Impact still ahead of outcomes for most marketers
Insights into the drivers of profitability that can be found in the correct use of data
Return on investment has been the first concept on the lips of marketers this year. Yet according to a new survey, they may have been talking about it rather than acting on it. Keeping marketing activity levels up may be more important to many companies than the beneifts their business is seeing from them.
When SPSS asked 100 marketing professionals what their most important business objectives were at present, just 5 per cent put ROI as their top priority. Well ahead of that were ongoing activities like customer acquisition (29 per cent), customer service (20 per cent), customer retention (19 per cent) and cross or up-selling (15 per cent).
“Our concern is that, when you stand the talk about ROI up against the practice, it is very low,” says Colin Shearer, senior vice-president of strategic analysis at SPSS. “The over-arching thing is to continue marketing activity. The danger is in confusing activity with outcomes, thinking that if you are doing enough marketing, that will drive the business.”
When the recession first started to hit, this was the argument made by top-level marketers and consultants. Looking back to previous downturns, they argued that companies which maintained spending came out quicker and thrived better.
Several things make the current economic climate fundamentally different to previous ones, however. Previous downturns were caused either by soaring prices (like the 1970s oil shock) or stalling consumer spending and rising inflation. This time round, there has been a total absence of funding for companies, who have had to cut investments or go under.
The second difference is the availability of tools to support evidence-based decision making. Marketers now have the luxury of predictive analytics, yet just 3 per cent place prime importance on accountability on a financial level and only 1 per cent said reducing the level of fraudulent and high-risk customers.
“The impact of marketing activity can be measured for its impact on sales outcomes and the cost-effectiveness of campaigns. Yet what we are seeing are marketers trying to ensure they use the best messages and offers, but they are still running large campaigns so nobody gets missed,” says Shearer.
With only 8 per cent giving top priority to targeted communications, it is clear that there is a gap between what is possible in terms of identifying best prospects and modelling the outcome of a campaign, and actually applying that to reduce volumes while maintaining results. “That is a strong message and it is a win-win,” he says.
It is tempting to imagine that data-driven marketing is the preserve of large organisations with the resources to adopt it. Yet the SPSS study found that in smaller companies (those with fewer than five people in the marketing department), 16 per cent said ROI was their top priority, while in large organisations (with more than 50 marketers), only 7 per cent said it was.
“It is down to individuals who get it. People in smaller organisations are at the shaper end and are less insulated - their marketing is judged for its contribution to the business’s success,” says Shearer. “These things are there for the taking.”
Introducing predictive analytics into a small business is likely to impact right across the organisation. In large organiations, the benefits may be constrained to a single department or line of business, but it might have a disproportionately large impact. At Saga, for example, implementing predictive analytical solutions from SPSS enabled cost savings and revenue increases worth £1 million in year one.
Resistance to change could be one reason by SPSS found a low level of importance being given to ROI. In particular, marketers may be unwilling to let go of their personal and creative input. According to the survey, 7 per cent said they primarily make their marketing decisions using gut feel, with 36 per cent combining instinct and proven results.
“Decisions that have no basis in fact, but are pure gut feel, are always risky,” warns Shearer. “Does using predictive analytics mean that marketers just turn the whole thing over to machines that build smart models? No - they are built and run by people in order to enable marketers to do their job better.”