Matthew Jauchius, CMO, Nationwide Insurance, discusses what it takes to build an organization that can use advanced analytics to make better decisions and deliver value.
How advanced analytics support marketing decisions
"Marketing analytics have not allowed us to make decisions we couldn't have made before. But they have allowed us to make every decision we made before better.
"Before we made the investment in marketing analytics, we were already spending hundreds of millions of dollars on promotional activities. We had to decide, how much goes to television? How much goes to digital? How much goes to sports marketing or sponsorships? We had to decide how many ad spots to run per year and whether to have a spokesperson or not. Many times, these decisions were more art than science — based on instinct and experience.
"Marketing analytics allows us to make every single decision I just mentioned better with data. Marketing is definitely on a journey. I don't know if it's hit the tipping point from art to science. But there's no question in our mind at Nationwide that it is on that journey from art to science.
"For example, one of the decisions that we made was: should we spend money in regions or metropolitan areas where we have already a high concentration of agents? Or should we spend our money across the entire country? Analytics enabled us to make the right decision, which for us was to go for more of a national buy and put less money in the local geographical buy. This gave us a double-digit increase in marketing efficiency as measured by quality demand generated per dollar."
The importance of Big Data and advanced analytics
"From 2009 to 2012, promotional spend in property and casualty insurance in the United States went up 62%. We went up 0%.
"Yet we increased demand generation across all channels, which is clicks on the Internet, calls into our call center, and quotes from our exclusive agents, by 15% a year. We have achieved over a 15%, approaching 20%, per annum increase in productivity in marketing for four years running since 2009.
"By the way, this was achieved with 11% lower headcount and $4.5 million less market research and data costs."
The three lessons learned about advanced analytics
"You need to invest in organizational support outside of marketing. This includes your board of directors, senior management, the chief executive officer, and the other C-suite executives. We're spending hundreds of millions on promotional activity. When times get a little tough, that's the first thing people want to cut. 'Hey, call the marketing guy. Cut his ad budget.' Without communicating clearly marketing's role in driving growth with these constituencies, you'll have a tough time countering the call to cut budget.
"You also need to build the support inside of marketing. You invest in people, technology, and data because this capability costs money.
"The third thing is to think about your own marketing organization. You're talking about changing the way that creative people work, who often have been brought up thinking of marketing as an art. You're now bringing in a bunch of folks with spreadsheets, which means you're going to change the way they work together and do things."
The biggest challenge of Big Data
"The concept I would urge most marketers to think about is the notion of what you're really doing with that big data. You are trying to change the way decisions get made in marketing. And academically, we can say, 'Well, of course I am. I apply big data. I have statistically more valid techniques. And therefore, I have better decisions.' But ultimately, every organization is about people.
"In marketing, the people who have had the control and the power for generations are often the creatives. In truth, the creative process does start with data and so forth. But at some point, you have to have inspiration. You have to have creativity. Forgetting the people part of this art-to-science journey could mean a disaster."
Transforming your organization to improve its analytics
"Most of the time, we think of marketing councils as bring together people from outside of marketing, such as pricing, finance, or distribution to use better data and make better decisions.
"What I'm suggesting is you use the same concept inside marketing. Typically, what has arisen in most marketing departments is a creative shop or a brand shop. Now you have a marketing analytics shop and a market research shop. All of these groups have critical pieces to the puzzle. But they may not have worked together in the way you need them to in order to get the right decisions.
"To increase our agility, I invested in talent, and I made organizational changes around the decision making of digital.
"At Nationwide, as in many companies, the Internet and mobile had grown up within a large business unit, whereas social technologies and the infrastructure was in the corporate center. What we determined was that a core set of digital capabilities around advertising, mobile, social media, and infrastructure — like usability labs — actually ought to be in the corporate center, which I control as chief marketing officer. Making that organizational change enabled me to put all of the digital resources in one place.
"The second step was putting the promotional dollars budget under one senior executive, myself. That's the only way I know how to do it. Otherwise you have committees, which do not move at the speed of digital. You have to put dollars and decision-making in the same place to move at the speed of digital."
The importance of bridge building
"One of the most important lessons we've learned throughout this journey is marketing is not an island. In many companies I've seen — and Nationwide is no exception — a lot of times, marketing has a vague status. 'We're going to give a certain amount of dollars to those guys. They're going to make ads and do whatever it is they do. And let's hope it generates demand.' Some companies are far more integrated than that, and some are less. It depends on the company.
"What we've done at Nationwide is build explicit partnerships with the technology folks, the finance people, and then the business people. We've built the answers to business questions into the management forums and the regular management meetings so that now marketing is not a separate thing. It's integrated into what we do."