Data is Not Enough: A Path for Marketers Transformation

As originally featured in CIO Review

 
 

In front of an audience of consumer goods marketers at Nielsen’s Consumer 360 conference in Washington, D.C., Daniel Zhang, CEO of Alibaba–who holds the record of the largest IPO in history-said “We believe data is oil in the new economy.” Mr. Zhang added, “We accumulate tons of consumer data. We know who the buyer is; we know what his home address is; we know what [are] his favorite brands; and we know whether or not he has a kid.”

 
 

This year, six companies account for more than half of the $664 billion in value added to the Nasdaq Composite Index. Four of these companies have businesses fundamentally built on unique behavioral consumer data: transactions (Amazon.com), intent (Google), the social graph (Facebook) and content consumption (Netflix).

 
 

Judging by the evidence, Mr. Zhang’s comparison of data to oil rings true. Have we found the Holy Grail of Marketing? Is it time to put an end to John Wanamaker’s old adage, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half”?

 
 

Unfortunately, for data to drive marketers’ transformation, a lot of work still needs to be done. Data is not enough. It is just the starting point in a long journey -with bumps on the road.

 
 

A path for marketers’ transformation

 
 

Many marketers have responded to the data trend with incremental, bespoke efforts; hiring a Chief Data Officer, or a team of data scientists and investing in “analytics” or “big data”. These are all lofty pursuits, but their impact is limited. Amazon, Google, Facebook and Netflix have built their entire businesses putting consumer behavioral data at the center, rather than adding data teams or technology on the side.

 
 

How can traditional marketers re-think their operating models to embrace data-driven transformation? Here is a suggested path, in four steps:

 
 
    1. Unify fragmented consumer data sets, understand key behaviors, and use these insights as the basis of their strategy
 
    1. Build direct relationships with consumers
 
    1. Shift from classic planning approaches to adaptive strategies, and foster flexible organizational structures
 
    1. Bring in new skillsets to the organization.
 
 

This is much easier said than done, but is needed.

 
 

1. Putting the consumer at the center via unified behavioral data

 
 

Former Google CEO Eric Schmidt famously said in 2010, “There were 5 Exabytes of information created between the dawn of civilization through 2003, but that much information is now created every 2 days.” This seems too much for marketers to handle.

 
 

First, the scale of data available requires massive investments in storage to house it, data science to apply intelligence to it, and applications to use it in the context of business decisions. This is a new capability that many marketers don’t have, and it is hard to build. The good news is that many marketers have taken the steps to address this.

 
 

Second, some of the data is low quality (“garbage in, garbage out”) and requires careful filtering to distill the signal from the noise. The industry is still struggling with measuring accuracy of simple metrics such as web traffic or viewable ad impressions. Cleaning up the data, and tying it to individual behaviors, is harder to solve – and often requires cooperation with other parties in the ecosystem.

 
 

Third and perhaps most importantly, the data is bespoke across multiple channels. Physical point-of-sale, online orders, social media, and call centers all collect customer data. There is also third party data. Consumers experience a brand across all of these touch points; however, marketers can’t put the pieces together and as a result, they lack a unified story.

 
 

The first step in marketer transformation is to unify behavioral data sets and connect them to individual behaviors. New and valuable insights will emerge that will allow marketers to re-orient their strategy around the consumer, not the channel.

 
 

2. Building direct consumer relationships

 
 

Marketers often rely on traditional intermediaries to get to consumers, like retailers to sell their products or media to distribute their brand message. This is no longer always necessary or ideal. Shifting to a direct model can be transformational.

 
 

Uber in transportation, AirBnB in lodging, and Birchbox in retailare are well-known examples of new entrants building direct, data-driven relationships with consumers. More established players, like HBO, have successfully launched direct-to-consumer services (HBO GO) that do not rely on third-party aggregators or distributors (MSOs).

 
 

Traditional media partners are also being disintermediated. Owning consumer relationships means talking directly to consumers. More and more companies are building content capabilities and choosing to speak for themselves.

 
 

If data gives marketers unique insights on their consumers, what is preventing them from building a direct relationship?

 
 

3. Shifting to adaptive strategies and flexible organizational structures

 
 

According to BCG, market leadership volatility (measured by the frequency of changes in market share positions among competitors) has multiplied by a factor of 22 since the 1950s. This means the value of classic planning is somewhat ephemeral. The only valuable strategy today is to be fundamentally adaptive. Think about this in light of a data-driven strategy: constantly observe behaviors, test strategies, and adapt. Observe, test, and adapt. Rinse and repeat.

 
 

Unfortunately, marketers still have very disconnected organizational structures, and are failing to embrace adaptive strategies. Often, every consumer touch point relies on a unique data set, a separate budget, and a separate team with different goals and metrics to measure success. It’s a recipe for failure that results in uncoordinated experiences for consumers, delays, duplication of efforts, and inability to take advantage of scale in key areas (like ad tech or activation).

 
 

While every company is different and requires a different organizational model, some common needs are clear. Marketers need to foster cooperation and connectivity via more flexible organizational groupings. All consumer touch points need to be aligned: share data, insights, and understand the brand story from the perspective of the consumer. That means simplifying the organization by reducing layers and groupings, reinforcing integrator roles, driving more cross-unit processes, and rotating talent more often.

 
 

4. Bringing new blood to the organization

 
 

Most importantly, a new people strategy is required. Specifically, marketers need to attract talent that can thrive in an environment of constant change and data-driven experimentation. As marketing disciplines (and media) converge, marketers need to nurture individuals who understand and can operate in more than one discipline or channel (“hybrid resources”). Finally, they need talent with the required fluency in technology data and analytics, understanding how to derive insights and convert them into an actionable strategy.

 
 

In summary

 
 

Data can unlock significant value for marketers, but the value does not reside in the data itself. It resides in using consumer behavior insights at scale to fundamentally transform the business: strategy, organization, and people.

 
 

Note: the views expressed in this post are my own, and may not necessarily reflect the views of my employer

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