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Big data gold isn't always where you would expect it

Thor Olavsrud | May 8, 2013
Many companies are focusing their big data initiatives in areas like sales, marketing, customer service and R&D, but other functions like logistics or finance may offer even greater ROI.

TCS surveyed 1,217 large enterprises in nine countries and four regions (U.S., Europe, Asia-Pacific and Latin America) in December 2012 and January 2013 about their big data initiatives.

Fifty-three percent of the companies surveyed had undertaken big data initiatives in 2012 and 43 percent predicted an ROI of more than 25 percent. About a quarter or the respondents projected a negative return or didn't know what their return was.

The 643 respondents that had undertaken big data initiatives represented a broad range of investment. Seven percent had invested at least $500 million and 15 percent spent at least $100 million on big data initiatives. Nearly a quarter (24 percent) spent less than $2.5 million. The industries that spent the most included telecommunications, travel-related, high tech and banking. The industries that spent the least included life sciences, retail, and energy/resources.

Perhaps unsurprisingly, 55 percent of all big data spending goes to four business functions that generate and maintain revenue: sales (15.2 percent), marketing (15 percent), customer service (13.3 percent) and R&D/new product development (11.3 percent). Ramaswamy notes that three non-revenue-generating functions get less of the big data spending pie: IT (11.1 percent), finance (7.7 percent) and HR (5 percent).

But while sales and marketing get the lion's share of the bi data budget (30.2 percent), the highest expected ROI came from the logistics and finance functions. Those functions together only constitute 14.4 percent of the big data budget, but logistics managers said they expected their big data initiatives to generate a 78 percent return, while finance managers expected a return of 69 percent. In comparison, marketing executives expected an ROI of 41 percent on their big data initiatives.

"This data suggests that activities which companies believe have the greatest potential to benefit from big data go far beyond marketing and sales," Ramaswamy says. "In fact, of the 25 highest-rated activities, there are an equal number in logistics and sales (six). In addition, marketing and customer service had four each. In other words, opportunities to capitalize on big data exist in numerous corners of a large, global company.

Using Big Data in Marketing

TCS found that marketers identified two areas that benefitted the most from big data initiatives: determining campaign effectiveness and channel effectiveness. Marketers also identified tailoring marketing campaigns and promotions offers and determining customer value as areas representing high potential benefit.

"Tailoring marketing campaigns can begin with figuring out which prospects should be targeted in the first place," TCS writes in its report, The Emerging Big Returns on Big Data.

"An auto insurance company that we spoke with found that over 80 percent of the over 100,000 households it sent direct mails to had the wrong demographics and would never buy insurance from the firm. In fact, only 1 percent bought policies as a result of these campaigns. After using analytics to determine the right demographics, the company conducted a more targeted direct mail campaign and increased its response rate tenfold. That boosted revenue and cut marketing costs," the reports says.

 

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