Marketing Analytics

Introduction
• Process of identifying metrics that are valid indicators of
marketing’s performance in pursuit of its objectives, tracking those
metrics vover time, and using the results to improve how marketing
does it work.
• Core Components : 1) Valid Indicators
2) Pursuit of Objectives
3) Tracking Metrics over time
4) Improve how Marketing works

Primary Components of the process:

• People
• Steps
• Tools and technology
• Input and Output
 Importance
1) Measuring the effectiveness of your website

• A solid marketing automation software, a robust CRM system, a content

marketing production space and a web presence tracking tool
like Mixpanel.
• Mixpanel : A detailed look into what users are doing on web and mobile
properties, or how much time they are spending within an application
2)Measuring the impact of your content marketing

Content Scoring takes a granular look at the effects of singular marketing

deliverables to revenue. It could tell you, for example, the amount of revenue a
single tweet or blog post contributed to the business as a whole.
 3)Marketing ROI planning

Marketing Evolution is an example of technology that helps marketers create ROI plans
while leveraging big data.
 Marketing Analytics Challenges
• Identifying and tracking meaningful analytics
• Lack of knowledge or expertise present
• Staffing
• Systems or infrastructure
• Lack of time
 Marketing Analytics Process
• Identify Metrics
• Analyze the Metrics
• Take Improvement Actions
 Why do we need a Dashboards
• Critical enablers of the marketing analytics
process
• Presents all the key metrics side by side for easy
comparison
• Spots Trends
• Encourages analyst to delve deeply into the data
• Single page real time user interface showing a
graphical presentation of the current status.
• “What have you done for us lately”
 Different Types
• Marketing Program Metrics
• Customer Program Metrics
• Lead Generation Metrics
• Website Metrics
• Demand Generation Metrics
• Content Marketing Metrics
• Social Media Metrics
• Public Relations Metrics
• Event Marketing Metrics
• Digital Marketing Metrics
• Web Marketing Metrics
 Descriptive Analytics
• Analytics, which use data aggregation and
data mining to provide insight into the past
and answer: “What has happened?”
 Examples:
• For example, a business which sells cars may have a long list of all of the
cars it has sold in a year. That list is too hard for people to use for decision
making, and so an analyst would summarize the data using descriptive
analytics.
• The resulting report may include the number of cars sold each month, an
average of how many cars were sold per day, or simply the sum of cars
sold in a year.
• All of these figures describe the data in simpler terms than the list as a
whole. Because it is easier to digest a summary than a list, the descriptive
report will be more suitable for those trying to understand what happened
and decide what to do in the future.
How to do descriptive analytics

1) Start by collecting
relevant data
2) Do the analysis
3) Present data clearly
4) Aim for consistency
 Diagnostic Analytics
• Diagnostic Analytics is all about making “why” statements.

• Examples of Diagnostic Analytics include attribute

importance, principle components analysis, sensitivity
analysis, and conjoint analysis.

• For example, for a social media marketing campaign, you

can use descriptive analytics to assess the number of posts,
mentions, followers, fans, page views, reviews, pins, etc.
There can be thousands of online mentions that can be
distilled into a single view to see what worked in your past
campaigns and what didn’t.
 Features
1. Backward looking
2. Focused on causal relationships and sequences
3. Relative ranking of dimensions/variable based on inferred explanatory
power
4. Target/dependent variable with independent variables/dimensions
5. Pattern detection and diagnosis
6. Inference and likelihood based
7. Model training and testing
8. Includes both frequentist and Bayesian causal inferential analyses
 Predictive Analytics
• Analytics, which use statistical models and forecasts techniques to
understand the future and answer: “What could happen?”
• beneficial in cyber-security, risk analysis, inventory management, etc. our
focus currently will be on its advantages vis-à-vis marketing and sales
forecasting.

Why is predictive analytics important for sales forecasting?

• Facilitates result-oriented sales
• Better conversions
• Saves time
• Cost-effective
• Optimize your marketing campaigns
Top brands to utilize Predictive marketing analytics

The trailer was built based on analytics and the production team saw a 10%
reduction in media spend and the movie exceeded box office opening estimates
by $30 million.
To do targeted marketing campaigns right for their audiences, ‘The Southern States’
customer insights team uses Alteryx, coupled with their Facebook information to run
Predictive marketing analytics done right can work to increase profit, customer
retention, sales and a company’s net worth – and the benefits of using state of the art
technology to create winning marketing campaigns? Priceless.
Lattice : Used by VMWare, DocuSign, and PayPal, Lattice Engines delivers
predictive apps that help marketers cut the production of crap and focus on
the money makers.
 Prescriptive Analytics
• Analytics, which use statistical models and
forecasts techniques to understand the future
and answer: “What could happen?”

• Five Step Approach :

I. Create Small and Concise Versions of Large Reports
II. Develop New Metrics
III. Make the Reports Look Pretty.
IV. Create Stories
V. Recommend Next Steps
Marketing Decision Models
 Types
• Consumer Decision Making Models
• Marketing Mix Models
• Customer-Centric Marketing Models
• Special Model Approaches
• Industry-Specific Models
• Return on Marketing Models
Consumer Decision Making Models
(i) measurement technique for quantifying buyer tradeoffs and attribute
values (or partworths)

(ii) an analytical technique for predicting buyers’ likely reactions to new

products/services;

(iii) Segmentation technique for identifying groups of buyers who share similar
tradeoffs/values;

(iv) Simulation technique for assessing new product service ideas in a

competitive environment

(v) Optimization technique for seeking product/service profiles that maximize a

pre-specified outcome measure such as share or rate of return.
 Marketing Mix Models
• Marketing mix modelling measures the potential value of all marketing
inputs and identifies marketing investments that are most likely to
produce long-term revenue growth.

• marketing mix modelling involves the use of multiple regression

techniques to help predict the optimal mix of marketing variables.

• Regression is based on a number of inputs (or independent variables) and

how these relate to an outcome (or dependent variable) such as sales or
profits.

• Once the model is built and validated, the input variables (advertising,
promotion, etc.) can be manipulated to determine the net effect on a
company’s sales or profits.
 Customer-Centric Marketing Models
• A market can be thought of as the collection of contexts in which
you might sell your product. You can split your market into a set of
market segments. Each of those segments represents a group of
customers, each of whom shares a set of problems for which they
would pay for solutions.
focused on satisfying the needs of individual customers
 Key goals of the model
• Provide a framework that helps product managers make
decisions about products.

• Establish an outside-in bias that encourages product managers

to think first about customers and second about
implementation.

• Encourage teams to design products that solve real problems

that people will pay to solve.

• Support both Agile and Waterfall development processes.

 Industry-Specific Models
• IBM Industry Data Model
• set of business and technical data models that are pre-
designed to meet the needs of a particular industry
• pre-built models specifically designed for an industry’s data
needs
• can jumpstart an organization down the path towards a
comprehensive analytics environment by applying proven
best practices in data modelling to self-contained units of
business functionality
 Market Segmentation
• Data Analytics: A Marketing Segmentation
Case Study
• Segmentation solution is created through a
rigorous and iterative process
• Most segmentation analyses are based upon
various types of “cluster analysis,”
Different types of data used
Data source combined to segments
 Geographic
• wherein companies segment the market by attacking a restricted
geographic area

• Regional differences in consumer preferences exist, and this often

provides a basis for geographic specialization

• Geographic segmentation can take many forms (urban versus rural,

north versus south, seacoasts versus interior, warm areas versus
cold, high-humidity areas versus dry areas, high elevation versus
low-elevation areas, and so on)

• For example, a company might choose to market its red-eye gravy

only in the southeastern U.S. Likewise, a picante sauce might
concentrate its distribution and advertising in the Southwest

• Geo : Geographical analysis and visualisation software.

 Demographic
• Gender, age, income, housing type, and
education level are common demographic
variables
• Music streaming services tend to be targeted
to the young, while hearing aids are targeted
to the elderly
 Psychographic
• Based upon multivariate analyses of consumer
attitudes, values, behaviors, emotions,
perceptions, beliefs, and interests.
• Psychographic segmentation is a legitimate
way to segment a market, if we can identify
the proper segmentation variables (or lifestyle
statements, words, pictures, etc.)
 Behavioral
• Behavioral segmentation divides a population based on their behavior, the
way the population respond to, use or know of a product.

• Thus consumer decision making is affected by his behavior and that is

exactly how the behavioral segments are targeted.

• Hotels and restaurants will target new year as they will have more
customers over the new year which is a moment of outdoor celebration
whereas Christmas is more of a family celebration and a gifting festival.
Thus, most companies which are categorized as “gifts” will market
themselves heavily during this time. If there is a company (such as a
chocolate company), then they can strategically target “Christmas and
new year”.
 Cluster Analysis
• needs to categorize :objects in each group are similar, and the
objects in each group are substantially different from the objects in
the other groups
1. When Procter & Gamble test markets a new cosmetic, it
may want to group
2. U.S. cities into groups that are similar on demographic
attributes such as percentage of Asians, percentage of
Blacks, percentage of Hispanics, median age,
unemployment rate, and median income level.
3. Microsoft might cluster its corporate customers based
on the price a given customer is willing to pay for a
product. For example, there might be a cluster of
construction companies that are willing to pay a lot for
Microsoft Project but not so much for Power Point.
4. A marketing analyst at Coca-Cola wants to segment the
soft drink market based on consumer preferences for
price sensitivity, preference of diet versus regular soda,
and preference of Coke versus Pepsi
 Conducting cluster analysis
The primary objective of cluster analysis is to define the
structure of the data by placing the most similar observations
into groups.
To accomplish this task, we must address three basic questions:
• How do we measure similarity?
• How do we form clusters?
• How many groups do we form?
 Measuring similarity
Similarity represents the degree of correspondence among
objects across all of the characteristics used in the analysis. It is a
set of rules that serve as criteria for grouping or separating
items.
• Correlational measures. - Less frequently used, where large
values of r‟s do indicate similarity
• Distance Measures. Most often used as a measure of
similarity, with higher values representing greater dissimilarity
(distance between cases), not similarity.
 How do we form clusters
SIMPLE RULE:
• Identify the two most similar(closest) observations not already in the
same cluster and combine them.
• We apply this rule repeatedly to generate a number of cluster solutions,
starting with each observation as its own “cluster” and then combining
two clusters at a time until all observations are in a single cluster. This
process is termed a hierarchical procedure because it moves in a stepwise
fashion to form an entire range of cluster solutions.
• agglomerative method because clusters are formed by combining existing
clusters
 How many clusters do we form?
• Most appropriate set.
• This approach is particularly useful in identifying outliers.
• It also depicts the relative size of varying clusters, although it
becomes unwieldy when the number of observations
increases.
Calculating Lifetime
Customer Value
 Introduction
• LTVC (Lifetime value of your customer) is a great way to identify
how much value your customer will bring to you over his/her
lifetime.

 Given the retention rate, discount rate, and profit per period
generated by a customer, we can easily compute the value of a
customer.

 Given N = Number of purchases, t = Time of last purchase, T =

Time elapsed between acquisition of customer and present time,
and T* = t / T, (T*)n estimates the probability a customer is still
active at time T.
 Basic Customer Value Template

• Per period discount rate:

– (typically 10 percent to 16 percent per year)
– An annual discount rate of 10 percent means
• Per period retention rate:
– A retention rate of 60 percent per year means that during any year you lose 40
percent of the customers and you retain 60 percent of your customers.
 Assumptions
■ A fraction (1– retention rate) of the customers is lost each period.
The fraction of customers lost each period is known as the churn
rate.
– The quantity 1– retention rate is known as the churn rate
– let r = retention rate

■ The customer generates the same profit margin each year.

– a customer generates a $1 profi t margin.
– The discount rate and retention rate must refer to the same length of time.

■ The number of periods considered is limited to 360.

Even if a period is a month, this covers 30 years.
 Customers generating profits

– 100 for beginning of year

– 100*( 1– retention rate) for end of year)
– .5*100*(1+ retention rate) for middle of year)

Discount rate is 10 percent then the following are

true:
– End-of-year discount factor for year 1 is 1/1.10.
– Beginning-of-year discount factor for year 1 is 1.
– Middle-of-year discount factor for year 1 is
1 /1.105
 Explicit Formula for the Multiplier
• Compute the value of the customer as:

(Profi t per Period) * (Multiplier)

– Multiplier = (1 + i) / (1 + i − r)

i = per period discount rate

r= per period retention rate
 Measuring Sensitivity Analysis with
Two-way Tables
• Sensitivity analysis of a model involves determining how “sensitive” model
outputs are to changes in model inputs.
• Sensitivity analysis is important because estimates of the model inputs
may be wrong so you need to have an idea how errors in your input
estimates will aff ect the model’s outputs.

• For each combination of retention rate and discount rate, Excel computes
the output cell (the multiplier.)
 Varying Margins
• Customer margins tend to increase with the length of a customer’s tenure

• Values are needed for thefollowing three parameters.

– Year 1 margin per customer:
This is the margin at the beginning of year 1, say, $1 in this case.

– Steady state margin per customer:

This is the per period profit margin for a customer who is with the company for a long
period of time.

Assume the steady state margin increases from $1 to $1.50.

– Periods until margin per customer is halfway to the steady state margin
($1.25). Call this T*.
Now assume that T* = 3 periods.
 Estimating the Chance a Customer
Is Still Active
The following data is needed:

■ N = Number of purchases
■ t = Time of last purchase
■ T = Time elapsed between acquisition of customer and present time

• After defining T* = t / T, the authors show that (T*)n estimates the

probability that the customer is still active