Download DELIvERING bIG DATA`S POTENTIAL: A MARKETER`S

Delivering Big
Data’s Potential:
A marketer’s primer
Bryan Smith, PhD
Director Marketing Strategy
& Analysis, SapientNitro
San Francisco
Bryan is a computational
research scientist with
15+ years of experience
uncovering insights buried
in massive data.
You’ve heard it at conferences, read about it the trade rags, and followed the
debate on your favorite blogs – Big Data is here to intuit your customer’s most
intimate thoughts, predict his/her behavior, and solve all your marketing problems.
Odds are, your organization has spent significant time, money and effort debating Big Data
opportunities, conducting workshops, developing proof of concepts, selecting vendors, and hiring (or
at least attempting to hire) a team of data scientists and engineers.
With a bit of luck, these efforts have built your capability
to tackle the first three Vs of Big Data: Volume (using
larger data sets), Velocity (acting on signals more
quickly), and Variety (leveraging diverse data sources).
The ROI deficit is partially explained by obvious factors
identified by Gartner and Wikibon: immature technology,
lack of skilled data science resources, and poorly defined
business use cases.
But, what about the all-important fourth V… where
is the Value the Big Data hype promises to deliver?
According to recent research1,2 the average return per
dollar invested in Big Data to date is just 55 cents,
yet investments in data-driven decision making are
projected to provide larger ROI than many other
marketing investments. So what’s going wrong? What
actions can you take to deliver on Big Data’s potential?
However, in our work with clients, we’ve observed
some more basic pitfalls – poor communication
between marketing and data science teams, a dearth
of understanding of one another’s perspectives, and
hit-or-miss methods for commissioning and managing
data science work. This article hopes to address these
issues by unpacking basic concepts for marketers to
communicate with data science professionals and
practical advice on managing data science efforts to
yield maximal returns.
1
2
Enterprises Struggling to Derive Maximum Value from Big Data: http://wikibon.org/wiki/v/Enterprises_Struggling_to_Derive_Maximum_Value_from_Big_Data
Gartner Survey Reveals That 64 Percent of Organizations Have Invested or Plan to Invest in Big Data in 2013: http://www.gartner.com/newsroom/id/2593815
129
delivering big data’s potential: A marketer’s primer
Learning to Communicate: A Data Scientist’s Glossary
We’ve developed the following functional glossary to help demystify some of the common terms used in data
science practice, connecting them to some practical ways we use them in our work.
Big Data comprises both a technology stack component and the machine-learning algorithms running on top. Given
that Big Data core technology stacks are being increasingly commoditized (e.g. Cloudera, MapR, HortonWorks, etc.,)
our focus here is on the machine learning aspects of the broader Big Data domain.
Machine Learning
Machine learning is the process of training computers how to “learn” interesting patterns in data and how to
adapt automatically when data change over time. We feed the machine-learning algorithms data at training time to
build models, and those models are then used to inform marketing and operations decisions, ideally in an adaptive
manner. It comes in two different flavors: supervised learning and unsupervised learning. These two methods
differ in the data required to make them work and the insights that they yield.
Applying Big Data in Retail: Visualizing Cross-Category Sales Activity
The images show a comparison to two cross-channel sales scenarios derived from clickstream data. The image on the left
represents relatively low cross-channel sales, while the image on the right represents relatively higher cross-channel sales, for
example, after optimizations were made to the site.
This interactive tool – based on terabytes of data – can identify categories which retailers might want to cross-promote which
are not intuitive. For example, using this method, we could discover correlations between buyers who purchased tent hardware,
and, who also purchased batteries. A secondary benefit is that these data unlock opportunities for brands to offer additional
advertising slots to buyers.
delivering big data’s potential: A marketer’s primer
Fig. 1
Supervised Learning
Training (old data)
Predicting (new data)
algorithm
input
measurements/output
model
model
input
estimated outputs
Supervised Learning
Supervised learning algorithms require both input (e.g., user clickstream) and output (e.g., user purchases) data,
commonly referred to in statistics as the independent and dependent variables, respectively. The general purpose is
to create a model for how the output relates to the input. Once we have a “good” model based on past clickstreams
and purchases, we can employ that model to estimate purchase propensity using input data from new users.
Supervised Learning Use Cases
Applying Supervised Learning algorithms to marketing
problems can generate powerful predictive models,
which can be used and refined over time. These
models can generate deep insights and guide marketing
strategy, and also allow you to test ‘what-if’ scenarios.
1. Conversion probability: How likely is a specific
shopper to purchase based on user data
(demographic, geographic, social media profile) and
purchase history?
2.Click-through rate prediction: What are the
estimated click-through rates on new content,
based on user profile data, time of day, product
category, content publisher identity, and historical
click-through data?
3. Churn probability: What are the online behaviors
which best predict the loss of a customer? Or,
conversely, what are the characteristics of
customers most likely to stay with your business?
4. High-value user acquisition: Who are the most
valuable customers over the long-term to your
business? Marketers can then apply these
characteristics to shape marketing strategy as part
of a new user acquisition campaign.
Technical Deep-Dive: Two Explanatory Models
Algorithm #1 “Classifier”
A classifier is a supervised-learning algorithm concerned
with assigning data to one or more pre-defined
categories. It is particularly useful for interpreting data
with discrete categories – such as purchased or not
purchased, or click or not clicked.
In the example above, we defined two specific
categories, “purchase” or “no purchase,” which may
be encoded as numeric values of 1 and 0, respectively.
We would use a classifier to understand how the data
we’ve collected relate to these two distinct “classes.”
If certain combinations of user demographic data,
marketing channel identity, and content relevance are
correlated with conversion probability, we may be able
to discover those relationships using this type of model.
Algorithm #2 “Regression”
Regression models are used when we want to
understand “continuous” outputs, such as the actual
amount of money a customer is likely to spend over
their lifetime. So, rather than the discrete “purchase”
and “no purchase” categories described in a classifier,
a regression model can be used to estimate how
combinations of data may be predictive of actual dollar
amounts spent by your users. Regression models are
also supervised, meaning we need to train them using
historical examples of both the input data as well as the
actual purchase data for the same set of users.
delivering big data’s potential: A marketer’s primer
Fig. 2
Unsupervised Learning
Training (old data)
Applying (new data)
algorithm
ungrouped input
model
grouped output
unknown input
group assignment
model
Unsupervised Learning
Unsupervised learning, often called data mining, occurs when we are concerned with understanding patterns and
relationships within the input data itself, regardless of any particular output. Given that we do not need to use any
particular output data to train these kinds of models, unsupervised learning may seem like the path to magical
customer insight. In practice, successful application of these methods requires clearly defined questions and
hypotheses in order to generate value.
Unsupervised Learning Use Cases
Applying unsupervised learning models to marketing problems generate different types of insights – namely, they
don’t try to determine causality, but rather they only generate characteristics of the segments.
1.Bottom-up segmentation: Identify naturally
occurring “clusters” of users within the data; key
inputs are data about users and their behavior. This
information can be used in targeting campaign
efficacy assessment, etc.
2.Product recommendations: Suggest products
that are likely to be enjoyed by a user by using
collaborative filtering (a variant of pattern mining)
combined with user preference or ranking data.
3.Experience personalization: Establish user
personas using clustering algorithms applied to user
data, to be employed in personalization strategies.
4. Dynamic site optimization: Dynamically optimize
a site experience by using frequent pattern mining
combined with clustering algorithms, taking
into account both the user’s current clickstream
behavior as well as a persona grouping to which
that individual belongs.
5. Cross-Category promotions: Using basket analysis
(frequent items mining), identify items or item
categories that often occur together in transaction
data. Use the resulting information for promotions,
sales and inventory management optimizations.
delivering big data’s potential: A marketer’s primer
Technical Deep-Dive: Two Explanatory Models
Algorithm #1 “Cluster Analysis”
Clustering algorithms are used to group objects, such as users or products, into clusters
(or segments) based on some notion of similarity. Whereas top-down segmentation
as executed by a marketing expert enables precise targeting, there is also significant
value in understanding the naturally occurring groupings (personas, user archetypes,
etc.) in a user database. For this type of exploration, we rely on cluster analysis.
Algorithm #2 “Frequent Pattern Mining”
Market basket analysis, likely a concept many readers have exposure to, is a type of
frequent pattern mining. The famous (though likely apocryphal) association between
beer and diapers in retail consumer’s carts is an illustrative example of using market
basket analysis to identify product associations that are not necessarily intuitive.
Collaborative filtering algorithms, used by Netflix recommendations and Amazon’s
“users who bought X also bought Y” are other examples. It is worth noting that many
of the algorithms in a data scientist’s toolbox may be described in terms of “frequent
pattern mining,” but the above examples define a general distinction.
Putting the Models to Work: The Intersection of Business
and the Data Scientist
Now that you are armed with a knowledge of some commonly used vocabulary of
the data scientist, you should understand some differences in perspectives between
typical marketing resources and the data scientist.
Marketers are familiar with the world of creatives and creativity. The cadence of data
science work does have some elements in common with creative work. Data science
is more ambiguous in nature and quality results may take longer to develop than
initially anticipated. In fact, in the same way that a creative team needs a clear brief,
data science teams need concrete questions provided by the marketer to direct their
efforts. Left without direction, or with a vague mandate to go produce some insights,
we’ve seen data science teams work feverishly for months, only to produce insights
with limited practical utility.
Unlike creative however, data science also has elements of scientific research, which
makes progress through experimentation. Carefully designed experiments typically
prove or disprove hypotheses, but can also sometimes be inconclusive. A series
of false hypotheses or failed experiments can lead to dead ends and the need to
backtrack. It may seem from the perspective of the marketer that the data science
team is flailing, not making progress at all, when in reality this iterative process may
be a normal progression as these methods are initially adopted. While a deadline on
a creative team may work to fuel the creative process, a deadline on a data science
team will only limit the time taken on a set of experiments, which may not guarantee
better insight or deliver a business result more quickly.
delivering big data’s potential: A marketer’s primer
Essential Marketing Questions to
Ask Your Data Team
1. What attributes define my most valuable
customers?
Best Practices in Managing the Data
Science Team
How do you work with data professionals in your
organization? To answer the question, let’s take the
hypothetical example of a brand that needs a datadriven cross-category sales and promotions retail
strategy. Here are some best practices:
2. What customer segments am I most likely
to lose over the next 3 months?
3. What features of my product resonate
with various segments of my user base?
4. How are my marketing campaigns being
received in social media?
5. Are there identifiable differences among
various groups who like or dislike my
products?
6. Why was the click-through rate of my
most recent campaign so high/low?
1. Ask specific questions: Being clear about the
expected outcomes of your data science efforts may
seem obvious, yet too often we see insufficient time
devoted to identifying and prioritizing the questions for
the data science team.
Leveraging data to optimize cross-selling activities
requires a careful consideration of factors ranging from
your marketing mix to your supply chain. All of these
complex systems and more may come into play. Left
undirected, a data science team may decide to tackle
any or all of these systems that may not align with your
marketing objectives. Questions that seem related
to the general problem may in fact require distinct
approaches to research and answer.
In the context of our example (a retail brand driving
cross-category sales and promotions), you may want to
specify questions including:
• What categories occur most often together in user’s
carts?
7. Can I move stale inventory by identifying
cross-promotion opportunities from
existing user behaviors?
8. Are there any readily-identifiable
common attributes of my most successful
salespeople?
• Is there any geographic variability with category
associations?
• How can we measure cross-category promotions
activity across geographies?
• Are there any additional specific sources of data we
can integrate to better inform our models?
• What categories of items show up consistently
together organically (in the absence of any known
cross promotions)?
delivering big data’s potential: A marketer’s primer
2. Create a sense of urgency: Our earlier comments
about data science being like research are not meant
to imply that an approach to Big Data should come with
no deadlines and open wallets.
We’ve found an effective technique for creating a
sense of urgency to meet deadlines is to create a
backlog of well defined and time boxed “experiments,”
in which the expected results are well understood by
both the marketing and the data science team. Setting
specific objectives and timelines around data source
identification, data access processes, and information
security issues should be included.
For our hypothetical situation, we will need to know
how to access historical sales data, promotion
activities, and product catalogue data. With data in
hand, we need a simple analysis of item and category
co-occurrence. Given our understanding of this initial
model, we need to make decisions about what specific
questions to approach next.
The ideal length of time per experiment is four to six
weeks, seldom exceeding eight weeks.
Be prepared for failure. Expect it. The goal is to learn,
acknowledge failures, and reprioritize the backlog. This
approach borrows in many ways from Agile software
development.
3. Define the owners: For the questions your teams
will be answering, both within your team and the data
science team.
• Who is the ultimate owner?
• Who owns data provisioning and access?
• Who will use the results of the cross-category analysis?
• Is this effort intended for the marketing team,
promotions, purchasing, or someone else?
4. Create an integrated view of your data science
efforts, and keep control of your information:
Maintaining access to your information and your semiprocessed data is not just a matter of IT security. Rather,
it’s about ensuring efficient access to the types of data
that will be required to generate insights you seek.
Due to hype, available options and vendor proliferation,
organizations are outsourcing not only the collection and
storage of their data, but are giving up access to raw
data streams.
The perceived convenience and initial cost savings of
leaving your data collection and management processes
to third-party vendors could end up proving costly in the
long run, as demands for those data evolve over the
lifetime of an organization. Simply, these pitfalls can
be avoided, and outsourcing benefits fully realized, by
involving data science and governance in any decisions
where data will be housed outside the enterprise.
The bond between marketing and data science has
deep roots. Direct marketers have leveraged data
science for decades.
But digital media has changed the dynamics of this
partnership – offering massive data streams that
promise to provide insight into not only what customers
are saying and doing, but potentially also what they are
thinking.
As George Dyson asked and answered, “But, how can
the machine know what I think?” The machine does not
need to know what you think – no more than one person
ever really knows what another person thinks.
A reasonable guess at what you are thinking is good
enough. That’s the promise of data science for
marketers. Let’s work on that ROI.
• Are there multiple consumers of the insights? If so,
does the output need to be specifically crafted for
these various users?
This is a critical stage of the process to actively manage
and assess, with the risk being the possibility that brilliant
insights are being delivered into a void of inaction.
135