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You've Come a Long Way, Baby

September 8, 2009  

"The use of mathematics in marketing seems to be one of the hot topics today," begins a post at The DoubleThink blog. "But is it that new? Not really." The informative primer that follows divides the history of marketing analytics into four distinct eras, and traces its roots to the Direct Response period launched by the mail-order catalog created by Aaron Montgomery Ward in 1872. Over the next several decades, marketers "measured what was easy to measure and thereby focused mainly on short term effects."

Next came the Mass Marketing Effectiveness of the 1950s, "when operations research and management science models in production and manufacturing that had become popular during and just after WWII were being applied to marketing for the first time." During this era, says DoubleThink, econometric modeling was the preferred method for understanding the outcomes of a company's media and marketing mix.

The rise of CRM Effectiveness in the 1990s provided tremendous customer insight. "Frederick Reichheld published The Loyalty Effect in 1996," says the post, "in which he demonstrated that a 5% improvement in customer retention rates usually yields a 25% to 100% increase in profit." Garth Hallberg, meanwhile, showed that the majority of a company's revenue often comes from a small percentage of its customer base.

We've since entered the Digital Effectiveness era: "We no longer have to wait weeks or months before we can observe the impact of our marketing activities. We can get a read almost instantaneously, allowing for real-time optimization." Imagine what Aaron Montgomery Ward could have done with that.

The Po!nt: For a useful, big-picture view of marketing analytics, it's hard to beat this history lesson from DoubleThink.

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