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I'm a partner in the advanced analytics group at Bain & Company, the global management consulting firm. My primary focus is on marketing analytics (bio). I've been writing here (views my own) about marketing, technology, e-business, and analytics since 2003 (blog name explained).

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September 30, 2008

After The Apocalypse: Recalibrating Analytics

Yesterday's debacles in Washington and on Wall Street will further shock consumer spending in both practical and psychological ways. Practically, credit will be tighter, bonuses lower, jobs fewer. Psychologically, the decline in the stock market will pile onto declines in home equity to further chill the wealth effect that's been driving us for some time.

What does this mean for marketers relying on analytics to make decisions? Analytics are built on regressions on past activity and tests across present efforts. With recent developments, it's highly likely that many regression-based models that look backward to predict ahead will be obsolete, especially for highly seasonal businesses. So, this should mean a shift in analytic efforts toward testing in general, and consequently toward test-friendly media (e-mail, search, display, lightweight direct mail) and easier-to-execute components (copy, price) to help firms feel their way forward to a better understanding of how consumers will react under the new realities.

Unfortunately, in many cases, firms will be organizationally constrained from making this important adjustment. Skills and resources for regression-based analytics are different from those for test-based analytics. Big-bang model building efforts of the past year or two may create a drag on the ability to gather and re-direct the necessary budgets to test more extensively and aggressively. But marketers that took a pragmatic, efficient, and balanced approach to analytics will find the transition an easier one to make.

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