For Customer Intelligence Professionals

February 10, 2012

Welcome To The Era Of Digital Intelligence

Web Analytics Is No Longer Adequate To Support Data-Driven Marketing

by Joe Stanhope
with Dave Frankland and Michelle Dickson

Execut i v e S ummary
Interactive channels continue to prove their worth for revenue generation and customer engagement,
but the growing complexity and volume of digital interactions cause analytics challenges. Traditional
techniques such as web analytics were not designed for the breadth of channels, devices, and speed
that fuel todays digital interactions. The underlying design of web analytics is fundamentally
inadequate to accommodate emerging channels, sophisticated consumers, technical challenges, and
the democratization of analytics within data-driven enterprises. Because subpar analytics put customer
relationships at risk, Forrester is redefining the modern practice of web analytics as digital intelligence.
This new approach to analytics brings a set of expanded requirements and calls on firms to consider
their technology frameworks, organizational structures, metrics, and optimization practices.
the Digital marketing mix Defies traditional analysis approaches
Growth in interactive marketing spend continues unabated, further cementing the importance of digital
channels to commerce and customer engagement.1 Why? Interactive marketing is effective across all
phases of the customer life cycle driving traffic for discovery, delivering content for exploration,
supporting eCommerce for buying, and reinforcing engagement through customer relationship
management (CRM), loyalty, and support and follows the ongoing shift of wallet share to digital and
emerging channels.2 Given the investment and revenue at stake, analytics is a critical function to support
the development, validation, and optimization of digital channels. And web analytics is the logical
hub of interactive channel analysis, based on the historical centrality of the website.3 Unfortunately,
most firms traditional approaches to web analytics are vestiges of a simpler time, when understanding
traffic sources and on-site user behavior were of paramount importance. In todays multifaceted digital
landscape, standard web analytics methods are ill-equipped to keep pace with:

Intricate multichannel customer relationships. Consumers expect a high degree of coordination

and relevance across touchpoints, raising the bar for marketing execution and analytics. The
website although still important is now one of many destinations. Social networks and
applications comprise independent, yet related, channels that demonstrate the distributed nature
of digital customer experiences. But traditional web analytics tools primarily track on-site
behavior rather than the multichannel customer interaction funnel.

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Welcome To The Era Of Digital Intelligence

For Customer Intelligence Professionals

Device proliferation. As the number and variety of devices providing Internet access explode,

the paradigm of content consumption and commerce is shifting from fixed location computing
to multiple screens across multiple locations.4 Firms require analytics that deliver visibility to
the devices, locations, technologies, and usage patterns that characterize multidevice Internet
access. But, again, web analytics offers a default perspective based on the fixed website.

Dynamic interaction management. Marketers must react to changes in customer behavior

instantly, making the link between analytics and marketing crucial for coordinating interactions
based on accurate and timely insights. Firms require near-real-time analytics that deliver
actionable insights and direct connectivity to targeting and marketing execution systems. Yet
todays web analytics solutions mostly offer isolated reports and dashboards.

modernize measurement with Digital Intelligence

As marketings remit evolves to accommodate a growing catalog of intertwined touchpoints, so too
must marketing analytics. To close the gap between web analytics and comprehensive analytics for
digital marketing, customer intelligence (CI) professionals must adopt an updated approach (see
Figure 1). Forrester calls this digital intelligence, defined as:
The capture, management, and analysis of data to provide a holistic view of the digital customer
experience that drives the measurement, optimization, and execution of marketing tactics and
business strategies.
New Requirements Form The Foundation For Digital Intelligence
Developing an approach to analytics that adequately covers the breadth of data, analysis techniques,
and delivery of insights to support decision-making requires CI professionals to re-imagine their
expectations and requirements (see Figure 2). Digital intelligence comprises an evolutionary step
beyond web analytics to make analysis:

Customer-centric. As customers and prospects seamlessly move across channels and devices

at will, digital intelligence supports the analysis of customer interactions in concert rather than
discrete channel views. In addition to visibility across all channels, analysis is highly granular to
identify, track, and interact with individual visitors.

Data-agnostic. To conduct multichannel digital analysis, digital intelligence incorporates data

warehousing capabilities that accommodate data collection, storage, and management across a
broad range of data types. This includes interaction data across all digital and offline channels,
customer data, and business data such as financial and product information.

February 10, 2012

2012, Forrester Research, Inc. Reproduction Prohibited

Welcome To The Era Of Digital Intelligence

For Customer Intelligence Professionals

Directly applicable to business actions. Digital intelligence emphasizes the direct application

of analytics to marketing activities rather than static reporting and dashboards. This takes the
form of native functionality such as targeting, site optimization, and data mining to connect
analysis to the delivery of content and promotions. It also provides the ability to export analytics
data and insights directly into third-party optimization and marketing execution systems.

Intelligent. The volume and scope of the outputs from digital analytics results in a theoretically

limitless number of metrics, goals, key performance indicators (KPIs), reports, dashboards, and
visualizations. Digital intelligence provides automation and data-mining capabilities to process
data and proactively detect anomalies, trends, and shifts in data to alert users and free them
from the time-consuming and ineffective task of manually poring over endless reports.

Figure 1 The Evolution Of Digital Intelligence

The golden age of web analytics
1993 to 1999

2000 to 2006

Web server log analytics

Web analytics

The World Wide Web

and the web browser
emerge.

2007 to 2010

2011 to present

Digital analytics

Digital intelligence

There is mainstream
acceptance of
interactive channels
such as search, email,
and websites

There is mainstream
acceptance of social
media channels.

There is mainstream
acceptance of mobile
and application
channels.

Firms understand
the volume of activity
on the website.

Firms understand
aggregate visitor
activity on the
website, content
usage,and sources of
traffic.

Firms understand
interactions across
interactive channels
and track the success
of interactive
marketing campaigns.

Firms understand
interactions across
digital channels in
a business context
and can take direct
action on insights.

Website analysis is
conducted, using data
collected from web
server logs.

JavaScript is accepted Data collection

Data collection
as the web analytics
expands to incorporate expands to
data collection
social and interactive
incorporate mobile,
mechanism of choice.
channels; vendors
applications, and
extend native
media; complimentary
data warehousing
tag management and
capabilities and partner data syndication
integrations.
capabilities emerge.

The rst
commercial
website analytics
software is created.

The second generation

of web analytics
applications cement
the market; Google
launches Google
Analytics, a free web
analytics application.

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February 10, 2012

Enterprise technology
vendors enter and
consolidate the web
analytics application
market; site
optimization
application vendors
proliferate.

Specialist vendors
enter the market to
address emerging
media, data
management, and bigdata analytics.

Source: Forrester Research, Inc.

2012, Forrester Research, Inc. Reproduction Prohibited

Welcome To The Era Of Digital Intelligence

For Customer Intelligence Professionals

Figure 2 The Digital Intelligence Architecture

Digital data
inputs

Business
data inputs

Data
processing

Data
warehouse

Analysis

Action

Games
Ratings and
comments
Mobile website
Fixed Internet
website

Performance
monitoring

Email
Organic search
Paid search
Display
advertising
Video

Direct response
and brand metrics
Product

Data mining

CRM/
customer

Data collection

POS

Tag management

Transactions

Data ETL

Static reports and

dashboards
Digital intelligence Dynamic reports
data warehouse
and dashboards
Segmentation

Social networks
Finance
Affiliates
Mobile
applications

KPIs
Interaction
analysis
Forecasting

Design
Personalization
Campaign
management
Privacy
management
Targeting
Optimization
Customer
relationship
management
Support and
contact center

eCommerce
Social listening
Live chat
Voice of customer
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Source: Forrester Research, Inc.

Distributed. To fully leverage digital data, analysts and tools must convey insights to business

stakeholders to drive decisions. Digital intelligence ensures that analysis capabilities are not
exclusive to technical staff and analysts, the traditional bastion of insight generation. In addition
to providing advanced analytics and annotation capabilities for power users, digital intelligence
provides nontechnical users and business stakeholders with access to role-relevant analytics
data via persona-appropriate, self-service interfaces and functionality.

February 10, 2012

2012, Forrester Research, Inc. Reproduction Prohibited

Welcome To The Era Of Digital Intelligence

For Customer Intelligence Professionals

Right-time. Marketers place a premium on timely, high-speed analysis, due to the incredibly

fast pace of digital interactions and campaigns. Waiting days or weeks for reports and analyses
incurs an unacceptable opportunity cost for failing to continuously optimize customer
experiences. Digital intelligence delivers analysis in real time or on demand at a pace that
matches users decision-making schedules.

Tightly managed. The capacity to manage large volumes of diverse digital data sources is a

mandatory baseline requirement for digital intelligence. Digital intelligence offers access to a
suite of management tools including tag management, data syndication, centralized user and
functional administration, data warehousing, and data processing to facilitate the availability
of high-quality data for analysis.

Digital Intelligence Demands A Broad Measurement Strategy Shift

Digital intelligence is not simply a semantic attempt to revise web analytics history. It is a new
strategy for comprehensive analytics, based on a cohesive approach that incorporates a combination
of technologies; a wide set of stakeholders and users; and multiple outputs spanning reports, data
integrations, and direct action. Delivering digital intelligence requires a measurement strategy
reboot to break away from historical biases and develop a holistic plan. To understand the
requirements, gaps, and benefits of digital intelligence, CI professionals must consider:

A new technical approach. Digital intelligence isnt available through an all-in-one product suite.
CI professionals must employ a combination of technologies to collect, process, store, analyze,
and distribute digital data. When considering technology in this environment in which data
and functionality integrations between tools are a given solution packaging, data integration
capabilities, and partner programs matter as much as native functionality and user experience.

Ownership structure. Digital intelligence must be deeply embedded in the business rather

than an isolated function, raising important questions about functional ownership. Although
business stakeholders such as interactive marketing and eCommerce professionals comprise
the primary consumers and beneficiaries of digital intelligence, the practice remains highly
technical and dependent on advanced analytics skillsets. Because of this, Forrester believes that
a customer intelligence command center, with support from business technology and input
from the business, should own digital intelligence.5

Metrics and KPIs. By providing substantially more raw data and links across data points,

digital intelligence introduces the opportunity to reconsider the data sources, calculations, and
interdependencies of metrics and KPIs. For example, even the classic website bounce rate metric
warrants reconsideration in a digital intelligence context to determine how it could be redefined as
a universal metric to track low-engagement visits across social media, websites, and applications.
Then marketers could use it to trigger individual-level messaging to drive marketing actions.

February 10, 2012

2012, Forrester Research, Inc. Reproduction Prohibited

Welcome To The Era Of Digital Intelligence

For Customer Intelligence Professionals

Optimization as a core competency. Conducting statistically sound experiments is the only

way to cut through digital marketings diversity and volume of interactions to determine which
content, promotions, and experiences will resonate with customers and prospects. CI professionals
must cultivate a culture of experimentation and ensure that digital intelligence utilizes testing and
targeting as a key method of making analytics actionable and embedded in all marketing activities.

W h a t i t means

digital intelligence integrates analytics into the business

Digital intelligence distinguishes itself from traditional web analytics by going beyond expanded
data collection and generating more reports. Digital intelligence ultimately breaks down the
wall between analytics and the business, eliminating passive insight delivery to make digital
data directly actionable. Digital intelligence is a new analytics standard because it closes the gap
between analysis and action to optimize digital customer experiences seamlessly, based on a
holistic view of customer relationships and delivered at the speed of interactions. The depth of
data, organizational, and process integration required by digital intelligence offers opportunities
to all participants in the digital marketing process:

Digital intelligence levels the playing field for marketers. Historically, marketing success
relied on scale, volume, and resources, but success in the second digital decade depends
on an organizations ability to deliver cohesive and relevant customer experiences. Firms
regardless of size that leverage digital analytics will be in position to create sustainable
competitive advantages within their markets.

Digital intelligence opens up the market for technology providers. Web analytics
vendors are in pole position to lead the digital intelligence solution market, given their
technical capabilities and market penetration, but this is no guarantee of success. A new
entrant or entirely new class of technology provider could redefine the category, driving
innovation and providing new options to firms. Several categories are in the running;
these include data-management platforms for audience intelligence, such as Krux Digital;
data-mining and predictive analytics platforms, such as SAS; analytics platforms, such as
Causata, Splunk, and Vertica; and demand-side platforms that are connecting media and site
targeting, such as X Plus One.

Digital intelligence pulls service providers out of their silos. Advanced requirements
and a lack of available packaged solutions create new opportunities for third-party service
providers as firms seek out tactical and strategic support to implement and manage digital
intelligence. A broad range of service providers will expand from their traditional footprint
to operate in the digital intelligence market. Digital marketing agencies are an obvious
beneficiary, but nontraditional service providers will gain significant traction either through
specialization, such as analytics consultants, or through the integration of digital intelligence
into enterprise IT services, such as systems integrators.6
February 10, 2012

2012, Forrester Research, Inc. Reproduction Prohibited

Welcome To The Era Of Digital Intelligence

For Customer Intelligence Professionals

Endnotes
1

Interactive marketing spend totaled nearly $35 billion in the US in 2011, with continued double-digit
growth forecast for the next five years. See the August 24, 2011, US Interactive Marketing Forecast: 2011
To 2016 report.

Forrester estimates that eCommerce in the US, after maintaining double-digit growth in spite of the
recession of the past few years, will pass $200 billion in 2012 and achieve a double-digit share of overall
retail sales, See the February 28, 2011, US Online Retail Forecast, 2010 To 2015 report. US mobile
commerce is projected to grow fivefold in dollars and more than triple its overall share of eCommerce in
the next five years. See the June 17, 2011, Mobile Commerce Forecast: 2011 To 2016 report.

If the Web is the common thread throughout the marketing mix, marketers can ill afford to miss the
opportunity to use web analytics to close the gaps between cross-channel marketing tactics. See the March
29, 2010, How Web Analytics Will Emerge As A Cornerstone Of Customer Intelligence report.

Evolving form factors and pervasive wireless connectivity have transformed computing from an activity
done in one location to an activity done anywhere. Contrast the experience of computing on a desktop
PC, in one place with a clear start and finish time, to that of the anytime/anywhere computing done on a
smartphone or tablet. See the May 17, 2011, What The Post-PC Era Really Means report.

Highly accountable marketing organizations have unified corporate goals and objectives that pulse through
all parts of the organization. How do they get there? They ensure sound organizational alignment that
coordinates customer data and analytics, marketing technology, and measurement across the enterprise.
This kind of organizational alignment is built upon a basic center-of-excellence model. Forrester calls
this particular model a customer intelligence command center. See the March 23, 2010, The Marketing
Accountability Index report.

Third-party service providers offer CI professionals expertise, processes, and flexibility across a wide
variety of web intelligence services. The four primary categories of web intelligence service providers are
technology vendors, marketing agencies, specialist consultancies, and systems integrators. See the January
19, 2012, Where To Get Help With Web Analyticsreport.

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and technology. Forrester works with professionals in 19 key roles at major companies providing proprietary research, customer insight, consulting, events, and
peer-to-peer executive programs. For more than 28 years, Forrester has been making IT, marketing, and technology industry leaders successful every day. For
more information, visit www.forrester.com.
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