The second reason for the Internets increasing importance to companies is its unmatched role as a gold mine of customer intelligence. Consumers spend hours every day on the Internet and leave behind large amounts of information about who they are and what they seek. Their daily Internet journeys reveal their online interests, the content of their communications, the purchases they make, and so on. While these consumer actions are similar to what goes on in the real world, on the Internet this information can be collected, recorded, and analyzed, which opens the door to the use of big data and advanced analytics. In 2012 alone, Internet users generated 4 exabytes (4 x 1018 bytes) of data, fed by more than one billion computers and one billion smartphones. On Facebook alone, users share 30 billion pieces of content every month. Whats more, in 2010, there were 5 billion mobile device users and 30 million networked sensor nodes numbers that have grown by 20 and 30 percent a year respectively since then.
Link to products. For a specific product, teams analyze consumer purchasing behaviors to identify correlations between the product and the profile characteristics of the Web users. Marketers should base the purchasing behavior analysis on sales conversion rates, i.e., the percentage of people who actually purchase the product compared to the total audience who received the related display advertising. The selected methodology clustering Web users based on segmentation trees helps marketers avoid the black box syndrome. Tailor advertising. Marketers then build a digital campaign that focuses on the customer segments they have identified as being the most likely to buy the considered product. Then, these segment-specific ads are pushed only to those segments for whom they were created. Integrate algorithm. Finally, the company must integrate the algorithm into its digital advertising management IT tools. Once the algorithm is embedded within the various ad servers, the targeted campaigning becomes a part of the organizations day-to-day processes, focusing only and automatically on the Web users with the highest potential to convert.
Segment size Percent of total population 0.1 0.1 0.1 3.6 0.1 0.7 0.9 0.7 3.2 1.0 0.8 1.3 4.9 6.2 3.6 20.8 0.8 48.8 2.3
First 14 segments represent ~ 25% of the total advertising audience and have an average conversion rate equal to 2.4 (140% above average of all users)
Exhibit 1
The best way to capitalize on the strong correlation involves focusing the digital advertising campaign on the customer segments with the highest conversion rates. To ensure that the campaign reached a significant number of people, McKinseys pilot targeted the advertisements toward the top quartile, i.e., the quartile of the segment with the highest conversion rates. The top quartile conversion rate was 2.4, which means that such a campaign would be 140 percent more efficient than an average random campaign (Exhibit 2).
A 6-week pilot indicates that tailored campaigns increase digital marketing ROI by 250%
Percent
Campaign focus Web users receiving the ad Rest of recipients Standard campaign Best quartile 25
75
40 60
+140 Targeted campaign Theoretical conversion rate2 Actual conversion rate after a 6-week pilot +250
100
240 350
1 Ratio of online purchasers to all ad recipients, indexed on the outcome of the standard campaign 2 Based on the modeling
Exhibit 2
SOURCE: McKinsey
Profiling online users in an effort to evolve digital marketing is only one step companies can take toward unlocking big datas potential. Nevertheless, the application of online profiling is limitless. It could be applied to direct marketing (e.g., an e-mail campaign focused on the most promising prospects). Looking further, another exciting challenge to come will involve the adaptation of a companys online stores based on target Internet user profiles. In some ways this may one day resemble the offline world, where, for example, a sales agent at a telecoms store will intuitively welcome and interact with a senior citizen who exhibits little knowledge of the latest technology and services in a totally different way than he or she would with a young geek-like teenager who is probably well aware of the technology at hand. For now, though, marketing organizations would be well advised to take stock of the wealth of online consumer information that is readily available and develop highly targeted advertising campaigns to boost their marketing efficiency. In addition to profiling online users, big data can also be leveraged in a very pragmatic and operational way. There is no doubt it can reshuffle the cards of search, affiliation marketing, and Internet-based direct marketing.
Contacts
Eric Hazan Principal Phone: +33 1 40 69 14 87 E-mail: eric_hazan@mckinsey.com Francesco Banfi Principal Phone: + 33 1 40 69 93 64 E-mail: francesco_banfi@mckinsey.com
The authors would like to thank Alain Levy, CEO of Weborama, who provided big data technology as well as advice for the project.
Telecommunications, Media, and Technology Practice April 2013 Designed by Visual Media Europe Copyright McKinsey & Company www.mckinsey.com