Derek is head of marketing at a large company. His boss wants him to use data science, but Derek’s not sure about it. What is it and what are its benefits?
Data science is about analyzing information. In marketing, data science is used to assess how different marketing strategies are working and to understand customers better. For example, if Derek runs an ad on a social media site, he’ll get lots of information back about the number of clicks on the ads, how many of those clicks resulted in a sale, and so on. Analyzing that data will allow Derek to understand how successful the ad was.
To help Derek better understand data science for marketing, let’s take a closer look at some of its benefits and its limitations or challenges.
Benefits for Marketing
There’s a good reason Derek’s boss wants him to use data science. That reason is that there are many benefits that data science can bring to marketing.
For one thing, it allows companies to calculate the return on investment, or ROI, of a marketing campaign. The ROI is simply the net return on an investment divided by the cost of the investment. In other words, it’s the yield of an investment.
Take the ad that Derek placed on social media. He knows how many customers clicked on the ad and how many of those clicks resulted in a sale. He also knows how much he paid for the ad. So was the ad worth it? He can calculate the ROI for the ad by subtracting the cost of the ad from the sales due to the ad. That’s his net return. Then, he’ll divide that by the cost of the ad, which gives him the ROI. If it’s a high number, that’s a good thing!
Essentially, the ROI on a campaign tells a company quantitatively whether the money spent on that marketing campaign was worth it, and data science allows marketing departments to calculate the ROI.
Data science also gives information to marketing departments on which marketing strategies are working. For example, knowing that one ad gets more clicks than another ad tells Derek that he should probably go with the first ad. Of course, more clicks don’t always mean more sales, so if one ad is getting fewer clicks but more sales, he should go with that one. All of that information is part of data science.
Finally, data science can provide a picture of target consumers. It can tell a company what they like, what they don’t like, what they need, and what drives their purchases. For example, Derek might want to market to women ages 40-65. He might be able to get data that shows him that those women use certain social media sites but not others. Data science might also tell him that they tend to click on ads that include humor or animals or the color blue. All this is valuable information for Derek if he’s trying to market products to those consumers.