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Data Fog Blinds Marketers

Companies spend too much time simply getting data into a form where it can be analyzed, professor says. That doesn't leave enough time for business problems.

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Companies are caught in a data fog, and they'll probably stay there for a few years, said Jeff Tanner, professor of marketing at Baylor University's Hankamer School of Business.

Tanner was involved in helping to value a recent sale of customer transaction data, something he said has grown more common as new sources of data, like social media, emerge. Companies want data they can use to create more complete pictures of individual customers to tailor their marketing.

By and large, though, he said that companies are still struggling to get data into a form where they can analyze it. A study he did of retailers and consumer packaged goods companies found that companies spend 70% to 90% of their time getting data into a form where it can be analyzed. That means as little as 10% of that time is spent on actually using the data to help the business.

This study tells us companies by and large aren't able to see what's in their data. For privacy advocates, the good news is that we're nowhere near a time when this pizza-ordering nightmare will come true. Of course, companies can already piece together enough information to raise privacy hackles. But as Tanner told Information Week, privacy is a bifurcated thing -- some people care a lot, some people don't. Companies will have to learn how to craft messages that don't inadvertently trigger outrage, as Target did when it turned out it had accidentally outed a pregnant teen, raising concerns.

[Are you comfortable with how much personal data your GPS collects? Do Drivers Need More Privacy Protection?]

"The mistake they made was in announcing her as pregnant when she wasn't ready," Tanner said. He said Target has reformulated the way it makes such offers, blending items a pregnant woman might want with other products and not directly making references to being pregnant.

Most companies still struggle to get such useful information out of their data. Tanner says the challenges companies face in analyzing data will lead to a period of what he calls "information brokering," where companies outsource their data to others to analyze. Data sales will become less common in the short term. "We're running up into analysis and storage and preparation capacity limits," Tanner said.

So what is data worth? The answer boils down to how close it gets you to a valuable transaction.

Note that it doesn't mean how close it gets you to a customer. Location data by itself isn't valuable. "What I keep hearing over and over from vendors is that you'll be able to give discounts to buyers, and blahblahblahblah. If I know your regular stop is 3rd and Broad, and there's a Starbucks there, and I push you a note saying 'here's $1 off a latte,' that's just mindless discounting."

Tanner says what companies need to do is glean better information from their data. In his Starbucks scenario, the company would want to know if the driver at 3rd and Broad ever actually goes into a Starbucks, and if so, what does she buy, and when? For himself, he notes that sometimes his local 7-11 is out of his favorite apple fritter when he stops in. The company loses a sale and Tanner doesn't get what he wants. Ideally, the 7-11 should be able to use data about when things sell and when they don't to create a more efficient supply chain.

For now, his fritter is lost in what he calls "a lot of murkiness" in the data.

Michael Fitzgerald writes about the power of ideas and the people who bring them to bear on business, technology, and culture.

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User Rank: Author
1/13/2014 | 5:14:04 PM
Mindless discounting
The go-to example in a lot of digital marketing is about offering a coupon, as Prof Tanner notes. What companies really need is data analysis that helps them build closer ties to their customers so they can offer them what they really want -- so companies can sell it WITHOUT aggressive discounting. But do companies have the cooperation among marketing, IT, customer service, etc. to cut through this data fog? Is that's what's missing?     
Michael Fitzgerald
Michael Fitzgerald,
User Rank: Moderator
1/14/2014 | 2:52:46 PM
Re: Mindless discounting
it's a tough problem, and I think he's defined it well. less clear to everyone is how companies can figure out ways to get past it. Those that do will clearly gain advantage over their rivals. 
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