Marketing Analytics

Contents
• Introduction
• Importance of MA
• Tools and Techniques used in MA
• Examples of MA
• Consumer Decision Making Model
• Customer Segmentation using Cluster Analysis
• Marketing Mix Allocation using Conjoint Analysis
• RFM Analysis
• Predictive model of Promotional Effectiveness
 Introduction
• Marketing analytics helps organization improve their efficiency.
• Marketing analytics helps to achieve the traditional marketing
discipline.
• Traditional Marketing Disciplines include –
– Market Research – understanding your audience by means of survey
– Consumer Behavior – observing the audience
– Brand Management – to explore about the brand
– Product Management – to explore about the product
– Social Media Marketing – ads in fb,insta
– Sales Management – finding out sales figure for a particular month or
year
 Cont.
• Traditional questions asked during the sales or
promotion of a particular product?
– Which product variant will the customer prefer?
– Which product features do customers like the
most?
– Which promotion channels to spend on?
– How much sales can I expect the next month?
– How should I price my product?
 Importance of MA
(i) Understanding the customer and market trends is really important
in today’s time. Marketing analytics easily allows understanding of big
picture trends that too by focusing on every single detail.
(ii) With the aid of providing you with a clear picture of the efforts
and the returns, it allows you to easily depict that which programs
worked and also depicts the reasons why it failed or even succeeded.
(iii) The market study is also an important part of the business.
Marketing analytics allow monitoring of trends over time.
(iv) Marketing analytics allows understanding the return on
investment by providing a clear picture of the working and the
reports of each program.
(v) By easily helping to study the market trends, marketing analytics
facilitates to proficiently forecast future results.
• Analytics help you find the keywords that can
easily be used to optimize business processes by
(i) Customer surveys — One can easily infer the
relative priorities of competing interests by the
examination of keyword frequency data.
(ii) Industry trends — It becomes really easy to
understand and predict trends in customer.
Behavior.
(iii) Product design — It is vital to understand what
are the solutions that a customer is looking for.
 Tools and Techniques
• Descriptive – (What happened?)
• Examples –
– What was the traffic from USA?
– What were the top 5 products this month?
• Tools and Techniques
– Google Analytics, Tableau, MS Excel
• Diagnostic – (Why it happened?
• Examples –
– Why were the sales down in December?
– Why did shirts sell more than trousers?
• Tools and Techniques
– Google Analytics
• Predictive – (What will happen?)
• Examples –
– What will be the sales next month?
– Will the prospect enrol or not?
• Tools and Techniques
– Data Mining, Tableau, Machine Learning, Python , R
• Prescriptive –(What to do if something will happen?
• Examples –
– Use Optimized budget for campaign
– Shortest route to deliver the product
• Tools and Techniques
– Machine Learning, Deep Learning, Python, IoT
 Examples

• Amazon Fresh and Whole Foods

This campaign is one of the best Marketing Analytics Examples that
showcase how analytical data helped Amazon gauge how
customers purchase groceries. It also updated the company about
how suppliers would do their interaction with the grocer.
• Netflix use of Marketing Analytics for Target Adverts
Netflix used the analytics data to find out specific inclinations of
their audiences. Accordingly, company sent emails to their
subscribers about the programs that would be best fit for them.
These marketing analytics examples facilitate the smooth operation
of an online marketing campaign.
• Online marketing campaign depicts how the online appearance
of your site is and that is solely responsible for how your website
fares among the users.
Consumer Decision Making Model
• The consumer’s decision making model deals
with the process of consumer decision
making.
• This model consists of three stages
– The Input stage
– The Process stage and
– The output stage
• The input stage can be broadly categorized
into :
– Firms efforts and
– Socio-cultural Environment.
– The firm’s efforts relate to the firms marketing
mix, i.e. Product, Promotion, Price, Channels of
Distribution, People and Physical evidence. This
stage involves the activities the firm undergoes to
sell their products.
– Socio-cultural environment on the other hand is
the environment of friends, family, society, culture
and sub culture that surround a consumer.
 Consumer Decision Making Process Stage
• Here the customer selects the most appropriate product out of
several alternatives.
• In order to solve a problem, a buyer goes through several steps –
– Problem recognition/Need
– Information Search
– Evaluation of Alternatives
– Selection and Trial
– Purchase Decision
– Post Purchase Behavior
• Actual Performance is equal to expected performance
• Actual Performance is less than expected performance
• Actual Performance is more than expected performance
 Output stage
• The final stage in the consumer decision-
making is the Output stage.
• This stage is concerned with the actual
purchase, repurchase and the purchase
evaluation.
 Customer Segmentation using Cluster
Analysis
• Customer Segmentation is the subdivision of a market into discrete
customer groups that share similar characteristics.
• Customer Segmentation can be a powerful means to identify unsatisfied
customer needs.
• The most common ways in which businesses segment their customer base
are:
– Demographic information, such as gender, age, familial and marital status, income,
education, and occupation.
– Geographical information, which differs depending on the scope of the company. For
localized businesses, this info might pertain to specific towns or counties. For larger
companies, it might mean a customer’s city, state, or even country of residence.
– Psychographics, such as social class, lifestyle, and personality traits.
– Behavioral data, such as spending and consumption habits, product/service usage,
and desired benefits.
 Examples of Cluster Analysis
• When P&G test markets a new cosmetic, it may want to group US
cities into groups that are similar to demographic attributes such as
percentage of Asians, percentage of Blacks, percentage of Hispanics,
median age, unemployment rate ad median income level.
• A marketing analyst at Coco-Cola company wants to segment the
soft drink market based on consumer preferences for price
sensitivity , preference of diet or regular coke, and preference of
Coco-Cola Vs Pepsi.
• M/S might cluster its corporate customers based on the price a
given customer is willing to pay for a product. For e.g., there might
be a cluster of construction companies that are willing to pay a lot
for M/S Project but not so much for M/S Power Point.
 K Means Clustering Algorithm

• Specify number of clusters K.

• Initialize centroids by first shuffling the dataset
and then randomly selecting K data points for
the centroids without replacement.
• Keep iterating until there is no change to the
centroids. i.e assignment of data points to
clusters isn’t changing.
 Advantages of Customer Segmentation

• Determine appropriate product pricing.

• Develop customized marketing campaigns.
• Design an optimal distribution strategy.
• Choose specific product features for
deployment.
• Prioritize new product development efforts.
 Advantages of K-means Clustering
• K means clustering is one of the most popular
clustering algorithms and usually the first thing
practitioners apply when solving clustering tasks to get
an idea of the structure of the dataset.
• The goal of K means is to group data points into
distinct non-overlapping subgroups.
• One of the major application of K means clustering is
segmentation of customers to get a better
understanding of them which in turn could be used to
increase the revenue of the company.
 Marketing Mix Allocation using Conjoint
Analysis
• Conjoint analysis is a technique used by various
businesses to evaluate their products and services,
and determine how consumers perceive them.
• Products are broken-down into distinguishable
attributes or features, which are presented to
consumers for ratings on a scale.
• The technique provides businesses with insightful
information about how consumers make purchasing
decisions.
• “What features should we add to our
products”?
• “What impact would changes have on sales
and revenues”?
• “How will the intended changes give us an
edge over competitors”?
• “What would be the impact of prices changes
on sales”?
• For example, a laptop has attributes such as
color, price, dimensions, processing power, hard
disk space, RAM and shape.
• Conjoint Analysis aims to find the value
 consumer place on each of these attributes
before they make a decision to purchase the
laptop.
• Consequently, total utility received from all
attributes of a product or service is equal to the
sum of utilities derived from each attribute.
• Conjoint analysis can be divided into three distinct phases:
– Data. Collection of data pertaining to trade-offs on various attributes. This
information can be collected by conducting a preliminary survey, which will
help the business identify how the product is broken down in consumers’
mind. All the information collected at this stage is represented in form a
questionnaire after thorough analysis and deliberations.
– Analysis. Once the questionnaires are filled, and the information from
consumers is collected, statistical analysis of the data takes place, which is a
process through which, businesses derive meaning out of the results. Graphs,
charts and other tools could be used at this point to compressively represent
the information that has been collected, along with its meaning and
interpretation. Effective representation of all the collected results is important
since managers need to fully understand and comprehend the results.
– Action. The third phase calls for action, since now managers are expected to
use the results of conjoint analysis and help business stimulate demands for
their products and services. For example, a decision to change the price,
addition of new features, and change in marketing strategy or delivery channel.
Models can be used to show exactly, a particular change in design could impact
demand. Hence, managers will use these models for decision making.
 Steps in developing Conjoint Analysis

• Companies should follow these steps in order to develop a conjoint analysis:

– Product/service attributed should be selected. For example, size, appearance, price,
functionality, user friendliness.
– Each attribute should be assigned a value. These values of these attributes will represent
the variance available in each of these attributes. For example, for the attribute of size,
the options available could be 5”, 10” or 25”. Higher value on the scale represent, more
importance attached to a particular attribute.
– Product/service should be defined as a combination of all the varying attributes, which
will form the subset of all possible products that a company can manufacture or deliver.
– The combination of attributes through which a product is represented must be
determined. This information can be represented through visual diagrams, prototypes or
mere descriptions.
– It must be determined how the results and answers from the respondents will be
aggregated. Decision makers are faced with three choices at this stage: Individuals
responses could be used, the results could be aggregated to represent a single utility
function or the respondents could be segmentized into sub-groups.
– Decision makers at this stage should select the technique they’ll be employing to process,
organize and analyze the data, in order to draw meaningful conclusion out of the
information. A popular model to represent varying attributes Part-Worth Model.
Alternatively, vector models or ideal-point models could also be used.
 RFM Analysis
• RFM stands for recency, frequency, and
monetary value. 
• The  idea is to segment customers based on
when their last purchase was, how often
they’ve purchased in the past, and how much
they’ve spent overall.
• All three of these measures have proven to be
effective predictors of a customer's willingness
to engage in marketing messages and offers.
 Benefits of RFM Analysis
• Personalization-By creating effective customer
segments, you can create relevant, personalized
offers.
• Improve Conversion Rate-Personalized offers will
yield higher conversion rates because your
customers are engaging with products they care
about. 
• Improve unit economics
• Increase revenue and profits
 Predictive Model of Promotional
Effectiveness
• It’s the measure of the relationship of sales of different products as
it is crucial to analyze what effect of promotion on some products
will have on other similar products.
• Sales lifecycle of products were factored in to accurately forecast
sales in the absence of promotion.
• THE METHODOLOGY
– Forecast Market sales for individual products
– Forecast Sales for product groups/categories
– Incorporate promotion attributes into each of the forecasts
– Measure the statistical significance of the effect of promotion on market
share
• TECHNIQUES, TECHNOLOGIES, TOOLS
– ARIMA, Auto-Regressive and Recurrent Neural Networks, Random Forest,
Croston Model, Poisson Regression, Ensemble modeling