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2011

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With prairie-fire speed, a new paradigm is overtaking the brand-centric marketing models of the 1900s. At the core of the new model is a guiding belief that cold, hard numbers ensure warm, fuzzy customer relations — and even warmer ROI.

To survive in a marketplace where tech-empowered consumers have boundless choices, companies are harvesting numbers and tilling customer data, driven by a near-religious faith that the numbers contain crucial insights into customer’s tastes, preferences and shopping vulnerabilities.

In short, we’ve gone from mass marketing to math marketing, and any CMO who isn’t adjusting to the new reality is at risk of becoming “ad man out.”

Changing roles
“If anything has completely changed the roles of the CMO and marketing, it has to be data analytics,” says CMO Council VP of Programs & Operations Liz Miller.

Thanks to escalating increases in computing power over the past 20 years, we have not only new tools but a thriving analytics industry to go along with them. Scores of data mining companies have sprung up over the past decade, eager to provide companies with math-supported marketing optimization solutions like customer experience analytics, customer link analytics, event triggered marketing, marketing mix analysis, real-time decision management and more.

Future marketers are also readying for the inevitability math-intensive future, with business schools offering courses in data analysis and customer relationship management (CRM).

“Our textbooks are full of formulations like net present value tables that we used to only think of in finance,” says Duke University associate business professor Julie Edell Britton. “How do you determine which customers to invest resources into? Which customers are worth paying a lot of attention to? Which ones are worth less? We now look at financial returns and profitability on customers the way we would evaluate an investment portfolio.”

Investing in analytics
The lessons Britton is teaching in the classroom are already being applied in the real world. Take, for example, David Norton, senior vice president and CMO of Caesars Entertainment and a vocal advocate of math-driven marketing. Norton has helped transform the legendary gaming corporation into a math marketing juggernaut, using analytics to steer the operations of global Caesars properties that include Planet Hollywood Resort & Casino, Horseshoe, Paris and Flamingo.

“Here, we try to be as analytical as possible,” Norton says. “We don’t rely at all on gut instinct if we can avoid it.”

Norton estimates that Caesars has spent more than $100 million on analytics and other CRM infrastructure and software over the last decade. Caesars’ CRM architecture includes SAS-brand software for predictive consumer analysis and business intelligence, as well as Teradata as the warehouse, with Cognos and Unica as other key tools.

“It’s a big deal,” Norton says of Caesars’ multimillion-dollar roll of the dice on analytics. “We analyze the business all day long — trends, marketing performance, incremental profitability, test and control results — to know how we can spend our money wisely and engender as much loyalty as we can.”

Not catching on everywhere
But Norton’s enthusiasm and embrace of marketing mathematics haven’t caught on everywhere. A 2011 Ventana Research study including input from more than 2,850 organizations finds that more than half of organizations still spend the majority of their time in unproductive data preparation and quality assurance processes, rather than in applying analytics.

Those same organizations reported issues with data accuracy and timeliness of analytics, thus placing themselves “at a competitive disadvantage against the most mature organizations that are using predictive analytics to help determine future outcomes.”

The Ventana study concludes that most organizations have room to grow in their use of business analytics, as only 15 percent of surveyed companies earned Ventana’s highest “maturity” rating.

Slow to change
Jie Cheng is VP of Analytics and Customer Insight for Acxiom’s Global Consulting organization. He believes some marketers are slow to adapt to the new math marketing reality because … well, they’re often slow to adapt to most game changing trends.

A chat with Cheng gives you the sense that some CMOs’ foot-dragging could be a form of passive resistance against an inevitably more dutiful future, since adapting will also require more from CMOs — more skills, more accountability, more pressure to make optimal business decisions.

“What math marketing does is make the marketing more financially measurable,” Cheng says. “Once things become measurable and attributable, then the marketing organization — in particular, the CMO himself — is held accountable for whether they are spending wisely and generating a return in multiple of their spending.”

Invest in relationships
Of course, it’s important to remember that math marketing and analytics aren’t necessarily about massive investments in technology.

“The hardest thing you’re going to have to invest in is the relationship it’s going to take to mine the data,” says CMO Council’s Miller. “That’s not a cost investment — it’s a time and relationship-building investment.”