Marketing is a mix of art and science. The scientific nature of marketing analytics makes it an important complement to the more creative aspects like content creation.
Simply put, marketing analytics helps you find out which of your creative efforts makes the most business sense.
Here, we’ll provide an overview of marketing analytics, its benefits, and some practical steps you can use to improve your marketing efforts.
Overview: What is marketing analytics?
Marketing analytics is a data-driven discipline that focuses on quantifying the effectiveness of marketing campaigns and informing marketing-related business decisions. It helps you nail down ROI (return on investment) of a given campaign, measure engagement, and make better predictions.
While it’s possible to apply analytics to traditional offline marketing, digital marketing makes it significantly easier to track marketing data and use analytics tools to curate it.
For example, email marketing KPIs (key performance indicators), such as bounce rate and open rate, can be easily tracked and analyzed using email marketing software. In comparison, measuring the effectiveness of a billboard isn’t as easy or precise.
Benefits of leveraging your marketing analytics
At a high level, there are two main benefits of marketing analytics: quantifying how well you’re doing today and learning how you can improve. Drilling down a bit further, specific benefits of marketing analytics include:
- Quantification of ROI: By tracking and analyzing KPIs related to specific marketing campaigns, you can determine their ROI. This is an excellent way to determine what’s working and what isn’t. Additionally, it can help you secure a budget and make a case for why a given campaign is a good investment in the future.
- Improved customer engagement: Direct marketing efforts tend to work better when they are targeted. Analyzing data from previous campaigns, for example open rates from two targeted email blasts, leads to a better understanding of what your customers respond to.
- More informed decision making: Analytics helps you understand what marketing efforts contribute most to business development. With granular information on your previous campaigns, you can make better decisions and improve your prospecting and closing efforts.
- Data visualization capabilities: “A picture is worth a thousand words” holds true when it comes to helping convey impact in business meetings. Analytics tools can help in this regard. For example, MailChimp supports a variety of data visualization features to represent KPIs related to email campaigns.
Ways you can use your marketing analytics to help your campaigns
Today many marketing analytics tools are built into marketing software products like CRM software. As a user, it’s important to remember the old saying “garbage in, garbage out” applies to analytics software.
What this means is one of the most important things you can do is ensure “good” data goes in. This means keeping customer databases up to date, tracking costs, and integrating data from all your marketing platforms. It also means focusing on data that is relevant to your sales and marketing goals.
To help you get started, here are three ways you can use marketing analytics to improve your marketing campaigns.
Track your marketing campaigns’ ROI
Marketing 101 shows us there are plenty of effective marketing channels you can use.
Additionally, you’ll find reams of statistics online touting the impressive ROI of different channels. That provides you with a starting point, but how do you know what works best for your business? This is where marketing analytics comes in.
By tracking the ROI of a given campaign, you can quantify what channels work best for you. The metrics to track here are simple: costs of the campaign and sales it produced.
How to track your marketing campaigns’ ROI:
Of course, how to actually track ROI depends on the type of campaign and tools you use. You may be able to use a spreadsheet to track the costs and returns on coupons to a local restaurant sent via direct mail.
For anything beyond small-scale campaigns, for example sending multiple campaigns to a large email list, the spreadsheet may not be scalable enough. Which leads us to our tips for tracking ROI...
- Use software: If you’re doing social media, email, or database marketing at a reasonable scale, you’ll likely benefit from software. For email campaigns, email marketing software can help you track ROI. For more advanced marketing efforts, CRM software like Salesforce with its “Campaigns” feature can help you attribute costs and returns to specific campaigns.
- Leverage UTM links: UTM (Urchin Tracking Module) links allow you to track where traffic is coming from. This is particularly important when quantifying the ROI of different pull marketing campaigns that may have a call-to-action that sends customers to the same webpage.
Use predictive analytics to boost sales
The ability to make better predictions is one of the key benefits of marketing analytics.
In fact, SalesForce found that predictive intelligence led to an average conversion rate increase of 22.66%. A wide variety of data including purchase history, region, company size, and behavioral patterns help enable predictive analytics.
By using algorithms to compare the activity of current customers and prospects to historical data, analytics tools can help you “nudge” them into making a purchase or taking a specific action.
For example, a follow-up email with a coupon after a customer abandoned their cart on an e-commerce site may lead to a sale.
How to use predictive analytics to boost sales:
Predictive analytics allows you to send highly targeted content based on real-world data. Some of the most common ways to use predictive analytics to boost sales include:
- Use predictive lead scoring: Traditional lead scoring involves manually identifying the characteristics of a qualified lead. Because it can be hard to determine which criteria matter, it can become a bit of a guessing game. Predictive lead scoring makes the process more streamlined and scientific by using algorithms to analyze historical data and determine qualified leads for your team to pursue.
- Send customized recommendations and suggestions: If you’ve ever wasted hours viewing suggested content on YouTube or Netflix, you know the power of suggestions from algorithms. The feature to look for to bring this functionality to your marketing platform is a “recommendation engine”.
- Identify customers likely to “churn”: Customer churn means lost revenue. Since behavior patterns tend to recur, predictive analytics can identify customers likely to leave. As a result, you can trigger automated offers or incentives to be sent or have a salesperson or customer service rep reach out to increase your chances of retaining the customer.
Learn from A/B tests
A/B tests are a great way to measure the effectiveness of different campaigns using the same marketing channel. You can use A/B tests to control for specific variables like wording, content, images, etc. and better understand what elicits the desired response from your customers.
How to use A/B tests:
To get started with A/B testing, you need to do three things:
- Choose a marketing channel
- Select the KPIs you want to track
- Decide on the variables you want to test
For example, you can use A/B testing to determine which email campaign leads to the highest open rate. Email marketing software like Zoho Campaigns makes running and tracking these tests simple.
With analytics software, running A/B tests is simple enough. However, it can be easy to draw false conclusions if you set your tests up poorly. Here are some tips to help you avoid common mistakes:
- Develop a good hypothesis and test it: The goal of your A/B testing should be to learn and do more of what works. To make that happen, come up with a good set of hypotheses to test. For example, “adding the recipient’s name to the subject line will increase open rates by more than 10%” is specific, testable, and useful to future campaigns. Taking this approach will help keep you focused on measurable and actionable information.
- Understand statistical significance: Pure chance can alter the results of A/B tests. If your sample sizes are too small or your tests are too short, the results may be invalid. For example, you can’t be as confident in the results of a test sent to just 10 people as you can in the results of a 10,000 person test. Similarly, an hour-long landing page test isn’t as informative as a week-long test.
- Focus on your independent variable and control everything else: Good A/B tests allow you to attribute results to a specific variable. If you change too much, you won’t learn what actually caused the different results. For example, if you want to know which color button gets clicked more often on a webpage, only change the color of the button. Don’t also change text or the position of the button. As much as practical, make your independent variable, a.k.a. the variable you are testing, the only thing you change.
Marketing analytics helps optimize campaigns
Marketing analytics enables marketers to make better decisions and quantify historical performance.
However, it’s important for you to make sure you use analytics tools wisely. This means capturing “good” data and avoiding “garbage in, garbage out” as well as understanding how to contextualize the information the tools provide.
If you can do that effectively, analytics tools can provide a significant boost to your marketing efforts.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool owns shares of and recommends Alphabet (C shares), HubSpot, Netflix, Salesforce.com, and Twilio. The Motley Fool has a disclosure policy.