How Smart can Smart Data be?

Big data is all the rage, but how can companies be more competitive through smart data applications?

By Louisa Wah Hansen

For quite some time, businesses have been eyeing big data for its huge potential to reinvent marketing, but successful applications are still rare. How can companies achieve greater heights through smart data applications? Big data is quickly becoming the go-to solution for any company that wants to have an edge over their competitors.

According to a McKinsey report, titled “Big data: The next frontier for innovation, competition, and productivity,” the use of big data will become a key to competition and growth going forward: “From the standpoint of competitiveness and the potential capture of value, all companies need to take big data seriously.”

At the Chinese University of Hong Kong Business School, professors and students of the marketing department are actively engaging themselves with the business sector to help them translate their big data into practical and strategic solutions.

In fact, they have been doing so since the late 1990s, but today, their effort is further crystalized through the official opening of a Marketing Engineering Lab last year with the sponsorship of IBM, who donated sophisticated data-crunching software. The lab now aims to play a pivotal role in pioneering big data applications in Greater China.

Prof. Lau Kin-nam at Department of Marketing, CUHK Business School and Director of the Marketing Engineering Lab says that his objective is to connect academia with industry by providing free student service to different business sectors. The goal is help companies set up the software infrastructure and business model so they can start using data in an intelligent way to support their marketing decisions.

Currently there are 80 students enrolled in the Master of Science in Marketing program, and another 15-20 undergraduates who have signed up for the same program. “We will train them to help companies. At the same time, students can have real data and practical experience. It would help them get a job in the area,” says Prof. Lau.

He gives an example of how the retail sector could make use of its customer data to design better marketing strategies.

“Each point-of-sales (POS) transaction such as credit card number, Octopus card ID and so on all contains customer data. Most retailers just want to capture MIS data and stop at the sales statistics level. By contrast, we want to capture data at the customer level. For example, we can count how many customers come to the store each month, how much money they have spent and what exactly they have bought,” he says. “By capturing these data, a retailer can then make more cost-effective decisions on its marketing efforts.”

Prof. Lau plans to assign students in his class to serve companies in the retail industry during the first half of 2014. They will help the companies analyze the POS data and turn them into effective marketing decisions.

All About Relationships

Today, many industries still suffer from inefficient marketing efforts and spending. Prof. Lau cites the hotel industry as an example. “Hotel clubs or food-and-beverage clubs often send excess promotional materials,” he says. “Often, I would get a dozen different promotional materials at the same time from the same club.”

He says the problem with hotels is that they often lack in-house customer relationship management (CRM) teams and do not have the staff to manage their customer database.

While CRM has been used for about two decades, the proliferation of social media and the latest development of mobile applications mean marketers should pay acute attention to their customers’ particular needs through these channels.

By gathering and analyzing customer data through social media and contacting them through mobile apps (mobile CRM), companies will stand a much greater chance in not just acquiring new customers but also in keeping them for the long haul, says Prof. Lau.

“Today, the third largest nation in the world is Facebook. As many as 90 percent of our students use the smartphone. On social media and mobile devices, friends tell their friends about products and services that they like, so this could really reduce advertising dollars spent in traditional areas,” he says.

Prof. Lau explains that traditional media such as TV stations have already realized that traditional advertising won’t tell them who is watching the ads and how many views actually lead to purchases. On the other hand, by monitoring the click rates on online media channels, companies will be able to design their marketing budgets more efficiently.

He explains that the older form of metrics, “cost per click” (CPD) has gradually been favored by “cost per unit of sale” (CPS), which can tell an advertiser how clicks on an online ad translates into actual purchases.

As online advertising become increasingly prevalent through the PC and mobile devices, Prof. Lau sees more and more of companies’ advertising budget shifted away from traditional media to mobile media in the next few years.

“By capturing and analyzing customer data, companies can manage customer relationships using mobile devices,” he says, pointing out the latest development being real-time location marketing driven by the mobile phone. The way it works is actually quite simple: Shops in a mall would send promotional messages to shoppers who have chosen to connect their mobile devices to the mall’s Wi-Fi server. This not only helps stores reduce their advertising spending but also makes the effort much more targeted than traditional advertising.

On the Drawing Board

In early 2014, the marketing department of the CUHK Business School will be rolling out a smart marketing conference to bring together the academia and different industry sectors—including companies from China, IBM’s clients and some professional organizations. The event aims to introduce innovative ideas and developments in smart marketing and big data engineering.

Discussions are also underway with IBM China to co-organize the second teachers’ workshop in smart marketing in China, the first one having taken place in Hong Kong last year.

“Our goal is to come up with a new CRM model for each of the industry we’re going to work with — banking, retail, hotel, skincare and fashion — and help support them so that they can make smarter marketing decisions.”