Moneyball For Marketing: Why Analytics Are Critical For A Win

By October 14, 2011 Press

In recent years, the tracking and analysis of data in sports has become a necessity for winning teams, especially in Major League Baseball. Front offices that were previously overseen by former ballplayers or managers are now being run by young number crunchers with laptops, spreadsheets, and complex formulas for determining the production trends of players. This use of baseball statistics, dubbed Sabermetrics, is even receiving the Hollywood treatment with the film “Moneyball,” starring Brad Pitt as a cunning Big League general manager.

The importance of using analytics to influence marketing-investment decisions has also reached a critical point, even if Pitt won’t be playing a CMO on the big screen anytime soon. Historically, CMOs and marketing executives have relied on experience and gut instinct (with the assistance of basic analytics) to make decisions on how to invest their marketing dollars. In today’s world of marketing, with increased competition, evolving and expanding media channels, and shrinking budgets, instinct and experience alone aren’t enough.

But while baseball and other business sectors have been aggressive in adopting a data-driven approach, marketing is starting to fall behind. According to a 2011 survey by the MIT Sloan School of Business, 80% of brand and market management decisions by top-performing companies are primarily based on intuition. Unlike sports or even other sectors of the economy, in marketing gut instinct tends to trump analytics.

It is surprising that an industry like marketing, which is full of progressive thinkers, would be slow to embrace the use of advanced analytics. After all, what marketer wouldn’t like to know exactly what is driving his or her sales?

Part of the problem is that historically the methods for statistical analysis have been incomplete. It would be hard to find a marketer who hasn’t questioned the recommendations from a traditional media-mix model because of the results. Often they see limited lift or, even worse, lower performance from implementing the recommendations. Some marketers never even attempt to implement the model recommendations and stick to basic analytics, such as tracking responses through toll-free phone-number activity. This grim reality is largely driven by the fact that media-mix models do not fully account for all relevant sales drivers and are therefore incomplete in their ability to drive proper investment recommendations.

The good news is that the marketing analytical tools have finally caught up. By working with the right partner, CMOs can adopt new analytical methods that are comprehensive, effective, and actionable. But all analytics are not created equal, and marketers should be sure that the products or services they are using can fully factor in the following key drivers of sales and performance:

  • Controllable factors: Offline and online media (TV, search, etc.), offers and promotions (price point changes, promotional offers, etc.), and active channels (door-to-door, outbound telemarketing, etc.)
  • Uncontrollable factors: Structural factors that include economic, cultural, and political issues or competitors’ actions

If a system can address these key variables, then it will provide marketers with incredibly valuable insight they can then use to make informed decisions about how to best allocate their precious marketing dollars. What’s more, these savvy marketers will have detailed records on how these analytically based decisions have increased the company’s bottom line. It certainly never hurts to have those numbers at budget time.

As a recent owner of a sizable consumer marketing budget, I know firsthand how important analytics are in the current age of marketing. Using advanced analytics to understand marketing performance comes as close to a silver-bullet solution as the industry has ever seen because it is translatable to any marketing medium and immune to any trends.

Whether it’s in the board room or on the ball field, more and more the best teams are using analytics to make winning decisions. If this keeps up, maybe we will see Brad Pitt playing a CMO in the near future.

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