Corporate Alt-Data Adoption and the Future of the Data Industry
Earnest Analytics’ Director of Marketing, Michael Maloof, sat down with Head of Research at AlphaSense, Nick Mazing, on the AlphaSense Signals podcast to discuss alt-data adoption among corporations. Other topics included trends in the alt-data landscape, and Earnest’s new online visualization platform, Dash.
Michael Maloof on alt-data users: ”Hedge funds were the first, and still the largest users, of alt-data, but only 65% of them currently use it in some capacity. So even among those original use cases, there’s still room to grow. But in recent years, we’ve been seeing surging demand from corporate marketing and strategy teams and consultants. So companies, especially consumer-facing corporations, have for years relied on a mix of legacy alt-data sets, including syndicated data surveys, internal data to answer questions like market share changes, sales growth versus competitors, and customer satisfaction.”
Michael Maloof on how companies use alt-data with traditional data: ”Chief marketing officers and strategists are coming to providers like Earnest as it’s helped fill the gaps in their data mosaic instead of a corporate data analyst they would’ve had to hire for this. So in most cases, we provide insights into areas of the business they never had; they’re complementing their existing data understanding. The first and most obvious pain point clients ask us to solve is to help identify their real market share and benchmark sales against competitors, not just the ones that participate in data syndication. In one case — a DTC clothing brand — a client wanted to know their market share in a competitive metro area and if their targeted marketing strategy was creating positive ROI, which is difficult to say accurately with syndicated data. And the lag with that data set would be too long to make any immediate course corrections. But with an Earnest online dashboard, they can go in with a few clicks, create a full market share cohort using transaction data and see what their share of sales is, how it’s changing in real-time, pretty much down to the day.”
Michael Maloof on alt-data driven customer lifetime value models: “We’re also seeing a big focus right now on customer acquisition costs and lifetime value on the heels of these well-publicized advances in marketing measures like Professor Dan McCarthy’s Customer-Based Company Valuation. These models focus on matching acquisition costs with the value that new customer cohorts bring to the company, and they’re huge improvements over the old buy-till-you-die model of customer lifetime valuation.
So, the main ingredient for this analysis, though, is years of customer spending history, and that’s just not available in companies internal CRM tools or via syndicated in survey data. So, the models demand higher accuracy than that. That’s where we’re seeing more sophisticated clients actually buying the disaggregated row-level data of actual consumers and their transactions so that their own analytics teams can run tests to determine how much they should spend to acquire and keep new customers. It’s really interesting because right now, especially, we’re looking back on all the new customers acquired by DTC and subscription brands during the pandemic to see which kept spending and which lapse.”
Michael Maloof on how corporations are interacting with alt-data: “So, corporate clients wanna interact with alt-data in a lot of different ways, and it really depends on the user and their goal. Here at Earnest, our mission is to make sure that every user has access to the type of data they need to answer their business questions. The fastest adoption we’re seeing right now is actually with that higher level, busy data user, they were not served by the complexity of legacy alt-data tools that require dedicated analysts just to interpret it, maybe a stats degree, this is a busy user, they likely have a trusted advisor helping key decision makers, like a chief marketing or product officer, and they’re turning to the ready-made tools like Earnest Dash to answer those high-level questions, like, what sales growth by income cohort across my industry, what’s my market share? In that case, our proprietary Earnest Dash platform, users can actually do their work online in the portal, save it, share it with the org, download it into Excel for further manipulation. It’s just got a level of polish that didn’t exist in the industry until pretty recently and is turning on a lot of new users to alt-data.”
Michael Maloof on using alt-data in sophisticated modeling: “Then there are always gonna be those very sophisticated data teams, their executives tasked them with, like, finding untapped sales opportunities, exploring share of wallet among specific loyalty cohorts. And those users are turning to what we call row-level data like I mentioned. This is called Earnest Direct product in our case, a lot of companies have something like this. In this case, we’re actually delivering files with billions of rows of actual transaction and household-level data to users to analyze every day, pretty much as they wish. And this is much better for bigger, and like, really bigger questions that maybe more are organization specific.”
Michael Maloof on corporate adoption so far: “If we’re at the 65% of hedge funds using alt-data benchmark, my guess is that we’re in the low single digits of corporations using this next generation of more user-friendly alt-data. And in some industries, this type of data is already table stakes. Yes, if you go to the large mass retailers who are very data-hungry, have large teams to handle it, you’ll find that almost all of them are using something like this right now.
But there are a lot of companies out there looking for help choosing store locations, assessing market share, sizing market opportunities, valuing their customers who are just not yet alt-data users. So, we truly have a really long way to go with that corporate adoption.”
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