Technology and data give companies unprecedented insight into customer behavior and new ways to measure success.
The transformation has been so profound that companies can grow rapidly by leveraging these advancements properly. But “properly” is the key word.
“The risk of getting distracted simply by following what others are doing or the next thing that’s coming out isn’t trivial. It’s real,” said Omar Rodriguez-Vila, an associate professor in the practice of marketing at Emory University’s Goizueta Business School. “The challenge for leaders is blending the approaches they used in the past with the new technologies today.”
Organizations must still adhere to fundamentals like marketing segmentation and value proposition formation, Rodriguez-Vila said. But they must invest in new technologies and workforce skills as well to create growth opportunities.
To remain competitive, leaders will need to foster internal collaboration between departments that have not historically worked together, like marketing and finance, said Daniel McCarthy, an assistant professor of marketing at Goizueta Business School at Emory University.
“There’s this tremendous influx of customer-level data that often isn’t being used to its fullest advantage by marketers. Transitioning certain business processes to be more integrated and customer-centric is taking a lot longer than it should due to functional silos,” McCarthy said.
Big data’s impact on marketing
The abundance of data now available to marketers lets companies track the effectiveness of their marketing and the activities of their customers more precisely.
“Rather than just engaging with a customer when they decide to contact a company, it’s now possible to get signals from that customer throughout the customer journey. This creates opportunities for marketers to interact with their customers and prospective customers more than they have in the past,” said David Schweidel, a professor of marketing at Goizueta Business School.
Schweidel distinguishes among actions aimed at three aspects of the customer journey: acquisition, retention, and engagement. Marketers can intervene at any part of the customer journey based on the signals they receive, Schweidel said. All are opportunities for marketing touchpoints.
Companies can make effective marketing decisions by collecting and analyzing both internal and external data. Internally, marketers can glean insights into customers through CRM data like purchasing and order activity. The best customers can be identified through use of the company’s mobile app or their enrollment in a customer loyalty program. Externally, organizations can learn what consumers value through the vast amount of unstructured data that they produce, such as when they review products and post on social media. “That’s information about how consumers are interacting with each other as well as with brands,” Schweidel said.
Brands are even learning how to interpret user-generated images without accompanying text — a necessary undertaking as social media trends toward more visual and photo-heavy content — and integrate more nuanced external data from other organizations, such as credit card companies. “If we just look at what a customer does with a single company, we miss out on everything else that that customer’s doing,” Schweidel said.
For example, a quick-service restaurant may know how often customers visit one of their locations every month. But aggregated credit-card data may show them how often a customer visits competing restaurants. Then the quick-service restaurant could create ways to increase market share.
McCarthy helps companies use modeling to predict customer behavior over time. While other data sources can be useful, he recommends that business professionals begin by predicting what customers will do using historical purchase activity. “I’d rather focus on the data sources that are much easier to analyze and make sure that we’re maximizing our value there before moving on to data sets that are hard to use,” McCarthy said.
“I would recommend fully leveraging individual-level transactional data using best-in-class marketing science models to predict what all those customers will do in the future, such as when they’re going to make their purchases, how much they’ll spend, and how much of that spend will be retained as profit,” he said.
“Businesses can translate that into an estimated customer-lifetime value for every customer. That rolls up into higher-level strategic thinking,” like what whole companies are worth, where a company is doing well, and where it is not doing so well, McCarthy said.
Customer data can also be leveraged by executives and investors to measure the value of an entire firm, McCarthy wrote in a recent Harvard Business Review article. In the article, he shared with business leaders how to calculate a customer-based corporate valuation (CBCV) by evaluating customer acquisition, customer retention, how often a customer buys from a company, and the average amount per purchase.
“CBCV exploits basic accounting principles to make revenue projections from the bottom up instead of from the top down,” McCarthy and co-author Peter Fader explained. “Although this may seem like a radical departure from traditional frameworks, that’s not the case: CBCV simply brings more focus to how individual customer behavior drives the top line.”
Sustainability as enabler of new growth
Knowing who its customers are also can help a company grow by addressing societal needs, which can be particularly powerful for younger consumers who are more likely to make purchasing decisions based on environmental and community issues.
“There’s a huge advantage if your customers are passionate about an issue and your organization aligns itself with that issue,” Schweidel said. “The downside to that is if you’ve got a mixed customer base where some people are really passionate about it and some people are opposed to it, you run the risk of alienating a different group of customers.”
Companies should use consumer data when deciding whether to take a stand on a cause, Schweidel said, noting Nike’s decision to hire Colin Kaepernick, a controversial former professional football player, as a spokesman as an example. “I would suspect that they had the insight into who their core customers were and where those core customers stood on the issues that Kaepernick has been supportive of and that they had made the kind of the calculated risks in deciding to align themselves with him,” Schweidel said.
“Managers often have the best intentions when trying to link their brands with a social need, but choosing the right one can be difficult and risky and has long-term implications,” Rodriguez-Vila and co-author Sundar Bharadwaj wrote in an article about competing on social purpose for Harvard Business Review. They based the article on their research around social-purpose brand programs and their experience working with leading brands to design growth-focused, social-purpose strategies.
“Competing on social purpose requires managers to create value for all stakeholders—customers, the company, shareholders, and society at large—merging strategic acts of generosity with the diligent pursuit of brand goals,” the researchers wrote.
Rodriguez-Vila and Bharadwaj suggest that leaders ask questions like “Can the brand have a demonstrable impact on the social need? and “Are key stakeholders on the front lines of the social issue likely to support the brand actions?” to gauge if stakeholders would accept the organization’s social purpose strategy.
How organizations can secure new growth in today’s tech-led environment
To leverage an effective marketing strategy, it is necessary to break down silos, McCarthy said. “Marketers should be in close communication with the finance department, for example, so that marketers can get access to the transactional data that they need.”
Successful companies also update their projections regularly, McCarthy said. “If you’re running a customer-lifetime-value analysis, do it every single month and use that to inform your decisions for the next period. Then revisit the model again, making sure that you’re always moving in the best possible direction over time.”
Leaders must also be aware of the significant ethical and privacy concerns surrounding the use of customer data. Schweidel shows students in his data monetization class the different data sources that are available, like credit card data by purchasing category or mobile location data. But the insights provided by granular data, he notes, need to be balanced against considerations such as consumers’ desire for privacy and the ethical use of data.
“Data security is going to be crucial with all of the data breaches that we’ve been hearing about and now the penalties associated with those data breaches,” Schweidel said. “Companies must make sure they’re using the right data to answer their questions.”
A strong customer focus will also be crucial for organizational growth in today’s business environment, McCarthy said, “Customer-centricity is all about figuring out what your customer finds most valuable and making investments that will nurture those relationships over time,” he said. Companies should avoid drastic short-term decisions to meet quarterly targets and focus on long term-value and what their customers care about to ensure durable customer relationships instead.
“Historically we’ve seen an underinvestment in customer relationships. But through our work, we’ve found that customer relationships can be very valuable,” McCarthy said. “When a company has a better sense of customer lifetime value, for example, and the value and importance of their customers, they’re less likely to make short-term cuts that could impair those long-term relationships.”
Ultimately, marketing will increasingly adopt beliefs and frameworks long held by their counterparts in finance, including the paramount importance of allocating budget on the basis of return on investment, McCarthy said. “Marketers need to obsess over return on investment. Companies always want to be focused on what investments have an acceptable rate of return.”
If you’d like to learn how you or your organization can engage with Goizueta faculty on this topic, speak with a learning advisor at 404-727-2200 or visit our website.
Emory University’s Goizueta Business School was created in 1919 as one of the nation’s first business schools. Its degree and Executive Education programs consistently rank in the top 25 in the world among major publications including Businessweek, The Economist, U.S. News & World Report, Financial Times, and Forbes.