Unit
-1
Marketing Analytics:
Meaning and Characteristics
Marketing analytics is the practice of measuring, managing and
analyzing marketing performance to maximize its effectiveness and optimize
return on investment (ROI). Understanding marketing analytics allows marketers
to be more efficient at their jobs and minimize wasted web marketing dollars.
Marketing analytics involves the technologies and processes CMOs
and marketers use to evaluate the success and value of their efforts. As such,
marketing analytics uses various metrics to measure the performance of
marketing initiatives. Effective marketing analytics gathers data from all
sources and channels and combines it into a single view. Teams then use the
analytics to determine how their marketing initiatives are performing and to
identify opportunities for improvement. It is difficult to determine the
effectiveness and return on investment (ROI) of your marketing campaigns
without marketing analytics.
Beyond the obvious sales and lead generation applications,
marketing analytics can offer profound insights into customer preferences and
trends. Despite these compelling benefits, a majority of organizations fail to
ever realize the promises of marketing analytics. According to a survey of
senior marketing executives published in the Harvard Business Review, “more
than 80% of respondents were dissatisfied with their ability to measure
marketing ROI.”
Characteristics of Marketing Analytics
1.
Ensure high-quality data
Your analytics rest on your data. That means you need a tool that
mines both structured and unstructured customer data from all possible sources,
including various interactions and touch points.
2.
Get real-time insights
Your marketing analytics solution also needs to deliver
real-time insights to you. You can’t be effective if your information is
out-of-date; tracking the right metrics at the right time is key.
3.
Perfect your dashboard
While it may be tempting to track as many metrics as
possible, your analytics will not be as useful if you do. Rather, define your
goals and measure results for the use cases most important to you.
4.
Choose the right analytics visualization
Marketing teams and stakeholders must be able to make
something of the data if you are to gain meaningful insights from it. The key
is to choose the most appropriate data visualizations so you can find patterns
and interpret the data. Thus, you must choose a marketing analytics solution
that allows you to choose or customize your visualizations instead of using
default charts for displaying data.
5.
Use a tool featuring machine learning and AI to
predict and prescribe
Marketing must be real-time and predictive to be effective
today. You must be able to make accurate predictions, analyze the data, and
make data-driven decisions to enhance each step of the customer journey.
Advantages and
Disadvantages of Marketing Analytics
Advantages of Marketing Analytics
1.
Granular Segmentation
Marketing departments depend on the right segmenting to deliver
impactful messaging and relevant communications to leads and customers. After
all, one email that targets males aged 20–55 probably won’t incite as much
engagement compared to a message targeting a smaller age bracket, an audience
with a shared interest or audience with similar spending activity.
But there’s a reason many marketing analytics teams don’t go as
granular as they’d like in their communications. It’s because they don’t have
access to marketing analytics dashboards that instantly group customers based
on different metrics.
For example, a marketing assistant could search ThoughtSpot for
customers that have purchased six or more times this year in the Southwest
region to gather contacts for an upcoming joint promotion with a business chain
in the area.
2.
Tailored Messaging
Effective marketing has always been about persuasion. But instead
of trying to persuade the masses, marketing today is about delivering
personalized messaging and offers to both customers and potential customers
alike.
Send something irrelevant to a lead and they’ll disregard the
message and probably your business along with it. Do the same thing to an
active guest and they’ll think you’re not paying close enough attention,
damaging your rapport.
Marketing analytics tools can also play an integral role in the
timing of communications and the mode through which they’re sent. This gives
businesses the best chance of reaching customers in a good state of mind.
3.
Multi-Channel Customer View
The more a marketing department interacts with leads and
customers, the better understanding they have of their audience base. This is
especially helpful in our digital age because, just like the preference of
communication medium, consumers tend to spend time in different places.
Tracking customer behavior, including engagement and buying
activity across channels, gives marketing a comprehensive understanding of how
to interact with a customer. This includes what kinds of communications they
respond best and worst toward, as well as strategies that can increase their
lifetime value.
4.
Marketing Analytics with ThoughtSpot
Leveraging a marketing data analytics tool offers knowledge at
scale for an entire marketing department and beyond. Platforms like ThoughtSpot
allow marketing teams to better segment audiences, deliver tailored messaging
and gain a complete view of customers across channels.
Disadvantages of Marketing Analytics
1.
Misidentifying Market Needs
One of the elements of your marketing analysis is identifying the
needs of each market segment. It also identifies other businesses and products
that are attempting to satisfy the needs of this segment. The disadvantage of
doing this is twofold. You may overestimate how well your competition is
meeting the customers’ needs and quit before you even try to market. You also
may misidentify the need that is being met. Don’t overlook the uniqueness of
your own offering. Just because competition wants the same customer you do,
that doesn’t mean you are satisfying the same need.
2.
Evaluating Market Growth without Market Share
Your marketing analysis will include a look at how the overall
market is growing, which can give you some idea of your range of opportunities.
If your analysis discourages you, however, it can be a disadvantage. You can
successfully compete in a limited market if you capture market share. An
analysis of the market size alone is not enough to indicate your opportunities.
Improved market share can compensate for a slow-growth market.
3.
Market Segmentation Versus Target Markets
You must identify the segments of the market that have potential
customers for your products or services. This will help you understand the
varied approaches you may need to take to reach different types of customers.
The downside is that you may spread yourself too thin. Few businesses can
afford to market to every single potential customer. Identify a target market
that you choose from among the available segments, and go after that target
market in a focused manner.
4.
Improper Interpretation of Data
A marketing analysis is only as good as the analyzer. You can
collect a lot of data in market surveys, but interpreting that data correctly
is vital. You will be at an extreme disadvantage if you misinterpret facts and
make decisions based on that misinterpretation. Run your analysis past a
trusted adviser or two. Make sure your analysis is not wishful thinking.
Market Data Sources
(Primary and Secondary)
Primary
Market Research
Primary
research is research that is conducted by you, or someone you pay to do
original research on your behalf. In the case of primary research, you
are generating your own data from scratch as opposed to finding other people’s
data. You might choose to gather this data by running a survey,
interviewing people, observing behavior, or by using some other market research
method.
Secondary Market Research
Sometimes called “desk research” (because it can be done
from behind a desk), this technique involves research and analysis of existing
research and data; hence the name, “secondary research.” Conducting
secondary research may not be so glamorous, but it often makes a lot of sense
of start here. Why? Well, for one thing, secondary research is
often free. Second, data is increasingly available thanks to the
Internet; the US Census and the CDC (health data), for example, are two great
sources of data that has already been collected by someone else. Your job
as a secondary researcher is to seek out these sources, organize and apply the
data to your specific project, and then summarize/visualize it in a way that
makes sense to you and your audience. So, that’s what secondary market
research is all about. The downside, of course, is that you may not be
able to find secondary market research information specific enough (or recent
enough) for your objectives. If that’s the case, you’ll need to conduct
your own primary research.
Sources of Secondary Data
Secondary data comes in all sorts of shapes and
sizes. There are plenty of raw data sources like the US Census, Data.gov,
the stock market, and countless others. Internal company data like
customer details, sales figures, employee timecards, etc. can also be
considered secondary data. Published articles, including peer-reviewed
journals, newspapers, magazines, and even blog postings like this count as
secondary data sources. Don’t forget legal documents like patents and
company annual filings. Social media data is a new source of secondary
data. For example, the New York Times collected Twitter traffic during
the 2009 Super Bowl and produced this stunning visualization of comments
throughout the game. Secondary data is all around us and is more accessible
than even. It is increasingly possible to obtain behavioral data from
secondary sources, which can be more powerful and reliable than self-reported
data (via surveys and focus groups).
The
New Realities of Marketing Decision Making Market Sizing: Data Sources
Every
business has a market. From businesses like Amazon, whose audience could be
anyone, to niche businesses selling specialized, custom products, knowing your
market is essential to establishing a successful business. Many organizations
believe their product is so novel or useful that their market is everyone, but
more often than not, the customer base will actually exclude certain
demographics. If your product is extremely expensive, that means the product is
probably only going to be bought by people in a certain income bracket. If your
product can only be used in certain areas (like boats as opposed to cars),
you’ll likely only sell that product regionally. This is why it’s important to
understand your target audience and estimate your market size and type when
setting up your business and marketing plans.
Market Size
Market size can be simply defined as “the number of people
likely to buy a product or service.” Many businesses have a rough idea of who
their market is or how many individuals it might involve, but it’s important to
accurately estimate market size in order to plan for things like budgets, sales
goals, marketing efforts, and staffing. Knowing how large your market can be
directly proportional to your business efforts. Using smart market size
estimation techniques is an important planning step.
How to Evaluate Market Size?
There are several kinds of market sizing techniques that
businesses should consider and use in their market size analysis. The most
important step, before considering anything that will help you estimate your
market, is having good data that accurately paints the picture of the
marketplace or industry. Having good data and research is necessary to
understanding how to estimate your market size. Before working with any market
size estimation techniques, make sure you have solid information to draw from
and analyze. With good data, you can:
·
Look at the competition: Are you the only
provider of your business or service locally? Regionally? Nationally? This will
tell you a lot about the potential size of your market. If you have a lot of
competition, you know you are competing with other businesses for customers,
effectively reducing or limiting your potential market.
·
Understand your product: Be realistic about
things that will affect who will buy your product. Things like cost,
usefulness, reliability, or availability will influence how many people are
truly in your market.
·
Understand your customer: Similar to
understanding your product, you must know something about your customer when
doing market size calculation. Are your customers likely to be male? That tells
you something about your market. Are they likely to be college-educated? Found
in cities? Make a certain salary a year? Knowing your target customer always
leads to helping you estimate your market size.
Estimating your market size is an important step in establishing
and growing your business, including planning budgets, forecasting goals, and
creating marketing plans. In addition to being something businesses should do
as they launch, it should also be reevaluated regularly as your business gains
customers and recognition. Customer market size is never a static thing and can
grow, change, and shrink based on anything from the economy to available
technology, so always be mindful of market size for your business.
Data Sources
Your selected approach will dictate the necessary sources to
estimate market size. Secondary research or desk research searches for existing
data and is the most commonly used form of research in this type of exercise
because it is quicker to obtain and therefore usually more cost effective.
Through general web searching, a wealth of information can be found at little
or no cost. Subscription-based or syndicated research is a great place to
start, but there are also free sources that contain valuable information.
Articles about companies or products in the target market will often quote data
from these sources. You might also check whitepapers and product announcements
for similar information. Publicly held companies are required to share
information in analyst and investor reports. Quarterly and annual reports are
typically available on these company websites as well as through the SEC
filings. Also, trade associations will often conduct market research and
aggregate industry data.
Primary research, also called field research, is often used in
addition to secondary research. The primary research can take on many forms and
can strengthen your understanding of the market, allowing you to make better
informed assumptions. The most versatile form of primary research is in-depth
telephone interviews that can be used to capture more sensitive information. If
possible, on-site visits can be used to confirm or contradict market sizing
estimations or determine key information on market trends, such as technology,
market performance, relative competitive position or other information dealing
with understanding scope and defining the target market.
Stakeholders
A stakeholder is a party that has an interest in a company
and can either affect or be affected by the business. The primary stakeholders
in a typical corporation are its investors, employees, customers and suppliers.
However, the modern theory of the idea goes beyond this original notion to
include additional stakeholders such as a community, government or trade
association.
Stakeholders can be internal or external. Internal
stakeholders are people whose interest in a company comes through a direct
relationship, such as employment, ownership or investment. External
stakeholders are those people who do not directly work with a company but are
affected in some way by the actions and outcomes of said business. Suppliers,
creditors and public groups are all considered external stakeholders.
Internal Stakeholder
Investors are a common type of internal stakeholder and are
greatly impacted by the outcome of a business. If, for example, a venture
capital firm decides to invest $5 million into a technology startup in return
for 10% equity and significant influence, the firm becomes an internal
stakeholder of the startup. The return of the company’s investment hinges on
the success, or failure, of the startup, meaning it has a vested interest.
External Stakeholder
External stakeholders are a little harder to identify, seeing as they
do not have a direct relationship with the company. Instead, an external
stakeholder is normally a person or organization affected by the operations of
the business. When a company goes over the allowable limit of carbon emissions,
for example, the town in which the company is located is considered an external
stakeholder because it is affected by the increased pollution
Conversely, external stakeholders may also
sometimes have a direct effect on a company but are not directly tied to it.
The government, for example, is an external stakeholder. When it makes policy
changes on carbon emissions, continuing from above, the decision affects the
operations of any business with increased levels of carbon.
Problems with Stakeholders
A common problem that arises with having numerous
stakeholders in an enterprise is their various self interests may not all be
aligned. In fact, they may be in direct conflict. The primary goal of a
corporation, for example, from the viewpoint of its shareholders, is to
maximize profits and enhance shareholder value. Since labor costs are a
critical input cost for most companies, a company may seek to keep these costs
under tight control. This might have the effect of making another important
group of stakeholders, its employees, unhappy. The most efficient companies
successfully manage the self-interests and expectations of their stakeholders.
Stakeholders vs. Shareholders
Stakeholders are bound to a company with some type of
vested interest, usually for a longer term and for reasons of greater need. A
shareholder, meanwhile, has a financial interest, but a shareholder can sell a
stock and buy different stock or keep the proceeds in cash; they do not have a
long-term need for the company and can get out at any time.
For example, if a company is performing poorly financially,
the vendors in that company’s supply chain might suffer if the company no
longer uses their services. Similarly, employees of the company, who are
stakeholders and rely on it for income, might lose their jobs. However,
shareholders of the company can sell their stock and limit their losses.
Application and
Approaches (Top-Down and Bottom-Up)
Top-Down
Top-down analysis generally refers to using comprehensive
factors as a basis for decision making. The top-down approach will seek to
identify the big picture and all of its components. These components will
usually be the driving force for the end goal.
Overall, top-down is commonly associated with the word
macro or macroeconomics. Macroeconomics itself is an area of economics that
looks at the biggest factors affecting the economy as a whole. These factors
often include things like the federal funds rate, unemployment rates, global
and country-specific gross domestic product, and inflation rates.
An analyst seeking a top-down perspective will want to look
at how systematic factors are affecting an outcome. In corporate finance, this
can mean understanding how big picture trends are affecting the entire
industry. In budgeting, goal setting, and forecasting the same concept can also
apply to understand and manage the macro factors.
Top-Down Investing
In the investing world, top-down investors or
investment strategies focus on the macroeconomic environment and cycle. These
types of investors usually want to balance consumer discretionary investing
against staples depending on the current economy. Historically, discretionary
stocks are known to follow economic cycles with consumers buying more
discretionary goods and services in expansions and less in contractions.
Consumer staples tend to offer viable investment
opportunities through all types of economic cycles since they include goods and
services that remain in demand regardless of the economy’s movement.
Comprehensively, when an economy is expanding, discretionary overweight can be
relied on to produce returns. Alternatively, when an economy is contracting or
in a recession, top-down investors will usually overweight to havens and
staples.
Investment management firms and investment managers can
focus an entire investment strategy on top-down management that identifies
investment trading opportunities purely based on top-down macroeconomic
variables. These funds can have a global or domestic focus which also increases
the complexity of the scope. Typically, these funds will be called macro funds.
Generally, they make portfolio decisions by looking at global then
country-level economics. They further refine the view to a particular sector,
and then to the individual companies within that sector.
Top-down investing strategies typically focus on profiting
from opportunities that follow market cycles while bottom-up approaches are
more fundamental in nature.
Bottom-Up
The bottom-up analysis takes a completely different
approach. Generally, the bottom-up approach will focus its analysis on specific
characteristics and micro attributes of an individual stock. In bottom-up
investing concentration is on business-by-business or sector-by-sector
fundamentals. This analysis seeks to identify profitable opportunities through
the idiosyncrasies of a company’s attributes and its valuations in comparison
to the market.
Bottom-up investing begins its research at the company
level but does not stop there. These analyses weigh company fundamentals
heavily but also look at the sector, and microeconomic factors as well. As
such, bottom-up investing can be somewhat broad across an entire industry or
laser-focused on identifying key attributes.
Bottom-Up
Investors
Most often, bottom-up investors are buy-and-hold investors
who have a deep understanding of a company’s fundamentals. Fund managers may
also use a bottom-up methodology. For example, a portfolio team may be tasked
with a bottom-up investing approach within a specified sector like technology.
They are required to find the best investments using a fundamental approach
that identifies the companies with the best fundamental ratios or industry
leading attributes. They would then investigate those stocks in regards to
macro and global influences.
Metric focused smart-beta index funds are another example
of bottom-up investing. Funds like the AAM S&P 500 High Dividend Value ETF
(SPDV) and the Schwab Fundamental U.S. Large Company Index ETF (FNDX) focus on
specific fundamental bottom-up attributes that are expected to be key
performance drivers.
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