How to Make Better Marketing Decisions Using Data
“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” – John Wanamaker
Any business owner trying new things to get customers in the door can likely sympathize with this comment…
But it doesn’t have to be like that! At least not anymore. Now there are countless analytics’ tools and trackers that allow you to have a wealth of data around what’s working, what’s not working, and what’s likely to work at your fingertips.
The question is, are you using it?
What is Data Driven Marketing?
Data driven marketing means getting serious about getting to know your customers based on their actions. It means using data to understand:
- Who they are
- What they like (and why)
- What they buy (and why)
- When they buy
- Where they buy
- How they buy
- Why they buy
The more complete your customer profile is, the more effective your decisions about how you spend your marketing time (and money) will be.
Is this Data Really Useful?
You might not want to admit it, but you’ve probably spent money on marketing in the past based on nothing more than a hunch that it will pay off. Or you’ve made a marketing decision based on vanity metrics that didn’t actually result in more revenue. Getting more website hits or more Facebook likes might feel good, but it doesn’t necessarily mean your business is going to see any more money.
Instead, this data-driven marketing is focused on how many people you actually engage, how many people bought the product (and will buy another!) and making decisions based off of that information. Data-driven marketing isn’t a new phenomenon (think of Nielsen ratings). But prior to the internet, there were a lot of holes in the data, and the methodology was very broadcast based. The idea was, “how can I shout about my product in as many venues as possible?”
Marketing has evolved. Mass media marketing is no longer the only option, and it doesn’t work for many brands. Marketing is now a two-way street, with customers talking to you on social media (and the expectation being that you’ll talk back within a few hours). And now you have a whole new ability to collect vast amounts of data on how people interact with your brand and your business online. But there are two parts of this: it’s not just about collecting the data – that’s easy… you have to know how to read it and integrate it with your marketing strategy.
Too many businesses just collect the data, but don’t use it in a strategic way.
Take a store that sells shoes online, for example. The business owner might notice brown shoes were the top seller for the last month, and decide to put brown shoes on sale to attract new customers.
The more savvy business owner, however, might instead:
- Look at all orders containing brown shoes
- Notice that 60% of people are buying a certain shoe polish at the same time
- Send a coupon for shoe polish out to the remaining 40% that bought brown shoes, turning them into repeat buyers.
Another example: A business owner runs a promotion for 25% off orders of $100 or more and revenue goes through the roof. The business owner then decides to run this promotion on an ongoing basis, but within another month, sales have dropped well below their previous monthly average. What happened?
Well, the business owner made a decision based on revenue spike alone and didn’t dig into the data to realize that 90% of orders placed under the promotion were repeat customers. These customers likely would have come back to buy at a later date anyway. He cannibalized his own his future revenue, destroying the lifetime value of customers.
A more savvy business owner would have looked into the distribution of new versus returning customers for the promotion and instead of continuing to run the current offer, spend marketing dollars on attracting new customers.
Lesson learned. Use your data to get insight and refine your marketing strategy. Don’t just look at a number and make one decision based off of it…look at the big picture and the long term.
What Does this Mean for Your Marketing?
Well, first of all, obviously you need a way to track the data. (Google Analytics is a great way to get started.) After that, to be successful in data-driven marketing, you need:
- A general understanding of marketing, pricing psychology, and customer behavior, at least at the basic level.
- A deep understanding your audience and their data.
Having those two things in combination is a necessity, and adding in experience and skill is what leads to success. Unfortunately, there is no standard equation that works. Just because you know your audience well doesn’t necessarily mean you’ll know where to spend your marketing dollars.
It takes a mindset that is passionate about serving your particular audience along with experience and skill to set the execution strategy. And then you need the ability to implement your strategy and quickly adapt along the way.