Big data myths busted

In a world that changes as fast as today’s, marketers need the latest data more than ever.In this article, I’ll explore one of the biggest changes in the marketer’s world: the rise of big data and big data analytics. Overhyped, yet under-tapped, big data is absolutely changing the way we can understand buyers, target offers and track trends. I’ll also explore – and expose – some marketing myths by looking at what the data tells us.Why this relentless focus on data?We at FICO believe that business decisions, like marketing tactics, are better informed by data than by gut instinct, and that marketers need to get technical and quickly understand how to analyse data to improve their choices.Let’s look at how big data can help marketers and how it is changing the world we work in.Voluminous data alone won’t lead to marketing success. But the winners will be those who can pull more meaningful insights from both the data they have already and new data sources.What is big data?Big data is the data that is beyond the reach of current tools and technology to harness. There will always be more data than we can effectively manage and make sense of.Big data is defined by the “three Vs” – variety, volume and velocity – but we think it needs a fourth V, which is “value”. Although data can be defined as big data regardless of its value, the only big data worth considering for businesses is that which holds important information that useful insights can be drawn from.Social media marketing and big dataThere is no social media marketing without big data. Social media creates unstructured, or “big” data, and harnessing it to extract value is a challenge. Effectively marketing in social channels requires extreme context awareness.The social audience demands authenticity and high quality content, and can readily take down a brand or “call them out” on mass-marketing messages that are poorly placed.Advertisers such as Facebook have started to master the art of leveraging big data to deliver highly relevant advertising to its users, and distilling learnings from user-generated content, including unstructured elements such as images and text. The rapid growth of spending by advertisers on both Facebook and Twitter is a tribute to their ability to monetise the data assets they have created with their social tools.Until recently, it has been very difficult for businesses to identify relevant social influencers. With the advent and rapid uptake of social media, however, analytic scientists now have a powerful playground to understand peer-to-peer influence and identify key social influencers. This is made simpler by recent innovations in big data, which allow processing and analysing of the extremely large volumes of structured and unstructured data that is generated by social media platforms.These, combined with predictive analytics methodologies, provide effective targeting at low cost to generate actionable insights and benefits to marketers in their peer-to-peer marketing campaigns. For example, retailers can use the information drawn from predictive analytics to market specifically to each customer and provide much better, tailored customer service, even realigning and relocating stores to match shoppers’ geographic locations and shelving preferences.By identifying influencers in social media, you can determine patterns and sentiment that can be harnessed in the development of marketing campaigns. For example, the application of text analytics can help take large amounts of unstructured content, such as commentary about a movie or book, and generate structured meta data that advertisers can actually design campaigns around.Potential downfallsIt is paramount that advertisers adhere to privacy laws and policies, for example. Savvy consumers will abandon a brand or a channel altogether if they feel their data is being misused, or if they are not receiving a reciprocal service in exchange for the use of their data. Both marketers and social media companies must develop the right skills internally to effectively use the opportunities presented by big data.Traditional approaches to mass marketing and segmentation, or making too many assumptions about what the data is telling you, can steer a social marketing campaign the wrong way. The audience is unforgiving, and most companies only get one chance to get social marketing right. The amplification effect that marketers are looking for from social can work for them, but can equally turn strongly against them if they execute poorly.Putting a data-driven approach to the testIn this rapidly changing world, what are some of the myths that people hold on gut instinct, and do they stand up to the data? We’ve put some common marketing principles to the test to see what stands up to the evidence:1. Marketing matters to the C-suite – confirmedPwC’s 2013 Global CEO Survey 1 found that 82% of CEOs are looking for “new ways to stimulate customer demand and loyalty this year”. A 2012 study by The Economist Intelligence Unit reported similar findings: Driving revenue was most frequently cited as the top marketing priority by CEOs and other non-marketing C-suite executives. It ranked above finding new customers and well above creating new products and services. This suggests that a shift in the CMO focus is taking place – and it’s one that’s long overdue.2. Our customers are satisfied, so they’re loyal – bustedSatisfaction doesn’t always correlate with loyalty. Nor does loyalty always lead to higher spending and increased wallet share. In a global survey of retail banking customers, Capgemini and the European Financial Management Association found that less than half of the respondents said they were likely to stay with their banks.In regions where customers reported higher levels of positive experiences, that percentage improved. Positive customer experience, the survey found, was a stronger predictor of retention than satisfaction. Similarly, for retailers, the Harvard Business Review article Customer Loyalty Isn’t Enough. Grow Your Share of Wallet reported that common gauges of loyalty such as satisfaction metrics correlate poorly with share of wallet.3. Email is dead – bustedEmail is not only alive, but it’s increasingly seen as the number one direct channel in terms of daily use and consumer preference for marketing communications. According to a recent article in Advertising Age, email response rates have even held firm against Google’s redesigned Gmail inbox, which places marketing emails into a “Promotions” tab, with many businesses seeing little or no change in recipient behaviour. Ninety-one per cent of consumers check email daily, up from 85% in 2008, according to data from ExactTarget. Clearly email shouldn’t be counted out. Still, demographics matter, and communication preferences are changing. Customers in the youngest demographics show a strong preference for mobile SMS and texting and older consumers are adopting mobile and social technologies at a quickening pace.4. Discounting is a race to the bottom – bustedDiscounting can be extremely effective and profitable with some customers, if – and it’s a big if – you can figure out which ones they are, you can use discounting to increase both your competitiveness and profitability. Unfortunately, many retailers are indiscriminately following the deep discounting trend in mobile marketing. Waves of daily deals and local deals are leading them to overuse discounting even to the point of endangering their brand. In retail banking, increasing pricing transparency from online comparison sites is pushing some financial institutions in this direction as well.Analytics can help you protect your brand and maximise the reach of your marketing budget by taking advantage of the fact that consumers vary significantly in their sensitivity to specific discounts and other aspects of offers. Today, we can predict these sensitivities with great precision. So, with data-driven insights, you can target discounts to where they will have the biggest impact on customer behaviour. You can also free up your budget to incentivise other customers to buy, producing more bang from your budget.5. Showrooming is a killer – bustedThe internet and now mobile have accelerated the trend and allow consumers to perform comparisons quickly, conveniently and anywhere. But what hasn’t changed are your choices as a competitor: You can choose to compete on cost, but you can also win on service or your own unique winning mix. Macy’s has used innovative mobile advertising campaigns to bring more shoppers into its stores, for example creating a mobile game of word association to draw traffic for a one-day sale while building brand awareness. Like other forms of mobile advertising, participatory ads are more likely to succeed if analytics are used to target customers with relevant content and offers.Click-and-collect strategies are also proving to be an effective way to outmanoeuvre online competitors while bringing buying customers into stores. Many busy customers, in Europe especially, prefer to avoid delivery fees by dropping by a store to get their item – and they’re likely to make another purchase or two while there. Omni-channel strategies such as these are the key to combating showrooming. Leading retailers are co-ordinating online, mobile and store interactions to create a seamless experience for customers so showrooming isn’t a stumbling block.6. We need more customer data – confirmedMany companies have piles of data they have collected, but are not yet leveraging for better decisions. Unstructured data, for instance, from customer service chats and phone conversations, as well as online customer product reviews, are full of potentially valuable insights. Analytic techniques, such as FICO’s Semantic Scorecard technology, can extract the most predictive features from this data, and combine it with traditional structured data analytics to improve the accuracy of customer behavioural predictions.In other cases, where data is already being analysed, there may still be potential to draw out more value by looking at it in a new way. Many companies have collected transaction log data, for example. But few are currently analysing it with time-to-event models in order to predict with precision when a customer behaviour is most likely to occur – this week? Next week? There are lots of opportunities for marketers to learn more in this area and feel the benefits.It’s helpful to learn from what others are saying in the marketplace, but some tenets of common wisdom shouldn’t be relied upon when setting a forward course. When resources are scarce, deciding where to allocate them is critical to creating successful momentum.To make better marketing investments, make sure you’re basing them on sound assumptions.The writer is Matt Beck, vice-president, marketing solution consulting, FICO.