Jon MacDonald is an Entrepreneurs' Organization (EO) member in Portland and founder of The Good, conversion rate experts who deliver increased revenues, customers and leads. We asked him to share his perspective on data-driven marketing techniques. Here's what he had to say.
Whether your current marketing ROI is something to brag about or something to worry about, the secret to making it shine can be found in a movie from 2011. Do you remember the plot?
The manager of the downtrodden Oakland A's meets a baseball-loving Yale economics grad with unique theories about assembling a winning team using computer analysis models.
His unorthodox methods run contrary to scouting recommendations, but despite ridicule from naysayers, the geek proves his point. His data-driven successes may even have been the secret sauce that fueled Boston's World Series title in 2004. The movie is Moneyball, and it's a true story.
While data-driven metrics seemed like a geeks-only game just a few years ago, it's time to climb aboard the data-driven bandwagon?or get crushed by it.
Let's take a deeper dive into data-driven marketing.
Data-Driven Marketing: The Situation
Brand awareness, test-drive, churn, customer satisfaction, and take rate are essential non-financial metrics, according to author Mark Jeffery, adjunct professor at the Kellogg School of Management. Throw in payback, internal rate of return, transaction conversion rate and bounce rate?and you're well on your way to mastering Jeffery's 15 metric essentials every marketer should know.
According to Jeffery, "Organizations that embrace marketing metrics and create a data-driven marketing culture have a competitive advantage that results in significantly better financial performance than that of their competitors."
You don't believe in taking marketing advice from a guy who earned a Ph.D. in theoretical physics? Search on "data-driven stats" for a look at the research. Marketers adopting data-centric methods are leading the pack.
Data-Driven Marketing: The Problem
If learning to leverage data can help the Red Sox win the World Series, why are most companies still hesitating more than a decade later? Because we've quickly moved from "available data" to "abundant data" to "Big data."
CMOs are swamped with information and struggle to make sense of it all. It's a matter of getting lost in the immensity of the forest and forgetting about the trees. We want the fruits of data-driven marketing, we just aren't sure where or how to pick them.
Data-Driven Marketing: The Cure
The cure to big-data overload is hidden right in the problem: data is produced by scientific means. That's why academics are the best interpreters of that data. So, we can either hire a data scientist or learn to approach the analytical part of business like a math major.
Turns out, it's not that difficult to get started.
The Scientific Method of Marketing
You're probably familiar with the scientific method. It goes something like this:
- Identify and observe a problem, then state it as a question.
- Research to develop a hypothesis that would answer the question.
- Create and run an experiment to test the hypothesis.
- Review findings to establish conclusions.
- Keep asking and keep testing.
By focusing on one part of the puzzle at a time, neither the task nor the data seems overwhelming. Since you design the experiment, you can control it.
Here's an example of how to apply the scientific method to inform data-driven marketing:
- Question: Let's say that a product on your e-commerce site isn't selling as well as you want. The category manager advises lowering the price. Is that a good idea?
- Hypothesis: Research tells you similar products are selling at an average price that is about the same as yours. You hypothesize that lowering your price will increase sales.
- Test: You devise an A/B test for one week that offers the item at a lower price to half of your e-commerce visitors and at the current price to the other half.
- Conclusions: Results show that lowering the price did not significantly increase sales.
- Action: You create another hypothesis to explain the disappointing sales and test it for accuracy.
You may think that example is an oversimplification, but we've seen clients make impressive gains by arriving at data-driven decisions based on even less complicated experiments. And we've found that scientific methodology applies to companies both large and small.
Big data certainly is big, but it doesn't have to be scary. Step-by-step analysis on fundamental questions, followed by a data-driven marketing plan, is enough to get you started on the path toward achieving large gains.
Follow the Moneyball method of data-driven marketing and you'll be on your way to the World Series of increased revenues in no time!