Marketers are swimming in data. The amount of data available to marketers is exploding and the analysis of very large data sets, popularly referred to as “big data,” has been touted as the next wave of productive marketing practice. Such data range from records of transactions to the text of reviews and customer service interactions, to images and video. The availability of such data should make brand building easier.
There is little question that big data has the potential to generate greater profits. McKinsey and Company studied the use of big data in five different industries around the globe and found that the use of big data can increase operating margin by as much as 60%. At the same time, a study reported by the Marketing Accountability Standards Board (MASB) and marketing research firm Truthset found only modest agreement on basic demographic information across sixteen leading digital targeting data service providers. Agreement on gender was only 51% among these sixteen providers and for age ranges, where more options are available, the agreement was only 7%. The lesson is that big is not necessarily better and in some cases, may be worse because it creates a false sense of confidence.
Big Data’s Strengths
Of course, a great deal of the benefit of big data for marketers has little to do with the identity of individual consumers. Much of the value of big data arises from its ability to make firms more efficient. The ability to quickly summarize transactions, identify trends, and forecast future demand allows firms to be more responsive more quickly to markets. Such responsiveness has two benefits: (1) it enables the firm to be where the action is faster than competitors, thus producing more sales and (2) it allows the firm to reduce the amount of unsold inventory that does not match demand. It is also possible to conduct real time experiments to see what types of advertising and promotions work, improve those that do work and change those that do not, and repeat the process. Direct marketers, using catalogs, telemarketing, and home shopping television channels have used such approaches for years, but it is now possible to do such experimentation on a larger scale and at a more rapid pace. Finally, new technologies provide a means for customer feedback about existing products and services and potential new products and services more quickly and far less expensively than ever before. As a result, products can, at least in theory, be improved and innovations created at a rapid pace. All of these benefits can potentially be realized without a single consumer revealing their identity or providing personal information.
Big Data’s Weaknesses
Successful branding is more than analyzing trends, however. Rather, branding is about building personal relationships. It is about more than simple demographics. Rather, it is about complex behavioral, lifestyle, life stage, and interest attributes. It is about problems and aspirations. Teasing such information from big data is difficult, if not impossible. Big data are often not representative of the market as a whole. Information about a firm’s own customers provides little information about consumers who are not customers. Even information about a firm’s own customers may be bound by time, place, and the customer’s purpose for interaction. Indeed, one limitation of much big data is that it has been collected and structured to serve purposes other than informing marketing decisions.
The Danger In Big Data
While it is clear that big data has large benefits for both firms and consumers, it is not a substitute for other types of data, like talking to customers. Big data that might otherwise be useful is often not in a form that is useful for marketing decisions. A real danger for marketers with access to big data is a complacency that grows from the perception that they know so much about the market. In fact, what they know is only history, and an incomplete history at that. History is a good predictor in the very short term, but a terrible predictor of even the intermediate term especially in a rapidly evolving economic, social, and technological context. Marketers can play a critical role in helping organizations understand the uses and limitations of big data, and the many other tools for engaging with and understanding consumers. There is great potential but much remains to be done to make it a useful tool for managing and growing businesses and brands.
Contributed to Branding Strategy Insider by: Dr. David Stewart, Emeritus Professor of Marketing and Business Law, Loyola Marymount University, Author, Financial Dimensions Of Marketing Decisions.
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