The Data Dilemma

Building a competitive advantage that is sustainable over time depends on the interplay between data and story. Data alone is just table stakes these days. In a marketplace awash in data, story serves three vital functions without which all the data you collect is of little value. The first function, which was the subject of a previous essay, is to provide a framework that makes it possible for your audience to hear what you have to say and remember it. The second function of story is to provide an organizing principle to help you figure out what to measure and how to think about the information that your measurement provides. That is the subject of this essay. Jim and I are also working on one more essay to address the third function of story—to anchor a relationship with your audience that allows you to use all this insight to secure a sustainable competitive advantage.

With regard to the second function, figuring out what to measure and how to think about the information you collect, here’s the underlying principle: In the social sciences, any question that can be answered by quantitative analysis alone is probably a trivial question. I understand that direct measurement of certain variables is essential to running a business of any size. But my experience is that anything you can determine by quantitative analysis alone is unlikely to give you a sustainable competitive advantage, primarily because your competitors either have, or soon will have, access to that same information.

With regard to the “hard problems,” the ones that ultimately determine success or failure in the marketplace, the role of data is not to solve the problem directly. In fact, data can actually complicate the problem if it is not understood in the context of story. A good and enduring example of this phenomenon is the legendary New Coke debacle. The marketers at Coke had persuasive data suggesting that a sweeter formula would help them turn around decades-long share losses and boost relevance with younger audiences. But in the words of then Coca-Cola President and Chief Operating Officer Donald Keough, “The simple fact is that all the time and money and skill poured into consumer research on the new Coca-Cola could not measure or reveal the deep and abiding emotional attachment to original Coca-Cola felt by so many people.” The data was there, but without an understanding of the story playing in people’s heads, the data was not just unhelpful, it was misleading and dangerous.

Data does have a role to play in relation to the hard problems, but its role is not to solve the problems. The key function of all this data, properly analyzed, is to surface patterns that are not visible to the naked eye. Once you can see these patterns, you can develop a hypothesis about what they might mean. The hypothesis is the story that you tell yourself about the possible meaning of the patterns in the numbers. Then, if you’re a good scientist, you say to yourself, “If my hypothesis is true, then such and such ought to also be true,” and you design a further study and collect new data in an effort to get closer to the truth.

This interplay between data and story is the virtuous cycle that builds value in a brand. You have a hunch about some aspect of your business—product formulation, price sensitivity, package design, brand extensions, social-media strategy, whatever. You frame that hunch as a testable hypothesis and collect the data to prove or disprove it. Based on what you learn, you refine your hypothesis and collect more data. Rinse and repeat. But if you have no clear articulation of the story framework of your brand, then, for the most part, you are simply racing against your competition to refine hunches about the category as a whole or, worse, following data in a way that dilutes the emotional attachment people feel toward your brand.

I have a friend who runs marketing at a large consumer-products company. He is focused on providing the right experience to the right people at the right time and place. The trick, of course, is to understand how story and data interact with regard to each element:

Right experience: Data plays a role in validating a proposed activity or communication, but the question of which experience is “right” for the brand is ultimately a story question that your audience can’t answer for you.

Right people: Research is an essential tool for understanding your target, but if you want to sustain your competitive advantage, you need an authentic relationship with your audience. (More about this in the next essay.)

Right time and place: Data is the main driver here, especially in a digital, programmatic world with a vast array of media to choose from.

In the end, of course, if there is no story expressed in the way the activity or communication is presented to your audience, then your marketing initiative won’t qualify as an experience, and no one will remember what you are trying to communicate.

Think about something as tangible as price. You can research elasticity of demand against price in your category, but this research won’t tell you anything about what meaning your consumers attribute to the pricing decisions you make. Pricing communicates something quite different about a value brand than it does about a premium one. Or consider packaging. Suppose you are selling hot sauce in glass bottles, and you want to know whether you would lose customers by switching to plastic. Before you can gather useful data, you have to understand the meaning of your brand story and the role of those glass bottles in communicating that meaning. If you start with the story framework, you can frame your questions in a way that gets at the relationship your customers have with your brand, and you can parse their answers in a way that provides unique and actionable insight. Otherwise, there is a danger that you are primarily probing your customers on the rational side of their brains, which probably has little to do with how they actually decide what to buy.

Over time, it is hard to win based on math alone, even if you are better at the math than everybody else in your category. On the other hand, if you can combine your math skills with your experience and your creative intuition in order to find meaningful patterns in the numbers, then you can build a relationship with your customers that is authentic, motivating, resilient and long-lasting.