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Marketing chiefs not prepared for data explosion: IBM study

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Latest IBM study of 1,700 chief marketing officers finds few are confident about their ability to gain advantage and understanding of their customers and markets with Big Data.

I remember in the early days of analytics hearing a story about a beverage company that was perplexed about an annual spike in orange juice sales in upstate New York every late March and early April. By analyzing new data becoming available, the company was able to determine that the sales spike was coming from retirees returning from their winter homes in Florida for the season. Thus, they were able to adjust their promotions and stock store shelves based on a predictable trend.

If only business problems could be so simple anymore.

IBM just released the results of a study, based on interviews with more than 1,700 chief marketing officers, that confirms that the digital revolution has made their jobs much tougher. "New information and communication technologies are revolutionizing business by letting customers and citizens peer through corporate walls." Consumers expect more value, and they have more choices.  Plus, they expect organizations to act in a socially and environmentally responsible manner. "With social media, anyone can become a publisher, broadcaster and critic."

Now, some better news: The same digital revolution provides "unprecedented opportunities to engage with customers."  The only catch is organizations need to be able to effectively intercept and interpret vast quantities of data -- still a work in progress.  In fact, the study report, 71% of CMOs admit they are "unprepared" for managing the coming data explosion. Another 68% report they haven't quite grasped the potential of social media.

What a couple of the CMO respondents had to say about the data explosion:

“'One of our biggest challenges is in data analysis. For the complexity and size of our organization, we are way behind,' a consumer products CMO in the United States admitted."

“'We’re drowning in data. What we lack are true insights,' a life sciences CMO in Switzerland commented. An energy and utilities CMO in the Netherlands put the problem even more bluntly: 'At this moment, I don’t know how our marketing department will cope with the expected data explosion.'”

Or the data explosion that's already here, for that matter. I have been involved with surveys recently that show one out of ten companies now manage and store more than a petabyte of data. That's 1,000 times bigger than the most massive database on the planet just a decade ago.

It's not just CMOs that are perplexed. Many of the most well-trained data scientists within the utility industry, for one, are concerned about how they will be handling the avalanche of data coming in from smart meters and other devices attached to emerging Smart Grid.

So how ready are companies on the ball, forward-thinking and savvy with new technology and applications, to meet and manage the new opportunities Big Data offers to business intelligence?  The researchers divided respondents into two buckets: "outperformers" and "underperformers." These classifications were based on self-assessments by respondents about their companies, validated, where possible, by compound annual growth in operating margins and profit before taxes between 2006 and 2010.

Did the outperformers feel more confident about their ability to handle Big Data?  Not really, the study finds. A majority of the leaders, 65%, still said they were not prepared for the data explosion, versus 77% of their laggard counterparts. The same held true for ability to handle social media opportunities and challenges.

The survey report also makes the point that while marketing rely the most on traditional sources of information to make decisions -- such as market research reports (82%) and industry benchmarking (80%) -- newer forms of intelligence are still under the radar. Most of the traditional sources of information "have one big drawback --they can only show customers in aggregate, offering little insight into what individual customers need or desire."

The report observes that relatively few CMOs are exploiting "the full power of the digital grapevine." While nearly three-quarters use customer analytics to mine data, only 26% are tracking blogs, only 42% are tracking third-party reviews and only 48% are tracking consumer reviews. "This is largely because the tools, processes and metrics they use are not designed to capture and evaluate the unstructured data produced by social platforms. Yet blogs, consumer reviews and third-party reviews disclose what discrete customers want. They provide a rich source of information about customer sentiment, with context, that can help companies more accurately predict demand patterns."

Big Data is also a double-edged sword. "Nearly two-thirds believe they will need to change the mix of skills within the marketing function and enhance its analytics capabilities." However, the report adds, "relatively few CMOs are thinking about the profound policy implications of big data — especially those relating to privacy and security. Only 28% consider it necessary to change their privacy policies, for example, despite the numerous ways in which customers’ privacy can now be compromised."

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Joe McKendrick

Contributing Editor

Joe McKendrick is an independent analyst who tracks the impact of information technology on management and markets. He is a co-author of the SOA Manifesto and has written for Forbes, ZDNet and Database Trends & Applications. He holds a degree from Temple University. He is based in Pennsylvania. Follow him on Twitter. Disclosure