What is marketing analytics Why has it become so central to gathering data about customers and performance?

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.

What Is Marketing Analytics?

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.

In the pursuit of digital transformation, more and more marketing teams are looking to take advantage of what could be their organization’s greatest asset: enterprise data. Spending on data analytics was over $29 billion in 2021, because of a 26% increase from the previous year.

But what is marketing analytics exactly, and what does it have to offer your organization? In this article, we’ll go over everything you need to know. The most important benefits, the best marketing analytics tools and metrics, and the challenges that marketing analytics has to overcome.

Marketing analytics is the use of quantitative methods to analyze marketing data, helping you make smarter data-driven decisions. Thus, the goal of marketing analytics is to:

• Calculate the impact and return on investment (ROI) of various marketing activities.
• Identify new opportunities, channels, and markets before your competitors do.
• Understand the behavior and desires of your customers and prospective customers.
• Monitor trends over time, and predict future results based on historical data.

Operating based on gut feelings is often not a bad way to go. However, it can only get you so far, and it won’t help you find patterns in large data sets. What’s more, key decision-makers such as managers and executives will be reluctant to sign off on a new idea unless you have solid proof of its plausibility.

That’s where marketing analytics comes in. It advances the field of marketing from an art to a science. Marketing analytics removes the guesswork from the equation in favor of evidence-based arguments. As this is so, there are a variety of metrics that can be tracked and analyzed in marketing analytics. These include website traffic, conversion rates, click-through rates, cost per acquisition (CPA), customer lifetime value (CLV), and more.

As a result of tracking these metrics, marketers gain insights into the performance of their marketing campaigns . Marketing analytics can also help marketers to identify opportunities for growth and optimization.

How is Marketing Analytics Accomplished?

How then is this all accomplished? There are many different ways to approach marketing analytics. Most businesses use a combination of qualitative and quantitative data to get a complete picture of their marketing efforts.

To clarify, qualitative data includes things like customer surveys, focus groups, and social media data. This type of data can be very useful in understanding customer sentiment and what motivates them to make a purchase.

Additionally, quantitative data includes things like website traffic data, sales data, and click-through rates. Data like this helps businesses understand which marketing channels are performing well but also which ones need improvement.

Who is Needed to Perform Marketing Analytics?

Consequently, there are a few key players involved in performing marketing analytics:

• Marketing data analyst: responsible for collecting, cleaning and organizing marketing data. They use statistical techniques to analyze data and uncover insights that can be used to improve marketing campaigns.
• Marketing strategist: responsible for developing marketing plans and strategies. They use insights from marketing data to create plans that will optimize campaigns and achieve desired business objectives.
• Marketing manager: responsible for overseeing all aspects of marketing campaigns, including budgeting, execution and measurement. They use data from marketing analytics to make decisions about where to allocate resources and how to optimize campaigns.

4 Benefits of Marketing Analytics

Understanding now what marketing analytics is, how does it benefit you? According to McKinsey & Company, marketing analytics can have enormous impact on organizations of all sizes and industries. A study of 400 companies found that integrated marketing analytics can free 15 to 20 percent of marketing spending. That is a significant impact! So then, what are the details about how marketing analytics benefits you?

1. You get a better understanding your customers

If you want to understand what truly makes your customers tick, marketing analytics can help you get inside their heads (or as close as possible without needing an MRI). Marketing analytics offers a 360-degree view of your customers by collecting as much data as possible, from their first contact with your business to their most recent purchase. Different ways of segmenting your audience, such as behavioral and demographic segmentation, can help you deliver the right messages to the right people.

Organizations that know more about their customers are more likely to keep their customers happy—and do better for themselves as well. According to McKinsey: “Companies that make extensive use of customer analytics are more likely to report outperforming their competitors on key performance metrics, whether profit, sales, sales growth, or return on investment.”

The benefits of customer analytics include:

• Delivering effective, personalized messages that are more likely to convert.
• Increasing customer loyalty, engagement, and positive word of mouth.
• Reducing churn rates and raising customer retention.

Learn How Audience Segmentation Can Help You Reach Your Customers

2. You start outperforming your competitors

Of course, converting and retaining more customers also means that you’re in a better position to beat your business rivals. Marketing analytics can help you identify emerging trends and ideas before they hit the mainstream, getting the jump on your competitors.

Just as marketing analytics can be applied to your own marketing campaigns, you can also apply it to your competitors. For example, competitor analysis can help reveal your rivals’ strengths and weaknesses, find interesting strategies and campaign ideas, and identify opportunities for poaching customers.

If you don’t keep up with a robust analytics program, then the fate of your business could be at stake. The well-known decline of Kodak, for example, happened after the company made poor strategic decisions and failed to prepare for the rise of digital photography, which competitors like Canon and Nikon embraced.

3. You are able to measure your performance

You might be completely satisfied with the marketing campaign for your latest product, but the real test is how your target audience responds to it. That’s where marketing analytics comes in, collecting people’s reactions and responses due to your marketing efforts through quantitative and qualitative information.

Marketing analytics measures the business impact of your marketing campaigns, so that you know precisely how well each campaign is performing. Selecting the right metrics and KPIs for marketing analytics will be highly rewarding when it comes time to crunch the numbers. Later, we’ll discuss some of the best metrics and KPIs for marketing analytics programs.

4. You can make informed decisions about resource allocation

Even the biggest marketing department has a finite amount of resources at its disposal: employees, budget, technology, etc. But how can you distribute these resources in an optimal way (or as close to optimal as humanly possible)?

Marketing analytics can provide the answer: previous performance should match the current investment. In other words, people and campaigns that have done well in the past should be prioritized when allocating resources for future marketing activities. Companies like Amazon, The Mariott Hotels, Netflix, Mcdonald’s, and Uber Eats are just a few huge companies that are investing in marketing analytics.

With the many benefits of marketing analytics come great power and responsibility. To create an effective program, you’ll need a robust suite of tools at your disposal. In this section, we’ll go over 3 types of tools that you should consider adding to your arsenal.

1. Website analytics tools

Website analytics tools are almost as effective as watching over your customers’ shoulders (without being quite as creepy). Event-based analytics tracks people’s clicks and actions as they navigate through your website, helping you understand each customer’s journey from start to finish. For example, when presented with an overlay that advertises a sale on your website, what percentage of customers click through to look at the sale items?

There are a wide variety of website analytics tools, depending on which behaviors and actions you want to measure. Website analytics tools can measure how long customers spend on each page, tell you which search terms they entered to get there, and even generate a “heatmap” of the cursor activity on a specific page, showing which areas customers tend to focus on. Examples of web analytics tools are Google Analytics, Adobe Analytics, Mixpanel, Matomo, StatCounter, and many more.

2. A/B testing tools

A/B testing is an invaluable practice for marketing analytics. During A/B testing, customers are segmented into two or more groups, each of which is presented with a different user experience (unbeknownst to them). By measuring the behavior of each group, you can determine which alternative is most effective for your purposes.

The applications of A/B testing are endless: the text of your headings and calls to action, the website’s design and layout, the logo of your business, and even the color of a particular button. A/B testing is a powerful technique, but you need to use it the right way. For example, the more elements you squeeze into a single test, the harder it will be to understand the motivation for any particular success or failure.

3. Digital marketing analytics tools

The Internet is a big place, especially for marketers. Digital marketing campaigns may comprise a variety of channels: social networks like Facebook, Twitter, YouTube, and Pinterest; search engine optimization (SEO) for Google and other search engines; platforms for display ads and search engine ads; and much more.

Capably dealing with so many channels will require you to master a number of tools for digital marketing analytics. For maximum productivity, the best teams will have to integrate these tools—both with each other, and with other technologies like CRM (customer relationship management) software.

Read About More Marketing Tools and Techniques Here.

You can have all the data in the world, but it means very little unless you choose the right ways to slice and dice it. Metrics and KPIs (key performance indicators) are the building blocks of marketing analytics. These are measurable values that offer a quantitative assessment of how well you fulfill a specific business objective.

Below, are three metrics and KPIs that you should seriously consider for your own marketing analytics workflow.

1. Clickthrough rate (CTR)

Clickthrough rate (CTR) is one of the easiest metrics to understand: it measures the percentage of people who click on a link, ad, and email. This metric roughly corresponds to the percentage of your audience interested in learning more about your products and services.

2. Engagement

Engagement is a category of metrics that measures how much users are interested in, or engaged by, your content. This type of metric is most commonly applied on social networks where people can easily interact with your business. Engagement metrics include:

• The number of users who approve of your content (e.g. likes, favorites, retweets, etc.).
• The percentage of your followers who engage with your content.
• The percentage of viewers who share your content (also known as the virality rate).

3. Website traffic

Website traffic metrics give you more insight into how users behave while visiting your website. The most important website traffic metrics are:

• Traffic sources: Useful for knowing what search terms people enter to find your website and for knowing whether an influential figure has shared your content.
• Bounce rate: The percentage of users who leave your website immediately after viewing a single page.
• Average time on page/on site: Users who tend to linger on your website and on a particular page are more likely to be interested in your content.
• New vs. returning visitors: A large proportion of new visitors is a good sign when you’ve started a new marketing campaign. On the other hand, having a large number of returning visitors likely means that you have a steady base of loyal customers. 

Learn More About KPIs and Metrics in this Article

Challenges of Marketing Analytics

The marketing analytics landscape is complex and ever-changing, therefore making it a challenge for organizations to keep up with the latest trends and best practices. In addition, there is a lack of skilled analysts who can effectively utilize marketing data to drive business decisions. As a result, many organizations are struggling to fully harness the power of marketing analytics. Here are the main challenges companies are facing:

Lack of skilled analysts

One of the biggest challenges faced by organizations is the lack of skilled analysts who can effectively utilize marketing data to drive business decisions. In many cases, the people who are tasked with managing marketing analytics are not properly trained in the use of analytical tools and techniques.

Complexity of the landscape

The marketing analytics landscape is complex and ever-changing, making it a challenge for organizations to keep up with the latest trends and best practices. There is a vast array of analytical tools and platforms available, each with its own strengths and weaknesses.

Lack of integration

Another challenge faced by organizations is the lack of integration between marketing data and other business data. In many cases, marketing data is isoltated from other types of data, such as customer data, financial data, and operational data.

Poor data quality

One of the biggest hurdles for marketing data is poor data quality. Inaccurate or incomplete data can lead to inaccurate insights and decision-making. There are a number of factors that can contribute to poor data quality, such as incorrect data entry, errors in tracking systems, and duplicate records.

Why Should You Invest in Marketing Analytics?

Marketing analytics is an essential practice for marketing teams and organizations that want to make better use of their enterprise data. By asking the question “What is marketing analytics?”, you’re already ahead of the curve.

If you need help implementing a marketing analytics program for your own business, get in touch with IronFocus today. Let our team of experts help you optimize your marketing funnel and make smarter, data-driven decisions.

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