The Five Essential Practices of the Data- Savvy Organization

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1 The Five Essential Practices of the Data- Savvy Organization Marketers are caught in a downward spiral of reporting past performance to continually prove the value of marketing. They must begin using marketing data to influence decisions and improve marketing. Only then can marketing have a greater impact on business results. By Julie Schwartz, Senior Vice President of Research and Thought Leadership, ITSMA with Susan McKittrick and Susan Aldrich of Patricia Seybold Group Key Takeaways Marketing organizations that use data in their strategic and tactical decision making have a business-performance advantage. Once you have proven the value of marketing and have secured your budget, shift to using marketing data to look ahead, optimize marketing performance, and deliver business results. Marketing can t become data savvy without technology and data governance, specifically integrated marketing automation, sales automation, CRM, and financial systems. To maximize the impact, marketing must elevate its data analytics initiative to a more strategic level to avoid building yet another data silo. M arketers continually find themselves in the precarious position of trying to prove marketing s worth. But even if marketers have the data they need, reporting results is merely a necessary first step. Marketers must use the data to make decisions that have greater business impact. In other words, marketers must stop merely using data to prove marketing s value and begin using it to improve results to become data-savvy marketers. In this Update, we establish the link between data-savvy marketing and business impact and outline in detail the five essential practices of data-savvy marketers, based on ITSMA survey research as well as interviews with ITSMA members. Reproduction or disclosure in whole or in part to other parties shall be made only upon the express written consent of ITSMA. U ITSMA Reproduction Prohibited

2 Marketing Organizations That Leverage Data in Their Decision Making Have a Sales- Performance Advantage Why is becoming data savvy so important? We ve long suspected that companies that are proficient at collecting high-quality data and analyzing it to support critical marketing decisions would outperform their competitors, grow faster, have higher customer satisfaction and loyalty, and increase profitability. Trouble is, we ve never been able to prove this link. Until now. ITSMA research shows that marketing organizations that leverage data in their strategic and tactical decision making have a business performance advantage. Datasavvy organizations were better able to significantly or somewhat improve their average time to revenue and their sales costs per order dollar over the last two years (Figure 1). Of the data-savvy marketers, 55% reported a shorter time to revenue compared with two years ago. By contrast, only 19% of the other marketers reported a shorter time to revenue. More than half the data-savvy marketers reported a lower sales cost per order compared with two years ago, whereas only 25% of the other marketers reported lower sales costs. Figure 1. Data-Savvy Marketers Report Shorter Sales Cycles and Lower Sales Costs In your last fiscal year, how did your sales organization perform in the following areas: % of Respondents Compared with two years ago our Average Time to Revenue (Pipeline velocity: time from sales-accepted lead to deal closure) was:* Data Savvy (N~21) All Other (N~63) Significantly or somewhat longer About the same Significantly or somewhat shorter Compared with two years ago our Sales Cost per Order Dollar (cost of sales divided by revenue) was:* Data Savvy (N~21) All Other (N~63) Significantly or somewhat higher About the same Significantly or somewhat lower *Indicates a statistically significant difference ITSMA. All rights reserved. Reproduction or forwarding of this document to others is prohibited. U0073 2

3 Most Organizations Are Just Getting Started However, the advantages of being data savvy don t go far enough at least not yet. We found that being data savvy had no impact on revenue and profitability. One possible explanation is that most marketing organizations, even those that we consider data savvy, are just getting started. Most data-savvy companies have three to five years experience, compared with one or two years or less for the rest of the companies surveyed. There s a steep learning curve and it s an iterative process. Further, although data-savvy companies marketing executives are using data and analytics to support marketing decision making, data is not widely used by executives outside of marketing to make decisions that impact the business. For example, C-level executives may be holding marketing accountable for performance, but they are not using marketing data to make their own decisions. As expected, more business unit and sales executives used marketing data to make decisions. Mostly, though, executives are reviewing reports without taking action on them. Furthermore, a surprisingly large number of marketers didn t know how or if executives were using marketing data. Clearly, it will take time for marketing data to infiltrate the organization. Perseverance is essential. Identifying Data-Savvy Marketers What does it mean to be data savvy? Loneliness is perhaps the defining characteristic. Only 21% of the organizations that responded to our survey can be classified as data savvy. But members of this select group share important characteristics that set them apart. They: Foster a culture that places importance on making decisions based on data and analysis Report leading-edge or above-average data usage to support marketing activities* Have written procedures for collecting data and clear expectations for analyzing data Product and services companies are more likely to be data savvy. Three quarters of the data-savvy marketers hail from product-and-services companies as opposed to primarily services companies. Based on our definition, we identified 23 data-savvy marketing organizations % of Respondents (N=107) Data-Savvy Marketing 21% Organizations *Leading edge. We use data analysis to make both tactical and strategic decisions, such as estimating the impact of marketing investments on revenue (in addition to what is described below) Above average. We use data analysis to make tactical decisions that improve the impact of marketing such as optimizing the landing pages (in addition to what is described below) Average. We regularly collect and report data, providing organized information in reports or dashboards to show the impact of marketing Back of the pack. We rely primarily on anecdotal information to show the impact of marketing 2011 ITSMA. All rights reserved. Reproduction or forwarding of this document to others is prohibited. U0073 3

4 The Challenges of Being Data Savvy All marketers, even those that we classify as data savvy, face considerable challenges in using that data to improve marketing and business performance. Data-driven marketing is hard. The most significant challenges to becoming data savvy are: Lack of budget/resources/time. Investing in analytics is always a tradeoff. Inevitably, companies question whether the money would be better spent on activities rather than measurement. Lack of integrated data/centralized database. At most companies, data resides on multiple systems. For example, it is not unusual for companies we interviewed to have a mix of Eloqua marketing automation, Salesforce.com sales automation, Oracle financials, and Siebel customer relationship management (CRM). Lack of IT systems and tools for data collection and analysis. Without the requisite tools, collecting and analyzing marketing data becomes a time-consuming, manual process. Poor data quality. Gathering quality data is a big undertaking. Data from different systems and departments need to be identified, cleaned, maintained, and shared. In the absence of this data governance, quality suffers and, as a result, nonmarketing executives have little confidence in the data. Lack of analytical and/or data management skills. Traditionally, the marketing profession has attracted right-brain creative types. Consequently, today s marketing organizations are short on analytical and data management skills. Difficulty linking marketing performance metrics to business metrics. Marketing organizations don t have a shortage of data and metrics. For example, they have plenty of data on downloads, clickthroughs, and number of leads generated. What they don t know is the business impact, such as the number of leads generated that become opportunities and, ultimately, closed deals. The Five Essential Practices of Data-Savvy Marketers Given all the challenges of becoming data savvy, what qualities (besides perseverance) set data-savvy marketers apart? ITSMA has uncovered five essential practices. Essential Practice #1. Establish Clear Objectives and Leadership The critical practice that undergirds all of the successful companies in our study is establishing clear objectives. Data-driven marketers seek executive sponsors, clarify what they are going to accomplish and by when, and commit to measures of success. In addition, they empower a marketing leader who is held accountable for delivering against the objectives ITSMA. All rights reserved. Reproduction or forwarding of this document to others is prohibited. U0073 4

5 Essential Practice #2. Maintain a Marketing Technology Strategy and Road Map Marketing s use of technology has become mission critical and mission critical can t be left to chance. Not surprisingly, data-savvy marketers are also technology savvy. They are more likely to build a plan and map out a marketing technology strategy (Figure 2). More than half have had such a road map in place for more than one year. In contrast, nearly 25% of the other marketing organizations have no plans to implement a technology strategy and road map. In addition to building a road map, the data-savvy markers in our study have hired marketing technologists (technology-adept individuals who report to the marketing organization and liaise with IT) and made investments in new technology, training, and administration. The marketing technologists work with IT and cross functionally to integrate marketing automation, sales automation, CRM, and financial systems. The ultimate goal is to build a centralized, integrated database that will provide one view of the customer. Figure 2. The Data Savvy Are Also Technology Savvy Do you have a marketing technology strategy and road map? % of Respondents In place for more than one year Implemented within the last year Under way/partially implemented Budgeted for the next fiscal year In the planning stages Do not have, no plans at this time Data Savvy (N=23) All Other (N=78) Note: Differences are statistically significant. Essential Practice #3: Exercise Data Governance Getting a company s data in order is a big undertaking. Data from different systems and departments needs to be identified, cleaned, maintained, and shared. For most organizations this is a continuing journey. Poor-quality data is at the heart of many failed analytics initiatives ITSMA. All rights reserved. Reproduction or forwarding of this document to others is prohibited. U0073 5

6 Data governance is one challenge that the data savvy have conquered. In fact, we found that data-savvy marketers rated the quality and sufficiency of their data on customers, markets, competition, marketing programs, leads, and nurtured contacts significantly higher than the others (Figure 3). This greater confidence in data most likely contributes to another finding: marketers in data-savvy organizations rely more on data and analysis when making marketing decisions. While all decisions are based in part on experience and intuition, the marketers in data-savvy organizations relied less on these and more on data and analysis in making decisions. Figure 3. The Steps the Data Savvy Have Taken Have Yielded Higher- Quality Data What kinds of data does your marketing organization collect or have access to? How would you rate the quality of that data? % of Respondents with Sufficient, High-Quality Data Customers (e.g., who they are, what they bought, what they are likely to buy in the future, how satisfied/loyal they are, how profitable they are)* Marketing programs (e.g., how much they cost, new contacts identified, existing prospects touched, likely revenue impact from program)* Markets (e.g., how much market segments are spending and with whom, what issues affect future spending, perceptions of company brand, awareness measures)* Sales-accepted leads (e.g., who they are, how they found the company, what they are likely to buy and when)* Contacts whom marketing is nurturing (e.g., who they are, how they found the company, what interests them, how likely they are to buy)* The competition (e.g., perceptions of competitors, market share, pricing, offerings)* *Indicates a statistically significant difference Data Savvy (N~23) All Other (N~83) Essential Practice #4: Dedicate Data Analytics Resources Clearly, marketing organizations do not become data savvy by asking their marketing staff to be part-time analysts. Almost 80% of the data-savvy organizations compared with only 16% of the other organizations have a dedicated analytics person or group comprising analytics professionals either within or separate from marketing operations. However, the presence of a dedicated analytics group does not mean that the rest of the marketers are left in the dark. On the contrary, data-savvy marketing organizations with dedicated analysts are just as 2011 ITSMA. All rights reserved. Reproduction or forwarding of this document to others is prohibited. U0073 6

7 likely as other marketing organizations to encourage all of the marketing staff to sharpen their analytical skills. Figure 4. Data-Savvy Marketers Have Dedicated Analytics Resources Who in your marketing organization is responsible for analyzing marketing data? % of Respondents We have a dedicated marketing analytics group (or person) made up of analytics professionals, either within or separate from marketing operations This is the responsibility of the marketing management team This is a responsibility of the marketing operations function, but there are no dedicated analytics professionals 9 38 No one is responsible for analyzing marketing data (done on an ad hoc basis or not at all) 19 We use only external providers to analyze marketing data 5 Other Note: Differences are statistically significant. 6 Data Savvy (N=23) All Other (N=84) Essential Practice #5: Report Business Impact Not Just Marketing Metrics Business executives often complain that they are bombarded with marketing data number of campaigns, clickthrough rates, brand awareness metrics, and so on but fail to see how marketing results relate to financial performance. Data-savvy marketers do more than report marketing activity and use data to justify the marketing budget (Figure 5). They also use data to optimize marketing programs and the marketing budget to achieve superior results. But then they take it a step further: they are able to link marketing performance metrics to business metrics. The research results show that the data savvy use marketing data much more extensively (Table 1). They not only have high-quality data to report campaign response rates, downloads, customer buying trends, and competitive positioning but are also able to link this data to business impact, such as pipeline, bookings, profitability, time to revenue (TTR), sales costs per order dollar (CPOD), and measures of customer loyalty/retention (your ability to help keep customers happy and coming back for more) ITSMA. All rights reserved. Reproduction or forwarding of this document to others is prohibited. U0073 7

8 Figure 5. Data-Savvy Marketers Report Business Metrics Marketing Impact Metrics Business Impact Metrics Reporting Performance/ Justifying the Marketing Budget Optimizing the Marketing Budget and Programs Growing the Business Table 1. The Data Savvy Use Marketing Data Much More Extensively Which of the following describe the ways you are using marketing data? 50% or more are using marketing data this way: Data Savvy (N=23) All Others (N=84) Measure and report marketing s performance Improve customer satisfaction/loyalty Improve cross-selling and upselling initiatives Optimize the marketing mix (programs and campaigns) Justify the marketing budget Optimize the overall marketing budget Report online/ /website metrics (e.g., page views, number of unique visitors) Identify new or emerging customer segments Determine which leads are sales ready Segment markets to target specific campaigns and offers Predict campaign effectiveness Track customer retention Determine optimal mix of content for lead nurturing activities Measure and manage sales pipeline velocity (time to revenue: time from sales-accepted lead to deal closure) Test value propositions or messaging Determine market sentiment (social media) Identify and measure online advocacy Analyze purchase patterns to prioritize offers made, timing of offers Predict customer buying behavior Calculate and analyze customer lifetime value Predict the revenue impact of price changes 2011 ITSMA. All rights reserved. Reproduction or forwarding of this document to others is prohibited. U0073 8

9 However, marketers must do a better job of tailoring marketing data to business needs. Metrics must be both meaningful to the business executives and aligned with the business strategy, and therefore will vary by company. However, based on the research ITSMA believes these four metrics are mandatory: Sales pipeline contribution (number of leads) Pipeline velocity (the speed at which leads move through the pipeline to a sale: TTR) Business closed (orders or bookings) Measures of retention, loyalty, and add-on business (renewal, upsell, and cross-sell) Reach Out Beyond Marketing In the end, it s about the business. The more marketers can tailor marketing data to the needs of the business, the more impact it will have. To do this, marketing leaders must reach out to other executives to discover their needs and uses of marketing data. A surprisingly large percentage of survey respondents indicated that they didn t know how the rest of the organization used or wanted to use marketing data. We can only assume that these marketing leaders did not meet with other executives to discuss the data in or implications of their reports. The result? Creation of yet another data silo. And they missed opportunities to gradually build credibility through accumulated successes. Further, our interviews revealed that data-savvy marketers elevate the strategic importance of marketing data by taking their initiatives out of the marketing function and into the end-to-end revenue-generation process, aligning and partnering with the sales organization. In doing so they address the entire revenue cycle, from initial buyer interest all the way through to deal closure. It is not just about marketing impact but about the health of the business. What may have started as a marketing transformation project becomes a business transformation project. In that new context, securing funding, one of the biggest challenges marketing faces, becomes moot. Marketing is freed from having to prove its worth and instead can concentrate on using marketing data to improve marketing and have a greater impact on business results. Data-Driven Marketing Survey Methodology In March 2011, ITSMA and Patricia Seybold Group invited their members and subscribers to participate in a Web-based survey. Some 107 representatives from 71 companies responded to the survey. In addition, ITSMA conducted 30-minute follow-up telephone interviews with 18 respondents. Respondents included marketers from professional services firms, software solutions providers, computer systems and solutions providers, network systems and solution providers, and telecommunications services providers. Half the respondents were from companies that primarily sell services (i.e., less than 10% of revenue from products), and the other half from companies that sell both products and services. All sell business to business. More than half the respondents have greater than $1 billion in services revenue ITSMA. All rights reserved. Reproduction or forwarding of this document to others is prohibited. U0073 9

10 About the Authors Julie Schwartz, Senior Vice President, Research and Thought Leadership, ITSMA. Julie oversees ITSMA s thought leadership development and custom research. She has authored numerous reports and articles on technology services trends, marketing, branding, and sales topics, and is a frequent speaker at public events and client meetings. Susan McKittrick, Analyst/Senior Consultant, Patricia Seybold Group. Sue McKittrick reports for Patricia Seybold Group on marketing optimization and specializes in technologies, processes, and metrics that help companies attract and retain profitable customers. Susan E. Aldrich, Senior Vice President, Senior Consultant/Analyst, Patricia Seybold Group. As a consultant, Sue Aldrich s specialty is understanding, instrumenting, and improving the Quality of Customer Experience (QCE) SM, with a particular focus on cross-channel, cross-lifecycle customer experience, for both consumers and business customers. For More Information ITSMA Online Survey: Data Driven Marketing. The path to marketing accountability and business impact is lined with data. If you have a data-driven marketing organization, you will see business benefits that fall directly to the bottom line. But becoming data driven isn t easy and takes time. This survey report looks at how marketers are using data to report marketing performance, inform decisions, predict buyer behavior, and forecast trends. It provides detail on the current state of data driven marketing, as well as what it takes to become a data savvy marketing organization. Browse all ITSMA publications at About ITSMA ITSMA specializes in helping companies market and sell services and solutions more effectively. We work with the world s leading technology, communications, and professional services providers to generate increased demand, strengthen customer relationships, and improve brand differentiation. Our comprehensive research, consulting, and training on topics such as ITSMA Account-Based Marketing SM, brand positioning, and solutions development provide the insight and experience companies need to improve business results. ITSMA is based near Boston and has offices in London and Tokyo. Learn more at ITSMA Updates are provided to ITSMA members as a membership benefit. Learn more about membership at ITSMA. All rights reserved. Reproduction or forwarding of this document to others is prohibited. U