We see the phrase “data-driven marketing” thrown around all the time. It sounds impressive but if you’re not 100% clear on what it’s actually all about, you’re not alone.
So, what exactly is data-driven marketing?
This type of marketing deals with extracting actionable insights from a large pool of data sets. These insights are then used for predicting consumer behaviour, creating amazing products, and improving brand perception.
In other words, data gives you more clarity and helps you to make informed marketing decisions. Having access to correct data also allows you to refine your existing marketing strategies so you can make meaningful predictions about your future products and come up with accurate solutions.
A brief history of Data-Driven Marketing
The origin of data-driven marketing is traceable to Customer Relationship Management. Around the 80s, banks and insurance companies had figured out ways to establish personal relationships with their customers using the data they collected via their CRM.
Usually, they would phone the customers or send letters to their addresses whenever the need arose. At the time, this strategy was fresh off the block and helped them win more customers.
As more businesses began to realise the importance of data, focus shifted towards creating consumer-focused products and attracting the right buyers for products. Data experts have said that data-driven marketing takes its root from the big data concept. That couldn’t be further from the truth.
For as long as people keep mining data, marketers will keep benefiting from its usage. Data will become more accessible, the process of analysing data will become more efficient, and more opportunities will open up for businesses and organisations to benefit.
What kind of Data should you collect?
Data is broadly categorised into 3 types: consumer data, financial data, and operational data.
From this broad categorisation, we can get useful information such as gender, IP addresses, location, email addresses, device type, choice of messaging app, and preferred social media apps.
Other useful pieces of information include transaction histories, buying habits, marketing statistics, pricing, page activity, consumer satisfaction, and purchase criteria.
While these data components are useful in their own rights, you may not necessarily have to collect them all at once. You have to be able to determine the kind of data that's helpful to your business at every stage and that which isn’t.
Collecting data willy-nilly won’t cut it either. Not only do you need to clarify what kind of data you need, you also need ‘clean’ or high quality data to base your decisions on.
Benefits of using Data-Driven Marketing
There are several benefits in using data-driven marketing, but in this blog post, we’ll take a look at some of the most critical ones.
1. Data-driven marketing saves you time
The ability to analyse complex data and pull out the most accurate information within a short time frame is by far the biggest advantage of data-driven marketing. That clarity can help you make better, faster decisions when planning and executing your marketing campaigns. Having access to helpful data also means that you’ll get more clarity about your target audience.
2. Increase ROI with personalised messaging
In marketing, personalisation is the key to engagement. People don’t respond to generic messaging as much as they do the personalised ones. In fact, 99% of marketers claim that personalisation smoothens customer relationships. Also, businesses that employ data-driven personalisation delivered 5 - 8 times the ROI on marketing spend.
3. Reduce the risk of product failure
One of the benefits of data-driven marketing is that it inspires you to identify what works and what doesn’t work, especially in the aspect of product development. When there’s no helpful data to use, you stand the risk of creating a subpar product that might hurt your brand reputation and send your customers away. But when you understand what consumers love about a product, you’re already a step closer to creating a product that can stand the test of time.
Challenges of Data-Driven Marketing
So far, we’ve examined the good side of using the data-driven marketing approach to marketing. But it would be completely unfair to not mention some of the challenges tied to this method of marketing.
Finding the right data to use can sometimes be a big headache. Usually, you’re confronted with a large pool of data and it takes time and effort to make sure you end up using the right data. It can also be particularly challenging to normalise, interpret, and link data, especially if you’re new to it.
For this reason, there’s a need for marketers to work towards creating customised systems that are capable of collecting data in real-time, verifying them, and keeping them up-to-date. With this in place, it becomes much more manageable to use your data, and your outcomes will be even better.