Download Marketing Analytics: Welcome to the Era of Big Data

Chapter Five
Marketing Analytics:
Welcome to the Era
of Big Data
Marketing: Real People, Real Choices, 8e
Solomon, Marshall, and Stuart
Copyright © 2016 Pearson Education, Inc.
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Chapter Objectives
• Explain how marketers increase long-term success and
profits by practicing customer relationship
management
• Understand Big Data, data mining and how marketers
can put these techniques to good use
• Describe what marketing analytics include and how
organizations can leverage both marketing analytics
and predictive analytics to improve marketing
performance
• Identify how organizations can use marketing metrics
to measure performance and achieve marketing
control
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Real People, Real Choices:
Decision Time at Teradata Corporation
• Which option should be pursued?
– Option 1: Continue on current course and focus on
short-term product launch in order to provide
more time and resources for future re-launch
– Option 2: Launch the product and brand in a “twoprong” release
– Option 3: Delay the cloud product launch,
accelerate efforts to rebrand Aprimo, then launch
cloud product and new brand together
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CRM: A Key Decision Tool
for Marketers
• Customer relationship management (CRM)
involves systematic tracking of consumers
preferences and behaviors over time in order
to tailor individualized value propositions
– Allows firms to get “up close and personal”
– A process by which firms enact their customer
orientation
– Capture information at each customer touchpoint
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CRM Facilitates One to One Marketing
• One-to-one marketing includes several steps
– Identify customers and get to know them in as
much detail as possible
– Differentiate among these customers in terms of
both their needs and their value to the company
– Interact with customers and find ways to improve
cost efficiency and the effectiveness of the
interaction
– Customize some aspect of goods or services
offered to each customer
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Table 5.1: Four Steps of
One-to-One Marketing
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Examples of CRM in Action
• USAA
• Amazon.com
• Disney’s MyMagic +
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Figure 5.1: Characteristics of CRM
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Share of Customer
• Its easier and less expensive to keep a current
customer than it is to acquire a new one.
– Many firms look to increase share of customer,
instead of share of market.
• Share of customer is the percentage of a given
customer’s purchases in a category over time
– Enables company to grow sales and profits at a
lower cost, relative to new customer acquisition
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Customer Equity and Lifetime Value
• Lifetime value of a customer
is how much profit a firm
will make on a customer
• Customer equity is financial
value of a customer
relationship
– Takes into account monetary
investments to acquire and
maintain relationship
LVC Tool
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Customer Prioritization
• Not all customers are equal … at least, not in
terms of profitability!
• CRM systems enable marketers to identify
priority customers and customize
communications and special offers accordingly
– For example, a firm may emphasize personal
selling for contacting high-volume customers,
while using direct mail or telemarketing to
communicate to low-volume customers
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CRM: Transforming Customers into
Corporate Assets
• CRM leverages database technologies to
customize customer interactions based on:
– Share of customer
– Lifetime value
– Customer equity
– Customer prioritization
Are their limitations, or even dangers, to viewing
customers as financial assets?
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Big Data: Terabytes Rule
• Big data is a popular term to describe the
exponential growth of structured and
unstructured data
– Internet data can be hard to analyze using
traditional approaches
– Internet of Things
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Insights from Big Data
• Big Data can provide competitive advantages
in three main areas:
– Identifying new opportunities
– Transforming insights into better products
– Delivering timely information more efficiently
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Big Data Predicts Infectious Disease
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Big Data Creation, Sources, and Usage
• Millions of pieces of information that make up
Big Data originate from two source categories:
– Direct path
– Indirect path
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Figure 5.2: Sources of Big
Data for Marketers
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Social Media Sources
• Web scraping
• Sentiment analysis
– Measuring brand attitude by assessing the context
or emotion of online comments
• Brand mapping
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Nielsen Brand Association Map
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Figure 5.3: Corporate IT Data Sources
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Government and NGO Data
• Increased types and amounts of governmentgenerated data are accessible to enterprising
marketers.
– U.S. Census
– Index of Economic Freedom
– Bureau of Transportation Statistics
– Recalls.gov
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Commercial Entities
• Many companies today collect data in large
quantities to sell to other organizations
– Credit card purchase data
– Supermarket scanner data
• Data sold in aggregate form
• May be a primary or secondary source of
revenue for the firm
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Partner Databases
• Two-way information exchange between
purchasing organization and suppliers
• Provides benefits to buyers and sellers
– Real-time demand signals
– Replace inventory with information
– Fewer stock-outs
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Data Mining
• The biggest data challenge for many firms is
determining what to do with it all!
• Data mining refers to process by which
analysts sift through Big Data to identify
unique patters of behavior
– Data warehouses
– Data brokers
– Reality mining
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Figure 5.4: Structured and
Unstructured Data Examples
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Unstructured Data
• Data analysts have traditionally focused on
structured data
– More readily obtainable
– Computers today can easily analyze a large
number of data points.
• Deriving meaning from unstructured data is
more difficult, but potentially more valuable
– New technologies are making this process easier
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Ethical/Sustainable Decisions
in the Real World
• Data brokers are companies that collect and sell
personal information about consumers, including:
– Religion and ethnicity
– User names
– Income
– Medication they take, and more …
• Acxiom acknowledges it has on average 1,500 pieces
of information on 200 million+ Americans
Should it be legal for companies to collect and sell
your personal information without your knowledge?
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Data Scientists: Transforming Big Data
into Winning Insights
• Being able to transform data into insights is a
challenging proposition!
– Requires understanding of advanced analytics as
well as way companies interact with consumers
• Data scientists search through disparate data
sources to discover hidden insights
– Advanced degrees, often Ph.D.’s
– Six-figure starting salaries
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Figure 5.5: Uses of Data Mining
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Big Data: Summary
• Mining of Big Data can provide marketers with
valuable new insights …
• But also presents difficult new challenges!
– Technological challenges
– Analytic challenges
– Ethical challenges
Does knowing how companies seek to use personal
information change your perspective of marketing?
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Marketing Analytics
• “Half the money I spend on advertising is
wasted – I just don’t know which half.”
– John Wannamaker,
19th century Philadelphia Retailer
• Marketing analytics comprises technologies
and processes that enable marketers to
collect, measure, analyze, and assess
marketing effectiveness
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Connecting Digital Channels to
Marketing Analytics
• Marketers have long faced challenges in
determining campaign and channel
effectiveness
• Digital marketing has become an increasingly
important element of the marketer’s toolbox
– More and more people spending increasing time
online
– Much easier to track consumer behavior in
response to digital marketing actions
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Figure 5.6: Major Digital
Marketing Channels
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Comparing Value of Digital
Marketing Investments
• Cost-per-click
– Advertiser is charged only when user clicks on ad
– More expensive, requires greater interaction
• Cost-per-impression
– Advertiser is charged each time ad shows up on
user page
– Less expensive, but not as easy to measure
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Predictive Analytics
• Up to now, discussion of marketing analytics
has focused on validating prior investments
– Focus on understanding current performance
• Predictive analytics use large quantities of
data to more accurately predict future
outcomes
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Marketing Metrics and
Predictive Analytics
• Marketing metrics enable firms to assess
performance of current initiatives.
• Predictive analytics is a “crystal ball” through
which marketers can predict the success of
future initiatives.
What factors might a bank card issuer use to help
predict student customers’ spring break location
choices?
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Metrics for Marketing Control
• Marketing control means the ability to identify
deviations in expected performance – both
positive and negative – as soon as they occur
– Enable marketers to adjust their actions before
greater losses or inefficiencies are accumulated
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Key Marketing Metrics
• Click-through rate
(Click-throughs /Impressions) X 100
• Conversion rate
# of goal achievements/# of website visitors
• Cost per order
Advertising costs/Orders
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Real People, Real Choices:
Decision Made at Teradata
• Lisa chose option 2
– Implementation: Lisa’s team launched the cloud
product at a major industry trade show, even as
they applied data from their research to the
creative development of the Teradata brand.
– Measuring Success: The market took notice . One
major analyst firm welcomed the new approach
so much that it renamed the annual category
research report “Integrated Marketing
Management.”
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All rights reserved. No part of this publication may be
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photocopying, recording, or otherwise, without the prior
written permission of the publisher. Printed in the United
States of America
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