Marketing: Big Data Benefits & Challenges

Marketing Big Data Benefits

Big Data Study - Marketing Big Data Benefits & ChallengesThe marketing managers we surveyed identified two areas with the highest Marketing Big Data benefits: determining campaign effectiveness and channel effectiveness. Close behind were tailoring marketing campaigns and promotion offers, and determining customer value.

A large telecommunications company that spoke to us illustrated just how important Big Data had become in determining customer value, pricing and understanding customer behavior. The firm has a database with a sizable sample of customers in one of its consumer business units. It has collected data on every customer transaction, starting from the time someone becomes a customer and including the offers they choose. The company monitors that data to sort out high-profit from low-profit customers, and how to convert the latter to the former.

Tailoring marketing campaigns can begin with figuring out which prospects should be targeted in the first place. An auto insurance company that we spoke with found that over 80% of the over 100,000 households it sent direct mails to had the wrong demographics and would never buy insurance from the firm. In fact, only 1% bought policies as a result of these campaigns. After using analytics to determine the right demographics, the company conducted a more targeted direct mail campaign and increased its response rate tenfold. That boosted revenue and cut marketing costs.

The company also used analytics to laser focus a marketing campaign following Hurricane Sandy in 2012, that let customers in the Northeast know the company was standing by to help them. The firm said analytics enabled it to create newspaper and broadcast ads for a more targeted set of media outlets, which reduced its campaign cost by 75% (as opposed to running a more scatter-shot marketing campaign). “Needless to say we couldn’t get to every single customer. But with the money we spent, we probably hit 90% of our members with an ad for a much lower cost,” said an executive at the firm.

Companies such as retail giant Sears Holdings Corp. have discussed publicly how they’re using Big Data to set prices in close to real time. The $42 billion retailer has millions of products, about 4,000 stores and over 100 million customers. Three years ago, it took Sears eight weeks to run its pricing algorithms. In addition, the company was only able to tap a tenth of the potential of its pricing data because of the limitations of its aging mainframe computers. Since then, the company began using open source database Hadoop. By last summer, the firm was running its pricing algorithms in a week, and some in less than a day.1

At the opposite end of the scale (although still termed a ’moderate’ big data benefit) were monitoring and improving customers’ offline experience and discerning competitors’ moves beyond pricing.


Exhibit IV-6: Areas of Greatest Benefits for Marketing
Q18-a: Degree of Potential Benefits Big Data Could Generate for the Company: Marketing – Mean Summary

Exhibit IV-6: Areas of Greatest Marketing Big Data Benefits | Q18-a: Degree of Potential Benefits Big Data Could Generate for the Company: Marketing - Mean Summary

Marketing Big Data Challenges

So what do marketers believe holds them back the most from leveraging Big Data? They felt the greatest challenge was technological: handling the volume, variety and velocity of the data. This isn’t surprising, since marketing has usually been the least automated function in many companies. And marketing is far less worried about keeping data secure from internal or external parties who shouldn’t have access to it.

We spoke with a number of executives – especially from the IT and analytics group – who said that marketing managers were daunted by the thought of having to deal with volumes, types and data speeds of a size they were not familiar with. The head of analytics at an insurance company told us that the marketers in his firm weren’t initially prepared to create and execute marketing campaigns more rapidly. “It usually takes about three to four months to get a big campaign out the door,” he said. “When I tell them they could do that in three or four weeks, they can’t do it yet. They don’t have the processes in place. They don’t have the mindset to move that quickly. And, in some cases, they don’t have the resources, or the experience of trusting the data, or being able to move that quickly.”

Exhibit IV-7: Greatest Big Data Challenges for Marketing
Q23: Greatest Challenges to Getting Value from Big Data: Mean Summary – Marketing

Exhibit IV-7: Greatest Big Data Challenges for Marketing | Q23: Greatest Challenges to Getting Value from Big Data: Mean Summary - Marketing

Big Data Study Findings: By Business Function
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  1. Rachael King, ‘How Sears Uses Big Data to Get a Handle on Pricing’, The Wall Street Journal, June 14, 2012. []

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