5 Obstacles to Marketing Intelligence - Part I

5 Obstacles to Marketing Intelligence
What Stops Us From Achieving Marketing Greatness

http://emagine‐group.com Brand Focused, Socially Active, Digitally Enabled

In the first 2 lectures, I gave you an
introduction to what marketing
i d i h k i
intelligence is and how it can change the
way marketing is done in our companies.


Now, we will start to look at what keep
Now we will start to look at what keep
organizations from achieving greatness
through marketing intelligence
through marketing intelligence


I am sure you are starting to wonder
why I haven’t defined marketing
h h ’ d fi d k i
intelligence, metrics or any other terms
related to the topics we are discussing?


Examples and understanding is
a ays be e a a de
always better than a definition.
o


A small test for you working
professionals:
f i l
Talk to your marketing department
about how they do their marketing…


Then ask them about marketing
Then ask them about marketing
intelligence and analytic marketing and
watch their eyes glaze over.
watch their eyes glaze over


While most marketers can easily explain
what they are doing in terms of
what they are doing in terms of
marketing activities, very few can
explain what intelligent marketing or
explain what intelligent marketing or
analytic marketing would look like.


In the process, 5 key roadblocks or
obstacles were identified that keep
obstacles were identified that keep
marketers and organizations from
adopting a marketing intelligence
adopting a marketing intelligence
position.


What Are The 5 Obstacles?


Obstacle 1:
Obstacle 1
Getting Started
g


We don’t know how.


We don’t have the right metrics.


The problem is not too little
Th bl i t t littl
data, but too much that isn’t
,
useful.


We don’t know where to start.


Obstacle 2:
Ob t l 2
Causality
y


There are too many confounding
factors – meaning that too many
f t i th t t
campaigns overlap making cause
p g p g
and effect impossible.


There is a time delay between
y
the marketing campaign and a
customer action.
i


Awareness campaigns do not
p g
directly results in sales, but our
CFO wants to see a financial ROI.
CFO t t fi i l ROI


Obstacle 3:
Ob l 3
Lack of Data
Lack of Data


We are a business‐to‐business
(B2B) company and sell
(B2B) d ll
indirectly. As a result, we don t
indirectly. As a result, we don’t
know who our customers are.


We can’t collect customer data
W ’t ll t t d t
due to privacy issues.
p y


Obstacle 4:
Ob t l 4
Resources and Tools


We don’t have the time and/or it
W d ’t h th ti d/ it
costs too much.


We don’t have the tools and/or
/
systems to support analytic
marketing.
k ti


We are marketers and can’t
communicate with information
technology (IT) people.
t h l (IT) l


IT builds systems, but they are
y , y
not the resources and tools we
need.
d


Obstacle 5:
Ob t l 5
People and Change
p g


We don’t measure because we
W d ’t b
don’t want accountability.
y


Our incentives are all for
O i ti ll f
marketing activity, not results.
g y,


We don’t have a culture of
W d ’ h l f
measurement.


We don’t have the skills for
W d ’t h th kill f
analytic marketing.
y g


Our organization is resistant to
g
new ideas, such as analytic
marketing.
k ti


Marketing is creative; imposing
g ; p g
metrics and process will kill
creativity and innovation.
ti it di ti


Breaking Down the 5 Obstacles


Obstacle 1:
Getting Started—Focus on
G tti St t d F
Collecting the Right Data and
g g
Create Momentum


Royal Bank of Canada started
their journey toward marketing
th i j t d k ti
intelligence by working with their
g y g
own resources.


“You have to look at what you do
today and think… “How can I do
t d d thi k “H Id
this better, cheaper, faster and
this better, cheaper, faster and
smarter?”


Every year around IRA
yy
contribution time, the sales force
at RBC was given a list to call.
t RBC i li t t ll


The average yield per sales
person was 1 – 2
1 2 people out of
l t f
10 accepting the offer accepting
10 accepting the offer accepting
the offer being made by RBC.


The RBC marketing team built a
Th RBC k ti t b ilt
model to rank and score the list
based on the potential to
contribute more than US$ 5,000
ib h US$ 5 000
to an IRA.
to an IRA.


The model involved analyzing
y g
more than 1 million customers,
for 12 months of data, and score
f 12 th f d t d
t e to d t e top 50,000
them to find the top 250,000
that would potentially
contribute.
ib


While the size of the dataset
seems intimidating, possibly
i ti id ti ibl
solving the problem for 10, you
solving the problem for 10, you
can solve the problem for 1,000.


At RBC, collecting the relevant
At RBC ll ti th l t
data to do the scoring required a
g q
great deal of manual legwork, 6
months of effort and
h f ff d
approximately US$ 100,000.
approximately US$ 100,000.


The goal was to generate a
g g
targeted list of the top 25
customers to call.ll


The results were impressive.

8 out of 10 customers called
accepted the offer.


But….


It took time for the sales force to
I k i f h l f
realize the value of the new list.
realize the value of the new list.


In the first year, only 25% of the
I th fi t l 25% f th
sales force participated.
p p

In the third year, 75% were
I h hi d 75%
participating.


Due to the success of this small
D t th f thi ll
experiment, RBC was able to
p ,
build a business case that
brought them a US$ 4 million
b h h US$ 4 illi
marketing initiative.
marketing initiative.


What did we learn?
Wh t did l ?

You don’t need 100% data and a
multimillion dollar infrastructure
l i illi d ll i f
to get started.
to get started.


The key question:

What 20% of data will give you
What 20% of data will give you
80% impact?


Walgreen’s Pharmacy

Walgreen’s Pharmacy is a
US$ 59 billion annual
$
revenue pharmacy
company with 6,850
stores across the United
States


Walgreen’s Geo‐Spatial
The geo‐spatial picture shows dots
that are customers and where they
live and are coded by shape
live and are coded by shape
depending on which of the three
Walgreen’s stores they shop.
The Diamond customers shop at
The “Diamond” customers shop at
Store 1
The “Square” customers shop at
Store 2
The “Star” customers shop at Store
3


Walgreen’s Marketing Strategy
Walgreen’s has always marketed
using flyers in newspapers
They pay based on zip codes (the
They pay based on zip codes (the
dashed line in the map)
The marketing manager noticed
something very interesting the
something very interesting – the
circle is two miles in radius and
after looking at the pictures, he
noticed that there are no dots for a
store more than two miles from
any store.
The conclusion – if you live two
miles from a pharmacy store, you
probably don’t shop there.


At this point, Walgreen’s treated
each locale equally – equal dollar
hl l ll l d ll
amounts in each zip code across
amounts in each zip code across
the United States.


But the data shows that if there
is no store within two miles of
i t ithi t il f
the zip code, customers do not
the zip code, customers do not
shop at the store


Based on this understanding,
B d thi d t di
Walgreens stopped spending
g pp p g
advertising dollars in all zip codes
without a store within two miles
ih i hi il
of the zip code
of the zip code


Total cost of collecting the data
g
and creating the plots –
US$ 200,000.
US$ 200 000


Impact to sales revenues – 0


Impact to marketing was a cost
p g
savings of more than US$ 5
million
illi


“We started with simple Excel
p
spreadsheets that contained the
advertising circulation
d ii i l i
distributions by zip code. It was
distributions by zip code. It was
not hard to get the advertising
data into the software.”


The technology – a PC, ESRI map
gy , p
and graphing software and a
data set of Excel spreadsheets
d t t fE l dh t


The bigger challenge was
changing Walgreens’ business
h i W l ’b i
p
process to use analytic marketing
y g
insights


The mistake they made was too
y
many changes too quickly that
made people uncomfortable.
d l f bl
Within a few weeks, things had
Within a few weeks, things had
returned to the old way of doing
things.


So they started small….


They found one Store Operations
VP and a district manager that
VP d di t i t th t
were willing to try doing things
were willing to try doing things
different.


They showed them the pictures
y p
and explained that it didn’t make
sense to spend US$ 80,000 in
t d US$ 80 000 i
ad e t s g a p code e
advertising in a zip code five
miles from a store to generate
US$ 20,000 in sales.
$ i l


After 5 experiments, Walgreens’
cut US$ 300,000 off the bat in
t US$ 300 000 ff th b t i
advertising cost and showed that
g
the approach really worked.


With the win, they set up a
process to review the marketing
process to review the marketing
spending with each district
manager throughout the United
States.
States


Overcome Obstacle 2: Causality—
Conduct Small Experiments


There are too many possible causes
There are too many possible causes
of anything you measure to identify
a single cause and effect;
o e app g a e g ca pa g s
overlapping marketing campaigns
makes it impossible to tell what’s
working and what’s not working!
working and what’s not working!


The “answer” is one of taking a
systematic and disciplined
i d di i li d
approach to marketing campaign
approach to marketing campaign
execution.


Conduct small experiments,
isolating as many variable as
i l ti i bl
possible to see what works and
possible to see what works and
what does not.


While we know that most
marketers are aware of this
approach, you will be shocked to
h ill b h k d t
learn that almost 70% do not use
ea t at a ost 0% do ot use
experiments to pilot test
marketing campaigns
k i i


Why?


Most marketing organizations’
g g
reward systems are based on
activity, not results.
ti it t lt


Harrah’s Entertainment regularly
g y
designs experiments to quantify
the impact of its marketing.
th i t f it k ti


It designed an experiment
targeting two groups of frequent
t ti t ff t
slot machine players in Jackson,
slot machine players in Jackson,
Mississippi.


The experiment had two groups
Th i th dt
– a control group with a standard
g p
marketing offer and a test
marketing offer called “The
k i ff ll d “Th
Challenger
Challenger”


Harrah’s Offers

Control Group “The Challenger”
The Challenger
A $125 package of a free room, $60 in free casino chips, no
two steak dinners, and $30 in hotel room and no steak
two steak dinners and $30 in hotel room, and no steak
free chips at the casino dinner

Gaming Activity Significantly
Gaming Activity Significantly
Gaming Activity unchanged
Higher


Harrah’s Entertainment tested
the experiment across other US
geographies.
hi


As a result, Harrah’s was able to
A lt H h’ bl t
cut the budget for this type of
g yp
marketing by more than 50% and
increase the performance of the
i h f f h
marketing.


Why does this
Wh d thi
experiment work?
p


By limiting who gets the
experimental offer addresses the
i t l ff dd th
causality issue and there is a
y
minimal time delay between
executing the campaign and
ti th i d
obtaining the results of the
obtaining the results of the
campaign.

5 Obstacles to Marketing Intelligence - Part I

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5 Obstacles to Marketing Intelligence - Part I