Failing to invest in data analytics happens all too often; in fact it is the norm. However, the adoption of specialist analytics platforms is on the rise. Companies are increasingly building in-house analytics teams or partnering with experts to manage their analytics needs.
According to Forbes, the data analytics market is expected to grow at a compound annual rate of almost 30% for some time, with an increasing preference among firms for data-driven decision making.
For marketing professionals, the importance of investing in data analytics - and in the right areas - cannot be overstated. Get it right, and you can transform your business into a finely tuned, data-powered sales engine. Get it wrong, and improper investments can misguide your data, ultimately hindering your capacity to make informed choices and harmonize your actions with your overarching business strategy.
In this article, we explore the hidden costs and missed opportunities of inadequate data analytics investment, with guest contributions from a panel of ecommerce leaders.
Why aren’t firms embracing data?
Innovative companies use data analytics for customer insights, revenue growth, efficiency, and better customer relationships. But why do some firms resist it? Here are some of the most common reasons:
The cost is presumed to be too high:
There’s a frequent misconception that investing in data analytics is going to be expensive - but that’s not true. Any business, regardless of its size or budget, can get started with data analytics. You’ll probably already have the data in your finance system, CRM or on your server, so you just need to work out what you want to analyze, and how to do it. There are lots of low-cost tools on the market which you can put to use to interpret your data. You also need to weigh up the cost to your business of not investing. Paying attention to the wrong data, or no data at all, is going to mean that your business decisions and other investments - such as marketing campaigns - are unlikely to be effective or measurable.
Data analytics is just for big businesses:
You might be surprised to hear that when it comes to data analytics, size doesn’t matter: it's about data quality, not quantity. A lot of small to medium-sized businesses don’t believe that they have ‘enough data’ for data analytics to really make a difference to their business, but it’s actually the smaller, more agile businesses that can see quick, significant benefits as a result of data analytics. As a smaller business, there is probably less red tape around changes, making it easier to make adjustments - to a web page for example. Arguably, smaller businesses have an advantage when it comes to making use of data analytics.
It’s too technical for us:
You don't need an IT degree to use data analytics in your business - data analytics isn’t about knowing how to code, it’s about interrogating your data in the context of your business and customers to draw value from it. Partnering with experts simplifies the process even further, and you can also start simply and build the extent of your analytics over time - for example, starting with the setup of a few key metrics and reports, and adding to these when you’re ready.
The Tech Trap - Wrong Tools, Higher Costs
Investing in data analytics is crucial, but investing in the wrong tools can be equally detrimental. Using outdated or inappropriate analytics tools not only leads to wasted resources but also incurs unnecessary costs.
Most organization’s reports are set up for managers to check top level performance, not for deeper analysis and action. It’s fine to have these reports, but recognise them for what they are and ensure you have much more specific reporting and analysis which allow you to drive performance at the tactical level.
Incendium AI founder James Kinsley explains the common problems affecting businesses when it comes to data analytics:
“Clients often come to us with an existing analytics setup in place which they simply aren’t getting any value from; it isn’t driving smart business decisions. 9 times out of 10 this is because they don’t have the right fundamentals in place and so even with the best team looking at the data, it’s going to be a stretch to get anything out of it. It’s our job to take a step back, help them re-assess their goals, the questions they need answering and come up with a solid strategy that will help them get the most out of their data. Every byte should help drive consistent, profitable, predictable growth and ROI.”
To drive growth, you will need to adopt new metrics and understand why traditional metrics no longer give you what you need in order to make correct, impactful decisions. Not sure which metrics you should be tracking? Read our ultimate guide for ecommerce businesses: “Actionable Ecommerce Measurement: The Incendium Blueprint For Rapid, Profitable Growth” and discover some of the most underrated ecommerce analytics metrics here.
Don’t Surrender Your Competitive Edge
In almost any sector, when it comes to beating your competition, staying ahead of the curve is imperative. Neglecting data analytics means surrendering the competitive edge that data-driven insights provide. If your competitors are not making the same mistake, they’ll be able to scale faster and pull ahead.
Every unanalyzed piece of data is a potential revenue stream left untapped; customer behavior patterns, purchasing preferences, and emerging trends all provide opportunities for optimization. When you fail to invest in data analytics, these revenue streams remain hidden beneath the surface, out of reach.
We asked a panel of ecommerce experts the following question: “In terms of data, what are the key things you have found holding you back from doubling investment in marketing spend?”
Here are their insights:
Vidhi Arora, Head of Analytics and Insights at Stark Group
“Being able to prove the value that offline marketing brings.”
Adrian Goller, Performance Marketing / Analytics Team Lead at ETERNA Mode GmbH
“Internal resources in people / manpower that are capable of using and working with data. Sometimes also to connect different data pools or silos to gain insights.”
Zeeshan Javed, Head of Media Performance and Analytics at Foxtel Group
“Often it comes down to diminishing return of activity. It is a really hard thing to measure when you don't know how far along the curve you are. There are a plethora of studies indicating what it roughly is for each industry, but it is hard unless a company invests in the right marketing analytics to gage what your personal diminishing return curve looks like for your product base in your country, using your specific omni-channel mix. As such, predictability of growth is difficult, as the growth won't be linear and the more you expand your spend, returns won't grow proportionally. Without knowing this up front, it is difficult to sell any increase in investment upwards to the business.”
Marcin Bernad, Head of Analytics (Marketing & Product) at eobuwie.pl SA
“Deep understanding of user interactions and behaviors from the first touchpoint with our brand to purchase.”
João Rodrigues, Head of Data and Analytics at Mercadão
“The key factor holding us back from doubling investment in marketing spend is the challenge of establishing a trustworthy attribution model. Finding a model that inspires confidence from all stakeholders is difficult due to the complexity of the customer journey, multi-channel interactions, time lag, data accuracy, subjectivity, and user behavior. To overcome this challenge, we need to focus on collecting high-quality data, experimenting with different attribution models, using data-driven approaches, and continuously refining our approach based on feedback and analysis. A reliable attribution model will enable us to make more informed decisions on marketing spend and optimize our strategy for growth.”
The High Cost of Missed Opportunities
When it comes to the cost of investing in data analytics, the missed opportunities are more than just a setback; they're a financial burden. Under-investing will cost you time and money in the medium and long term; you’ll be chasing your goals without a solid foundation of insights into your marketing, your customers’ spending habits and preferences, or an understanding of business performance at each stage of the funnel.
The path to data-driven success begins with informed decisions, and neglecting data analytics is a choice no business can afford to make.
Read our free ultimate guide for ecommerce businesses: Actionable Ecommerce Measurement: The Incendium Blueprint For Rapid, Profitable Growth
Unlock more analytics insights from ecommerce leaders here: https://www.incendium.ai/resources/26-ecom-analytics-experts-top-metrics-measures