Beware of WYSIATI on the Road to Data-Driven Marketing

Fueled by the explosive growth of online communications and commerce, marketers now have access to an immense amount of data regarding customers and prospects. Many marketers have recognized that this vast sea of data is a potential source of insights that can be used to improve marketing effectiveness and drive business growth.

As a result, big data, marketing analytics, and data-driven marketing have been among the hottest topics in marketing for the past several years, and many marketers have made - and continue to make - substantial investments in data acquisition and analytics.

Yet despite the abundance of data and the increasing power of analytics technologies, many marketers aren't satisfied with the results they've obtained from their investments in data and analytics. In my last post, I discussed some of the findings in Gartner's Marketing Data and Analytics Survey 2020. Gartner's research found that:

• 54% of senior marketers (CMOs and VPs of marketing) say that marketing analytics has not made the impact on their company that they had expected.
• On average, marketing analytics influences only 54% of marketing decisions.

When Gartner asked survey participants why they don't use marketing analytics to support marketing decisions, the four reasons most frequently cited by respondents were:

• Data findings conflict with intended course of action
• Poor data quality
• Analysis does not present a clear recommendation
• Results of analysis are not actionable

The Limitations of Data-Driven Marketing

So why have data and analytics failed to produce the impact that marketers expected? Part of the explanation is that marketers are still learning how to generate insights from data and analytics that can make meaningful contributions to growth. But it's also becoming clear that the data most marketers are relying on, while vast, can produce "blind spots" that result in less-than-optimal growth strategies.

An October 2020 article in the Journal of Marketing identified four of these potential blind spots:

1. "First, marketing data may result in prioritizing short-term growth ahead of long-term growth."
2. "Second, marketers may overly rely on historical, internal data at the expense of forward-looking, external growth opportunities."
3. "Third, marketing data may create a preference for more easily measured digital touchpoints at the expense of offline channels."
4. "Finally, marketers may rely on available data in lieu of representative or predictive data."

The fourth blind spot cited in the Journal of Marketing article alludes to a broader issue regarding the limitations of data-driven marketing. The vast amount of data that we can now access and analyze, and the growing power and sophistication of marketing analytics software can easily lead us to overestimate the potential of data-driven marketing to drive business growth.

This overconfidence can make marketers susceptible to a version of the McNamara Fallacy, which the noted social scientist Daniel Yankelovich described in the following terms:

"The first step is to measure whatever can easily be measured. This is OK as far as it goes. The second step is to disregard that which can't be easily measured or to give it an arbitrary quantitative value. This is artificial and misleading. The third step is to presume that what can't be easily measured really isn't important. This is blindness. The fourth step is to say that what can't be easily measured really doesn't exist. This is suicide."

Like all humans, we marketers have a strong tendency to base our decisions on the evidence that's easily available, and we tend to ignore the issue of what evidence may be missing. Psychologist Daniel Kahneman has a great way to describe this powerful human tendency. He uses the acronym WYSIATI, which stands for what you see is all there is. My point here is that it can become easy for us to believe that the data we can track, collect, and analyze is the only thing that matters, and that simply isn't true.

I'm not arguing that marketers should ignore or avoid using data, marketing analytics, and data-driven marketing. These tools and techniques can be immensely powerful. The key is to use them wisely and to remember that they're neither complete nor perfect.

Senior Marketers Say Analytics Isn't Meeting Expectations

 

Using data to inform marketing decisions is widely seen as critical for marketing success. But recent research has found that most senior marketing leaders are disappointed with the results they've obtained from their analytics investments. Read on to learn what senior marketers are saying about the unfulfilled promise of marketing analytics.

Marketers have been using data to support their activities and programs for decades. And the volume of data available to marketers has exploded in recent years because of the exponential growth of online communications and commerce.

Marketers have recognized that this vast sea of data has the potential to provide insights about existing and prospective customers that can be used to improve the effectiveness of their strategies, activities, and programs. As a result, many marketers have made substantial investments in data acquisition and analytics capabilities.

The Unfulfilled Promise

Despite the increased attention and investment, recent research has shown that most senior marketing leaders aren't satisfied with the results they've obtained from their investments in marketing analytics.

The Marketing Data and Analytics Survey 2020 by Gartner Research was a survey of over 400 marketers. The survey participants were split fairly evenly between producers (those who provide marketing analytics) and consumers (those who receive marketing analytics output). Forty-nine percent of the respondents were in North America, and 51% were in Western Europe. More than 80% of the respondents were with organizations having $1 billion or more in annual revenue. Therefore, this research reflects the perspectives of large enterprise marketers.

In the Gartner survey, a majority of senior marketing leaders - CMOs and VPs of marketing - were unimpressed with the results they've received from their marketing analytics efforts. Fifty-four percent of the senior marketing respondents said that marketing analytics had not produced the impact on their organization that they had expected. The survey also found that analytics only influences 54% of marketing decisions (on average).

The Gartner survey results echo the findings of the February 2020 edition of The CMO Survey sponsored by Duke University's Fuqua School of Business, the American Marketing Association, and Deloitte. In this research, survey respondents indicated that marketing analytics was used in marketing decision making only 37.7% of the time. That was down from 43.5% in the February 2019 edition of the survey.

The CMO Survey also found that marketing analytics has only had a modest impact on company performance. The survey asked participants to rate the contribution of marketing analytics to company performance using a 7-point scale (1=not at all and 7=very highly). In the February 2020 survey, respondents rated the contribution of marketing analytics at 3.9. The same question has been asked in each edition of the survey since at least August 2012, and the rating has not varied significantly over that entire period.

Why Analytics Isn't Meeting Expectations

Gartner's research also sought to identify why marketing analytics isn't meeting marketer expectations. The survey asked participants why they don't use analytics to support marketing decisions. The following table shows the top four reasons identified by the survey respondents.

Of all the reasons shown in this table, I find the first one to be the most interesting. Apparently, some marketing leaders don't use the output of marketing analytics to support decisions when the output conflicts with their intended course of action.

It would be easy to describe this reason as a classic example of confirmation bias. Marketing leaders seek information that will justify the action they've already decided to take, and they ignore any contradictory information.

In fairness, though, more is probably behind this reason. If a marketing leader perceives that the output of marketing analytics is based on poor quality data, or if the output doesn't provide a clear recommendation or actionable insights, he or she may feel justified in ignoring that output.

There's no doubt that data and analytics are increasingly important for marketing success. Unfortunately, these tools - like many other marketing technologies and techniques - have been hyped by vendors and industry pundits, and that hype has contributed to unreasonable expectations. Marketing leaders need to have a realistic view of what data and analytics can and can't do. That's the topic I'll address in my next post.

Top image courtesy of Petr Sejba (www.moneytoplist.com). CC

Ending the Cold War Between Brand and Demand

 

In 2018, Samuel Scott wrote a column for The Drum in which he contended that the marketing industry has split into two distinct camps that advocate two very different approaches to the practice of marketing. Samuel described this divide as a "Cold War" between "online B2B marketers" and "offline B2C marketers."

A similar Cold War now exists within B2B marketing. The divide is between marketers (and agencies and consultants) who advocate the importance of long-term brand marketing, and those who focus exclusively - or almost exclusively - on shorter-term demand generation marketing. 

To use Samuel's words, B2B brand and demand generation marketers ". . . have different practices, read different publications, attend different conferences, follow different thought leaders, and view the other as outdated or uneducated." 

At present, the proponents of short-term demand generation marketing appear to be winning the "war." Several research studies have confirmed the tilt toward short-term tactics among B2B marketers. For example, in a 2020 survey of over 450 B2B marketers by The Marketing Practice and Marketing Week:

• Only 18% of the respondents said they run campaigns for more than six months.
• Only 20% said they report on a campaign's impact beyond six months.
• Only 33% said they allocate more than 40% of their resources to long-term marketing goals (more than six months).

The bias for short-term marketing is due to several factors, but two stand out in importance. First, the tenure of CMOs is one of the shortest in the C-suite, and therefore marketing leaders are under intense pressure to produce quick results. A 2019 study by Korn Ferry (a global organizational consulting firm) found that the average tenure of CMOs at the 1,000 largest U.S. companies (by revenue) was 3.5 years, the lowest of all C-suite titles.

The second major factor driving the preference for short-term demand generation marketing is that the performance of those programs is relatively easy to measure. The objective of most demand generation programs is to elicit a behavioral response from potential buyers, and those behaviors are easy to track with today's marketing technologies.

In contrast, the objective of most brand marketing programs is to evoke a change in the minds of potential buyers. For example, brand marketing programs are often designed to raise awareness and increase brand salience and mental availability.* Marketing experts have long recognized that these objectives are vital to driving growth, but they are extremely difficult to measure because they don't usually involve observable behaviors.

These factors have combined to cause many B2B marketing leaders to put too little emphasis on brand marketing. Jann Schwarz, the Global Head of The B2B Institute (a think tank funded by LinkedIn), described the situation in stark terms:  "The biggest problem in B2B marketing is pervasive under-investment in brand marketing, which is hurting companies' growth prospects."

The Cold War between B2B brand and demand marketers is particularly unfortunate because there is compelling evidence that companies will maximize their growth potential by balancing their use of long-term brand marketing and short-term demand generation. I discussed some of this evidence in an earlier post, so I won't repeat all of that discussion here.

The most important point is that multiple research studies have shown that consistent brand marketing (when well done, of course)  will improve the effectiveness and efficiency of demand generation marketing programs. A strong brand will substantially increase demand generation conversion rates and ultimately result in lower customer acquisition costs. There is also evidence that a strong brand can reduce the price sensitivity of some prospective buyers and thus improve gross profit margins.

The bottom line is, both effective brand marketing and effective demand generation marketing are needed to maximize growth. So it's time we ended the Cold War.

*Brand salience and mental availability both refer to the propensity of a brand (company/product/service) to be thought of or noticed when a potential customer is in a buying situation.

How to Plan for Successful "COVID-Exit" Marketing

The COVID-19 pandemic turned the business and marketing world upside down in 2020. To constrain the spread of the coronavirus, governments instituted, relaxed, and then reimposed mandatory business closings, stay-at-home orders, and a plethora of other business restrictions and public health measures.

The U.S. economy gyrated wildly in 2020. Real GDP growth fell by an astounding 31.4% (annualized rate) in the second quarter and then grew by an equally astounding 33.4% (annualized rate) in the third quarter. While some companies experienced tremendous revenue growth in 2020, a much larger number of businesses saw their revenues fall dramatically.

The good news is, December 2020 marked the "beginning of the end" of the COVID-19 pandemic. The U.S. Food and Drug Administration granted emergency approval for two COVID-19 vaccines, and as of January 8th, about 6.7 million Americans had been vaccinated according to CDC data.

As I noted in my last post, the U.S. economy is expected to grow substantially in 2021, after a lackluster start in the first quarter. The biggest challenge for marketers in 2021 will be to design and execute marketing programs that will enable their companies to take full advantage of the improving economic and business conditions. To achieve this objective, marketing leaders will need to use an agile approach to marketing planning.

Assess Likely Business Conditions for Your Company

While the outlook for the U.S. economy in 2021 is good, estimates of overall economic performance aren't specific enough to enable marketers to develop sound marketing plans. Economic growth in 2021 is likely to be broader than the growth that occurred in the second half of last year, but it will still be uneven. The timing and pace of growth will vary for different products and services, industries, and geographic markets.

Given the unevenness of the economic recovery, it's essential for marketing leaders to base their plans for 2021 on a thorough assessment of the business conditions their company is likely to be facing over the course of the year. The centerpiece of this assessment should be a forecast of the revenue the company can potentially earn in each quarter of the year.

Revenue forecasts can be created in a variety of ways, but for most B2B companies, the best method is a bottom-up approach. In my experience, it also works well to begin with revenue sources that are most reliable and then move to sources that are less certain. Therefore, I typically recommend that marketers estimate revenues from the following sources in the following order:

1. Recurring revenues from existing customers
2. New sales to existing customers
3. Sales to new customers

It's also critical to update these revenue forecasts as the year progresses. More specifically, the "final" forecast for each quarter should be completed as early as possible in the preceding quarter. So for example, marketing leaders should be focused now on developing a final revenue forecast for the second quarter, and their objective should be to finalize the forecast for the third quarter in April.

Use Quarterly Marketing Plans

In the not-too-distant past, many marketers developed marketing plans on an annual basis. These "normal" practices disappeared when COVID-19 reared its ugly head. Many companies immediately went into crisis management mode, where conserving cash was the primary objective. As a result, marketing planning became short term, reactive, and tactical for many marketers.

2021 will not be a rerun of 2020, but this doesn't mean that marketers should go back to their pre-pandemic approach to planning. While the economic outlook for 2021 is clearer now than it was a few months ago, it's still risky for most marketers to commit to major marketing programs or investments months in advance.

As I noted earlier, the biggest challenge facing marketers in 2021 is to match their marketing activities and investments with the revenue growth opportunities that will become available to their company. Given that business conditions are likely to be improving over the course of 2021, marketing leaders should plan their programs and spending in quarterly increments. By using this approach, they can better align their marketing efforts with the business conditions their company will be experiencing. 

This approach does not mean that marketers should develop plans from scratch for each quarter of 2021. In fact, what they should do is develop tentative plans for each quarter early in the year based on their initial set of quarterly revenue forecasts. Then, as each revenue forecast is finalized, they can adjust their quarterly marketing plan to align with the final revenue forecast.

This approach enables marketers to take a more strategic view of marketing for 2021, while retaining the flexibility to adapt to changing business conditions.

Image courtesy of Chris Griffith via Flickr CC.

2021: A Better (but Still Challenging) Year for Marketers

 

A long-standing New Year's eve tradition in my family is to go around the room and have everyone relate one thing he or she was thankful for in the year about to end. I suspect if I asked a group of marketers what they were thankful for about 2020, many would loudly answer, "I'm thankful it's over!"

It's easy to understand why marketers want to put 2020 in their rearview mirror. For almost the entire year, marketing leaders were forced to deal with an exceptional level of uncertainty - about the trajectory of the pandemic, about the restrictions governments would impose to mitigate the spread of the virus, and about the status of the marketing budget.

As a result of these uncertainties, many marketers saw their planning horizon shrink tremendously. Rather than focusing on what marketing programs would be run six or nine months in the future, the burning question for marketers became, "What programs can we run next month?"

Fortunately, 2021 isn't likely to be a rerun of 2020. Last year, business conditions were largely dictated by the evolution of the COVID-19 pandemic, and that will remain true for most of 2021. But because of recent breakthroughs on the vaccine front, control of the pandemic is now within sight, and therefore business conditions are likely to be improving as the year progresses.

The Beginning of the End

Last month, the U.S. Food and Drug Administration gave emergency approval to two COVID-19 vaccines, and inoculations began on December 14th. While supplies of these vaccines are still limited, they are expected to increase rapidly over the next several weeks. In addition Johnson & Johnson expects to have clinical trial results for its vaccine candidate later this month. If those results are good, the J & J vaccine could be approved in February. So it's likely that vaccines will be widely available by the spring of this year.

Since March of last year, the foremost question for most of us has been, "When will the pandemic end?" Until a few weeks ago, it wasn't possible to answer this question. Now, however, it's reasonable to project that the pandemic will be brought under control this year.

In a November article, McKinsey & Company argued that ". . . the United States will most likely reach an epidemiological end to the pandemic (herd immunity) in Q3 or Q4 2021." The article's authors also argued that the U.S. could begin a "transition toward normalcy" in the second quarter of this year if vaccine distribution and other factors go well.

The pandemic storm clouds will not dissipate immediately. Several epidemiological models are now projecting that the incidence of COVID-19 will peak in this quarter and then begin to decline as the rollout of vaccines expands. The fall of new cases, hospitalizations, and deaths is likely to accelerate in the second quarter as warmer weather also helps to diminish the transmission of the virus. By the second half of this year, many of the public health measures implemented to control the spread of the virus will no longer be needed.

The Economic Outlook for 2021

There is an emerging view among economists that the U.S. economy will enjoy above-average growth in 2021 - after what may be a rocky start in the first quarter. The following chart depicts the latest forecast by The Conference Board for real GDP growth and real growth of consumer spending in 2021.

As this chart shows, economists at The Conference Board are forecasting tepid growth in the first quarter followed by substantial growth over the balance of the year. For the entire year, The Conference Board expects real GDP to grow 3.6% and real consumer spending to increase 4.3%. Other economists have predicted that real GDP in the U.S. will grow nearly 6% this year.

The connection between economic performance and the pandemic is easy to see in the quarterly forecast by The Conference Board. Economic growth in the first quarter of the year will be weak as mandatory business closings and other economic restrictions remain in place to combat a high incidence of COVID-19.

In the second quarter, the economy will improve as the number of people vaccinated continues to increase, which will depress the spread of the virus and allow some public health restrictions to be relaxed. Economic growth will be robust in the second half of the year as the U.S. nears herd immunity, and most public health restrictions are no longer necessary.

The biggest challenge for marketers in 2021 is to match their level of marketing activities and spending to the business conditions their company is facing. To meet this challenge, marketing leaders will need to use a planning process that can quickly adapt to changing business conditions. I'll describe one effective approach to marketing planning for 2021 in my next post.

Top image courtesy of Animated Heaven via Flickr.