It’s high time to use data in managerial decisions. Indeed!
Dr. Bodnár Viktória
What exactly is data driven marketing capable of?
Big data is taking a key role in more and more business areas. Therefore the number and the variety of the tasks the controllers has to perform increase as well. To have a clear picture of the importance of data driven marketing and its relation with controlling we have interviewed Viktória Bodnár, managing partner of IFUA Horváth & Partners.
What is new in data driven marketing (DDM)? Marketing departments are already familiar with analyzing data…
Business environment is evolving to a state where companies are not only capable of creating their own, clean, certain, analyzable databases from internal sources, but it is now possible to acquire such data from external sources. Hence, managers now base their decisions on reliable statistical analysis; decisions as segmentation, pricing, promotions or new customer acquisition. This is why this type of marketing is called "Data Driven," or "Evidence Based" marketing.
Companies began to systematical collect data from the early 2000s when Customer Relationship Management (CRM) became the hot topic. When questions - such as, with whom did we contract, what is the content of the contract, what did we sell and at what price - were raised to be answered. In the 2010s, the focus shifted to what existing and potential customers desire, what they purchase, or how do they make their decision. Companies are not only buying the market analysis from researchers to stare at the papers, or to make strategic decisions based on the finding, but they are advancing to the continuous analysis of internal and external data.
Understanding all this, is there really a place for market surveys?
My position is simply no. Consumers cannot answer credibly; biases such as their surroundings, their state of mind or their memory mislead them.One of our clients - a gas station network - used a representative questionnaire to evaluate how often their customers drink coffee in their stores. One respondent claimed he was confident he was drinking coffee once or twice a month at the client’s gas stations, so it was recorded that he drank 24 coffees over the last two years. This man had a loyalty card, and as it turns out, he had a total of 2 coffees over the last two years. I do not allege this person lied, more likely he did not remember at which gas station network he had his brew. Yet it matters a lot for our client.
Likewise, we can access more accurate data when we "listen" to social media. For example if a public transportation company is curious about its perception, this offers them a great way to see what their customers think about them. Let us say someone at the bus station tipped in a pothole, took a photo, and posted it on Facebook with an outraged comment. If someone calls her three months post the incident to ask her opinion, it may very well happen that her recent experiences made her forget this incident.
How utilize such a vast amount of data?
You need to know how to collect and evaluate the data. At the university, Professor György Meszéna has often told me that defining the phenomenon, is the task of the subject matter experts, the statistician should only analyze it. This is not the case anymore. Business needs to understand how to translate their questions for the statisticians. There is a need for data scientists, who can analyze and answer the questions in a business relevant way, also you need IT tools. Ergo, those, who can understand the business, perform the analytics and use the IT enablers, will conquer the market.
What is the benefit DDM brings to different areas of marketing?
DDM helps to understand more what is happening and why. For example, with DDM our customer segments will be truly homogenous, because those who drink coffee twice a month are categorized differently than those who drink twice a year. In fact, we get the point where we will not consider one million customers as four segments - in other words 250,000 consumers in one segment - since it is obvious that so many people's behavior cannot be identical. It is therefore necessary to ask business relevant questions in a more detailed and more professional way and to form targeted micro segments. If my goal is to increase coffee sales, first I have to learn who buys when, what kind of coffee and in which price range, then I have to create micro segments among my consumers to create a dynamic pricing and personalized actions. When I have the micro segmentation, I am able to set up targeted promotions for these segments. Imagine that at our annual sales strategy meeting we have phrased 20 business questions like this one, when all of our clients are listed in one of the 20 different micro segments along our twenty aspects of segment. With this at our disposal, we can design actions on the micro segment level, thus creating personalized marketing. Let me take it even further, we will also know whether our customer is responding to the content of the offer or just following a reference group.
Reference group as what your friends liked on Facebook?
That is right. We will know whether a TV ad is working or that our customers are not watching. Another example, when we researched the wine market for one of our clients with the initial assumption that the opinion of wine experts played a major role in customer decisions. However, it turned out that 90 percent of the customers pay no attention to the experts' opinion. There are people who are price sensitive and drink 2 euro wine, others prefer sweet wine and so on. Just to name another case: a multinational coffee producer invested so much in educating their costumers to distinguish between the 2 in 1 and the 3 in 1 instant coffee. The consumers were however mostly students, and there was no x in 1 for them. They had one purpose and one purpose only: to be awaken. That is why they bought coffee, instant coffee and energy drinks, they were not receptive to the message from the client.
Knowledge such as this can be useful for marketing, but where does the controller come into play?
Not long ago, there were only a few marketing and sales controllers, only to be found at FMCG and telecom companies. Yet, over the past two decades, we see an increasing demand from other industries. The controller is the person who sees the connection between the business areas. The controller is the one who knows that if we have a more accurate sales plan, we will be able to cover it with less changeovers in production, which leads to lower product costs and higher margins. The benefits from data driven marketing and sales are cascaded through production, procurement, and logistics. Modelling its effect for the entire value chain is the task of the controller..