It's Not the Size of the Data--It's How You Use It by Koen Pauwels -Chapter 1 Marketing Analytics Dashboards - What Why, Who and How

American Management Association www.amanet.org

A M E R I C A N M A N A G E M E N T A S S O C I AT I O NN E W Y O R K A T L A N T A B R U S S E L S C H I C A G O M E X I C O C I T Y

S A N F R A N C I S C O S H A N G H A I T O KYO T O RO N TO WA S H I N G TO N , D . C .

Smarter Marketing with Analytics and Dashboards

Koen Pauwels

Its Not the Sizeof the Data

Its How You Use It

EXCERPT FROM


Advance Praise for Its Not the Size of the Data

Its How You Use It

A fascinating combination of rigorous research and methodology withpractical insights and implications. Both practitioners and academicscan benefit from reading it.

Don Lehmann, George E. Warren Professor of Business, Columbia University; coauthor of Analysis for Marketing

Planning, Managing Customers as Investments, Product Management, and others

Big data in marketing is about looking for rationality to emotionalbehavior. This book teaches how to do that.

Stan van den Broek, Shopper Insights Manager, SCA Hygiene Products

Pauwels uses numerous examples to present scientific knowledge in animpressively simple and understandable way. An extremely informativebook that will inspire many managers to make immediate changes inhandling their data.

David Geistert, Department of Business AdministrationMarket-Oriented Media, University of Hamburg

Way more than just metrics and dashboardsthis will be a greatresource for marketers and business professionals.

Laura Patterson, author of Marketing Metrics in Action and Measure What Matters,

and cofounder of VisionEdge Marketing, Inc.

Foreword by Laura Patterson xiii

Acknowledgments xvii

Introduction: Decisions That Data and Analytics Can Inform xix

PART I: WHAT MARKETING ANALYTICS DASHBOARDSCAN DO FOR YOU

Chapter 1: Marketing Analytics Dashboards: What, Why, Who, and How 3

CASE STUDY e Right Chair #1: Marketing Analytics Gives SMEs a Competitive Advantage 5

What Is a Marketing Analytics Dashboard? 7

CASE STUDY Cars: From Begging HQ to Talking Trade-Os 10

Why Marketing Analytics Dashboards? 14

Who Uses Marketing Analytics Dashboards? 15

How Can a Marketing Analytics Dashboard Help You? 16

Wrap-Up and Managers Memo 18

Contents

vii


(full table of contents)

CONTENTS

viii

Chapter 2: Compare the Marketing Analytics Dashboard to Your Current Scoring System 21

Reporting Versus Analytics in Dashboards 22

Marketing Analytics Dashboards and Balanced Scorecards 23

CASE STUDY City Performance: From Charlottes Balanced Scorecard to Atlantas Dashboard 27

Decision Support Tools and Marketing Mix Models 29

Dashboard Building Blocks: Metrics and Key Performance Indicators 31


PART II: PLAN YOUR MARKETING ANALYTICSDASHBOARD

Chapter 3: Start with the Vision 39

Business Strategy Drives the Dashboard 40

CASE STUDY Unisys Makes Goal Alignment a Key Priority 40

How Goal Alignment Increases Performance 42

Top-Down or Bottom-Up Design? 44

Communicating Upward: Harnessing Top Management Support 47

CASE STUDY Dashboards Empower Middle Management: Discover Financial Services 48


Chapter 4: Assemble Your Team 51

Cross-Functional Development Teams 52

CASE STUDY Not All Fun and EB Games 53

Team Management Is Ongoing 54

Sustained Assistance from Top Management 57



ix

CONTENTS

Chapter 5: Gain IT Support on Big and Not-So-Big Data 60

IT Is from Jupiter, and Business Is from Mercury 61

CASE STUDY Inside and Outside Data at a Multichannel Retailer 63

Moving IT Closer to Business 63

Moving Business Closer to IT 66


Chapter 6: Build Your Database 69

Planning the Right Database 69

Building Your Database In-House 71

CASE STUDY The Right Chair #2: The Longest Journey Starts with the First Database Step 74

Outsourcing Your Database 76

Testing and Managing Your Database 77


PART III: DESIGN YOUR MARKETING ANALYTICSDASHBOARD

Chapter 7: Generate Potential Key Performance indicators 83

What Could Make or Break Your Business? 83

How to Structure Interviews to Generate KPIs and Structure KPIs into Groups 85

CASE STUDY IT Firm Generates and Organizes 150+ Metrics 87

Shortcuts? Start with the Competition or with Company Objectives 88

Clarify for All What Each KPI Means 92


CASE STUDY The Right Call #1: What Is a Qualified Lead? 93


Chapter 8: Eliminate to Select Key Leading Performance Indicators 97

Why Not Ask Customers Whats Important? 99

CASE STUDY First Tennessee Bank Tests Its Metrics 103

Which Indicators Lead Peformance? Granger Casuality in Action 104

CASE STUDY From 99 Metrics to 17 LPIs 106

Which Indicators Are Key? Vector Autoregressive Modeling 108

How KLPIs Improve Insights in Different Industries 112


Chapter 9: Include Emerging Channels: KLPIs for Online and Social Media 123

What Is Truly Different Online? 124

Customer-Initiated Contact Metrics 126

Capturing Conversation Topic Dynamics in Social Media 129

CASE STUDY Fashion Retailer Analyzes the Effects of Social Media 134


Chapter 10: Emerging Markets Frontier: Metrics Across Countries 141

The Need for Standardized, Global Metrics 142

Consumer Protection Lowers Marketing Responsiveness of Consumer Awareness 145

Individualism Increases Marketing Responsiveness of BrandConsideration and Liking 146

Income Increases the Sales Conversion of Brand Liking 147

x

CONTENTS


CASE STUDY How Advertising Effects Differ in an Emerging and a Mature Market 149


Chapter 11: Design the Layout and Dashboard Prototype 153

Dashboard Structure: Seven Must-Haves 153

Data Display on the Dashboard 158

Data Visualization 160

CASE STUDY Data Visualization at Procter & Gamble 163


PART IV: LIVE YOUR MARKETING ANALYTICSDASHBOARD

Chapter 12: Launch and Renewal of the Marketing Analytics Dashboard 169

Dashboard Implementation Roadmap 169

Execution Challenges 174

CASE STUDY The Right Call #2: Implementation Challenges 174

Key Implementation Success Factors 177

Renewing the Marketing Analystics Dashboard 180


Chapter 13: Change Your Decision Making: FromInterpretation to Action 183

Adapt the Dashboard Output 185

Decide on Rules for Setting Marketing Budget and Allocation 189

CONTENTS

xi


CASE STUDY Online Marketing Effects: Shifting Euros Away from Last-Click Misattribution 190

Addressing Implementation Challenges 199


Chapter 14: Nurture the Culture and Practice of Accountability 203

Organizational Culture Is Crucial to Dashboard Success 203

Motivating Employees to Use the Dashboard 205

The Practice of Accountability 207

How to Support Accountability Throughout the Organization 208


Conclusion: Call to Action 213

Notes 217

Index 225

About the Author 231

xii

CONTENTS


xiii

REGIS MCKENNA is attributed with saying that marketing represents theongoing effort to keep products and services in touch with evolvingconditions. As the pace of change has accelerated, so have the degree ofchoices and point of controlchoice of product, choice of brand,choice of channels, and choice of touch points. The customer, as theysay, is firmly in the drivers seat. As a result, marketers and marketinghave evolved from selling products and building relationships to creating compelling customer experiences. This in turn has led to aproliferation of content, and a focus on segmentation, customization,personalization, and engagement.

This multichannel, customer-driven dynamic environment pres-ents increasing challenges. There are more claims on your customers,your company, and your attention, time, and energy. Every day moreopportunities present themselves to marketing, such as new onlinecommunities, new channels of communication, and new markets andcustomer segments. So how do you decide where to make your invest-ments? Its often a tough choiceone that can be made easier if youhave the right insights from the right information, organized in theright way. Thats why the principles in this book are applicable to everymarketer everywhere.

I first met Dr. Koen Pauwels in 2007 when we were both attendinga marketing conference. It wasnt long before we recognized that wewere kindred spirits in our dedication to enabling organizations to usedata, analytics, process, and metrics to improve marketing alignment

Foreword


xiv


FOREWORD

and accountability. Since then, we have continued to help each othersefforts and those of marketers who want to operate centers of excel-lence.

I believe every marketing professional is committed to generatingvalue. But lets face it; every marketing investment is under intensescrutiny. The need for a good rationale to invest the resources you haveavailable was never more of a prerequisite than it is today. One of thequotes in this book I encourage we all commit to memory is Gut deci-sions, which were once seen as inspired (if they succeeded), are nowviewed as rash. To command authority, you need the numbers to backyou up. Thats why I encourage you to move this book to the top ofyour pile.

The basic idea behind this book seems rather obvious. By usingdata, analytics, modeling, data visualization, and dashboards, mar-keters can make better strategic and tactical decisions and investments.If only it were that simple. Koen Pauwels is clear right out of the gateit may not be simple but it is essential. The Advertising ResearchFoundations fortieth annual conference in 2001 was among the first toboldly address the topic of marketing measurement and accountability.And its likely to remain a top-of-mind topica topic that has remainedamong the headlines ever since marketers started scrambling to crackthe code, some more successfully than others. But all of us are exposed.What we can measure, the data we can collect, has exploded as quicklyas the channels and technologies we have at our fingertips.

What Koen Pauwels has brought into focus is that, at a time whenwe have more marketing data and technology than ever before, wemust undertake an immense effort to transition from activity-based tooutcome-based marketing. This transformation involves embracing thescience, and thus the difficult and what may at first glance seem like thedry side of marketing.

How can marketing prove and improve its value? Thats the ques-tion that has driven VisionEdge Marketing since its inception. Weknow from our work in hundreds of engagements that marketers who

create alignment, leverage data and analytics, identify and select theright metrics, and employ an effective dashboard are more successful,more confident, and more credible. This is the beauty in science side ofmarketing.

Through this book Koen Pauwels makes his extensive experiencewithin the reach of us all. He outlines steps, shares case studies, andprovides end-of-chapter guidelines that make it possible for marketersto create and utilize dashboards as a way to both monitor progress andfacilitate decisions. He designed this book to help marketers use dataand metrics to better understand the effect and impact of marketinginvestments.

For any marketer who wants to generate value, enable his or hercompany to compete successfully, and prove its value, read on. If youwant to avoid swimming aimlessly in a sea of data and metrics, thenthis book is for you. If you want to better understand how to select met-rics and present data, then start by turning the page.

Laura Pattersonauthor of Marketing Metrics in Action:Creating a Performance-DrivenMarketing Organization and MeasureWhat Matters: Reconnecting Marketingto Business Goals and cofounder ofVisionEdge Marketing, Inc.

FOREWORD

xv


xix


Gut decisions, which were once seen as inspired (if they succeeded), are now viewed as rash. To command authority, you need the numbers to back you up. ANINDYA GHOSE, 2013

I know that I ought to be looking at big data, but I am not quite sure why, how, and what decisions I would be making differently as a result. ANONYMOUS DESPERATE MANAGER, 2013

MARKETING IS AT A CROSSROADS. Managers are frustrated by the gapbetween the promise and the practice of effect measurement, betweenbig data and online/offline integration. Caught between financialaccountability and creative flexibility, most chief marketing officersdont last long in their companies. Their bosses have woken up to thefact their companies make million-dollar decisions based on less dataand analytics than they devote to thousand-dollar operational changes.Customer and market data management, product innovation andlaunch, international budget allocation, online search optimization,and the integration of social and traditional media are just some of theprofitable growth drivers that greatly benefit from analytical insightsand data-driven action.

Decisions That Data andAnalytics Can Inform

I N T R O D U C T I O N

Such data-driven action typically involves the following four ques-tions1:

1. What happened?

2. Why did it happen?

3. What will happen if?

4. What should happen?

Better, faster, and more transparent answers to these questions helpestablish marketing accountability.

Yet marketing accountabilitylet alone the accurate calculation ofreturn on marketing investment (ROMI)remains an elusive goal formost companies, which are struggling to integrate big and small dataand marketing analytics into their marketing decisions and operations.In their March 2013 article, McKinsey experts share that in our expe-rience, the missing step for most companies is spending the timerequired to create a simple plan for how data, analytics, frontline tools,and people come together to create business value. The power of a planis that it provides a common language allowing senior executives, tech-nology professionals, data scientists, and managers to discuss where thegreatest returns will come from and, more important, to select the twoor three places to get started.2

The benefits of getting started and marketing smarter are hugein both academic studies and business cases. Even a small improvementin using marketing analytic dashboards brings companies on average 8percent higher return on assets compared to their peers.3 This benefitincreases to 21 percent for firms in highly competitive industries.Organizations of any size and in any industry have seen sustainablecompetitive advantage from using marketing analytic dashboards.However, only 16 percent of large international companies use market-ing analytics.4 In my experience, this percentage is even lower for smalland medium-sized firms across America, Europe, and Asia. I see simi-lar issues across multinationals and companies with a few dozenemployees and in industries ranging from business-to-consumer, gov-

xx


INTRODUCTION

INTRODUCTION

ernment, and business-to-business. The next three short stories illus-trate the issues that have inspired this book.

In early 2012, I found myself at the U.S. headquarters of a fast-mov-ing consumer goods multinational. I had been called in to moderate thediscussion between the chief financial officer (CFO) and the chief mar-keting officer (CMO) on marketing effectiveness. The CFO insisted onmeasuring all main activities either by ROMI or by return on market-ing objective (ROMO). The list of activities included market research,marketing data management, offline marketing communications,online marketing communications, promotions, and direct marketing.Across all activities, the CFO was unhappy and had three concerns:objectives were not clearly defined, the timing of expected returns wasnot specified, and the marketing department showed resistance tomeasurement. I helped the CMO to:

> Clarify marketing objectives and align them with the business strategy.

? Overcome marketings resistance to measurement.

? Obtain excellent and relevant data.

? Develop the analytics that showed not just the size but also the timing of the profit returns to marketing investment in all categories.

The second illustrative tale took place in an executive meeting at aEuropean-based business-to-business manufacturer. Country man-agers were accustomed to obtaining a certain percentage of their rev-enues to spend on marketing. Faced with new competitive threats, alldecision makers felt that this rule was far from optimal and needed tochangebut how? Some countries asked for more money for joint pro-motions with their customersto then sell more of their product toend consumers. Others considered this simply giving away money tothe customers, and instead advocated a direct-to-consumer campaignto create awareness and preference for their product. Still a third groupbelieved the firm should target policy makers directly with sustainable

xxi


xxii


business credentials, pointing to huge successes of having a prime min-ister come talk at the companys trade shows. Unfortunately, the lack ofbefore/after measurement of sales lift left country managers unwillingthe change their positions. In this case, I worked in three steps. First, I ensured that each campaign had a stated, measurable objective thatwas defined in place and time and had a before/after measurement asbackup. Second, after collecting data across years and countries, I cate-gorized all campaigns by objective and ran analytical modeling toquantify the link between each objective and profits, accounting forcountry differences. Third, I recommended an improved allocation inthe direction of the findings.

The third story I want to share involves an Asian manufacturer ofconsumer durables who had only sixty employees and nobody incharge of data maintenance, let alone of the analytics to make themactionable. Managers were overwhelmed by the hundreds of onlinemetrics regarding their paid, earned, and owned media, and had littleinsight in the exact costs or returns of their offline marketing, whichmakes up 85 percent of their budget. When sales quotas loomed, theywould often shoot from the hipdoubling spending on marketingactions that were untargeted and probably inefficient. A nagging feel-ing was telling them they might be increasing sales, but at the expenseof profits. Moreover, several customers told them they put in an offlineorder based on online marketing touch points. Should online be cred-ited for offline sales? The offline marketing manager definitely did notthink so! I worked with both the offline and the online marketing man-ager to discuss how both channels contributed to sales. Based on thisframework, the company put in place the right metrics and collectedthe data over time. A marketing analytics dashboard allowed bothmanagers to play around with spending scenarios and observe the projected size and timing of profits, not just sales. They agreed on dra-matic budget shifts and saw their companys profitand their reputa-tionsgreatly increase!

Across these cases, we see the same three issues:

INTRODUCTION

INTRODUCTION

1. Unclear vision on how objectives relate to company performance.

2. Uncertainty on the size and timing of expected returns to marketing investment.

3. Resistance to measurement.

Sound familiar? Wouldnt it be great to have a comprehensive set ofsteps that can help you improve marketing decisions at your company?How about a book that is steeped in both scientific research and prac-tical applications to guide you along?

This book is all about marketing analytics dashboards, what theyare, how you can develop, use, and renovate themand how they helpyou make better decisions. This book guides you along a full journey ofdata, analytics, dashboard insights, and the action they inspire. In spe-cific chapters, you will learn the dashboard lingo, how to start the dash-board initiative, how to build it, design it, and implement it, and how torenovate the dashboard to maintain its relevance to decision makers inyour organization. This book doesnt shy away from the tough parts,both technically and practically, and it gives special attention to hottopics such as leveraging online data and emerging markets. You willlearn about what worked to overcome obstacles, how specific compa-nies did it, and what the evidence shows for your situation.

Welcome to the brave new world of marketing analytics dash-boards.

xxiii



What MarketingAnalytics Dashboards

Can Do for You

P A R T O N E

3American Management Association www.amanet.org

Marketing AnalyticsDashboards: What, Why,

Who, and How

LITTLES QUOTE RINGS AS TRUE TODAY as it did more than forty years ago,reflecting the tension between the abundance of marketing data at ourdisposal and the lack of actionable insights that derive from it. Theadvent of the Internet and recent availability of big data have onlyincreased the need to distill relevant information from a wealth of data.Dont get me wrong: I love big data, but, as with other things in life, itsnot about size, but what you do with it. Managers Ive worked withacross industries and countries know that more data does not meanmore insights for action. While many feel overwhelmed by big data,others feel they dont have enough of the right data to connect eachmarketing action to profit outcome. For example, a bricks-and-clicksclient contrasted the wealth of information provided by GoogleAnalytics with its inability to match direct mail lists with sales or toattribute a purchase to a specific marketing action (see the case studyThe Right Chair #1 later in this chapter). They wanted a marketinganalytics dashboard that connected online and offline marketing, met-

3

Data is prolific but usually poorly digested, often irrelevant and someissues entirely lack the illumination of measurement.

JOHN D.C. LITTLE,1 1970

C H A P T E R 1

rics, and profits, and allowed the decision makers to run easy what-ifscenarios. Feeling comfortable with comparing different plans, they rana field experiment proving a fourteen-fold increase in profitas prom-ised by the analytics behind the dashboard.

Wouldnt it be great if you could drive your company like a car or aplane? Thousands of bits and pieces of potentially important informa-tion feed into the few metrics that show up on your vehicle dashboard.You dont need to know everything that is under the hood to drive thevehicle!

In the last decade, the implementation of data analytics and dash-boards has generated and saved millions of dollars at hundreds of firms,some of which I was fortunate to work with.2 Firms are using dash-boards to track marketing effectiveness and guide decision making inindustries as disparate as business communication (Avaya), onlineservices (Google), financial services (Ameritrade, Morgan Stanley),systems integration (Unisys), technology and electronics (SAP,Lenovo), fast-moving consumer goods (Heineken), and manufacturing(Timken).

SAP and Vanguard provide excellent video case studies on the ben-efits of dashboardsand the currently unfulfilled opportunities theypresent. Their dashboards measure outcomes important to each busi-ness, intermediate funnel metrics, their marketing campaigns, andother activities that drive them. The SAP video3 shows how an individ-ual decision maker uses the dashboard, while the Harvard video caseon Vanguard4 shows how the dashboard is used in group decision mak-ing, in this case an executive meeting. As a result, marketing has movedfrom an expense to an investment with measurable returns.

Still, most current dashboards fail to leverage data analytics to pro-vide the needed insights for action. Vanguard CMO Sean Hagertyacknowledges: What is missing is the connection between the individ-ual activities and those outcomes. The next question is: how do you linkthe long-term measures to the short-term measures? So do awarenessand image attributes translate to sales? And I dont know how to answerthe question. That I think is the Holy Grail. We have not really solved

4

WHAT MARKETING ANALYTICS DASHBOARDS CAN DO FOR YOU


that.5 Indeed, many managers continue to be disappointed with theirability to connect marketing actions to key performance indicators andultimately to the financial outcomes (sales, profits, stock market capi-talization) that matter to the company and pay the bonuses of C-levelexecutives. The current frustration or fatigue rests with reportingdashboards. Reporting dashboards simply track metrics without show-ing which matters most to performance, and they dont permit the userto shift marketing budgets around and compare the predicted outcomein what-if analyses. Enter marketing analytics, which provides thebackbone of the visually attractive dashboard face.

Marketing analytics translates rich data into actionable insights andwhat-if analyses to test different scenarios. The case study below illus-trates that analytics can yield a huge competitive advantage even forsmall and medium-sized enterprises (SMEs).

CASE STUDY

THE RIGHT CHAIR #1 Marketing Analytics Gives SMEs a Competitive Advantage

Analytical marketing is not very common in small and medium-size enterprisesin the business-to-business sector. As such, if we had a model or decision support system to enable us to decide how to allocate resources across communication activities and channels, we will have a huge advantage compared to our competitors. LEON SUIJKERBUIJK, CEO OF INOFEC BV

Inofec BV is a family-run European office furniture supplier that oper-ates in the Netherlands and Belgium. Founded in 1986 by the currentCEOs father, the company has grown into a medium-sized firm withabout eighty employees. The company shows average annual growthof about 20 percent. Their more than 8,000 customers are profes-sional end users and can choose from an array of over 7,000 SKUs.

Inofecs main goal is to offer goods of high value at low prices.Their mantra: Treat everyone as you want to be treated yourself. Theircompetitive advantage is adding a high level of service to their prod-ucts (e.g., advice, assembly, and customized solutions) and having

MARKETING ANALYTICS DASHBOARDS: WHAT, WHY, WHO, AND HOW

5


their own distribution network. Their service is to deliver the productsto their customers, assemble the furniture, and only leave if the furni-ture is ready to use and the customer 100 percent satisfied.Furthermore, they spend a considerable marketing budget even dur-ing the recession, unlike their competitors, whose reaction to therecession has been focused on slashing costs drasticallyincludinglayoffs and reorganization. In the words of Leon: Our competitorshave an internal focus: management by fear regarding preservation ofjobs is key.

Within a challenging business-to-business environment, Leonrealized that more insights could be gained from analyzing Inofecsown financial and marketing data. He sees the recession not as a threat, but rather as an opportunity to invest in order to reap thebenefits down the road. Leon is convinced that quantifying how cus-tomers move through the purchase funnel (i.e., information, evalua-tion, purchase)and how marketing helps in this processmay lead toa sustainable competitive advantage. Prior to a dashboard implemen-tation, the effectiveness of marketing communications activities wasmonitored by observing subsequent sales changeswithout consid-ering long-term effects, cross-effects between channels, or control-ling for other factors influencing sales. Allocation decisions weremainly based on gut feel or thats how we did it the last time. Againstthis background, Leon was looking for another perspective and waswilling to adopt a marketing science approach.

The main marketing challenge facing Inofec is quantifying theimpact of marketing communications activities on purchase funnelstages (online and offline), and ultimately its impact on profits. Withthis knowledge, then, they can reallocate the marketing communica-tions budget accordingly. To this end, a dashboard tool was devel-oped to answer the following specific questions:

? Do Inofecs marketing communications activities only feed thefunnel or do they also have an effect on later stages of the pur-chase funnel?

? What is the (net) profit effect of their marketing communicationactivities? Especially, what is the effect of customer-initiated con-tacts versus firm-initiated contacts?

6



? When does the effect of marketing communications hit in andhow long does it last?

? How can Inofec improve its profits by reallocating its marketingbudgets?

Answering questions like these can lead to an improved under-standing of the role of marketing communications activities and plan-ning of appropriate strategic actions. Throughout this book, you willlearn about how Inofec overcame obstacles along the journey, includ-ing database creation, dashboard implementation, and the design of afield experiment that demonstrated a fourteen-fold profit increase overthe status quo.

WHAT IS A MARKETING ANALYTICS DASHBOARD?

Just like your cars dashboard, a marketing analytics dashboard bringsthe firms key market-based metrics into a single display. It provides aconcise set of interconnected performance drivers to be viewed in com-mon throughout the organization.

Inofecs dashboard is shown in Figure 11. It is but one example ofwhat a dashboard might look like. Hundreds of alternative designs areavailable at dashboardspy.com, and Chapter 11 helps you to chooseamong them to fit your needs best.

Lets break down the key elements of the dashboard definition:

? Concise set: A dashboards purpose is to help users focus theirattention on a few metrics. However, different users often focuson different metrics (typically the ones they can influenceand/or that they are evaluated against), and some people arecomfortable with more metrics than others, much like an air-plane pilot navigates a bigger dashboard than a car driver does.Dashboards solve this issue by allowing users to customize thedisplay to the users preferences and to drill down to differentpage views with more detailed metrics.


7


? Interconnected: A simple scorecard of metrics does not makea marketing analytics dashboard: The dashboard should helpusers understand how the business works and how their (proposed) actions can change the (predicted) performance! To this end, a dashboard needs an underlying (back-office)model that connects the metrics. In the Inofec dashboardshown in Figure 11, the user changes the marketing inputsand watches the projected profits (based on the analytics)change in real time. The next case study, Cars: From BeggingHQ to Talking Trade-Offs, illustrates the importance of theanalytics dashboard for a major car company. Just like car drivers, dashboard users need to know what happens whenthey hit the brakes or shift gears, but they dont need to knowexactly how the engine operates under the hood. Still, the existence of the engine is crucial.

? Key performance drivers: The presented metrics have beenshown to be important, leading indicators of performance,either by experience and/or by scientific testing in the underlying model. We have seen many cases in which managers got obsessed with metrics that did not drive

8



Figure 11, Marketing Dashboard Prototype

results. A good dashboard refocuses its users on the metricsthat truly matter.

? To be viewed: Dashboards visualize information throughdevices such as gauges, charts, and tables, often color-coded for easy summarization.

? In common throughout the organization: A dashboardmakes it easy to share information and to get all stakeholderson the same page (often literally). Theres still plenty of roomfor discussion on how to interpret the facts and what to donext, but at least it is clear what the facts are. Many companiesalso share dashboard views with partners such as suppliers,agencies, and customers, which helps to align the supply chainaround common goals.

Integration Is King

Integration is key to each of the elements above, and is the clear buttough-to-achieve answer in todays challenging times. Organizationsneed integration on at least three levels:

1. Data. Understanding the firms market and its position withinthe market requires information and data from diverse sourcesat different levels of aggregation and covering different timeperiods. The dashboard provides a common organizing frame-work.

2. Processes. The dashboard helps management relate inputs,such as marketing expenditures, to measures of marketperformance, such as market share and sales and ultimately offinancial performance, such as profits, cash flows, and share-holder value, thus building a bridge between internal andexternal reporting.

3. Viewpoints.Whether assessing the market, performance, orplanning, a dashboard allows different executives, in differentdepartments and locations, to share the same, equally measuredinput (i.e., to view the firms market situation in the same light).


9


Why Integration Is Lacking in So Many Organizations

At one extreme, different systems and departments often use their ownmetrics, based on their own data, processes, and viewpoints. How canmarketing and finance agree if they dont speak the same language? Atthe other extreme, some companies wrongly believe in one silver bul-let metric that captures all that is important.6 A single metric may haveworked, for example, for an encyclopedia salesman, selling a singledurable product on commission while facing little local competition.For organizations, however, the evidence is clear: The silver bullet met-ric is an illusion. Organizations have both short-term and long-terminterests; they need to consider both qualitative and quantitative infor-mation and must be able to differentiate the performance impact oftheir own actions from the influences of the environment.

In sum, a marketing analytics dashboard:

? Offers integration of diverse business activities, some ofthem qualitative, with performance outcomes.

? Measures both the short-term results of marketing and thelong-term health of the marketing asset.

? Isolates the effects of marketing actions from the otherinfluences on corporate performance.

CASE STUDY

CARS From Begging HQ to Talking Trade-Offs

At a major car company in the United States, managers were dread-ing their meeting with foreign headquarters (HQ). The typical meetingincluded setting higher (stretch) targets for sales and profits in thecoming years, while lowering marketing budgets. The boiling pointwas HQs decision to slow down the typical development cycle by ayear. How can we reach higher sales with less advertising and oldercars was the U.S. branchs objection. However, management protestwas waved away by HQ: Everyone has to work harder and smarter.

10




11


Why cant you reach your targets? Unfortunately, U.S. managementhad strong gut feelings, but no way to demonstrate how much oldermodels and lower ad budgets would weigh on profits!

Management and I set out on a dashboard project to investigate,quantify, and visualize profit performance drivers at the annual level, toaid in the yearly budget negotiations with HQ. Several meetings withmanagement and a study of available sources on the industry andcompetitors revealed dozens of potential key performance indicators(KPIs). We selected from among these KPIs the metrics that led prof-it and explained most of its change over time, and used them to buildour econometric model (see Chapter 8). To keep the projects outputat the strategic level, we summed up tactical executions and plat-forms (paid search, Twitter, Facebook, etc.) to the marketing instru-ment level (in the category online marketing communications). Thefinal model explained annual profit by:

1. Average model age.

2. Offline marketing communications.

3. Online marketing communications.

4. Regular price.

5. Financial consumer incentives.

6. Nonfinancial consumer incentives (free add-ons).

7. Financial incentives by the two closest competitors.

8. External factors such as seasonality and economic climate.

The model showed excellent fit and we validated it in two ways.First, management discussed the findings within the company toensure face validity. Second, we set apart the last year of data as ahold-out sample and showed the predictive validity of our modelbeyond the data used to estimate it. Once these validations createdbuy-in, we used the model estimates to create two simple Excel tools:the scrollbar (or slide bar, as we call it) shown in Figure 12 and theheat map shown in Figure 13. (To more fully appreciate the heatmap, you will want to see it in color; you can find it on my website:notthesizeofthedata.com.)

Managers enjoyed the ability to try out different scenarios, bothby moving the scrollbars and observing the predicted profit outcome

12



and by focusing on changing two marketing inputs at a time toobserve the best profit that the model could achieve in the heat map.Key to dashboard acceptance and use was the (correct!) feeling thatthe model did not replace the decision maker by providing a singleoptimal or right answer, but that it helped the decision maker byrunning what-if analyses (e.g., If the average model age increases byone year, how much do our incentives have to increase to achieve thesame profit level? and What happens if we increase the communi-cation budget instead?).

The dashboard tools also allowed the more involved user tounhide the Excel columns that show the model estimates and toquestion or change them. Indeed, headquarters did not simply rollover when presented with evidence that profits would drop by 20percent on the combination of older car models and lower ad budg-ets (while the target profit was 10 percent higher). Instead, theydemanded the detailed econometric evidence including the predic-tive performance in the hold-out sample. This changed the discussionfrom a general you just have to work harder and smarter to the spe-cific trade-offs managers face and how to join forces to overcomethem. One interesting outcome: The low average profit effect of anoften-used activity challenged common wisdom and encouragedmanagers to give creative employees more latitude to think furtheroutside the box in that area. In the end, a new marketing plan wasadopted with substantially higher spending on some items, lowerspending on othersand smarter use of the same budget for theremainder. Profit exceeded even the stretch target the next year.

Figure 12, Slide Bars for Manipulating Marketing Variables


Figu

re 13

, Hea

t Map

of t

he In

tera

ction

of T

wo M

arke

ting Va

riab

les on

Prof

its

WHY MARKETING ANALYTICS DASHBOARDS?

Marketing analytics dashboards respond to the increasing complexityand diversity of marketing data faced by senior management in theinformation ageof which the Cars case study is just one example. Inour experience across industries and firms, managers mention at leastfour factors driving the need for dashboards: poor data organization,managerial bias, increasing pressure on marketing, and the need forcross-departmental integration.

Poor Organization

Data overload is obvious in the fragmentation of media, multichannelmanagement, and the proliferation of product lines and services.Information technology makes it possible for firms to collect and ana-lyze data on customer activities across touch points and channels.

Unisys, for example, gathers hundreds of metrics generated bybrand tracking, CRM programs, tradeshows, media reports, satisfactionstudies, and blogs. Service- and contract-based markets always givefirms individual-level data, but online tracking of browsing use nowdoes so for virtually any company. This proliferation requires greaterdata organization as indicated in the successful examples of the information-based strategy at Capital One or information-based customer management at Barclays Bank.7

Managerial Bias

Human processing capacities remain limited, and research has demon-strated the presence and danger of managerial biases arising fromshortcuts in information processing and decision making.8 For exam-ple, managers anchor their new decisions based on old decisions anddo not adjust enough based on incoming information. The result is thatbrands and regions that got large marketing budgets in the past willcontinue to get large budgets, even if the money is now more usefulelsewhere.

Firms that see analytic capabilities as a key element of their strate-

14



gy outperform their peers since they know what products their cus-tomers want, what prices those customers will pay, how many itemseach will buy, and what triggers will make people buy more.

Increasing Pressure on Marketing

CEOs, CFOs, and CMOs demand more accountability from the mar-keting department. Marketing is challenged both to drive growth andto keep costs under control, with the immediate focus on either objec-tive swinging with the business cycle. Broad surveys of marketing andnonmarketing professionals consistently reveal increased expectationsregarding marketing accountability as well as its effect on the market-ing departments influence within a company.9

The goals of the typical marketing department have been revealedas disconnected from companies leadership agendas. As a result,CMOs are advised to agree on a marketing contract with the CEOthat specifies exactly which metrics marketing is supposed to improve.In this regard, a dashboard helps ensure everyone is on the same pageto detect and discuss marketing successes and failures.

The Need for Cross-Departmental Integration

The ability of marketing to reach across functions to accomplish com-pany goals is an increasingly important determinant of its success.Many firms have integrated marketing, innovation, and strategicgrowth leadership into a single corporate function.10 Companies facingdisruptive cross-national mergers and global expansion especially needintegration. This brings together marketing departments with differentvalues, performance metrics, and reporting practices. Standardizedtools and processes for efficiency are key to driving growth in suchorganizations.

WHO USES MARKETING ANALYTICS DASHBOARDS?

The benefits of marketing analytics dashboards are relevant to compa-nies of any size and in any kind of industry. This book provides dozens


15


of case studies in companies ranging from sixty employees to hundredsof thousands and in industries ranging from fast-moving consumergoods to online travel. In the broader area of dashboards (not neces-sarily connected to analytics), the footnotes for this chapter list over200 companies, including:

? Business communication (Avaya, Cisco)

? Consumer credit (Capital One)

? Education (Montgomery County Public Schools of Rockville,Maryland)

? Fast-moving consumer goods (Heineken)

? Gaming (Harrahs)

? Government (Connecticut Economic Dashboard, AtlantaDashboard)

? Hospitality (Hilton)

? Investment banking (Morgan Stanley)

? Mutual funds (Vanguard)

? Online services (Google)

? Systems integration (Unisys)

? Technology (SAP)

? Transportation (Virginia)

? TV broadcasting (British Sky)

As to who within these companies uses dashboards, users comefrom all management levels. We have seen dashboards used by CEOs,CMOs, CFOs, and COOs; by brand managers, marketing specialists,production managers, and R&D managers; by the sales force, you name it.

HOW CAN A MARKETING ANALYTICS DASHBOARDHELP YOU?

A marketing analytics dashboard can help you in several ways. In 16



particular, they help you provide better and faster answers to typicalmanagement questions:

1. What happened? Dashboards enable consistent measurementsand regular monitoring.

2. Why did it happen? Analytics dashboards relate managementaction to key performance indicators and hard performance.

3. What will happen if? Analytics dashboards enable what-ifanalysis to predict the perfomance outcomes of alternative scenarios and plans.

4. What should happen? Analytics dashboards allow you to optimize or at least improve decisions and communicate this process more transparently.

Several well-known companies have experienced these benefits.A dashboard enforces consistency in measures and measurement

procedures across departments and business units. For example, Avayaoperates in over fifty countries and diverse markets, with varying mar-keting tactics. Before the dashboard project, the company had no com-monality of systems around the globe (limiting data gathering), differ-ent definitions of what constitutes a qualified lead (a key performancemetric in the hand-off from marketing to sales for business-to-businesscompanies), and a lack of regional interest in gathering metrics.11

A dashboard helps to monitor performance. Monitoring in turnmay be both evaluative (who or what performed well?) and develop-mental (what have we learned?). Google provides a good example:Dashboard metrics are early indicators of performance, and if a dipoccurs in, for example, the trust and privacy metric, the companytakes corrective action.12

A dashboard may be used to plan (what should our goals andstrategies be for the future given where we are now?). For example,Ameritrade started with corporate scorecards from the strategic plan-ning department to develop a dashboard that plugs in to the planningcycle and is tied to quarterly compensation.13


17


A dashboard may be used to communicate to important stakehold-ers. In particular, it communicates not only what the performance is,but also communicates what an organization values as performance bythe choice of metrics on the dashboard. Vanguard has had great successin communicating dashboard metrics to its corporate board, and alsoin translating their business focus on customer loyalty, feedback, andword-of-mouth into their measurement on the dashboard.14

A dashboard offers a great starting point for tough discussions, suchas at the annual budgeting cycle, when the going gets tough (recessions,product recalls), and/or when management sets stretch targets withoutproviding the necessary resources. The case study Cars: From BeggingHQ to Talking Trade-Offs above offers a wonderful example in the car industry, where marketing analytics quantified the relation betweenmarketing actions and profits. The dashboard allows easy what-ifanalyses to discuss trade-offs with foreign headquarters. It also enablesmore effective communication with marketing partners, especially ascompanies move to performance-based compensation of agency work.The case study Not All Fun and EB Games in Chapter 4 is an excel-lent illustration of this benefit.

WRAP-UP AND MANAGERS MEMO

Marketing analytics dashboards play a vital ongoing role in marketingand business decisions for leading companies. As these best practicesshow, dashboards can help managers boost both accountability andcreativity for better marketing performance. In the words of CMOs at Target, Fidelity, MasterCard, and H&R Block, Science enriches theart in marketing, and art accelerates the science. If the art means ask-ing the right questions to create winning strategies, science is usingdata and analytics to answer questions, inform decisions and optimizemarketing efforts.15 This is our goal and invitation for you in this book. We close with a checklist of questions to diagnose your organi-zation on the need for a marketing analytics dashboarddo share itwith your boss!

18



MANAGERS MEMO

DO YOU NEED A MARKETING ANALYTICSDASHBOARD?

Is your organization or team suffering from any of the following?1 Trust issues between marketing and finance executives?

1 Lack of real-time employee insight in how they are progressingto achieve firm goals?

1 Confusion about the effectiveness of new media (what is yoursocial media ROI)?

1 Lack of comparable metrics across media (online vs. offline) orcountries?

1 Too many key performance indicators without proof of theirsales impact?

1 You are too young / too old to understand (authority insteadof fact-based arguments)?

1 Resource competition between online and offline marketingwithout clear attribution?

Can you or your marketing department answer these tough ques-tions on accountability?1 If we need to cut 20 percent from our marketing budget, what

would we cut?

1 If we need to obtain 10 percent more revenues next year, wherewould they come from?

1 What is affecting our current and future performance, and byhow much?

1 When does our marketing action affect performance, and howlong does it last?

1 Which marketing action gets us the highest return on invest-ment and where?


19


1 Can we increase baseline performance with a one-shot or with asustained campaign?

1 How can we improve the efficiency of effective media and theeffectiveness of efficient media?

Do you want to be able to do the following?1 Have the facts at everyones fingertips so meetings focus on

productive plans to action?

1 Justify your budgets and proposed changes in the winningfinancial language?

1 Scale up creative and sales-driving campaigns quickly?

1 Deploy marketing analytics to turn data into better decisions inyour firm?

1 Leverage local learning worldwide with globally agreed-uponmetrics?

1 Predict customer and competitive reactions to proposed marketing plans?

1 Reward managers who help move prospects down online andoffline funnels?

If you have answered yes to any of the above questions, this bookis for you!

20




Bulk discounts available. For details visit:www.amacombooks.org/go/specialsalesOr contact special sales:Phone: 800-250-5308Email: [email protected] all the AMACOM titles at: www.amacombooks.orgAmerican Management Association: www.amanet.org

2014 Koen Pauwels. All rights reserved.Printed in the United States of America.

This publication may not be reproduced, stored in a retrieval system, or transmitted in whole or inpart, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise,without the prior written permission of AMACOM, a division of American ManagementAssociation, 1601 Broadway, New York, NY 10019

The scanning, uploading, or distribution of this book via the Internet or any other means withouttheexpress permission of the publisher is illegal andpunishable by law. Please purchase only autho-rizedelectronic editions of this work and do not participate in or encourage piracy of copyrightedmaterials,electronically or otherwise. Your support of the authorsrights is appreciated.

About AMAAmerican Management Association (www.amanet.org) is a world leader in talent development,advancing the skills of individuals to drive business success. Our mission is to support the goals ofindividuals and organizations through a complete range of products and services, including class-room and virtual seminars, webcasts, webinars, podcasts, conferences, corporate and governmentsolutions, business books and research. AMAs approach to improving performance combines expe-riential learninglearning through doingwith opportunities for ongoing professional growth atevery step of ones career journey.

Printing number10 9 8 7 6 5 4 3 2 1

This publication is designed to provide accurate and authoritative information in regard tothe subject matter covered. It is sold with the understanding that the publisher is not engagedin rendering legal, accounting, or other professional service. If legal advice or other expertassistance is required, the services of a competent professional person should be sought.

Library of Congress Cataloging-in-Publication DataPauwels, KoenIts not the size of the dataits how you use it : smarter marketing with analytics and dashboards/ Koen Pauwels.

pages cmIncludes bibliographical references and index.ISBN-13: 978-0-8144-3395-9ISBN-10: 0-8144-3395-21. Marketing research. 2. Marketing researchData processing. 3. Dashboards (Managementinformation systems). I. Title. HF5415.2.P39 2014658.8302855437dc23

2013031903

ItsNotTheSizeOfTheData-excerpt_(b)Title_pgIts_Not_Size_of_the_Data-excerptPraise_pg_Its_Not_Size_of_the_DataTOCIts_Not_Size_of_the_Data-excerptForeword-Its_Not_Size_of_the_DataIntro_pages_Its_Not_Size_of_the_Datachp01-Its_Not_Size_of_the_Data-excerptCopyright_pg-Its_Not_Size_of_the_Data

Documents

It's Not the Size of the Data--It's How You Use It by Koen Pauwels -Chapter 1 Marketing Analytics Dashboards - What Why, Who and How