Forget Data. It’s The Math – And New Customers – That Matter.

christopherskinner“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Christopher Skinner, CEO at MakeBuzz.

Marketing data started to become a big deal in the early 1970s. It was the first time household data was structured and organized in databases so that it could be used in marketing applications. Companies like Acxiom and Epsilon saw the opportunity to leverage nascent computer technology to scale the way marketers stored and accessed their customer files.

Back then computers were just starting to create lots of data. Companies that knew how to structure and use that data did very well, and most are still leaders in the direct marketing space today. We now produce some 2.5 quintillion bytes of data every day – that’s a number with 18 zeroes after it. That includes some 150 billion daily email messages and data from 2 million Google search queries made every minute.

There is a ton of structured data you can use out there, but a tiny part of that data can be purchased and put to immediate use by a marketer. What we are starting to see in marketing today is that the data you can buy – third-party audience segments created via cookies, search keywords and direct marketing lists – is infinitesimally small compared to the total amount of data available.

We have entered an era in which marketers no longer ask ad tech providers what kind of data they have to sell to them. “Here is what I am trying to do,” they say today. “Show me how to put all the available data together to help me solve a problem.”

That’s represents an enormous sea change in the way the marketing world works.

The winners will be companies that help marketers structure and use differentiated data to get an edge, rather than compete for commoditized audience segments. It means more than just a post-cookie world and data exchanges turning into DMPs. In order to truly leverage the enormous amount of data available for marketing, you must first have a framework.

Even the most ambitious, successful marketing data use cases, such as the Datalogix and Facebook partnership, have limited applicability. Marketers can prove that Facebook ads drive offline purchases, but there are still a lot of marketing activities unaccounted for in the attribution model. The bigger problem is that marketers don’t understand how big their markets can be. That requires a marketing framework that revolves around net new customers.

Going beyond limited attribution models is highly challenging. It’s really easy to look at a search engine marketing (SEM) campaign report, see the cost per action and determine whether or not the channel is successful. It’s also easy to look at display advertising in isolation and leverage click-through rate or engagement metrics, such as time spent, to make a determination of success. However, the only real metric for success that takes all marketing channels into account is how many net new customers you bring into the fold. New customers are the only way you can sustainably grow a business.

When you start planning your next campaign, ask yourself whether you have a framework capable of answering the following questions:

  • Where are my best-performing markets? Your CRM and sales data tell you exactly where your customers are, where they live and their predilection for spending. Your future new customers are in areas that share similar attributes. If you believe that purchase consideration happens across many channels, including word of mouth, then testing with a highly targeted local market approach is the key to identifying your best potential markets.
  • What should my optimal sales in those markets be? Maybe you’re selling 100 widgets a month in Buffalo, but you could be selling 200. How do you know? The key to maximizing profitability is understanding the maximum sales threshold in a specific area. You need to employ a framework that uses all available data to test the limits of media’s ability to generate demand, and apply those learnings to similar markets.
  • Where does maximum profitability happen? Every market has a natural limit for growth, but also an optimized level for profitability. Maybe Buffalo can sell a total of 400 widgets a month, but only 250 profitably. It is critical to understand not just how to drive purchase behavior, but how to do so within an established profitability framework.
  • What type of media drives profitability in each market? Last but not least, the right marketing framework cannot live in a vacuum. Marketers that employ multiple tactics within a single market, such as SEM, display or email, cannot rely on siloed attribution reporting to understand results. They need to look at performance holistically, measured against the framework of net new customer creation. Each tactic contributes a certain percentage to the overall pie.

The only difference between the early and current direct marketing efforts is that now you have a wide variety of different tactics to leverage, along with a wealth of data available for targeting. Because it was difficult to measure success in individual media channels back then, marketers looked at net new customer creation as a matter of course. Today, with so much data to focus on, marketers find themselves caught in the weeds, measuring marketing results based on multiple KPIs.

When you use the framework of maximum profitability by market, each individual KPI gets put into a larger context, and starts to drive marketing philosophy, not just tactics. Instead of feeling overwhelmed by the amount of available data and technology in digital media marketing, you should embrace the idea that the data that isn’t for sale may be what differentiates you from a competitor. That type of thinking becomes possible with the right marketing framework in place.

Follow MakeBuzz (@MakeBuzz) and AdExchanger (@adexchanger) on Twitter.

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