Look at the dynamics of rapid changes in your environment. It all says one thing. The pace at which the changes are happening is lightning speed. Every day new companies, products, brands, and campaigns are launched across diverse geographies catering to various demographics, tastes, and preferences. And, given the variables in such a volatile environment, the risk factor is at an all-time high.
So, what do you do in such a case?
Well, successful companies and brands have adopted data as their fuel, and they drive home profitability, revenue, market share, and ROI based on the decisions they make which are data-centric.
Let’s take a look at the following to understand the importance of data in business decisions.
Studies by a global business consultancy firm, McKinsey, show that data-driven organizations are more likely to:
- Have 50% more sales
- Generate three times more turnover growth and ROI
- Increase profitability by a staggering 21 times than their competitors
What is Data-driven Decision Making?
DDDM or Data-driven Decision Making (also known as Information-based decision-making) is an approach to making decisions based on data, facts, statistics, metrics, and indicators. In short, data or numbers guide the decision-making process rather than relying on instinct, gut feeling, traditional norms, or visionary ambitious flashes of the mind.
Here’s an interesting fact:
- Almost half of America bases their decisions on gut feeling and intuition, despite knowing, noticing, or witnessing the practical facts suggesting the contrary.
Although intuition is a revered faculty of a refined mind, most often than not it could lead to erroneous decisions with drastic consequences. A better approach would be to look at the practical side of any business decision-making process.
The entire format, structure, and principle of DDDM make it a more pragmatic and practical approach in business decision making, and therefore, a more successful approach too.
It is important to understand that data gets created at every juncture of activity in business, for example, finance, production, sales, marketing, advertising, and administration, to name the major categories of business activities. When such historical data and information is used in marketing activities to drive home more sales, revenue, market share, or ROI, it becomes a data-driven marketing model.
For example, if your company sells a particular product and had run a campaign around that in the past, you will have access to the information regarding what worked and what didn’t. Moving forward, if you were to create a similar campaign, you will use the data from the past and try to implement what worked more while ignoring or bypassing the factors that did not work.
This way, your chances of success in the current campaign improve by leaps and bounds.
The Benefits of Data-driven Marketing
Since data-driven marketing shifts decision-making from instinct and guesswork to evidence-based insights, it involves collecting data from various sources like customer interactions, web traffic, engagements in social media platforms, and of course the current market trends and demographic preferences. When Marketing decisions are made based on evidence-backed statistics, they offer some unique benefits. Let’s have a brief look at those.
- Enhanced Customer Understanding
Marketing analytics of data will reveal deep insights into your customers’ behaviors, preferences, pain points, and expectations. This will enable marketers to customize and tailor their marketing campaigns for a more personalized customer experience.
Consider the following to understand it better.
- Around 71% of consumers are more likely to make a purchase when brands offer personalized experiences.
Now, if your company, brand, or campaigns did not consider personalization as a core aspect, then maybe you are losing a large chunk of the market base.
2. Improved ROI
Data will reveal a lot of key functional areas you need to focus on. It leads to efficient resource allocation, targeting the right audience with precise marketing communication through their preferred channels, etc. The result is improved yields on your investments.
A more robust and rigorous data-driven approach can also produce exponential results consistently.
3. Real-time Adaptability
Sometimes the market trends change, or customer preferences are not the same anymore, or maybe customers are expecting a few things more or less, which were not anticipated earlier.
With data-driven marketing, since marketers get access to real-time data, they can be swift in any changes required in the ongoing campaigns or marketing strategies or tap into an altogether new possibility that emerged out of the current data sets. It helps in optimizing the marketing efforts and campaigns and reaps the maximum benefits.
How to Make smarter decisions with analytics?
Since data analytics is a systematic process aiding your decision-making process, it involves some systematic steps as well.
- Define Clear Objectives
You need to begin by clearly defining your objectives for a particular area you want to focus on. For example, increasing website traffic, increasing click-through rates (CTR), boosting sales or generating more leads, etc. Once the goal is set, it becomes easy to follow through with the rest of the steps.
2. Gather Relevant Data
Now that you have set your objectives, you need to collate and gather the relevant data you would need to come to a conclusive insight from them. Identify the data sources that are most relevant to your objectives and then analyze them accordingly through various tools like Google Analytics, social media insights, CRM (Customer Relationship Management) system, etc. You should also gather secondary data from market research reports to get a macro-overview of your data sets.
3. Use Data Visualization
Since the data you have collected in the previous step often becomes harrowingly humongous, it becomes overwhelming to navigate through those numbers. Using visualization tools and graphs, charts, etc., makes it easier to understand what a particular data set is trying to tell you.
A simple example is if you try to understand the average American household whose income is more than $ 200k, the number could be overwhelming in absolute numbers, whereas if it is reduced to a percentage, it becomes easier to understand that among the U.S. households, 5.7% garner more than $ 200K per year.
4. Segment Your Target Audience
When you have visualized the data, it becomes easier to segment and categorize your audiences based on various factors, such as demographics, age, preferences, income, etc. This enables you to create personalized marketing campaigns for each customer segment.
5. Launch, Test, and Analyze
Create different sets of campaign communications and deliverables and experiment with each of them. Analyze which one is performing better than the others and then stick to the better-performing ones.
6. Monitor Regularly
Data keeps on changing, and so should your marketing decisions. It is an ongoing process and therefore, continuous monitoring of the entire decision-making process is vital in rendering them relevant and effective. If there is a shift, then swiftly stir your decisions accordingly to stay relevant and competitive in the market.
Embrace Data-driven Marketing to Watch Your Business Soar to New Heights
Data-driven marketing has revolutionized strategic business conduct and thinking. Transform customer connections and enable your marketers to make smarter, astute, and result-driven decisions with analytics and data and make your business more customer-centric, relevant, and competitive.