Interplay of technologies such as social media, cloud, analytics and mobility, to augmented reality in front end and analytics at the back end, is changing the way marketing is done and the digitally savvy consumer is targeted using various mediums at any time of the day and everywhere. This will be further accentuated by proliferation of sensors and internet of things. Marketing is the core component of any business whether it is selling goods or providing services. No matter how good the product is until the organization is able to market it appropriately, it cannot thrive. Humans have been increasingly using technology to improve the efficiency and to achieve enhanced outputs. So is the case with marketing, it has been evolving over the years. But in the recent years, it has completely metamorphosed and undergone a paradigm shift. Marketing is no longer a one way street, it is gradually becoming circular with information flowing rapidly and freely between marketers and consumers. Gone are the times when the organizations were reactive to the customer complaints, now they need to anticipate the customer pain and proactively move to resolve and delight the customers. Increased computation skills, advanced analytics and the availability of abundance of data available to the marketers, provide opportunity to the consumers, marketers and corporates to benefit from this information by being part of consumers emotions. To deliver a unique customer specific experience, target marketing based on customer profiling, previous history of searches, shopping, and location based preferences, etc. are gaining traction. This is the key to build and enhance the brand and get continuous feedback from the consumer. With this power, the marketing strategy can be calibrated on a dynamic basis which could avoid disasters for the brand. Organizations are moving from data driven organization culture to insights driven organization culture to generate higher return on investment on their marketing spend.
The purpose of this report is to promote discussions and share our point of view on the recent developments and trends in the marketing, analytics and digital world. Deloitte believes this report provides you with insights into the key changes undergoing the marketing function and the role technology is playing, including the digital interface needed.
1. SHIFTING MARKETING PARADIGM
Marketing, traditionally, has been driven by the 4Ps—Product, Price, Place, and Promotion. It then got extended to include 3 more Ps— Process, Physical environment, and People.
People was the key element to be added in the whole mix. Initially, it started with the inward facing thought of looking at the employees and internal stakeholders to understand whether the organization has enough skills to support the product or services. The reasoning was to create an internal competitive advantage against the other market players. The second aspect of this element was to discover whether there is a large enough audience in the target market for the products and services an organization is producing or servicing.
Gradually this element is shifting more and more towards learning and understanding the customers; both from a ten thousand feet above, for a holistic view, and also down to each and every customer transaction and interaction with enterprise. What is shifting is not the marketing paradigm but the methods or a set of procedures which traditional marketers swore by. With the help of an ever advancing technology, the spotting of a need, finding the potential buyers or knowing what will work best has been made an act of pure or at least cognitive science than just implementing past experiences or in many cases gut-feel.
1.1 So what is enabling this change?
In a resource-constrained environment, today's leading companies need to carefully plan how they will leverage customer data, advanced analytic techniques, and an elegantly visual customer insight-generation capabilities to improve customer acquisition, expansion, and retention.
Four recent trends have affected the way customers interact with companies and prompted development, across industries, of broader capabilities to acquire, retain, and expand customer relationships more effectively.
New economic realities: The current marketplace is markedly different than it was a decade ago. Globalization has led to convergence in buyer preferences across countries and industries. Clothing retailer L.L. Bean (www.llbean.com), shoe producer Nike (www.nike.com), and electronics maker Sony (www.sony.com) are just a few companies that sell global products— products marketed in all countries essentially without any changes. For example, Apple's iPad qualifies as a global product because of its highly standardized features and the company's global marketing strategy and global brand1. Information is increasingly transparent, and customers increasingly have their own voice and an array of choices. The variety of suppliers, channels, products, and services offered has created a reality where customer acquisition, expansion, and retention are increasingly difficult.
Data, data everywhere: Marketers have been dependent on the enterprise data for customer intelligence before the social media era. Now we can have multi-faceted customer data like purchase histories, browsing trends, and lifestyle changes.
The traditional know-how and workflows are changing and evolving due to the continuous integration of social media into daily processes, increasing competition in the markets and the explosion of data and information available to the marketers to optimize their spending and marketing strategies.
Powerful advancement in technology: The volume of consumer data and available software and hardware with which data can be analyzed have placed new power in the hands of companies that choose to leverage such tools. As more organizations turn to evidence-based management, the skills and experiences necessary to leverage the data along with tools and hardware available are being rapidly developed.
Relevant and accessible examples of success: Advanced analytics have received a groundswell of market momentum and acceptance thanks to a series of well-researched and well-written popular press articles and books. This interest level has been substantiated by market-leading companies that have effectively adopted analytic management techniques. Having said that, scientists were into analytics before it was cool. Any conversation about the new world of business analytics should come with a caveat— it's not really new. Businesses have been engaging in analytics for years—decades, even. It may be more accurate to say that analytics is experiencing a major renaissance, ushered in by big advances and investments in technological and data capabilities. As a result, business analytics has reached a next level of maturity. Business isn't the only field notable for major advances in analytics through the years. If anything, there may be a stronger case for the sciences leading the vanguard of analytics. Universities, research labs, and other science-focused organizations have been applying and refining analytics approaches to solve some incredibly complex problems through the years, in everything from molecular biology and astrophysics to the social sciences and beyond. In many cases, they don't even use the word "analytics." For them, it's all science.2
These four trends have affected the business environment and the way companies develop relationships with their customers. They have shifted focus from risk-averse internal focused activities that have limited upside to truly transformational corporate strategies that leverage customer insights and analytics. These combined developments have changed the traditional goal of marketing which was to familiarize potential customers to a product and then somehow convince them to buy it; to drive attention towards segmenting down to a bunch of likely customers and then sell them products they may not even be aware they want.
1.2 How is marketing changing?
1.2.1 From 'Spray-and-Pray' to Deep Customer Connections Customers are increasingly frustrated by the generic offers they are bombarded with from marketers, and most marketers continue their "spray and pray" mass marketing techniques of the past, seeing little reason to change. But today's customers only want interactions that are relevant, personalized, and based on a consumer's situation and preferences. Companies that fail to provide relevant offers will be left behind. This idea does not seem to be ground breaking, but the companies who act on it grow big. With real time marketing this concept has evolved to the next level with smart marketers giving audience the information they need most when they are most likely to need it or what we call next best offer/action.3
1.2.2 From Guess-Work to Actionable Data In the earlier days of marketing it was a lot of dart throwing — marketers were working on very little direction and mostly intuition. But in the recent times there has been an explosion of information from social media. Elaborate systems have been set up to monitor each and every consumer point. We are not only analyzing the present but also predicting the future with some of the most advanced statistical and machine learning techniques. With the access to data and dedication to optimization combined with real time marketing, marketers can target customers at an individual level and meet their needs based on reliable and trusted information.
1.2.3 From Selling to Storytelling Brands have realized that the more they self-promote, the more consumers tend to tune them out. It is human psychology to want to engage with someone who takes interest in you, asks questions, and genuinely wants to learn about you instead of someone who gives all the impetus on self-promoting. The most successful brands are the ones that listen as much as they talk if not more. Therefore, in recent time, the focus of marketers has been on reading between the lines and responding to the exact needs of customers as and when they need it.
2. OPPORTUNITIES GALORE
We have made references to changes in the marketing strategies because of data explosion, advanced analytics, and technological advancements. But how can marketing executives take advantage of this evolved environment? What are the opportunity areas and what could be the challenges?
2.1 What are the opportunities?
Now what would data analytics make organizations do better? Why should they embark on this tedious and often challenging journey? Advanced analytics provides marketers with an opportunity to deal with the challenges being faced by them and to gain an edge over the competition. The field is increasingly being used by marketers for the following purposes:
- Market forecasting: Statistical techniques are used to develop a predictive model to gauge the market size for a given product or service. This forecast can be used by business to make wise and justifiable business decisions, ranging from amount of goods manufactured to the amount and location of new stores to be opened. If a firm operates in multiple markets— some growing, some decaying, and some more or less stagnant— which are all dependent on geographical location and seasonality, then knowing these trends can have a huge impact on the marketing spends in terms of amount as well as the mode of marketing.
- Quantifying customer needs and motivations: With the increase in social networking data and the enterprise data in recent times tracking not only the actions of customers but also their moods and sentiments, marketers are using quantitative laddering and other approaches to track consumers' unmet needs and desires and to lure them to products which they never knew they desired. Marketers can no longer survive by targeting the population as a whole; instead each consumer needs to feel that the advertisement or campaign is specifically targeted to meet their specific needs and wants. Hence, marketers are increasingly segmenting their consumer groups in order to make them feel special and to provide the right offer to the right customer at the right time. Firms are increasingly using predictive analytics to gain insights into when customers are most likely to defect, to determine the lifetime value of customers, and to predict the most logical products to be sold to customers. This allows firms to target more profitable customers and to deal with each segment of customers depending on their predicted tendency.
- Enhancing brand equity: Firms spend millions in establishing and maintaining their brand image in the market. With increasing competition and several new brands emerging in each field, the value of brand image is quickly gaining importance. But just throwing money around to develop a brand in the market is not enough—firms are increasingly using predictive analytics to understand which brand predictions are most predictive of brand choice with the help of econometric brand choice models. In today's market, a single firm might brand its products differently to target different segment of customers.
- Product positioning and pricing optimization: This is probably the most applied and popular technique in the field of advanced analytics currently being used by marketers today. The degree of which this has been adopted in the market is itself evidence of its usefulness. It involves locking the desired set of attributes in order to optimize the volume of sale and profitability. Marketers are increasingly using 'what if' analysis to understand the impact of changing prices and introduction of new products to understand the impact on overall profits for the company.
- Marketing mix and marketing efficiency modeling – This is an area in which advanced analytics has been making significant inroads. Today, each firm is presented with an arsenal of modes of marketing ranging from leaflets in newspapers to google ads to sponsoring major events. Market mix modeling is an effective technique to showcase the effectiveness of these marketing campaigns to the marketers and allows them to allocate their marketing budget much more wisely and predict the increase in sales even before launching the campaign. The increment in sales observed by any company can be specifically broken down to its various causal factors.
2.2 Issues faced by the executives
Amid all that potential, companies continue to struggle to build truly fact-based cultures. While analytics has grown in importance and relevance in recent years, its acceptance and impact have been curtailed by a number of barriers to widespread adoption.5
There are a number of key hurdles to overcome in order for analytics to play a more significant role in the enterprise— starting with the quality of the data itself. Many companies continue to struggle with the amount of data at their disposal, and how best to categorize, synthesize, access, and analyze it—and then to implement decisions that stem from those findings.6
Just like the space race and nuclear race among the countries in the past, this age is all about the analytics race between companies, with each one of them striving towards becoming analytics enabled, as it is perhaps the most important evolutionary step any organization can take in the current times. The rewards to achieving data driven decision making are also huge and can provide a considerable boost to the bottom line. If the advantages are so clear and significant, why is it that not all organizations are taking significant steps to incorporate advanced analytics to their strategizing and decision making process? The answer is that in order to leverage the benefits of advanced analytics the organizations must overcome several challenges while experiencing end to end development and deployment of predictive models and further during business implementation.
A few of the major issues being faced by organizations in incorporating advanced analytics to their marketing strategy are explained in the figure below:
A further explanation of the issues which should be addressed on priority is given below7:
- Executive ownership: In the absence of a clear vision and a leadership advanced analytics, efforts might be stalled at the modeling stage. The leadership needs to be aligned with the question "What do we want to get out of this transformation?" There needs to be well orchestrated effort between technical preparation, cultural shift and change management; all of this driven by the expected business insights derived out of transformational initiative. Without the accountability for a targeted return on investment, organizations might end up spending a lot of time "doing" instead of "getting things done".
- IT involvement: IT needs to be involved in the implementation process so that the applications can be used in real time or day to day operations of the organization. They also help answer key questions such as: Are analytical solutions conforming to best practices and consistent standards? Are environments available to enable development of proof of concepts and the ability for industrialization into enterprise solutions?
- Data issues: Many organizations don't even attempt to implement advanced analytics as they are under the impression that either they don't have enough data or, if they do, the data is not clean enough or actionable. Many do not realize that to implement predictive analytics we don't need perfectly cleansed and organized data. Predictive analytics is not accounting, but rather a statistical process where there are several ways to cleanse the dirt and mine the diamonds out of coal.8
- End user involvement: Ultimately all the initiatives depend on the user adoption and how they have latched on to the program. End users need to be empowered and enabled to ride on the wave by showing them the art of possible. The success of any analytics project is linked to changing the decision making process and demonstrable benefits that can transform the organisation, particularly when they translate to financial returns. To involve the end-users, organizations can take multiple measures, one of the effective ones is creating a sandbox environment. An analytics sandbox is an environment which provides a core set of analytical tools and access to business data to enable exploration through various analytical techniques to identify new insights. The environment is separate from the production for standard BI and reporting to enable resource intensive analysis to be conducted without impacting critical production activities. The sandbox can be enhanced to enable users to load their own data for more advanced ad-hoc analysis using new internal and external data sets. In addition, in some more advanced cases users can install their own technologies into their own sandbox environments to enable truly customised analytical insight to be generated – and potentially industrialized later.
1 Global Business Environment. See: http://catalogue.pearsoned.co.uk/assets/hip/gb/hip_gb_pearsonhighered/samplechapter/0273752634.pdf
2 Analytics Trends 2016, the Next Evolution | Deloitte US. See: http://www2.deloitte.com/us/en/pages/deloitte-analytics/articles/analytics-trends.html
3 Marketing's 3 Biggest Paradigm Shifts: a Deep Dive. See: http://www.evergage.com/blog/marketings-3-biggest-paradigm-shifts-deep-dive
4 Will traditional marketing die in the long run? See: https://www.linkedin.com/pulse/paradigm-shift-from-traditional-marketing-digital-so-die-bharadwaj
5 Crunchy questions for sticky issues .Using analytics to outsmart competitors. See: https://www2.deloitte.com/ug/en/pages/deloitte-analytics/articles/crunchy-questions-for-sticky-issues.html
6 Deloitte Analytics Advantage Report 061913 – Documents See: http://docslide.us/download/link/deloitte-analytics-analytics-advantage-report-061913
7 The Biggest Digital Challenges and Opportunities Facing Businesses Today. See: http://digitalmarketingmagazine.co.uk/articles/the-biggest-digital-challenges-and-opportunities-facing-businesses-today/2705
8 5 key marketing challenges. See: http://www.smartinsights.com/managing-digital-marketing/resourcing-digital-marketing/five-main-marketing-challenges-2014/
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