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: Can we see monkeys from space? Emerging technologies to map biodiversity

An international team of scientists has proposed a new multi-disciplinary approach in which an array of new technologies will allow us to map biodiversity and the risks that wildlife is facing at the scale of whole landscapes. The findings are published in Nature Ecology and Evolution. This international research is led by the Kunming Institute of Zoology from China, University of East Anglia, University of Leicester and the Leibniz Institute for Zoo and Wildlife Research.

Using a combination of satellite and ground data, the team proposes that it is now possible to map biodiversity with an accuracy that has not been previously...

Im Focus: Climate satellite: Tracking methane with robust laser technology

Heatwaves in the Arctic, longer periods of vegetation in Europe, severe floods in West Africa – starting in 2021, scientists want to explore the emissions of the greenhouse gas methane with the German-French satellite MERLIN. This is made possible by a new robust laser system of the Fraunhofer Institute for Laser Technology ILT in Aachen, which achieves unprecedented measurement accuracy.

Methane is primarily the result of the decomposition of organic matter. The gas has a 25 times greater warming potential than carbon dioxide, but is not as...

Im Focus: How protons move through a fuel cell

Hydrogen is regarded as the energy source of the future: It is produced with solar power and can be used to generate heat and electricity in fuel cells. Empa researchers have now succeeded in decoding the movement of hydrogen ions in crystals – a key step towards more efficient energy conversion in the hydrogen industry of tomorrow.

As charge carriers, electrons and ions play the leading role in electrochemical energy storage devices and converters such as batteries and fuel cells. Proton...

Im Focus: A unique data centre for cosmological simulations

Scientists from the Excellence Cluster Universe at the Ludwig-Maximilians-Universität Munich have establised "Cosmowebportal", a unique data centre for cosmological simulations located at the Leibniz Supercomputing Centre (LRZ) of the Bavarian Academy of Sciences. The complete results of a series of large hydrodynamical cosmological simulations are available, with data volumes typically exceeding several hundred terabytes. Scientists worldwide can interactively explore these complex simulations via a web interface and directly access the results.

With current telescopes, scientists can observe our Universe’s galaxies and galaxy clusters and their distribution along an invisible cosmic web. From the...

Im Focus: Scientists develop molecular thermometer for contactless measurement using infrared light

Temperature measurements possible even on the smallest scale / Molecular ruby for use in material sciences, biology, and medicine

Chemists at Johannes Gutenberg University Mainz (JGU) in cooperation with researchers of the German Federal Institute for Materials Research and Testing (BAM)...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Plants are networkers

19.06.2017 | Event News

Digital Survival Training for Executives

13.06.2017 | Event News

Global Learning Council Summit 2017

13.06.2017 | Event News

 
Latest News

Quantum thermometer or optical refrigerator?

23.06.2017 | Physics and Astronomy

A 100-year-old physics problem has been solved at EPFL

23.06.2017 | Physics and Astronomy

Equipping form with function

23.06.2017 | Information Technology

VideoLinks
B2B-VideoLinks
More VideoLinks >>>