Marketing efforts, both paid and organic, share the same overarching goals: increase brand awareness, drive thought leadership, and generate qualified leads. Broad goals like these can be broken down into specific, trackable metrics that marketing teams can use to define success and gauge performance.
If you’re not a marketer or have never engaged with marketing analytics, you may wonder how progress is tracked, where marketing data comes from, and why analyzing it is important. This is where marketing analytics comes into play.
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Marketing analytics is the process of tracking and analyzing data from marketing efforts, often to reach a quantitative goal. Insights gleaned from marketing analytics can enable organizations to improve their customer experiences, increase the return on investment (ROI) of marketing efforts, and craft future marketing strategies.
According to a report conducted by PwC, highly data-driven companies are three times more likely than their less data-driven counterparts to see significant improvements in decision-making. Whether you work with marketers or are one yourself, it’s important to be familiar with the basics of marketing analytics and how it can inform your organization's decisions.
Where Does Marketing Data Come From?
The data you use to track progress toward goals, gain customer insights, and drive strategic decisions must first be collected, aggregated, and organized. There are three types of customer data: first-party, second-party, and third-party.
- First-party data is collected directly from your users by your organization. It’s considered the most valuable data type because you receive information about how your audience behaves, thinks, and feels.
- Second-party data is data that’s shared by another organization about its customers (or its first-party data). It can be useful if your audience types are the same or have similar demographics, if your companies are running a promotion together, or if you have a partnership.
- Third-party data is data that’s been collected and rented or sold by organizations that don’t have a connection to your company or users. Although it’s gathered in large volumes and can provide information about users similar to yours, third-party data isn’t the most reliable because it doesn’t come from your customers or a trusted second-party source.
While it’s important to know that second- and third-party sources exist, first-party data is the most reliable of the three because it comes directly from your customers and speaks to their behaviors, beliefs, and feelings. Here are some ways to collect first-party data.
Surveys
Surveying your current and potential customers is a straightforward way to ask them about their experiences with your product, their reason for purchasing, what could be improved, and if they’d recommend your product to someone else—the possibilities are endless. Surveys can be anything from multi-question interviews to a popup asking the user to rate their experience on your website.
A/B Tests
An A/B test is a way of testing a hypothesis by comparing user interactions with a changed version of your website or product to an unchanged version. For instance, if you hypothesize that users would be more likely to click a button on your site if it were blue instead of red, you could set up an A/B test in which half of your users see a red button (the control group) and half see a blue button (the test group). The data collected from the two groups’ interactions would show if your hypothesis was correct. A/B tests can be a great way to test ideas and gather behavioral data.
Organic Content Interaction
Interaction with organic content—such as blog posts, downloadable offers, emails, social media posts, podcasts, and videos—can be tracked and leveraged to understand a user’s purchasing motivation, their stage in the marketing funnel, and what types of content they’re interested in.
Paid Advertisement Interaction
You can also track when someone engages with a digital ad you’ve paid to display, whether it’s on another website, at the top of search results, or sponsoring another brand’s content. This data is crucial in determining where your customers are coming from and what stage of the funnel they see your ads.
Related: How to Learn Business Analytics Without a Business Background
How Is Marketing Data Analyzed?
With numerous types and sources of marketing data, it must be aggregated and structured before analysis. Some platforms you can use to do so are:
- Google Analytics
- HubSpot
- Sprout Social
- SEMRush
- MailChimp
- Datorama
In addition to tracking and aggregating data, you can use several of these platforms to conduct analyses and pull out key insights with algorithms. You can also manually analyze data by exporting datasets into Microsoft Excel or another statistical program, create visual representations of it using graph or chart functions, and run regressions and other analytical tests.
Why Is Marketing Analytics Important?
Understanding how to gather, aggregate, and analyze data can enable you to extract useful insights you can use to make a data-informed impact on your organization.
1. Improve the User Experience
Collecting and analyzing your users’ first-party data can reveal how they feel about their interactions with your product and website. Whether their feelings are explicitly stated (for instance, in a survey) or implicit in their behaviors (for instance, leaving the website shortly after loading the page), having this qualitative and quantitative information can allow your organization to make changes that address their needs and increase the potential for leads to become customers.
2. Calculate the Return on Investment of Marketing Efforts
Another important function of marketing analytics is calculating monetary gain that can be attributed to specific marketing channels or campaigns. To calculate the return on investment for a specific marketing effort, use the following formula:
ROI = (Net Profit / Cost of Investment) x 100
For example, say you release a video explaining the benefits of your product that costs $1,000 to produce. You track how many people navigate to the product page on your website immediately after watching the video and see that it led to 30 new customers in a given period. If your product costs $50, and each new lead bought one, you can attribute $1,500 of revenue to the video. The net profit, in this case, is $500.
Plugging this into the ROI formula looks like this:
ROI = ($500 / $1,000) x 100
ROI = (0.5) x 100
ROI = 50%
Any time ROI is a positive percentage, the marketing effort—in this case, the video—can be considered profitable. Without data to understand where leads are coming from, calculating the financial impact of specific efforts wouldn’t be possible. ROI calculations can determine which marketing efforts drive the most sales and prove projects' value.
3. Plan Future Marketing Strategies
With knowledge of your customers and the ability to track your marketing efforts’ return on investment, marketing analytics provides an opportunity to create data-driven strategies for your organization.
By analyzing marketing data, you can discover what’s working, what hasn’t worked, and how your customers feel about their experiences with your product and website. You can also get a full picture of the impact that marketing efforts are having on your company.
With that information, you can plan for the future. What should you do more of to reach your quantitative goals? Which effort failed to generate new leads and should be dropped from future plans? Data analytics helps you strategize and answer these kinds of questions.
Becoming a More Analytical Marketer
Harnessing the power of data can enable you to make strategic decisions and feel confident in your marketing efforts.
Honing your analytical skills can be as simple as considering others’ points of view, playing strategic games and brain teasers, or engaging with data on a daily basis. It can also be as structured and purposeful as taking an online analytics course to build your skill set and make connections in the analytics field.
Are you interested in strengthening your analytical skills? Explore Business Analytics and learn to collect, analyze, and interpret data to make an impact.
