Do you think it, or do you know it? The data analysis underlying marketing choices

di Alberto Aleo

In our experience as consultants we see many companies operating in many different sectors, but despite this great variety, most of them suffer from the same recurring problem: a lack of data analysis to support strategic and operational choices.

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Data analysis lies at the basis of many company activities. Marketing, especially, is closely connected to statistics and measurable information; so close, in fact, that it could hardly exist without them.
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The lack of data analysis that afflicts many of our companies is often engendered by a certain presumption or a misplaced creative flair. I’ll try to explain better: even today some sales executives, when asked to provide data on sales or a forecast of turnover, respond: “What’s the point? I know my clients well and I know what the market wants!”. The same happens with certain entrepreneurs who turnup their noses when presented with a profile of the target or data on the effectiveness of communication tools (for which they pay a lot of money every year), their typical response being, “If we had to rely on figures before making any decision we would not go far – even Steve Jobs said that marketing analysis is useless!”.

In these cases, sales is seen as an activity that requires you to ‘go with your gut’, with no specific expertise behind it, and marketing is perceived as an ‘artistic’ activity that should leave you free to create, with few constraints. Obviously, we are oversimplifying a more complex reality that, however, increasingly reflects reality.

Riccardo Silvi, professor of performance measurement systems at the University of Bologna, frequently asks his students questions, looking for possible solutions to business problems. When they answer he then asks: “Do you think it, or do you know it?”. This question forces them to question whether their opinions are based on knowledge or personal feelings, inviting them to adopt a rational, analytical approach based on elements and analysis of context data. We, too, every day in our work, should try to answer Professor Silvi’s question.

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Indeed, it is precisely in choosing what to observe, and in how to cross-check the data arising from this observation, that we express much of our ‘strategic talent’.
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Yet very few companies carry out, for example, a serious analysis of their customer portfolio.

Identifying customer segments will allow us, among other things, to study payment methods and credit risk as the characteristics of the target change. This is how many companies discover that the famous 20% of customers that generate 80% of turnover (the ones that should represent the ‘hard core’ of their business) are, in fact, a ‘time bomb’ ready to go off at any moment. We also receive information that is fundamental to calibrate sales arguments: we might discover that entire customer segments are much less sensitive to price leverage than other characteristics of the product or service. I personally believe that the minimum database available, should be as follows:

• Analysis of sales trend data, not only the general turnover but also margins and payments. Obviously, searchable by product, commercial area, customer;
• Analysis of general market data with (if possible) identification of our penetration rate and that of our main competitors (for the calculation of the share, take a look at the post ‘Mission Impossible: calculating the market share when there are no data’);
• Comparison analysis with the competition, crossing the characteristics of the entire supply system (hence, not only products, but also services, communication and everything that constitutes the company ‘output’) with the market share to better identify which choices have been rewarded by customers;
• ABC analysis of customers (the one we talked about in the post mentioned at the beginning of this article);
• Verification of the company’s performance, with a specific focus on the commercial activity that shows, for example, visits to customers, the estimates generated and their percentage of closure as well as the number, frequency and average amount of purchases. We should also check how many new customers are entering our portfolio.

Finding all this information is not always easy, but I assure you that in many cases all you need is an Excel spreadsheet and a little good will: you will be amazed at how much information and how many new ideas you will get from this work! Observing is a ‘creative’ act not only because it prompts new ideas, but also because – in a certain sense – it changes the object of our observation.

Just as in quantum physics, even in sales the act of observing customers carefully, of asking them the right questions and pinpointing their needs with greater precision, changes our relationship with them, thereby increasing our commercial performance.

It is a virtuous circle that must be triggered as soon as possible!

We leave you with an exercise that will help you reflect on today’s topic and which is, once again, inspired by Professor Silvi’s lectures. Imagine taking a photo of your typical customer and then trying to describe their characteristics, their styles of consumption, the history of the relationship that binds you together and so on. How many of the things you are describing are supported by data and how much is ‘what you think’? Have you ever verified all this by checking the figures?

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