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A New Look at the Value of Data to Marketers and the Economy

  |  October 22, 2013   |  Comments

New research from the Data-Driven Marketing Institute outlines the scope and flow of data through our data-driven economy.

4thgraphicMarketers instinctively know the value of marketing data - it's the fuel that drives relevancy, engagement, response and ultimately: Revenue.

However, it's hard to find the hard, cold facts around what, exactly, that data is doing for our industry and the economy. New research from the Data-Driven Marketing Institute, a think tank of the Direct Marketing Association (DMA), outlines the scope and flow of data through our Data-Driven Marketing Economy (DDME). (Full disclosure: I work for DMA.)

The Value of Data: Consequences for Insight, Innovation and Efficiency in the U.S. Economy shows that yes, the Data-Driven Marketing Economy is big--and has big impact. There are some surprising aspects, though, which may provide inspiration and opportunity for your business.

First, the facts:

  • The Data Driven Marketing Economy (DDME) added $156 billion in revenue to the U.S. economy and fueled more than 675,000 jobs in 2012 alone. The authors believe this represents about half of all measured media advertising expenditures and direct marketing expenditures in the U.S. in 2012 ($298 billion). 
  • The real value of data is in its exchange: 70 percent of the value of the DDME depends on the ability of firms to exchange data across it. This includes traditional practices to append public or behavioral data, as well as new practices like digital onboarding, which matches digital visitors and buyers with offline profiles.
  • Individual level consumer data helped marketers optimize expenditure on interactive and direct response marketing, both offline and on. It reduced inefficiency in matching producers and customers, or increased effectiveness, or both. A second consequence of the DDME was to improve the accountability of marketing investments.
  • All firms that use data to strengthen customer profiles and optimize targeting, however, small businesses are the biggest winners in the DDME, because they rely much more on the flows of data than large firms (who already have more customers). The authors found that finding new customers is the business practice that most relies on this exchange of data.
  • The vertical sectors that contribute the most to the DDME are eCommerce (22 percent with $34 mm), Postal Production (21 percent with $32 mm) and Search Audience Assembly (12 percent with $19 mm). Teleservices and eCommerce Fulfillment both ranked with 6 percent, and all the digital channels combined sum to 25 percent(including Search but not eCommerce).
  • The study was concerned with the DDME as it existed in 2012, but the authors anticipate that over the next five years the DDME will grow substantially. Not only will the online sector expand, but offline marketing practices will increasingly rely on individual-level data, the report says.

s-miller-ddmi-value-of-data-table-1

Source: The Value of Data: Consequences for Insight, Innovation and Efficiency in the U.S. Economy, 2013.

The report was conducted for policy conversation, not necessarily marketing purposes. However, I see three primary areas of import for marketers here:

  1. Proving the value of data-driven marketing to gain investment for management and stewardship of its collection and use;
  2. Demonstrating the value of data to digital channels, despite the lower budgets for data collection and use; and
  3. Moving conversations with policymakers from fear to fact-based.

Proving the Value of Data-Driven Marketing

First, proving value internally and ensuring investment is commiserated. "Data" in the report is not necessarily only digital. The study investigated many different sectors and found value being added in many ways that vary from rented lists of prospects, audience segments assembled by online publishers, personalization of direct mail offers, and all forms of delivery (e.g.: USPS sorting machines, Facebook servers, variable data printers).

In this way, the authors focus on the scope of our data-driven economy, not just the scale. As marketers, our task is to understand the value of individual data to our business so that we can invest properly, protect it and steward the responsible use of it.

Consider the impact of marketing data in:

  • Amplifying knowledge of current customers.
  • Accelerating the intelligence used in rapid product/service development.
  • Responding to customer inquiries and needs in (near) real-time.
  • Rapidly adapting messaging and offers to reflect shifts in consumer sentiment and activity.
  • Assessing the need for customized printed production.
  • Measuring the value of each media spend.

Demonstrating the Value of Data to Digital Channels

One of the more surprising and counter-intuitive findings of this report is that a large, even disproportionate amount of the data-driven economy is takes place in the off-line, non-digital economy. The authors account for this by explaining that the fees associated with audience classification and assembly in the offline world are significantly higher, not that digital channels are any less data-driven. The authors find that the comparison of email marketing and direct mail helps "illustrate a general insight into the overall efficiencies produced throughout the DDME."

The report finds, "Email's virtue is that the marginal cost of delivery is virtually zero. Yet the study found its net value added at $1 billion, suggesting a paradoxically low level of expenditure by marketers on such an inherently attractive medium. By contrast, direct mail with its reportedly lower return on investment was found in this report to have a net value added of an order of magnitude larger than that of email."

Moving Conversations from Fear to Fact

Third, we need to protect our data-driven way of life. In our increasingly pressured policy environment, where Congress, state legislators and regulators want to restrict marketers use of data for marketing purposes, this study also definitively shows that regulation restricting the responsible use of data would impact innovation, small businesses, jobs and economic growth... and harm the U.S. Economy.

Check out the full study and share your impressions of the findings in the comments.

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ABOUT THE AUTHOR

Stephanie Miller

Stephanie Miller is a relentless customer advocate and a champion for marketers creating memorable online experiences. A digital marketing expert, she helps responsible data-driven marketers connect with the people, resources, and ideas they need to optimize response and revenue. She speaks and writes regularly and leads many industry initiatives as VP, Member Relations and Chief Listening Officer at the Direct Marketing Association (www.the-dma.org). Feedback and column ideas most welcome, to smiller AT the-dma DOT org or @stephanieSAM.

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