January 1, 2014
By Sarah Sluis,

DMA13: Marketers Must Carefully Consider Big Data Strategies

Every data-driven vendor promises sizable lifts in return on investment in exchange for slicing and dicing a company's data to allow it to provide more relevant, targeted messages to its customers. But that customization comes at the expense of consumer tracking that puts some on guard, citing privacy concerns.

Linda Wooley, president of the Direct Marketing Association (DMA), acknowledged these industry challenges in her remarks to attendees at this year's DMA convention in Chicago in mid-October, saying it is in the best interest of the industry to self-regulate to keep consumers' trust.

The DMA also commissioned a study through its think tank, the Data-Driven Marketing Institute, which found just how valuable data-driven marketing is. According to the research, conducted by two business professors at Harvard and Columbia universities, data-driven marketing contributed 675,000 jobs and $156 billion to the U.S. economy in 2012.

But with all that data leading to great gains in effectively reaching customers, it's easy to forget that bad data leads to bad decisions. Take, for example, the recent housing crisis, which statistician and election predictor Nate Silver said in a keynote presentation was largely caused by an overreliance on bad data. Mortgage-backed securities were classified as far less risky than they actually were, leaving financial institutions unprepared to absorb losses when the market plummeted.

Marketers also stand to lose money by relying on bad information. Direct marketers have run A/B testing for decades, so Silver's advice to embrace the practices of companies such as Google, which runs thousands of iterative tests on its products every year, fell on friendly ears. "It's much easier to have an idea that looks great in a PowerPoint [presentation] or model than in reality," he warned.

Another speaker, Terry Jones, founder of Travelocity and a board member at Kayak.com, echoed that point, noting that 20 percent of Kayak's site is a test at any given point.

Listening to data can help marketers create change, Jones advised. "We've gone from knowing the customer as a demographic to understanding them as an individual," he expressed.

Consumers also have more knowledge and choices than they had in the past. Today, the "information has escaped," something Kayak leverages to its advantage. People go to Web sites, not travel agents, to book flights and hotels, reflecting a larger shift in consumer behavior. "The balance of power is shifting to the buyer," Jones said. "We have extremely empowered buyers."

Jones also sees customer service, sales, and product development as blending into one. At Kayak, "our slogan is 'give the pain to the people who cause the problem,'" he recounted. Developers are required to answer calls from users, giving them valuable feedback about the design and user experience. He also observed that "customers are dissolving the line between sales and service. They expect sales and service in every channel," a challenge to companies that have created silos between departments.

During a seminar on practical applications of big data, another speaker added marketing to the blend. "Our marketing can only be as good as the person who picks up the phone when you call us. The person on the other line is your media," asserted Christopher Butler, senior director of Equifax Personal Information Solutions. It's something the company backs up in its reporting. Equifax is changing its attribution to allow multiple channels to receive credit for sales. From an organizational perspective, it fosters collaboration, not competition, between departments. Most important, the approach keeps the company focusing on the customer through its application of big data, a common goal for attendees at this year's DMA.