Top 5 Interviews of 2013

Spread the word of brand success: An interview with Rob Tarkoff, Lithium Technologies

McKINSEY: What is Lithium’s specific value proposition?

“Social customers interact directly with brands or with other interested customers through online social networks”

ROB TARKOFF: Lithium provides a software as a service (SaaS) platform for large brands to involve and mobilize social customers. Since a brand should meet customers where they congregate, we help brands to engage customers across public social networks like Facebook and LinkedIn. However, we believe the real business value for brands is in creating their own on-domain engagement hubs, where they have greater control over the customer experience and can guide “social customers” to act in ways that drive real business objectives—getting customers to help other customers, for instance. In our experience, such peer-to-peer engagement typically results in better customer service and satisfaction.

By harnessing the power of dynamic online communities, our customers experience more value. Consumers know and understand the products they use, and are great resources for other consumers. If a customer having trouble with a product can get his or her questions answered in a community of other users, then the brand will spend less on customer support. Secondly, customers excited by a particular brand’s product or service are eager to spread the word. Creating a space for these “social customers” is its own marketing campaign that costs the brand virtually nothing and simultaneously boosts revenues.

McKINSEY: What exactly is a “social customer”?

ROB TARKOFF: A social customer is someone whose interactions with a product or service go beyond the shelves of the retail outlet. Social customers interact directly with brands or with other customers who have an interest in those brands through online social networks.

McKINSEY: Don’t social networks like Facebook and Pinterest provide forums for these social customers? What makes your platforms unique?

Share of people who trust what companies say

ROB TARKOFF: People connect with other customers in our branded online communities because they share a very specific interest. This level of focus and depth can’t easily happen on most general social networks. Our focus on the experience of the “social customer” is what makes us unique, and I believe we understand this segment better than anyone else. We apply the principles of behavioral science to help us analyze the ten-year history we have with our brand customers and the billions of interactions with over thirty million active users. Our solution is unique in that it delivers quantifiable return on investment in terms of increased sales and reduced costs.

McKINSEY: What advantages do online communities have over traditional channels?

ROB TARKOFF: Online communities have the power of dynamic peer-to-peer interaction that’s missing from traditional channels’ broadcast-style company-to-customer communications. Nielsen reports that 90 percent of people trust what their peers say and less than 20 percent trust what companies say. In online communities, brands can instantly engage with their customers and then enlist them to become true extensions of the brand as a group of highly engaged, interconnected, and loyal advocates who support the brand because they are invested in its success. All of this comes at a lower cost to the company and with higher engagement than traditional channels.

McKINSEY: Can you share an example of ROI improvements that can be achieved?

“Marketing is going to be less about projecting content outward and more about tapping into external conversation”

ROB TARKOFF: I can give you a few. HP is one of our largest customers. They had a one-year ROI target for their online community that was met in the first three months. Autodesk is also a customer of ours, and they achieved an ROI of USD 12 million in their first year with us and close to USD 10 million each year after. Another great example is CrowdSource—the platform we operate for Telstra. CrowdSource is able to resolve almost 50 percent of Telstra’s customer service issues on first query via the community. In fact, Telstra’s community has proven such a success they’re actually closing traditional call centers because their customers prefer to engage via the online community. These are examples of how social customer experience strategies deliver measurable business results.

McKINSEY: What are the key factors for success in creating successful and thriving social customer communities?

ROB TARKOFF: I think there are a few factors that are central to success. The first is to recognize the great diversity of social customers, understand the value of what they have to say, and then create an appropriate rank and reputation system that maximizes their contribution to the online discussion. Another factor is focusing on the needs of the customers from an interactive perspective—that is: how they engage with each other and their preferred way of experiencing content and conversation. Finally, setting up the relationship between public social networks and the social customer experience on your own site is critical. Public networks are a great place to make the introduction. They should be seen as the point of entry into your online community. Establishing an effective link will bring customers from a platform like Facebook to your own site—where they can get the intense engagement they’re looking for and access to deep insights into particular products or services.

McKINSEY: How does the social customer experience platform interact with a company’s other customer channels?

ROB TARKOFF: Seamless integration with all other customer service channels is the objective. Sephora is one of our customers, and they have integrated their online beauty talk community with their in-store Photobooth and Photokiosk technology. So, more and more the boundary between online and offline is vanishing. This is particularly important when one considers the fact that mobile devices are always connected and always with us. Retail brands have an opportunity to keep their customers “in their stores” at all times—even if much of that time is actually online.

McKINSEY: What are the most common challenges that the companies you work with experience in adopting these community-based solutions?

ROB TARKOFF: The biggest challenge is that companies aren’t always prepared for the major change management process they’re about to embark on. Implementing a successful social customer experience platform means a complete shift in the way companies think about not only their Web properties but also their social support and social marketing infrastructures. Most companies are accustomed to hiring professionals whose job it is to produce content and messaging on the inside and then disseminate it. Building a platform that really harnesses the power of deeply engaged customer communities, however, requires a different set of actions. These include bringing people on board who are experts at curating user-generated content. Such tasks require very different skill sets—and it often takes companies a while to fully understand this.

McKINSEY: What does the future hold for social customer experience platforms in terms of adoption and strategy?

ROB TARKOFF: A strategy that focuses on the social customer experience isn’t mainstream today, but I think in five years it will be. The way we market and support products is going to be completely inverted. It is going to be much less about producing content internally that gets projected outward and mostly about tapping into the external conversation. Consumers are more empowered now than ever before with a multitude of outlets to have their voice heard. The winning brands will be those that use this to their advantage and invite their customers in to play an unprecedented role in driving business results.

The social shopper

The new consumer decision journey

Nicolas: We’re in the midst of a user-driven revolution. Shoppers are fueling massive changes in media behavior that are forcing retailers to change fast. Digital as a medium, for example, is almost as big as TV in the U.S., accounting for 40 percent of time spent on media.

“We’re talking about $1.2T per year spent on products that people discovered.”

And it’s no secret Facebook is a big beneficiary as well as enabler of this revolution. We have 1.1 billion people. We also have 750 million mobile users, accessing Facebook 10 to 20 times per day to discover what matters to them. These are real people, not cookies or numbers of households. We tell marketers Facebook is all the people who matter to them, every day, everywhere. And for retail marketers that just means they need to be on Facebook because their customers are.

Look at Fab.com. It didn’t exist two years ago, now it has more than $200m in business, and they did it all on Facebook. Lacoste, for example, needed to get something out shortly before people were leaving for vacation. They took some pictures, posted them on Facebook, and in a matter of weeks had three times ROI

Brian: What’s interesting is that you could make the argument that consumer behavior hasn’t changed—they’ve always wanted to be aware of what’s out there and choose the best value for what they want. What has changed are the tools and technologies that are available now to deliver on that pent-up consumer demand. Online retail is experiencing double-digit growth, which is forcing retailers to think about being better across all channels.

“The easiest way to become omni-channel is to focus on the one part of your business that has always been cross-channel: people.”

Nicolas: It’s very true technology has changed the retail business. Merchandising has vastly opened up as a discipline, “maximizing ROI” has replaced “achieving ROI.” Above all, we are constantly faced with the challenge you mention: omni-channel retail. And I think retailers hear the admonition to become omni-channel far more than they hear any real strategy for how to do it. The bottom line is it’s going to vary from business to business, depending on the nature and complexity of your existing channels. But the easiest way to become omni-channel is to focus on the one part of your business that has always been cross-channel: people. Your customers simply want to discover your products, purchase them, and incorporate your brand into their lives in the easiest way possible. This is why the consumer decision journey (CDJ) can be a more relevant way to think about customer behavior than the classic marketing funnel. More importantly, reaching your customers at every stage of their shopping experience, along with increasing your investment in loyalty and mobile, is critical to becoming omni-channel. The customer decision journey spans all of your channels because your customer does. Build marketing systems with people at the core.

Brian: Absolutely. Traditionally, marketing has been about moving people who have the intent to buy through a process so they’ll make the purchase. We’re in this new world where marketing and retail executives are finding people before there’s an intent to buy by engaging with them in a way that’s not too creepy.

Cold data, warm connections

Nicolas: Eighty percent of online purchases are made without prior intent to buy that product. This means we’re talking about $1.2T per year spent on products that people discovered. Offline, this discovery is known by the name “merchandising,” and I can’t think of a single retailer who doubts its importance. And online, this discovery is constant. At Facebook we call it “news feed.” But feeds of all types occur on the Internet, and they are the future of merchandising.

The challenge for retailers is to appear in the right feed to the right person, with the right product at the right time. So effective marketing and sales today boils down to good targeting. You need to be able to predict what’s going to be interesting to each customer. With Big Data, we can create really small segments of customers, and they’ll discover what matters to them.

Brian: Yes, and that opportunity for more targeted connections is providing a big challenge to the way marketing does things. Big marketing grew up thinking in terms of developing three large campaigns that were pushed to a mass audience. But this ability to talk to small populations requires marketers to think in terms of creating 300 or even 3,000 campaigns.

Nicolas: Absolutely. Sometimes I ask retailers to think about it like holidays. Technology now allows marketers to tap into hundreds of moments in their customers’ lives—which is something marketers are already very good at doing with holiday marketing. Only now, instead of three or four special days per year, there are dozens, even hundreds.

Getting comfortable with test and fail

“We also have 750 million mobile users, accessing Facebook 10 to 20 times per day to discover what matters to them.”

Brian: Marketing at the kind of scale we’re talking about—small affinity clusters, continuous campaigns—requires the willingness of the marketing function to redefine marketing. That starts with having a lean startup mindset. In practice, that means that companies have to be OK with good enough and not insist on perfect. The best retailers are saying they’re okay with failure. That mentality leads to faster cycle times and a more highly developed learning muscle. And they also do a better job with practical measuring. This can’t be yearly brand-perception audits. This has to be about practical details that can be developed and measured quickly. These measurements need to capture the various actions along the consumer decision journey, not just the buy.

Nicolas: Our recommendation is not to jump to marketing to 100 or 1,000 segments. That’s overwhelming at first. Focus on strategic segments first—the ones that really matter to you. Measure how well you do, then use that as a baseline for expanding the number of segments to target. Only by doing it in this way can retailers develop processes that work in practice rather than in theory.

The Org Shake

Brian: The realities of the consumer decision journey are really starting to shake up traditional organizations. Recently I’ve seen a lot of cases where the CMO or business unit leader says that the org chart is useful for career-path development and progress reviews, but it’s not helpful to get work done. Work gets done today within “swat” teams of people from across functions focused on a specific task. In practice this “omni-channel” approach requires new talent, which in turn means getting creative.

“These are strong CEOs who have a strong vision. When people ask, ‘What’s the ROI of social?’ they’ll answer, ‘What’s the ROI on your mother?'”

Nicolas: You know, I’ve heard CMOs say, “I don’t even do org charts anymore.” This is about creating something much more cross-functional within marketing and within technology as well. Marketers are so much closer to finance than we’ve ever seen before. In retail, traditionally the store doesn’t talk to ecommerce. Now, they’re meeting for the first time and thinking about how to work together.

But what do you focus on when working cross-functionally to serve the customer decision journey? First, presence. How are you going to work together to be at every stage of their shopping experience? Second, loyalty. How are you going to work together to compel people to come back for you? Finally, mobility. Your product may not be mobile-first, but your customer is. How are you going to work together to be on the device your customer uses in every stage of their journey?

Brian: These changes we’re talking about are really shaking up the organization. Retailers have to think and act like publishers and have both the people and processes to manage a sophisticated content supply chain. It takes really strong leadership to make it work. Look at the people who are leading in multichannel retail—Howard Schultz at Starbucks, Blake Nordstrom at Nordstrom, or Angela Ahrendts when she was at Burberry. These are strong CEOs who have a strong vision. Every associate at Burberry has to be on an iPad. When people ask “What’s the ROI of social?” they’ll answer, “What’s the ROI on your mother?” Clearly they’re exaggerating to make a point, but this visionary ingredient is critical. You have to love risk, and that has to start at the top.

Measure what actually matters

Nicolas: ROI is table stakes for any marketing platform, and retailers are going to need better attribution models across channels. Because while social is a channel in its own right, it also works with and feeds off of other channels (which is why we’ve been focusing on developing multitouch attribution systems to help determine credit for the sale).

“The most successful marketers are seeing that allocating more resources to digital can drive higher impact across all channels.”

The bottom line is, return on investment requires investment. Social marketing is no more “free” than any other form of marketing, and the most successful marketers get that. This is where “social” metrics and “social” marketing can be a bit of a distraction, because social marketing is just marketing. The best companies we work with have KPIs that are about sales, profitability, and awareness.

The truth is, comparing digital to analog is not an apples-to-apples comparison. Nor is it “either-or.” So what happens when you shift budget in different ways across them? Digital still makes up a woefully small part of marketers’ budgets, given its impact, and I think the fear of moving those dollars is that taking money away from television or print will decrease the effectiveness of those channels. Yet the most successful marketers are seeing that allocating more resources to digital can drive higher impact across all channels.

Brian: My message to marketers is that you should be the CFO’s best friend. The metrics available today can help prove marketing ROI in a way that’s never been possible before. But you can’t spend time on measuring everything you can measure. It’s more important to focus on the one or two or three metrics that really matter. And marketers need to get comfortable with the idea that there’s no such thing as absolute metrics accuracy. Metrics that lead to helpful decisions require speed and making small bets to pilot ideas.

Nicolas: I couldn’t agree more. Being pragmatic is the antidote to complexity. Retailers are practical people. They’re seeing diminishing returns on search, for example, so they’re looking for pragmatic answers about what to do next to get to their goals. Although a note of caution on this metrics point: One thing I’ve noticed is an over-reliance on digital data only. If you’re just looking at digital data, you’re missing a big part of the picture.

Putting marketing ROI in the driver’s seat

Michael Lazerow, CMO of Salesforce Marketing Cloud, talks about the role of the CMO, and how the science of ROI is shaping marketing.

Using the cloud to create a complete picture of the customer

“In September at Dreamforce, we launched the Marketing Cloud as the world’s first unified, cloud-based social marketing suite. Marketers want the ability to do all of their social marketing through a single platform. Marketing Cloud combines Radian 6 — the number-one social listening product — with Buddy Media — the leader in social marketing — to create a platform that now serves 55 percent of Fortune 100 companies. Marketing Cloud has become one of Salesforce’s six major product lines, allowing our customers to fully engage with their customers, in addition to marketing to them and servicing them all through a unified platform. Now we’re able to help companies use less to do a lot more and grow their businesses around people.

It comes down to a greater ability to act. If you consider the idea of listening, for example: we’ve listened to consumer online buzz for the last seven years using various technologies. But when you bring it all together, that’s where the magic happens. That’s what allows you to turn the insight around who’s talking, where they’re talking, and what they’re saying into action. Integration is what enables the people perspective — the idea that a person is not a cookie, not an e-mail address, not a mobile phone number, but a person — by facilitating a company’s engagement with their customers across sales, service, and marketing. That’s a huge differentiator, and no one else is doing it.”

The two main drivers behind social media marketing success

“If we look back just ten years, the CMO’s job was 90 percent creativity and 10 percent science. I think now we’re at 50-50.”

“The first is the organizational commitment that this is the right thing to do. There was a time when this was a bigger leap of faith, but now that there are significant case studies around ROI, I think it’s easier for companies to make the serious investment. The second driver is a structure that facilitates internal collaboration. Companies with a flatter structure might find this task easier, since they tend to foster openness and trust. A company can’t completely control what its customers buy, what the press writes about it, or the way governments tax or regulate it. It can, however, encourage its employees to interface more seamlessly across departments — and this is critical to social media marketing success.”

The 50-50 creativity-science equation for CMOs

“If we look back just ten years, the CMO’s job was 90 percent creativity and 10 percent science. I think now we’re at 50-50. It’s not only about great stories, it’s about how you capture all that’s available to you in terms of quantitative and qualitative data and how you use that data to grow the business. Technology and analytics are fundamental to this. These “creative types” who got into marketing because of the art of storytelling are now spending more money on technology than CIOs. The most powerful part of marketing today is data, but it’s also the most misunderstood. One of the big things we’re working on is how to take all of that data and create insight for the business. Think, for example, of the technology we have on the listening side: we can take all of the online mentions of Coca-Cola — millions every month — sort them by location, and then by influence, credibility, and clout. So all of a sudden, those millions of seemingly unrelated mentions have become 4,000 individuals that Coca-Cola really should talk to because they’re influential about the brand.

“Every human interaction costs money, so I think companies will be best served by looking at the probable return on their investments in digital marketing.

‘Stacks’ is the name given to the type of information that is all about a company’s product, the stuff that you bottle and then sell. That’s where marketers used to be 100 percent focused. Now we’re talking about a time horizon that’s longer than a moment. It’s no longer just about that Super Bowl ad, which is the ultimate in this kind of stack technology and media. You create this amazing ad that pretty much runs once and then dies. But then you’re left with the question “How are we going to interact with these customers when they want to engage and do so on their terms?” That’s the role of the marketer as journalist compared with the marketer as artist. Marketing isn’t a moment in time anymore; it’s a long-term engagement. The company itself has to always pay attention, and this is the fundamental addition to the skill set and orientation of the marketing function — from a creative team that “launches” messages to a team of journalists that monitors, reports, and engages. At some point, there will be more journalists working in consumer-focused companies than in news media.”

Using ROI to drive marketing decisions

“Every human interaction costs money, so I think companies will be best served by looking at the probable return on their investments in digital marketing. What is the value of improved customer engagement? If you can use social media to turn moments of customer pain and frustration into moments of glee, you’re well on your way to creating customers for life. This happens to be the name of Salesforce.com’s 13-year-old program that employs a longterm perspective on customer engagement. The upside of social marketing is tremendous, and cost savings has to be seen as part of the equation. Some of our clients have reduced their customer services costs by 44 percent — and the up-front investments don’t have to be astronomical. One client, for instance, identified off-the-shelf technology alternatives that saved them USD 8 million per year over custom applications.

I also see the image of the CMO changing fundamentally. He or she will no longer be the person whose activities are seen as “add-on” and that have to be tempered in times of budgetary constraints. In crisis moments like these, it’s actually the CMO who is best equipped to deal with change — both now and going forward.”

Marketing learns to speak the C-suite’s language

Jonathan Gordon, a McKinsey partner, talks about the future of marketing with Brian Solis, principal analyst at Altimeter Group.

Brian Solis: Customers are becoming more demanding, and more connected. As I say in my new book, What’s the Future of Business, instead of purely reacting to this different breed of customer, companies need to evolve their business, philosophy, and infrastructure to create customer experiences around very specific moments of truth. Thinking of this as a decision journey gives marketers a better way to in turn make decisions around resource allocation, marketing spend and overall significance in each moment.

Jonathan: The whole idea of moments of truth really resonates with me. It’s a thoughtful view of the customer decision journey where you can say that there are certain events where “Here’s when it really matters,” or “Here’s when you’re going to succeed or fail.” The challenge for marketers — and brands in general — is that in some industries, those moments of truth are often disappointments in service delivery or other situations where the brand has let them down.

Making analytics the language of the C-suite

Brian: I think part of the challenge in marketing now is that you have social media champions within the organization today who’ve started a bottom-up effort to transform their businesses, but few of them have the momentum to break through the “glass” ceiling and get to the C-suite, where most of them don’t use this stuff any way. So for them to understand the future of their business from a social media perspective is rather difficult. I’ve stopped talking about social media’s impact and started talking instead about the way digital technology is changing the entire customer journey. Once you start speaking the language of the C-suite and show how channel usage is evolving toward social media, they begin to get it.

“All these digital interactions with customers have created an incredible amount of rich data that actually allow marketers for the first time to provide hard facts about marketing’s impact.”

Jonathan: There is a disconnect between more seasoned executives who have never really done digital marketing and younger marketers who’ve grown up with it. Rather than talk about social media, which sounds like sort of a buzzword, I’ve taken to calling it “digitized word of mouth,” which is a well-established and accepted concept. The difference is that you have to provide metrics that are meaningful to the C-suite — not just “fans” and “follows” but “sales” and “renewals.” As an example, the board of an insurance company was going to radically cut marketing’s budget because they didn’t understand what it was doing to help the company. The new CMO, however, used advanced analytics to show that marketing was actually driving sales and growth – these are metrics they took real notice of, and they ended up not cutting the budget at all. All these digital interactions with customers have created an incredible amount of rich data that actually allow marketers for the first time to provide hard facts about marketing’s impact.

Brian: Those analytics can be incredibly powerful but having impact can be a different story. It’s often that a team of analysts pour over data to deliver binders full of analysis, only to learn that they’re shelved and confined to a lifetime of collecting dust. Now comes a new breed of analytics that provide rich and visual reports, but these are too are at risk of collecting dust. What’s missing is the “human algorithm,” the connection between data, people, and trends that’s presented in a tangible and visceral way to help executives make decisions.

“What’s missing is the “human algorithm,” the connection between data, people, and trends that’s presented in a tangible and visceral way to help executives make decisions.”

Jonathan: You’re right. In many ways, data is a communications issue. Too often analytics is so dense that executives just don’t have the time to wade through it. At the same time, despite what the data often says, CMOs still think in terms of big campaigns of 12 to 18 months that are all about pushing the message out, where turning up the volume is too often the first response to a disappointing audience response. Given the rapid give and take of customer interactions, and the need for rapid response to optimize programs, campaign lengths will shrink significantly. You can see how digital tools have changed the way we work as a business team and how consumers behave. However, we retain the same old belief in big campaigns and old-school creative marketing. The basic marketing model is still mostly a twist on the 1950s model.

Building a “circle of innovation” for the C-suite

Brian: Getting to the C-suite is so important now because the ground we’re standing on is changing pretty dramatically. Many companies are going to need a new hired gun to come in and help the C-suite adapt at a much more rapid pace than they have so far. I almost wonder if somebody just needs to come up and be like the Chuck Norris of the executive suite and say, “Okay, everybody. This is what’s going on, and this is what we need to do about it.”

“In this new world marketing and service move beyond departments and into the very fabric of business philosophy.”

At the same time, the future of marketing is in the hands of people who don’t necessarily understand all the various customer relationships elements and how they tie into every part of the business. And this is why social media can’t solve it alone, because the social media team today is just another silo, and marketing and customer service are no longer just departments. This is now a way of everyday business and organizations need to create a circle of innovation at the executive level that reports specifically to the C-suite about how to manage these new opportunities.

What does “Marketing” mean?

Jonathan: Marketing in the digital age may mean something else entirely. My view is that marketing becomes less about communications and more about total value proposition. We worked with a telecom company to help them understand what was driving demand and customer acquisition. What we discovered through measuring social media was that customer dissatisfaction with the company’s call center was costing the company 8% of its customers a year — essentially offsetting all the acquisitions they were getting from the TV campaign. The answer isn’t for marketing to trumpet that the company has good customer service; the answer is to fix customer service. Marketing needs to be about the complete customer experience. Otherwise, it’s going to find itself in the very narrow world of communications.

Brian: Absolutely. In this new world marketing and service move beyond departments and into the very fabric of business philosophy. They now become part of this experiential journey where we start to affect every stage of how people are thinking, embracing, and interacting with us. The perfect example is the automobile industry. Most companies are doing amazing things with their car quality, but consumers’ top complaint is that they don’t like going to the dealership to buy or service their car. There’s a disconnect between design, advertising, and the last mile of customer engagement. In this new world, we must repair and design meaningful experiences at every step.

Before you can even get your customer to the first or second moment of truth, peers and competitors are already dissuading them in ways that you don’t even know. And the only way to start to change that is to realize that we can’t just use marketing to push more people into the funnel. They’re actively exploring the experiences of others to help them better understand how to think about you. There are both good and bad experiences for us to learn from and thus we have to source any dissatisfaction, learn from what’s positive, and identify new touch points to improve how we design, market, and serve.

Jonathan: Right now, a lot of marketing thinking is around emotional benefits but I wonder whether this is going to get challenged because digital technology can teach us so much about the actual fundamentals of the brand experience as opposed to the finer points of an image.

I think that’s a wave that some organizations are going to struggle with, because they’ve invested a lot into the emotional side of branding. Not to say that that’s not important, but it’s absolutely not a substitute for a good service experience or a good customer experience more broadly.

Advanced analytics for better decisions

Matthew Jauchius, CMO, Nationwide Insurance, discusses what it takes to build an organization that can use advanced analytics to make better decisions and deliver value.

How advanced analytics support marketing decisions

“Marketing analytics have not allowed us to make decisions we couldn’t have made before. But they have allowed us to make every decision we made before better.

“We have achieved over a 15%, approaching 20%, per annum increase in productivity in marketing for four years running since 2009.”

“Before we made the investment in marketing analytics, we were already spending hundreds of millions of dollars on promotional activities. We had to decide, how much goes to television? How much goes to digital? How much goes to sports marketing or sponsorships? We had to decide how many ad spots to run per year and whether to have a spokesperson or not. Many times, these decisions were more art than science — based on instinct and experience.

“Marketing analytics allows us to make every single decision I just mentioned better with data. Marketing is definitely on a journey. I don’t know if it’s hit the tipping point from art to science. But there’s no question in our mind at Nationwide that it is on that journey from art to science.

“For example, one of the decisions that we made was: should we spend money in regions or metropolitan areas where we have already a high concentration of agents? Or should we spend our money across the entire country? Analytics enabled us to make the right decision, which for us was to go for more of a national buy and put less money in the local geographical buy. This gave us a double-digit increase in marketing efficiency as measured by quality demand generated per dollar.”

The importance of Big Data and advanced analytics

“From 2009 to 2012, promotional spend in property and casualty insurance in the United States went up 62%. We went up 0%.

“Without communicating clearly marketing’s role in driving growth with these constituencies, you’ll have a tough time countering the call to cut budget.”

“Yet we increased demand generation across all channels, which is clicks on the Internet, calls into our call center, and quotes from our exclusive agents, by 15% a year. We have achieved over a 15%, approaching 20%, per annum increase in productivity in marketing for four years running since 2009.

“By the way, this was achieved with 11% lower headcount and $4.5 million less market research and data costs.”

The three lessons learned about advanced analytics

“You need to invest in organizational support outside of marketing. This includes your board of directors, senior management, the chief executive officer, and the other C-suite executives. We’re spending hundreds of millions on promotional activity. When times get a little tough, that’s the first thing people want to cut. ‘Hey, call the marketing guy. Cut his ad budget.’ Without communicating clearly marketing’s role in driving growth with these constituencies, you’ll have a tough time countering the call to cut budget.

“You also need to build the support inside of marketing. You invest in people, technology, and data because this capability costs money.

“The third thing is to think about your own marketing organization. You’re talking about changing the way that creative people work, who often have been brought up thinking of marketing as an art. You’re now bringing in a bunch of folks with spreadsheets, which means you’re going to change the way they work together and do things.”

The biggest challenge of Big Data

“The concept I would urge most marketers to think about is the notion of what you’re really doing with that big data. You are trying to change the way decisions get made in marketing. And academically, we can say, ‘Well, of course I am. I apply big data. I have statistically more valid techniques. And therefore, I have better decisions.’ But ultimately, every organization is about people.

“In marketing, the people who have had the control and the power for generations are often the creatives. In truth, the creative process does start with data and so forth. But at some point, you have to have inspiration. You have to have creativity. Forgetting the people part of this art-to-science journey could mean a disaster.”

Transforming your organization to improve its analytics

“Most of the time, we think of marketing councils as bring together people from outside of marketing, such as pricing, finance, or distribution to use better data and make better decisions.

“Now you have a marketing analytics shop and a market research shop. All of these groups have critical pieces to the puzzle. But they may not have worked together in the way you need them to in order to get the right decisions.”

“What I’m suggesting is you use the same concept inside marketing. Typically, what has arisen in most marketing departments is a creative shop or a brand shop. Now you have a marketing analytics shop and a market research shop. All of these groups have critical pieces to the puzzle. But they may not have worked together in the way you need them to in order to get the right decisions.

“To increase our agility, I invested in talent, and I made organizational changes around the decision making of digital.

“At Nationwide, as in many companies, the Internet and mobile had grown up within a large business unit, whereas social technologies and the infrastructure was in the corporate center. What we determined was that a core set of digital capabilities around advertising, mobile, social media, and infrastructure — like usability labs — actually ought to be in the corporate center, which I control as chief marketing officer. Making that organizational change enabled me to put all of the digital resources in one place.

“The second step was putting the promotional dollars budget under one senior executive, myself. That’s the only way I know how to do it. Otherwise you have committees, which do not move at the speed of digital. You have to put dollars and decision-making in the same place to move at the speed of digital.”

The importance of bridge building

“One of the most important lessons we’ve learned throughout this journey is marketing is not an island. In many companies I’ve seen — and Nationwide is no exception — a lot of times, marketing has a vague status. ‘We’re going to give a certain amount of dollars to those guys. They’re going to make ads and do whatever it is they do. And let’s hope it generates demand.’ Some companies are far more integrated than that, and some are less. It depends on the company.

“What we’ve done at Nationwide is build explicit partnerships with the technology folks, the finance people, and then the business people. We’ve built the answers to business questions into the management forums and the regular management meetings so that now marketing is not a separate thing. It’s integrated into what we do.”