Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Companies Using Marketing Analytics Increase Return on Assets by Avg 8%, Says Study Analyzing Fortune 1000 Co’s

30.11.2012
Fortune 1000 companies that increase their use of marketing analytics improve their return on assets an average 8% and as much as 21%, with returns ranging from $70 million to $180 million in net income, according to a paper written by two key members of the Institute for Operations Research and the Management Sciences (INFORMS®).

The research was conducted by Penn State University Management Science Professor Gary L. Lilien, former president of an INFORMS predecessor society; Arvind Rangaswamy of the Smeal College of Business at Penn State, former president of the INFORMS special interest group in ebusiness; and Frank Germann of the University of Notre Dame.

“Our study provides a strong rebuttal to executives who believe that information gathering and analysis result in excessive delays and ‘analysis paralysis,’” says Dr. Lilien, cofounder and Research Director of the Institute for the Study of Business Markets at Penn State’s Smeal College. “On the contrary: when analytics is deployed with strong support from key executives, organizations thrive in competitive industries and react well to today’s customers, who frequently change their product preferences.”

A podcast interview with Dr. Lilien is online at http://www.scienceofbetter.org/podcast/lilien.html.

The authors conducted a survey of Fortune 1000 firms, contacting 968 executives at 500 companies and receiving responses from 212 senior executives.

Marketing analytics is a technology-enabled and model-supported approach to harness customer and market data to enhance marketing decision making. It consists of two types of applications: those that involve their users in a decision support framework and those that involve automated marketing decisions.

The author’s analysis shows that firms realize favorable and, likely sustainable, performance outcomes from greater use of marketing analytics, showing that more intense industry competition and more rapidly changing customer preferences increase the positive impact of marketing analytics deployment on firm performance.

The study emphasizes the key role of management in the success of marketing analytics projects. A company’s top management team must ensure that the firm, (1) employs people with requisite analytics skills, (2) deploys a sophisticated IT infrastructure and data, and (3) develops a culture that supports marketing analytics, so that the insights gained from marketing analytics can be deployed effectively within the firm.

The analysis also shows that support from the top management team, a supportive analytics culture, appropriate data, information technology support, and analytics skills are all needed for the effective deployment of marketing analytics.

The authors were troubled by reports showing that despite many case studies on the effectiveness of marketing analytics in marketing and business decisions, the relative number of companies using analytics is still low. For example, a 2009 McKinsey study of 587 C-level executives showed only 10% of firms surveyed used marketing analytics extensively.

The author’s research, in contrast, shows strong benefits from applying marketing analytics. A one-unit increase (on a scale from 1 to 7) in marketing analytics deployment has major benefits. The authors considered one group of firms that have median (50th percentile) deployment of marketing analytics and operate in an industry withaveragecompetition andaveragechanges in customer needs and wants. For a firm in this category, they found, a one-unit increase in the deployment of marketing analytics (which translates into moving the firm from the 50th to the 65th percentile of deployment) is associated with an 8% increase in Return on Assets (ROA).

A second type of firm was also examined, one with median (50th percentile) deployment of marketing analytics but operating inhighly competitiveindustries withfrequentlychanging customer needs and wants. For this category firm, a one-unit increase (moving it from the 50th to the 70th percentile of deployment), is associated with a 21% average increase in ROA.

The 8% increase in ROA implied an expected increase of about $70 million in net income for firms surveyed by the authors; the 21% increase meant an increase of $180 million in net income.

The paper, “Performance Implications of Deploying Marketing Analytics,” is scheduled to be published in the International Journal of Research in Marketing.

About INFORMS

The Institute for Operations Research and the Management Sciences (INFORMS®) is the leading professional association for professionals in advanced analytics. INFORMS is an international scientific society with 10,000 members, including Nobel Prize laureates, dedicated to applying scientific methods to help improve decision-making, management, and operations. Members of INFORMS work in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, financial engineering, and telecommunications. INFORMS serves the scientific and professional needs of operations research analysts, experts in analytics, consultants, scientists, students, educators, and managers, as well as their institutions, by publishing a variety of journals that describe the latest research in operations research. Further information about INFORMS, analytics, and operations research is at www.informs.org.

Barry List | EurekAlert!
Further information:
http://www.informs.org

More articles from Business and Finance:

nachricht Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)

nachricht Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Neutron star merger directly observed for the first time

University of Maryland researchers contribute to historic detection of gravitational waves and light created by event

On August 17, 2017, at 12:41:04 UTC, scientists made the first direct observation of a merger between two neutron stars--the dense, collapsed cores that remain...

Im Focus: Breaking: the first light from two neutron stars merging

Seven new papers describe the first-ever detection of light from a gravitational wave source. The event, caused by two neutron stars colliding and merging together, was dubbed GW170817 because it sent ripples through space-time that reached Earth on 2017 August 17. Around the world, hundreds of excited astronomers mobilized quickly and were able to observe the event using numerous telescopes, providing a wealth of new data.

Previous detections of gravitational waves have all involved the merger of two black holes, a feat that won the 2017 Nobel Prize in Physics earlier this month....

Im Focus: Smart sensors for efficient processes

Material defects in end products can quickly result in failures in many areas of industry, and have a massive impact on the safe use of their products. This is why, in the field of quality assurance, intelligent, nondestructive sensor systems play a key role. They allow testing components and parts in a rapid and cost-efficient manner without destroying the actual product or changing its surface. Experts from the Fraunhofer IZFP in Saarbrücken will be presenting two exhibits at the Blechexpo in Stuttgart from 7–10 November 2017 that allow fast, reliable, and automated characterization of materials and detection of defects (Hall 5, Booth 5306).

When quality testing uses time-consuming destructive test methods, it can result in enormous costs due to damaging or destroying the products. And given that...

Im Focus: Cold molecules on collision course

Using a new cooling technique MPQ scientists succeed at observing collisions in a dense beam of cold and slow dipolar molecules.

How do chemical reactions proceed at extremely low temperatures? The answer requires the investigation of molecular samples that are cold, dense, and slow at...

Im Focus: Shrinking the proton again!

Scientists from the Max Planck Institute of Quantum Optics, using high precision laser spectroscopy of atomic hydrogen, confirm the surprisingly small value of the proton radius determined from muonic hydrogen.

It was one of the breakthroughs of the year 2010: Laser spectroscopy of muonic hydrogen resulted in a value for the proton charge radius that was significantly...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

ASEAN Member States discuss the future role of renewable energy

17.10.2017 | Event News

World Health Summit 2017: International experts set the course for the future of Global Health

10.10.2017 | Event News

Climate Engineering Conference 2017 Opens in Berlin

10.10.2017 | Event News

 
Latest News

Terahertz spectroscopy goes nano

20.10.2017 | Information Technology

Strange but true: Turning a material upside down can sometimes make it softer

20.10.2017 | Materials Sciences

NRL clarifies valley polarization for electronic and optoelectronic technologies

20.10.2017 | Interdisciplinary Research

VideoLinks
B2B-VideoLinks
More VideoLinks >>>