
or no business domain knowledge. Therefore, some of the “smart
insights” they discover have no real business benefits. Some ana-
lysts can only find patterns but are unable to form assumptions and
hypotheses to determine the root causes further.
3. Lack of innovation in analytical techniques and methodologies. Many
organizations keep using approaches and methods that once worked
very well and don’t try to improve them or don’t know how to
improve them. For instance, in the past 10 years, response rates and
ROIs of many traditional marketing channels such as direct mail,
print catalog, and e-mail have plateaued or even declined year-over-
year. One of the reasons, of course, is that marketers’ attention and
resources have shifted to mobile and online marketing where mar-
keters see more growth opportunities. However, lack of innovation
in analytical techniques and the slowness of adopting new technolo-
gies such as machine learning are two major reasons that have created
the low effectiveness of marketing initiatives.
Why Has Analytics Missed the Mark? 9

4. Poor communication skills. Some analysts cannot use easy-to-under-


stand English to effectively communicate the findings, insights, and
actionable recommendations to marketers.

Company Silos

The company silos present when certain departments or sectors do not


wish to share knowledge and information with others in the same com-
pany. This lack of information flow results in departmental isolation and
territorialism. Company silos can lead to negative customer experience,
inefficiency, and duplicate work, and may also contribute to the demise
of productive data-driven company culture.

• Negative Customer Experience. Negative customer experience is


often caused by either operational silo, channel silo, or both.
The operational silo happens when the various business units
present in an organization aren’t aware of one another’s oper-
ations and decisions and act autonomously without getting
insights from related business units. For instance, recently, I
called the customer service of a carpet cleaning company to
set up an appointment because I received a great e-mail offer
from them. The call center rep searched the database and
couldn’t find the offer code in the database. Her supervisor
has the authority to see more data in the system. She was able
to locate the coupon code, but she told me that the e-mail
was sent out by another franchise whose service territory is
out of the scope of my home; therefore, they couldn’t use
the coupon code. I was disappointed. Customers do not care
about how your franchise system works; they view all franchi-
sees as one in the same brand. At the very least, a disclaimer
should be included in the e-mail to remind recipients that the
offers are subjective to specific regions.
• Duplicate Work. In some large organizations, it is not uncom-
mon for each department to have similar positions per-
forming similar functions. Their jobs are highly overlapped.
Departmental silos also cause companies to spend money,
10 Highly Effective Marketing Analytics

which is avoidable. For example, I noticed that the credit card


department of one of my clients spent a significant amount
of money and hired a consulting firm to build a reporting
package for them. What I found out was that the company’s
analytics team could have developed that reporting package
much quicker if the credit card department had reached out
to them for help.
• Inconsistent Branding. Today, retailers recognize the importance
of omnichannel marketing. An omnichannel strategy focuses
on delivering consistent brand presence across channels during
a consumer’s buying process and making that buying process
a seamless and consistent experience. Channel silos hinder
the continuous flow of contextual and historical information
between channels, thus resulting in inconsistent brand images
and different customer experience across different channels.

Not Using the Right Metrics and Key Performance Indicators

Metrics are quantifiable measures that are used to monitor and evaluate
financial performance, reveal the truth about performance, and provide
an actionable way to achieve overall business strategies and goals. Key per-
formance indicators (KPIs) are a subset of metrics that provide a simple,
insightful snapshot of a company’s overall performance, as well as reli-
able, real-time information for effective decision making. Continuously
tracking the trends of KPIs for an extended period will help highlight any
issues that might otherwise go unnoticed and discover hidden opportu-
nities for further growing your business. However, in reality, quite a few
companies make decisions without using the right metrics, thus resulting
in low ROI of marketing initiatives. For instance, recently, quite a few
multichannel retailers repositioned print catalogs as a branding tool to
raise brand awareness and drive traffic to other channels. Did all these
retailers make the decision based on KPIs such as customer lifetime value
and incremental margin? Probably not. A couple of them I knew made
that move simply because other retailers did so.
So, how to fix these problems and improve the ROI of your invest-
ments in marketing analytics? The first step, of course, is to identify the
Why Has Analytics Missed the Mark? 11

gap between you and those analytically competitive firms. Below I’d like
to introduce you to four analytics maturity models that will help you not
only recognize where you are at on the analytics maturity curve but also
get you on the right path toward analytical success.

Davenport’s Five-Stage Analytics Maturity Model


In 2007, Thomas H. Davenport and Jeanne G. Harris published their
famous Five Stages of Analytics Maturity Model that classifies organiza-
tions into five maturity stages based on five success factors: data, enter-
prise, leadership, targets, and analysts.
Davenport describes five stages of analytics maturity as follows:

1. Analytically impaired: The organization is flying blind and reactive.


It is plagued by missing, inconsistent, or poor-quality data, multi-
ple definitions of data, and poorly integrated systems. Leadership is
not aware of the importance of analytics or simply has no interest
in analytics. Analysts have low analytical skills, and they are usually
attached to specific functions.
2. Localized analytics: Data are usable but in functional or process silos.
The organization collects transaction data efficiently but often lacks
the right data for better decision making. Analytic efforts are iso-
lated, opportunistic, and function specific, lacking communications
across different departments and teams. Leadership is only at the
functional or process level. Targets are disconnected and may not be
strategically important.
3. Analytical aspirations: The organization has a proliferation of business
intelligence (BI) tools and data marts, but most data remain unin-
tegrated, nonstandardized, and inaccessible. Organizations begin to
create a centralized data repository. Early stages of enterprisewide
approaches start appearing. Executives recognize the importance of
analytics. Many key areas hire analysts, and analytical efforts coalesce
behind a small set of targets.
4. Analytical companies: Leaders embrace analytics and support ana-
lytics initiatives. Data quality is high. The organization develops
an enterprisewide analytical plan, instills proper IT processes and
12 Highly Effective Marketing Analytics

governance principles, and embeds some automated analytics.


They hire highly capable analytics professionals. The organization
begins to develop an enterprisewide analytics capability, which is
viewed as a corporate priority. Analytical activities center on a few
key domains.
5. Analytical competitors: Leaders have a strong passion for analytical
competition. They hire the best analytics professionals. The organi-
zation relentlessly searches for new data and metrics and has a full-
fledged analytic architecture that is enterprisewide, fully automated,
and integrated into processes. The organization is routinely reaping
big benefits from its enterprisewide analytics capability and focuses
on making that business advantage renewable.4

Currently, most organizations are sitting at stage two or three in Dav-


enport’s model. According to a recent study by Gartner, almost 90 per-
cent of organizations have low BI and analytics maturity.5

Davenport’s DELTA Model


In their 2010 book, Analytics at Work: Smarter Decisions, Better Results,
Tom Davenport, Jeanne Harris, and Bob Morison introduced the DELTA
model. If the Five Stages of Analytics Maturity Model is the industry
standard framework for assessing analytics maturity, the DELTA model
is the compass for achieving analytics success. As Davenport explains, the
DELTA model has five attributes (later, two new elements Technology
and Analytical Techniques were added, thus becoming the DELTA Plus
model):

4
  Davenport, T.H., and J.G. Harris. 2007. “Five Stages of Analytic Competi-
tion.” Computerworld, September 17, 2007, https://computerworld.com/arti-
cle/2553020/five-stages-of-analytic-competition.html
5
  Gartner Press Release. 2018. “Gartner Data Shows 87 Percent of Organiza-
tions Have Low BI and Analytics Maturity.” December 6, https://gartner.com/
en/newsroom/press-releases/2018-12-06-gartner-data-shows-87-percent-of-
organizations-have-low-bi-and-analytics-maturity
Why Has Analytics Missed the Mark? 13

• D (Data)—must have large amounts of integrated, high-qual-


ity, and easily accessible data about their businesses and
markets. Technology-wise, you’ll need heavy-duty hardware
and software to do serious analytical work.
• E (Enterprise)—must have an enterprisewide approach.
Instead of managing your analytics resources in disconnected
silos, highly analytical firms manage these data, technology,
and analytics people in a coordinated fashion throughout the
enterprise.
• L (Leadership)—must have leadership supporting analytics
initiative. One of the key factors driving success in analytics
is the strong, committed leaders who understand the impor-
tance of analytics and constantly advocate for their develop-
ment and use in decisions and actions.
• T (Target)—must identify key target projects. The analytical
competition requires a clear business strategy that is opti-
mized with data and analysis. Your executives should begin to
consider what key processes and strategic initiatives would be
advanced if the right analytics were available.
• A (Analyst)—must hire and train high-quality quantitative
analysts and data scientists.

The Gartner Continuum Model


In addition to Davenport’s analytics maturity model, two other analytic
maturity models are worth your attention—the Gartner Analytic Contin-
uum Model and Wayne Eckerson’s Analytical Maturity Model.
The Gartner Continuum model was developed based on the difficulty
and sophistication of analytics. In Gartner’s model, analytics was divided
into four stages: descriptive analytics, diagnostic analytics, predictive ana-
lytics, and prescriptive analytics.

• Descriptive Analytics describes the world’s past and present.


It answers: What happened? What is happening now? How
many, how often, and where? What exactly is the problem?
What actions are needed?
14 Highly Effective Marketing Analytics

• Diagnostic Analytics analyzes historical data to produce


insights for future events. It answers: Why did it happen?
Why is it happening? What are the trends? What patterns are
there?
• Predictive Analytics analyzes past data to predict outcomes of
future. It answers: What will happen next? How much sales
revenue next year? How will people react to this marketing
initiative?
• Prescriptive Analytics answers optimization questions such as:
What should I do? How can I make it happen? What happens
if we try this? What is the best that can happen?

Wayne Eckerson’s Analytics Maturity Model


While Gartner’s analytics maturity model focuses more on the technical
side, Wayne Eckerson tries to combine Davenport and Gartner and pro-
vide a comprehensive and holistic approach to achieving analytic matu-
rity. In his book Secrets of Analytical Leaders, Mr. Eckerson introduces
an analytics maturity model that helps organizations assess their analytic
capabilities and also provides a clear path to analytics maturity. Mr. Eck-
erson’s model has four axes:

• Analytical Maturity—Analytics evolves from reporting to


analysis, then from analysis to the dashboard, and finally from
the dashboard to modeling.
• Data Maturity—Data begin from spreadsheets to independent
data marts, and then from local warehouses to the enterprise
data warehouse, and finally expands to the big data ecosystem
that integrates both the internal and the external data.
• Analytics Culture—Firms treat analytics as a cost center in the
beginning, then as tactical resources to mission-critical, and
finally as strategic resources.
• Scale and Scope—The scale and scope of analytics migrate
from individual to departmental, then from departmental to
enterprise, and eventually to enterprise plus.
Why Has Analytics Missed the Mark? 15

Like Davenport, Wayne Eckerson also drafted a roadmap to analytics


success. He developed a very comprehensive analytical framework that
highlights the major steps required to run a successful analytical program.
Wayne argued that to succeed with analytics, organizations must have
the right architecture and data, the right process, the right organization,
right people, and the right culture. He cautioned that the ideal path for
companies to achieving analytics success was to go from “Flying Blind”
straightly up to “Analytic Competitor.” Any other paths would be either
too risky or too expensive.
Both Davenport’s and Eckerson’s analytic maturity models are great
tools to help organizations recognize their current state on the analyt-
ics maturity curve. Not only do these models reveal the critical elements
required for the success of analytics, but also plot clear directions for mar-
keters to transform their organizations from analytically impaired to ana-
lytical competitors.
Paul Mauschbaugh, Group CIO—Services, Distribution, and Dig-
ital at Caterpillar Inc. testified to the accuracy of Davenport’s maturity
model. In the article Why Analytics Maturity Matters,6 Paul shared his suc-
cess story about how he had followed the maturation process and drove
analytics into the business at Caterpillar. Paul said he first introduced
predictive modeling to the company, but it was not widely accepted by
the business side. What he found out was that businesspeople didn’t trust
the credibility of the data. Therefore, Paul realized that the first hill to
conquer was gaining accountability for the quality of the data within the
business community. Paul points out that gaining accountability for the
process discipline and thus, the data that are output from that process is
a leadership challenge. Establishing KPIs for each line of business and
automating the reporting of data against those KPIs is one effective way
to drive such accountability. Paul also shared his learning from his amaz-
ing journey to analytics maturity at Caterpillar:

• Establish data warehousing/standards to democratize your


data to the technical community;

6
  Mauschbaugh, P. “Why Analytics maturity Matters.” Thoughtspot.com, https://
thoughtspot.com/fact-and-dimension/why-analytics-maturity-matters
16 Highly Effective Marketing Analytics

• Gain and leverage data visualization capabilities to democra-


tize your data to the business community; and
• Create and use the right KPIs that measure the results of those
business users.

Challenges and Opportunities Facing Small- to Medium-


Sized Firms
While these analytics maturity models worked great for Caterpillar,
marketers at small- to medium-sized firms are worried that the distance
between them and their larger competitors are widening. The reasons
for such concern are apparent: First, small organizations do not have the
best database, high-quality data, analytic talent, and the analytical tools
required to perform analytics work. Second, the biggest problem is money.
Small- to medium-sized companies typically have a small budget for
improving data and technology, recruiting, and training the best analytics
talent. And third, neither Davenport nor Wayne has provided a detailed
how-to guide to achieving analytics success for small- and medium-sized
organizations. Their models are more a compass than a detailed roadmap.
While it is true that lacking money certainly is a considerable con-
straint that prevents them from taking advantage of what analytics has
to offer, the best-kept secret is that small- to medium-sized firms will
benefit more from analytics than their larger competitors. Analytics is
an equalizer that democratizes the competitive advantages between large
and small organizations. Small- to medium-sized companies have some
advantages that their larger competitors do not have. First of all, they
usually have fewer business units and organizational layers, which help
analytical leaders speed up the decision-making process and gain quicker
consensus from different stakeholders, although leaders still have to juggle
analytics initiatives with corporate politics. Second, compared to large
firms, small- and medium-sized companies are quick and agile, enabling
faster implementations of analytics initiatives and faster reactions to risks
and learning. Last but not the least, analytics in smaller organizations is
more a people and analytics IQ problem than a data and technology issue.
Money certainly is an obstacle, but it is not as big a deal as you would
expect because there are always workarounds if you are creative enough.
Why Has Analytics Missed the Mark? 17

The ALADA Model—Five Pillars of Analytics Success


for Small- to Medium-Sized Firms
In general, Davenport’s DELTA model and Wayne’s IQ model can be
adapted and utilized by businesses of any size. However, these models
were developed mainly for large organizations; therefore, adjustments
are necessary when applying them to small- to medium-sized compa-
nies. Inspired by Davenport’s DELTA model and based on my success-
ful experience in using data-driven strategies to improve marketing for
small- to medium-sized organizations, I developed the ALADA Mod-
el—a pragmatic and practical roadmap specially designed for small- to
medium-sized companies to achieve analytics success.
The ALADA model has five key success pillars:

• Analytics Marketer;
• Leadership;
• Analytics Scientist;
• Data and Technologies; and
• Analytically Driven Culture.

Difference Between the ALADA model and Other


Analytics Maturity Models
Many large organizations started their marketing analytics journey with
a focus on data and analysts. Often, the first thing they did was to con-
quer data accountability and technology upgrades. But for small- to
medium-sized companies, while data and technologies are certainly very
important, too, the effectiveness and ROI of analytics are largely deter-
mined by three types of analytics people—Analytics Marketers, Analytical
Leaders, and Analytics Scientists. Together, they determine the analytics
IQ and analytics maturity of an organization.

The First Pillar: Analytics Marketers


In most organizations, many dialogues between marketing and analytics
take place every day. Most of them, however, are initiated by the marketing
18 Highly Effective Marketing Analytics

side requesting the analytics team to complete specific assignments such


as testing product offers or reporting the result of a recently completed
direct mail promotion, and so on. In other words, these conversations are
centered more at the tactical level rather than the strategic level.
On the marketing side, while marketing does understand that analyt-
ics can supply them with significant new decision-making firepower, still,
some marketers don’t enjoy talking to analytics because they don’t quite
understand the language of analytics. Also, because few marketers have
received essential training in statistics and analytics, they might not realize
that their internal analytics partners can solve many tough problems if
they reach out to their analytical team.
On the analytics side, most analysts are strong in math and coding
but don’t have much marketing knowledge and real-world business expe-
rience. Due to lack of marketing education and business acumen, some
analytics work is not conducted in the context of business. Therefore, the
findings and insights while seemingly statistically sound are not action-
able, or one insight would cause another or more questions.
Another big challenge for analysts is that most of them are not fluent
in business language. Marketers feel that analysts speak a language of their
own, not the language of business. According to a 2017 KPMG study,
many executives say that they don’t trust their own analytics. It is a shame.
This is when the analytics marketers kick in to help. I borrowed the
idea of analytics marketers from Mr. Eckerson. He first defined them as
“purple people,” being neither “blue” business leaders or “red” technology
leaders but a balanced blend of the two. Because the term “purple people”
often demands a further explanation, I came up with a more descriptive
name: analytics marketers—individuals who know analytics and also can
speak the language of business.

What Does an Analytics Marketer Do?


Analytics marketers are conduits between analytics, IT, and marketing
executive decision makers. They translate business requirements into
terms that analytics and technologists can understand. Conversely, they
also use plain English to show business the value of data and how to
exploit it through analytics. Analytics marketers translate insights gleaned
Why Has Analytics Missed the Mark? 19

from data into actionable recommendations and ultimately into the


impact at scale in an organization.
In their role, analytics marketers add value through performing the
following tasks within an organization:

• Understand stakeholders’ needs and wants, pain points, and


obstacles that prevent them from accomplishing more;
• Assess the quality of data and systems and the functions
of current technologies; evaluate the depth and breadth of
domain knowledge, analytical techniques, and bandwidth of
both the analytics team and the IT support team to identify
gaps; and make recommendations and plans to fill these gaps;
• Identify and prioritize business use cases. Analytics marketers
leverage their cross-disciplinary knowledge and skillsets to
identify the right opportunities that are realistically pursuable.
They help business executives identify opportunities that will
create the highest value when solved and prioritize the busi-
ness problems that analytics is suited to solve;
• Collect and prepare data. They help determine the data
needed to produce the most useful insights. They work with
the analytics team and IT team to improve data quality by
cleaning and consolidating disparate data and creating a single
customer view that is accessible by stakeholders;
• Help build the analytics engine. They prepare the right tools
for performing analytical jobs. They ensure the analytics team
will have the right analytics engine that is capable of solving
the business problems in the most efficient form for business
users.
• Validate insights and make actionable recommendations.
They validate and help translate insights into easy-to-under-
stand, actionable recommendations that business users can
easily extract and execute.
• Promote data-driven-oriented culture. They are evangelists of
analytics. They educate stakeholders to increase the analyt-
ics IQ of the company and drive adoptions of a data-driven
culture within the organization;
20 Highly Effective Marketing Analytics

• Help decision makers understand the limits of analytics and


how they can go wrong.

A small-sized business needs at least one to two analytics marketers,


whereas a medium-sized company will need more. Analytics marketers
can be people at any level, but ideally, they are middle- to upper-level
managers such as vice president (VP) marketing, VP analytics, marketing
managers/directors, analytics managers/directors, or analytics scientists.

The Second Pillar: Leadership


Like any other initiative, support from executives is critical to the suc-
cess of analytics projects. Davenport considered leadership the deciding
DELTA factor. “If we had to choose a single factor to determine how
analytical an organization will be, it would be leadership. If leaders get
behind analytical initiatives, they are much more likely to bear fruit.”7
Mr. Eckerson also concurred: “The biggest factor that determines ana-
lytical success does not involve technology; rather, it involves leadership.”
Broadly speaking, analytics marketers are analytical leaders. However,
in the ALADA model, the analytical leader specifically refers to the top
executives who sponsor analytics initiatives.

What Does an Analytical Leader Do?


A successful analytical leader does not have to know a lot about analytics.
But he or she must recognize that data are critical corporate assets and
analytics is the new science of winning. Marketing executive Steve Larkin
has helped many retailers to turn around their businesses. I had the plea-
sure of working with Steve for many years, first at Zales, then Golfsmith,
and most recently Charles & Colvard. He always starts his turnaround
strategies with fixing the bad customer data and creating a centralized
database accessible to both online and offline teams. The improved
and consolidated database will lay a good foundation upon which an

  Davenport, T.H., J.G. Harris, and R. Morison. 2010. Analytics at Work: Smarter
7

Decisions, Better Results. Harvard Business School Publishing.


Why Has Analytics Missed the Mark? 21

integrated omnichannel marketing strategy can be implemented. Steve


cautions, “It is a needed and often misunderstood and mismanaged topic.
Determining and prioritizing the most critically impactful and actionable
data is key.”
Essentially, an analytical leader needs to do at least these five things
below to ensure successful outcomes of analytics programs:

1. Recruit the right analytics people;


2. Break down company silos to make data accessible and collaboration
seamless;
3. Set up rules both written and unwritten to guide how things are to
be done in the company;
4. Evangelize the importance of data and analytics to the organization
and invest time, money, and people to achieve that vision;
5. Establish a measurement system in which marketing efforts and
team performance are regularly evaluated based on actionable KPIs.

Bernie Sensale was my boss when we both worked for Zale Corp
almost 20 years ago. Shortly after Bernie became the chief marketing offi-
cer of Zale Corp, he quickly identified several major analytics issues with
the marketing department:

1. Department silos. Zale Corp once owned six major brands: Zales,
Gordon’s, Bailey Banks and Biddle, Piercing Pagoda, and People’s
and Mappins Jewelers in Canada. Each brand had its marketing
team responsible for doing similar activities such as creating market-
ing campaigns, working with creative vendors and print workshop,
conducting campaign analysis, and so on. The analytical skills of
marketing analysts were different across these different brands, but
they did not share the best practices among themselves.
2. Data were not updated on time. The organization collected customer
and transaction data efficiently, but data were merged, cleaned, and
updated by a third-party vendor every 45 days. Lacking the ability
to update customer data in a timely manner caused many customer
complaints. For instance, a customer requested his or her name be
removed from the mail list, but because the call center rep couldn’t
22 Highly Effective Marketing Analytics

update the request immediately, that customer would continue to


receive direct mail for at least another 45 days.
3. Campaign results and analysis couldn’t be tracked in real time. An
outside company analyzed direct mail and catalog campaigns. They
reported the results three weeks after a campaign ended. Learning
from previous campaigns couldn’t be quickly applied to the next
campaign.
4. Analytics techniques were still at the descriptive and diagnostic
stages. The database marketing team’s main job was to perform ad
hoc requests such as pulling campaign files using recency, frequency,
and monetary, and so on. Their analytic efforts were opportunistic
and function specific.

In the next 12 months, I witnessed how Bernie magically transformed


an analytically blind organization into an analytical company. What
­Bernie did was:

1. Hire the right people. Bernie made several important hires. He


recruited an analytical director to oversee the analytics programs and
a top-level analytics scientist, Dr. Steven Yan, to improve analytical
techniques of the whole company.
2. Recognize the outstanding performance of analysts and reward good
behaviors. Several top analysts got promoted.
3. Adopt a federated organizational structure to break down the depart-
mental barriers. A central group that consists of the best data scien-
tists and business analysts was created to provide technical guidance
and assistance to each brand.
4. Get the data and technologies right. Bernie replaced the legacy cam-
paign management system, purchased more SAS licenses, hired a
new data vendor that shortened the data hygiene turnover time, and
created a centralized database that was accessible to all brands.
5. Cultivate a learning environment and encourage teams to learn and
share the best practices from each other to raise the analytics IQ of
the entire company.
6. Evangelize the importance of data and analytics to other executives
and middle-level managers.
Why Has Analytics Missed the Mark? 23

7. Create a marketing dashboard and corporate reporting package.


Campaign results were updated in almost real time. Management
used analytics results to help improve decision making.
8. Establish a measurement system across the entire company. Use
actionable KPIs such as customer lifetime value and incremental
ROI instead of vanity KPIs to measure the effectiveness of marketing
initiatives.

Considering Bernie did all these things before Davenport published


his breakthrough book Competing on Analytics, even up to date, I am still
amazed and very impressed by his textbook-like strategic move.
Matt Corey is the CMO of PGA Tour Superstores. I worked for him
during my days at Golfsmith. Matt is a brilliant and charismatic mar-
keting executive. His way to improve marketing results is to hire smart
people who have a can-do attitude. Matt’s ability to find so many compe-
tent marketers is enviable. Matt understands the importance of marketing
analytics. He encouraged the team to embrace advanced analytics and
statistical modeling to improve the performance of marketing initiatives.
He promoted marketing analytics among senior executives and gained
support from IT and merchants. In 2012, SAS voted Golfsmith the best
analytics company in the small- to medium-sized company sector.
Those good analytical executives all have similar traits: They are will-
ing to invest in the best people, they take calculated risks and have the
courage to challenge the status quo, and they have the ability to gaze into
the future.

The Third Pillar: Analytics Scientists


Here an analytics scientist is not an average data scientist or statistician,
but one who has:

• analytical intelligence—the ability of abstract thinking, logical


reasoning, verbal and mathematical skills, SAS, R, and Python
programming skills, and so on;
• creative intelligence—the ability to generate new ideas and
deal with novel situations; and
24 Highly Effective Marketing Analytics

• practical intelligence (also known as “street smarts”)—the


ability to apply knowledge to the real world.

Most average analytics professionals have analytical intelligence but


are typically weak in creative intelligence, probably even weaker in practi-
cal intelligence. A true analytics scientist has a combination of good data
knowledge, fluency in programming languages like SAS, R, or Python,
mathematical and statistical knowledge, an insatiable curiosity, business
acumen, and the ability to creatively solve real-world problems.
The best value an analytics scientist brings to the table is that he or she
spearheads new ways to transform current practices. He or she can come
up with creative and innovative solutions to solving problems with a very
limited budget and technical constraints.
For instance, Golfsmith couldn’t afford to buy a campaign manage-
ment system, which generally would easily demand a cost up to a quar-
ter-million a year for licensing, training, and a business analyst using the
system. So how to solve this issue? Our solution turned out to be quite
simple. We worked with the IT team to add a campaign data mart in the
database. Then we put the Base SAS on the top of the Oracle database and
created an in-house campaign management system that worked far more
efficiently than any campaign management system currently available in
the market. The invention literally saved Golfsmith more than $250K a
year and every year.

The Fourth Pillar: Data and Technologies


Compared to their larger competitors, small- to medium-sized compa-
nies typically do not have a centralized data platform that is accessible
to all stakeholders. However, being small also has several advantages.
First, you can improve the quality of the data with a modest budget. Sec-
ond, without having to rely on IT support solely, the analytics team can
step in and use analytical tools such as SAS, R, or Python to stitch data
from disparate databases and create a temp centralized customer data-
base, which can be used by many teams. And third, if you are creative
enough, small- to medium-sized companies can create many in-house
analytical applications such as the campaign management system that will
Why Has Analytics Missed the Mark? 25

work equally well as those big-name tools and will save a huge amount
of money for the organization. That is why I always say that it is totally
possible that small- to medium-sized organizations can achieve the same
or even greater significant analytics success with just a fraction of the costs
of their large competitors.

The Fifth Pillar: Analytically Oriented Culture


It is difficult to give a concise definition of what an analytically oriented cul-
ture is. Basically, an analytically oriented company has the following traits:

• Culture is all about rules and proper procedures. Establishing


rules is the most critical step to help cultivate an analytically ori-
ented culture. In an analytically oriented company, people will
look at insights gleaned from data before making any decision.
Everyone from the chief executive officer to the marketing intern
has to follow these rules. For instance, marketing promotion
meetings always kick off with facts and lessons learned from his-
tory to help shape opinions and strategies for future promotions.
• Data and insights are shared and leveraged across different
businesses, organizations, and products.
• An analytically driven company often adopts a federated orga-
nizational structure to create a center of excellence to elevate
the sophistication of analytics and also allow positive competi-
tion among brands.
• An analytically oriented company has many analytics market-
ers and data translators at different levels. Managers encourage
people to ask good questions, challenge assumptions, and
have healthy debates on where to make improvements, invest-
ments, or other changes.
• People like to challenge the status quo. Innovations in analyt-
ics are encouraged and rewarded.
• Actionable metrics and KPIs are used to measure the effec-
tiveness of marketing initiatives and employee performance.
Storytelling visual systems that infuse analytics across the
organization are widely used.
26 Highly Effective Marketing Analytics

In a nutshell, the secrets to achieving analytics success are that you


must recruit and retain the right analytics people, get the data and tech-
nologies right, and create an analytically oriented culture within the
organization.

Conclusion
The disappointing results of analytics initiatives were typically caused by
one of or a combination of several issues relating to data, technologies,
leadership, analytics people, organization structures, process, and corpo-
rate cultures. To achieve success with analytics, firms need to take advan-
tage of Davenport’s Five Stages of Analytics Maturity Model to recognize
their analytic maturity state and then follow Davenport’s DELTA model
and Wayne’s analytical framework to improve their analytics capabilities.
Sometimes, a fundamental shift in organizational structure, skills, and
culture is required.
Small- to medium-sized companies approach marketing the same way
as large companies do. They have unique advantages and disadvantages
when it comes to analytics. Complementing Davenport’s DELTA model
and Wayne’s analytical framework that is more suitable for large organi-
zations, Mu’s ALADA analytics maturity model was specially developed
for small- to medium-sized companies to break through the budget and
technical constraints and transform their organizations into analytical
competitors as well.
Analytics leaders should also be aware that while these analytics matu-
rity models have revealed the secrets to improving analytics’ capabilities,
they are more a compass than a detailed roadmap. Therefore, in real
life, innovations in analytics at more granular levels are encouraged and
required.
In the rest of the book, we will explore how to leverage marketing ana-
lytics to improve ROIs for a variety of marketing channels and how to use
the right metrics and KPIs to measure the effectiveness of marketing pro-
grams so that marketers can maximize the ROI of their marketing dollars.
Index
ACLTV. See Acquisition customer key performance indicators, 10–11
lifetime value lack of analytics marketers, 7
Acquisition customer lifetime value lack of executive support, 7–8
(ACLTV) right metrics, 10–11
applications of, 183–188 scarcity of analytics professionals
Arthur Hughes’ formula, 180–181 and skills, 8–9
B2B App start-up, 179–180 technology and IT support issues,
business applications, 176 4–5
forward-looking/backward-looking Analytics culture, 14
metric, 175–176 Analytics marketers
group level calculation, 174–175 in ALADA model, 17–20
methodology for business model, lack of, 7
177–186 Analytics professionals and skills,
for specialty sports retailer, scarcity of, 8–9
181–186 Analytics scientists, 23–24
time horizon, 175 Automating triggered e-mail,
Acquisition vs. retention, 211–212 138–139
Active customer segment groups, 45
ALADA model Behavioral segmentation, 32–35
analytically oriented culture, 25–26 Branding tool, 108–109
analytics marketers, 17–20 Business-to-consumer (B2C)
analytics scientists, 23–24
data and technologies, 24–25 business, xv
leadership, 20–23
vs. other analytics maturity models, Catalogers difficulties, 104
17 Chief marketing officer (CMO)
for small- to medium-sized firms, Survey, 2
17 CLTV. See Customer lifetime value
Analytical aspirations, 11 Company silos, 9–10
Analytical companies, 11–12 Compiled lists, 123
Analytical competitors, 12 Contractual continuous purchase
Analytical intelligence, 23 model, 177
Analytical leaders, 20–23 Contractual discrete purchase model,
Analytically impaired, 11 177
Analytically oriented culture, 25–26 Cooperative database, 124–125
Analytical maturity, 14 Creative catalogs, 126–128
Analytical professionals, xiii–xiv Creative intelligence, 23
Analytics CRM. See Customer relationship
company silos, 9–10 management
data problems, 3–4 Cross-channel attribution, 210–211
definition of, 1 Cross-departmental team, 143,
investment decisions, 5–7 166–167
220 Index

Culture, analytically oriented, 25–26 DELTA model, 12–13


Custom-attribution model, 205 Demographic segmentation, 36–37
Customer-based corporate valuation, Demographic segment profiles, 65–67
191–192 Demographic variables, 134
Customer identity, 77 Descriptive analytics, 13
Customer journey Descriptive variables, 98
definition of, 69 Diagnostic analytics, 14
five stages for companies, 71 Direct mail (DM)
lifecycle model, 70–71 40-40-20 rule, 83–84
mapping, 70 challenges, 82
Customer journey maps, 72–73 definition of, 82
benefits to marketers, 69 promotional lift analysis, 209–210
definition of, 69 strategy for, 82–83
Customer lifecycle journey model, Direct mail, 541-Rule
70–71 best practice of buying names from
Customer life stage model, 46–48 vendors, 86
Customer lifetime value (CLTV) independent variables, 89–90
acquisition. See Acquisition levels of list selection, 87–89
customer lifetime value mixed model, 90
(ACLTV) overview of, 84–85
definition of, 174 retail trade area (RTA) model,
existing. See Existing customer 91–93
lifetime value (ECLTV) right names from customer
overview of, 173 database, 86–87
Customer loyalty, 34 segmentation to refining mixed
Customer loyalty programs. See model, 90–91
Loyalty programs Direct selling tool, 107
Customer personas Discount program, 162
building, 68–69 Distance RTA model, 91–92
description of, 67–68
DM. See Direct mail
overview of, 67–68
tips for management, 69
Customer relationship management ECLTV. See Existing customer
(CRM), 71 lifetime value
Customer segmentation E-mail marketing
definition of, 32 automating triggered, 138–139
market segmentation vs., 32 CRM database, 133–138
Customer segment profiles cross-departmental team, 143
building, 64–67 importing into Facebook, 142–143
data variables, 64–65 issues in, 132–133
definition of, 64 new technologies, 144–145
demographic profiles, 65–67 personalizing bulk, 140–141
purpose of, 64 testing, 141
Customized RTA model, 92–93 uploading to Google AdWords, 142
E-mail Service Database (ESP), 132,
Data and technologies, 24–25 134, 138
Data maturity, 14 Emotional drivers, 157–158
Data problems, 3–4 Emotional loyalty, 157
Index 221

Enterprise-level segmentation. See High quality lists, 124


Strategic-level segmentation
ESP. See E-mail Service Database Inactive customer segment groups,
Exclusivity and perks, 163 45–46
Executive support, lack of, 7–8 Individual-level personalization,
Existing customer lifetime value 97–98
(ECLTV) descriptive variables, 98
aggregate level/individual level predictive variables, 98
calculation, 174–175 In-store selling tool, 108
applications of individual, Investment decisions, 5–7
189–191 IT support issues, 4–5
calculation of, 188–189
customer-based corporate Key performance indicators (KPIs),
valuation, 190–191 10–11
customer-management tool, 176 KPIs. See Key performance indicators
forward-looking metric, 175–176
time horizon, 175 Last-touch attribution, 204
Leadership, 20–23
Linear attribution, 204
First-touch attribution, 204 List brokers, 123–124
541-Rule Localized analytics, 11
40-40-20 rule vs., 85 Loyalty experts, 155
direct mail. See Direct mail, Loyalty marketing, 148–149
541-Rule Loyalty programs
framework, 102 benefits of, 150–152
personalization, 93–98 causes of failure, 154–155
reasons to finding, 101 cross-departmental team,
testing, 98–101 166–167
Five-Stage of Analytics Maturity definition of, 149
Model disadvantages of, 152–153
analytical aspirations, 11 effectiveness of, 167–170
analytical companies, 11–12 elements in, 150
analytical competitors, 12 gain/loss of, 160–161
analytically impaired, 11 measure and improve, 170
localized analytics, 11 nonfixed rewards, 163
Forbes Insights Report (2015), 2 nonstatic rewards, 163
Fractional—algorithmic attribution objectives and goals of, 165–166
model, 205 static rewards, 162–163
Frequency/Punch card value proposition, 161–162,
program, 162 164–165
Gartner Continuum model
descriptive analytics, 13 Managerial-level segmentation
diagnostic analytics, 14 applications of, 48–53
predictive analytics, 14 definition of, 31
prescriptive analytics, 14 developing, 40–44
Geographic segmentation, 35 for retention, 40–44
Marketers’ real-world problems,
GEO variables, 134–135 xiv–xv
222 Index

Marketing mix modeling (MMM) Mu’s RFM model, 41–44


building, 194–195 Mu’s seven-step catalog value
critical business questions, 195 evaluation system, 106–116
description of, 194 as branding tool, 108–109
diminishing return points, 198 as direct selling tool, 107
downside of, 198–201 as in-store selling tool, 108
media contribution, 196–197 interpretations, 111–112, 114–116
personal experience of, 201–203
simulator, 198
uniqueness of, 195–196 Noncatalog customers, 119
Market segmentation. See also Noncontractual continuous purchase
Strategic-level segmentation model, 177
criteria for, 54–55 Noncontractual discrete purchase
customer segmentation vs., 32 model, 177
definition of, 32 Nonfixed rewards loyalty
developing, 56–61 programs, 163
reasons for failure, 55–56 Nonstatic rewards loyalty
MCA. See Multichannel attribution programs, 163
Mixed rewards program, 162
MMM. See Marketing mix modeling Online navigation journey maps,
MTA. See Multi-touchpoints
attribution 73–74
Multichannel attribution (MCA)
definition of, 203–204 Personalization
limitations of, 206–207 benefits of, 93
performance of, 205–206 definition of, 93
single-touch attribution models, individual-level, 97–98
204 predefined behavioral segments,
worth of, 207 95–96
Multi-touchpoints attribution (MTA) segment-level, 93–95
limitations of, 206–207 Personalizing e-mail, 140–141
models, 204–205 Personas. See Customer personas; User
multichannel attribution vs., 204 personas
performance of, 205–206 Points program, 162
worth of, 207 Position-based attribution model, 205
Mu’s 541-Rule for catalogs Practical intelligence, 23
as acquisition tool, 120–122 Predefined behavioral segments,
compiled lists, 123 95–96
cooperative database, 124–125 Predefined segment variables, 135
high quality lists, 124 Predicted future value model, 46–48
identifying customers, 119–120 Predictive analytics, 14
list brokers, 123–124 Predictive model score
mail lists selection, 118–119 variables, 137
products and creative catalogs, Predictive variables, 98
126–128 Prescriptive analytics, 14
response lists, 122 Price conscious segments, 136
subscription lists, 122–123 Print catalogs
testing catalogs, 128–130 eliminating, 105–106
Index 223

ROI of, 116 Seasonality segments, 136–137


struggling with, 104 Segmentation
Product-related variables, 135 benefits of, 28–29
Products catalogs, 126–128 customer, 32
Product segmentation, 38–39 definition of, 27–28
Product segments, 136 levels of, 31
Profitability of catalog, 117–118 managerial-level, 31, 40–44, 48–53
Profit margin segments, 137 market, 32, 54–61
Projected future value reasons for failure, 29–30
active customer segment groups, 45 strategic-level, 31, 53–54
customer life stage model, 46–48 tactical-level, 31–40
groups, 44 Segment-level personalization, 93–95
inactive customer segment groups, Single-touch attribution models, 204
45–46 Small-to medium-sized firms
models, 44 ALADA model, 17
predicted future value model, challenges and opportunities, 16
46–48 Social segments, 137
Promotional history variables, 135 Static rewards loyalty programs,
Promotional lift analysis 162–163
cross-channel attribution, 210–211 Strategic-level segmentation
definition of, 209 definition of, 31
direct mail and catalog, 209–210 developing, 53–54
measuring marketing efforts, 209 Street smarts. See Practical intelligence
overview of, 208 Subscription lists, 122–123
by TV Ads, 210
Psychographic segmentation, 37–38 Tactical-level segmentation
behavioral segmentation, 32–35
Rational loyalty, 156 definition of, 31–32
Rebate/Cashback program, 162 demographic segmentation, 36–37
Recency, frequency, and monetary geographic segmentation, 35
(RFM) analysis product segmentation, 38–39
assigning goals, 43 psychographic segmentation,
in behavioral segments, 34 37–38
contact strategy for, 52 purpose of, 31–32
Mu’s RFM model, 41–44 uses of, 39–40
projected customer lifetime value, Technology issues, 4–5
45–46 Tenure, 34
segments, 136 Testing
Recurring triggers, 139 541-Rule, 98–101
Response lists, 122 catalogs, 128–130
Retail trade area (RTA) model, e-mail marketing, 141
91–93 360-degree customer view
Retention benefits, 74
acquisition vs., 211–212 customer identity, 77
managerial segmentation for, definition of, 74
40–44 developing, 76–80
Right metrics, 10–11 future actions, 78, 80
illustration purpose, 78–79
224 Index

one-to-one relationship, 75–76 Value proposition, 161–162,


past activities, 77 164–165
present activities, 77–78 Variable data printing
Threshold triggers, 139 (VDP), 84
Time-decay model, 205 VDP. See Variable data printing
Transactional drivers, 156–157
Transactional loyalty, 156
Transactional triggers, 138–139 Wayne Eckerson’s Analytics Maturity
Transactional variables, 135 Model, 14–16
Triggered e-mail, 138–139 analytical maturity, 14
TV Ads, lift analysis, 210 analytics culture, 14
Type 1 catalog customers, 118 data maturity, 14
scale and scope, 14
Type 2 catalog customers, 118
Weather variables, 134–135
User parsonas, 67 Zip code RTA model, 91
U-shaped model, 205

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