Prepare to be horrified: Poor Analytics Technology Is Costing You Millions

 

Recently I found myself completely appalled at something I have rarely seen before. It was a highly profitable enterprise company that was beautifully set up for digital analytics in one business unit TWO YEARS AGO and had simply let the deployment degrade. They had not used the data as leverage to expand quality insights across the organization. They had not used it to reduce costs or optimize ad buys. They just let it rot.

So in honor of this Halloween horror, I’m going to calculate some back-of-the-envelope numbers about the cost of doing nothing or even slipping backward in digital maturity. There are lots of places an organization can get stuck in the drive to digital maturity, but for this post I’m going to focus on the foundation which is tablestakes technology.  

Tablestakes technology is the standardized data collection and tools of record which are required to get to quality analysis. In brief, a well configured web analytics tool that captures data across all owned assets that touch the internet (mobile apps, desktop, kiosk, facebook page, campaigns, everything) plus qualitative tools like voice of the customer survey or ratings and reviews and data quality tools like tag managers and monitors. There’s a whole ecosystem here so I’ve summed it up in the picture below to give you a general idea of what I mean.

Getting stuck at this tablestakes level means tools are purchased but not fully used. Basically, there’s just a bunch of noise being recorded. And because the tools are not well-configured or interconnected, the people who try to extract meaning from the data waste a lot of time for very meager returns.  

Let’s assume this is an enterprise where the analytics tool is at least $100K/ year + $50K per 3 additional tools from the ecosystem. I realize these numbers can vary widely so feel free to customize for your case. DIRECT TOOL COST: $250K.

Then there is the time people invest to use the tools, or receive training. Let’s assume a small staff at this stage of no more than 3 people and all are doing this part time. Let’s assume a fully-loaded (this means including benefits and vacation) employee on average is approximately $100/hour so 3 people at 50% of their time gives us DIRECT PEOPLE COST: $312K.                            

So far I’m burning about half a million a year with no ROI. In enterprise terms, that’s bad but perhaps not bad enough to do something about. So let’s look at the opportunity cost. It may seem like business as usual, but competition is rapidly passing you by. A McKinsey study said digital leaders are 6% more profitable and 5% more productive. So if one business unit in your enterprise earns $500 million a year that becomes a potential LOST OPPORTUNITY COST of $30 million dollars a year.   

But let’s say - even though that’s a normalized average across industries - McKinsey might be wrong. What if it’s only half that, say $15 million. Is $15 million dollars an interesting number? You bet it is. And that buys a lot of resources.

The obvious moral of this story is don’t miss the forest (opportunity cost) for the trees (tools and people). Digital marketing analytics is how companies discover new ways to please their customers and provide long-term value. If you are still wrestling with tablestakes, it’s costing you millions today and perhaps a lot more in the analytically-competitive world of tomorrow.