MARKETING ANAYTICS

R22MBAM4

COMPILED BY:

Dr .V .Hima Bindhu

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 R22MBAM4: Marketing Analytics

UNIT-I

Unit-I: Introduction to Marketing Analytics

Definition, Need and Scope of Marketing Analytics, Marketing Analytics Vs Marketing

Research, Levels in Marketing Analytics, Adoption and Application of Marketing Analytics,
Marketing Analytics and Business Intelligence. MS Excel as a Tool for conduction of
Marketing Analytics. Using MS Excel to Organize and Summarize Marketing Data: Creation
of Pivot Tables and Organizing Data.

UNIT-II

UNIT-II: Summarizing Marketing Data

Summarizing Revenue Data: Month-wise and Product-wise. Slicing & Dicing of Data: Pareto
Principle, Report Filters and Slicers. Demographic Analysis: Analyzing Sales Data by Age,
Gender, Income and Location, Construction of Crosstabs of Two Demographic Variables.
Using GETPIVOT Function for Pulling Data. Adding Data Labels and Data Tables.

UNIT-III
UNIT-III: Customer Analytics

Customer Journey Mapping and the Process of Mapping (How to). Metrics for Tracking
Customer Experience: Customer Feedback Metrics & Behavior Derived Customer Metrics.
Customer Persona, Building a Customer Persona and its Benefits, Customer Lifetime Value
(CLV). Calculating Customer Lifetime Value: Creating the Basic Customer Value Template.

UNIT-IV
Unit-IV: Pricing Analytics

Pricing, Goals of Pricing, Price Elasticity, Estimating Linear and Power Demand Curves,
Using Excel Solver to Optimize Price. Price Bundling, Bundling Prices to Extract Consumer

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Surplus, Mixed Bundling, Using Evolutionary Solver to Find Optimal Bundle Prices. Price
Skimming

UNIT-V

Unit - V: Segmentation & Promotion Analytics

Segmentation Analytics: Cluster Analysis and its Applications, Location-wise Clustering,

Using Solver to find Optimal Clusters. Using Conjoint Analysis to Segment a Market, Using
Decision Trees for Segmenting the Market. Promotion Analytics: Promotions and Types of
Promotions, Discounting & Types of Discounting. Measuring the Effectiveness of
Advertising: The Adstock Model, Pay per Click Advertising.

Prescribed Textbook :

 Seema Gupta & Avadhoot Jathar, Marketing Analytics, Wiley, 2021.

 Wayne L. Winston, Marketing Analytics: Data Driven Techniques with Microsoft

Excel, 2014.

 Chuck Hermann, Ken Burbary, Digital Marketing Analytics, Que Publishing, 2e,
2018.

 Moustusy Maity and Pavankumar Gurazada, Marketing Analytics for Strategic

Decision

 Making, Oxford Higher education, 2021.

 Mike Grigsby, Marketing Analytics, Kogan Page, 2015.

 Robert Kozielski, Measuring Marketing Analytics, Emerald Publishing, 2018.

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 UNIT-1

INTRODUCTION TO MARKETING ANALYTICS

1.1 DEFINITION:

Marketing analytics is the study of data to evaluate the performance of a marketing activity.
By applying technology and analytical processes to marketing-related data, businesses can
understand what drives consumer actions, refine their marketing campaigns, and optimise
their return on investment.

Today, marketing analytics is a common practise at most businesses. In fact, more than 80%
of marketers say most of their decisions today are data driven. The abundance of data
combined with the accessibility of powerful analytics tools has made it possible for
marketing teams to evaluate every aspect of their digital marketing campaigns, giving
businesses what is commonly described as a 360-degree view of the customer.

1.2 What can organisations do with marketing analytics?

With analytics, organisations can answer questions like these;

How are our marketing activities performing today? How about in the long run? What can we
do to improve them?

How do our marketing activities compare with our competitors? Where are they spending
their marketing dollars? Are they using channels that we aren’t using?

What should we do next? Are our marketing resources properly allocated? Are we devoting
time and money to the right channels? How should we prioritise our investments over a
certain time period?

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Marketing analytics requires more than just flashy tools. Marketing teams need a strategy that
puts all their data in perspective. Here’s how marketing analytics works for most
organisations.

1.3 Need of Marketing Analytics

Using data to bolster marketing decisions allows businesses to eliminate the guesswork or
over-reliance on anecdotal evidence, and helps marketing teams make informed business
decisions and improve customer relationship management. Here are four other benefits:

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1. Get a complete view of all marketing activities.

Sometimes it can be hard to see the full picture across all marketing channels, such as paid
digital ads, email, social media, and web. Data helps you track these components,
understanding how they work independently and collectively.

2. Gain a better understanding of your customers.

Data can provide actionable answers about customer base, including who they are, what
actions they commonly take, what their pain points tend to be, and more. Data can help
understand what improvements a team can make to improve their experience.

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3. Refine your marketing strategy.

Data tells what works and why, it helps in refining marketing strategy in real time,
replicating certain efforts because they're performing well and eliminating those that are
under-delivering.

4. Predict the success of future marketing campaigns.

With predictive scoring based on past marketing campaigns, data can often predict how
customers will respond to future campaigns and overall advertising and marketing efforts.

1.4 Scope of marketing analytics with examples

Marketing analytics is a powerful tool that can help organisations make good decisions, but
it’s not magic. Here are some of the best examples of marketing analytics applications –

1.Use of marketing analytics to improve website

Amazon has long been a leader in marketing analytics, using its data-driven approach to
continue innovating its website and product offerings. For example, they have used data from
their customers to help them improve their search functionality, including personalizing
results based on each user’s browsing history. This personalized experience helps visitors
find what they’re looking for faster and more efficiently, which keeps them returning to
Amazon.

2.Using marketing analytics to make content recommendations

Netflix is another company that extensively uses marketing analytics to create content
recommendations more likely to appeal to each viewer’s tastes. They collect data about what
people watch (and don’t watch) every month and use this information to inform their
recommendations algorithmically.

3.Customer insights

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Walmart has an enormous amount of data about its customers’ shopping habits. It knows
where they live when they shop there, how much money they spend at the store each year,
and much more! This information allows Walmart to target specific customers with coupons
or other offers that appeal directly to them.

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1.5 Marketing Analytics Vs. Marketing Research

Market research and marketing analytics are two crucial components of marketing that aid in
customer understanding and decision-making. But there are some differences between the
two. For any marketing strategy to be effective, marketing analytics and market research are
crucial elements. Although they are similar, their approaches, methodologies, and goals are
very different.

Many different sources, including website traffic, social media engagement, and sales data,
can provide this information. Marketing analytics can be used to track the effectiveness of
marketing campaigns, spot trends, and improve marketing tactics.

By examining website traffic, social media engagement, and email open rates, for example,
marketing analytics can be used to assess the success of a campaign or pinpoint areas where
improvement is possible.

1.5.1 Key Characteristics of Marketing Analytics:

1. Data-Driven Approach: Marketing analytics is based on gathering and analyzing

information from a variety of sources, including customer interactions, web analytics, social
media metrics, and sales figures. Businesses can optimize their marketing campaigns and
strategies by using this data-driven approach to identify patterns and trends.

2. Quantitative analysis: Marketing analytics primarily concentrates on quantitative data,

using statistical techniques and models to glean insights. analyzing metrics like conversion
rates, customer lifetime value, return on investment (ROI), and market share is part of the
process. These metrics assist companies in assessing the success of their marketing initiatives
and pinpointing areas for development.

3. Predictive Capabilities: Marketing analytics uses predictive modeling methods to project

future results based on historical data. Businesses can use data to predict customer behavior,

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market demand, and campaign performance by spotting patterns and trends. This enables
companies to foresee market trends and take proactive action.

Market Research

Market research is the procedure of gathering and examining data about a market in order to
comprehend the needs and desires of consumers. Numerous sources, including surveys,
interviews, and focus groups, can be used to gather this data. Market research can be used to
find new market opportunities, create new goods or services, and focus advertising
campaigns.

For instance, market research can be used to determine customer preferences, evaluate
customer loyalty, and assess the success of current marketing campaigns.

1.5.2 Key characteristics Market Research:

1. The use of both qualitative and quantitative methods in market research to gather
information. To understand consumer attitudes, preferences, and motivations, qualitative
research uses in-depth interviews, focus groups, and observations. On the other hand,
quantitative research uses surveys, questionnaires, and statistical analysis to collect numerical
data.

2. Consumer Insights: Market research aims to comprehend consumer behavior, preferences,

and needs. It aids companies in identifying target markets, customer segments, and effective
marketing strategies. Businesses can customize their goods, services, and messaging to
satisfy particular customer demands by gaining insights into consumer attitudes.

3. Market analysis: Market research includes examining industry dynamics, market trends,
and the competitive landscape. It aids in the identification of market opportunities, the
evaluation of market potential, and the assessment of the viability of novel goods or services.
Additionally, this analysis aids companies in understanding their place in the market and aids
them in developing competitive advantages through strategic decisions.

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1.5.3 The Main Difference Between Marketing Analytics & Marketing Research:

Similar to how a doctor must first identify the issue before prescribing a remedy, a chemist
can provide the appropriate medication if they know what to look for. This is how market
research and marketing analytics differ. Market research aids in problem identification, and
marketing analytics offers understanding and remedies.

Despite being separate fields, marketing analytics and market research are not incompatible.
In actuality, they support one another and can be integrated to provide a thorough
understanding of the market and consumer behavior. Businesses can gain a competitive edge
and make better decisions by fusing the power of data analytics with thorough market
research.

The difference between a marketing campaign's success and failure can be traced back to a
company's commitment to its mission.

While market research and marketing analytics both aim to inform decisions, their
methodologies and approaches vary. While market research combines qualitative and
quantitative techniques to understand consumer behavior and market dynamics, marketing
analytics focuses on analyzing quantitative data to gain insights and make predictions.
Businesses can develop a thorough understanding of their target market, improve their
marketing tactics, and promote company growth by effectively combining these two
disciplines.

1.6 Levels In Marketing Analytics:

When we think about data trends, we think about the big catch phrases like machine learning,
big data, AI and the like. But at the core of it, data is all about helping you make smarter,
more well-informed decisions.

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What would be the point of things like predictive algorithms and big data if they didn’t lead
organizations to make smarter, better, well-informed decisions? But it's not just access to data
that helps you make smarter decisions, it's the way you analyze it. That’s why it’s important
to understand the four levels of analytics: descriptive, diagnostic, predictive and prescriptive.

1. Descriptive analytics

Descriptive (also known as observation and reporting) is the most basic level of analytics.
Many times, organizations find themselves spending most of their time in this level. Think
about dashboards and why they exist: to build reports and present on what happened in the
past. This is a vital step in the world of analytics and decision making, but it's really only the
first step. It’s important to get beyond the initial observations and dive into insights, which is
the second level of analytics.

2. Diagnostic analytics

Diagnostic analytics is where we get to the why. We move beyond an observation (like
whether the chart is trending up or down) and get to the “what” that is making it happen. This
is where the ability to ask questions about the data and tie those questions back to objectives
and business imperatives is most important.

Imagine going to a doctor where the only thing they do is look at you, make the observation
that “oh, yeah, you look sick,” and then leave the room. That's not going to do much for your
health. We need to be able to understand what is causing the sickness. The doctor should
make the observation, diagnose you and then give you a treatment plan to help you feel
better. It’s the same thing with analytics: you make an observation, identify the descriptive
analysis and move forward to the diagnosis.

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3. Predictive analytics

Predictive analytics allows organizations to predict different decisions, test them for success,
find areas of weakness in the business, make more predictions—and so forth. This flow
allows organizations to see how the first three levels can work together.

Predictive analytics involves technologies like machine learning, algorithms, and artificial
intelligence, which gives it power because this is where the data science comes in. Now,
when we incorporate the importance of not just predicting, but using data science, statistics,

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and the third-level of analytics combined with the first two levels, organizations truly can see
success with their data and analytical strategies.

However, the reality is that currently most of your organization isn’t spending a lot of time
with predictive analytics. Leaders are spending most of their time in descriptive and
diagnostic, but predictive is a very important part of the puzzle. Every organization needs a
workforce that can speak the language of data, and the language of predictive analytics.

4. Prescriptive analytics

Prescriptive analytics exist at a very advanced level and is the most powerful and final phase,
and truly encompasses the “why” of analytics. It’s when the data itself prescribes what should
be done. Data-driven decision making is tied most closely to predictive and prescriptive
analytics, even though these are the most advanced.

Think of prescriptive analytics as taking all other levels of analytics to prescribe things you
should be doing; the data and analytics show you the way. Thomas Matthew, chief product
officer at Zoomph describes it well:

"Prescriptive analytics builds on predictive by informing decision makers about different

decision choices with their anticipated impact on a specific key performance indicators.
Think of traffic navigation app, Waze. Pick an origin and destination and a multitude of
factors get mashed together, and it advises you on different route choices, each with a
predicted ETA. This is everyday prescriptive analytics at work."

Think of the first three levels of analytics: you have your description of what has happened,
followed by diagnosing why, and then you end with predicting what will happen. Now,
imagine you allow the data and analytics to inform you what action to take. That is powerful
and why it matters for businesses.

All four levels create the puzzle of analytics: describe, diagnose, predict, prescribe. When all
four work together, you can truly succeed with a data and analytical strategy. If the four
aren’t working well together or one part is completely missing, the organization’s data and
analytical strategy isn’t complete.

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These four levels of analytics need to permeate throughout an organization in order for data
literacy to be effective. Additionally, teams need to have better skills which allow them to tap
into each level as best they can. The ultimate hope is that those decisions tie back to the most
important business objectives and goals.

1.7 Adoption of Marketing Analytics:

Leveraging marketing analytics to drive decisions provides strategic advantages like

optimizing spending, personalization and proving ROI. But getting organization-wide
adoption of data-driven marketing requires overcoming ingrained habits.

1.Make the Business Case

Demonstrate how analytics will address specific pain points, goals and challenges faced by
the business. Quantify the ROI it can drive. This builds buy-in from leadership.

2.Involve Teams Early

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Get stakeholder teams like sales, product marketing involved during the rollout planning to
address concerns and gather input. Make them partners in the process.

3.Invest in Training

Conduct workshops and hands-on training to upskill teams on using analytics tools and
interpreting data. Well-informed users drive adoption.

4.Communicate Quick Wins

Highlight early analytics wins like optimizing spend or higher conversion rates. Tangible
results build confidence in the value of analytics.

5.Customize Data Access

Provide different teams access to metrics tailored to their goals. Finance may want revenue
data while Social seeks engagement levels.

6.Simplify Data Usage

Ensure easy accessibility through visual dashboards versus raw reports. User-friendly
interfaces drive regular usage.

7.Empower Decision-Making

Enable teams to take actions like budget shifts or content changes based on data without
lengthy approvals. Empowerment encourages adoption.

8.Lead by Example

Managers should consistently reference analytics in decisions and strategy. Lead by

demonstrating analytics value, not just directives.

1.8 Application of Marketing Analytics:

Marketing analytics is a powerful tool that businesses use to understand, measure, and
optimize their marketing efforts. Here are some common applications of marketing analytics:

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1.Customer Segmentation: By analyzing customer data, businesses can segment their
customer base into groups with similar characteristics, behaviors, and preferences. This
segmentation helps in targeted marketing campaigns tailored to specific segments, thereby
improving effectiveness and ROI.

2.Campaign Performance Tracking: Marketing analytics allows businesses to track the

performance of their marketing campaigns in real-time. They can measure metrics such as
click-through rates, conversion rates, and return on investment (ROI) to assess the
effectiveness of their campaigns and make necessary adjustments.

3.Predictive Modeling: Using historical data and advanced analytics techniques, businesses
can develop predictive models to forecast future trends, customer behavior, and market
demand. These insights help in making data-driven decisions and planning future marketing
strategies.

4.Customer Lifetime Value (CLV) Prediction: Marketing analytics helps in predicting the
lifetime value of customers by analyzing their past interactions, purchasing behavior, and
engagement with the brand. This information enables businesses to allocate resources more
effectively, focusing on acquiring and retaining high-value customers.

5.Personalization: By leveraging marketing analytics, businesses can create personalized

marketing campaigns tailored to individual customer preferences and behaviors. This
personalized approach enhances customer engagement, improves brand loyalty, and drives
higher conversion rates.

6.Channel Attribution: Marketing analytics helps in attributing conversions and sales to

specific marketing channels such as social media, email, search, or offline channels. By
understanding the contribution of each channel to overall conversions, businesses can allocate
their marketing budgets more efficiently.

7.Competitive Analysis: Analyzing competitors' marketing strategies, performance metrics,

and customer insights provides valuable benchmarking data for businesses. Marketing
analytics tools enable businesses to identify competitive strengths and weaknesses, helping
them to refine their own marketing strategies accordingly.

8.Social Media Analytics: With the proliferation of social media platforms, marketing
analytics plays a crucial role in monitoring brand mentions, sentiment analysis, and

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engagement metrics across various social channels. This data helps businesses to understand
their social media presence and optimize their social media marketing efforts.

9.A/B Testing and Optimization: Marketing analytics facilitates A/B testing of different
marketing campaigns, messaging, and creative assets to identify what resonates best with the
target audience. By analyzing the results of these tests, businesses can optimize their
marketing strategies for maximum effectiveness.

10.ROI Measurement: Ultimately, marketing analytics enables businesses to measure the

return on investment (ROI) of their marketing activities. By quantifying the impact of
marketing efforts on revenue and profitability, businesses can justify their marketing spend
and make informed decisions about resource allocation.

Overall, marketing analytics empowers businesses to make data-driven decisions, optimize

marketing strategies, and achieve better results in today's competitive landscape.

1.9 Marketing Analytics and Business Intelligence:

Marketing analytics and business intelligence (BI) are closely related concepts that both
involve the use of data to drive decision-making and improve business performance.
However, they serve slightly different purposes and focus on different aspects of business
operations.

1.Marketing Analytics:

Marketing analytics specifically focuses on analyzing data related to marketing activities,

campaigns, and customer interactions to optimize marketing strategies and improve ROI. It
involves collecting, processing, and analyzing data from various sources such as websites,
social media platforms, email campaigns, advertising channels, and customer relationship
management (CRM) systems. The goal of marketing analytics is to gain insights into
customer behavior, preferences, and trends, as well as to measure the effectiveness of
marketing initiatives. Key applications of marketing analytics include customer
segmentation, campaign performance tracking, predictive modeling, customer lifetime value
prediction, and personalization.

2. Business Intelligence (BI):

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Business intelligence, on the other hand, is a broader concept that encompasses the use of
data analytics to gain insights into various aspects of business operations, including sales,
finance, operations, supply chain, and customer service. BI involves the collection,
integration, analysis, and visualization of data from multiple sources across the organization
to support decision-making and strategic planning. Unlike marketing analytics, which focuses
specifically on marketing-related data, BI provides a comprehensive view of the entire
business, allowing stakeholders to monitor performance, identify trends, spot opportunities,
and address challenges across different functional areas. Key components of BI include data
warehousing, data mining, reporting, dashboards, and data visualization.

3.Integration of Marketing Analytics and BI:

While marketing analytics and BI serve distinct purposes, they are often interconnected in
practice. Marketing data is typically integrated into the broader BI infrastructure of an
organization to provide a comprehensive view of business performance. For example,
marketing analytics data may be combined with sales data, customer data, and financial data
to provide insights into the overall effectiveness of marketing efforts and their impact on
business outcomes. Similarly, BI tools and techniques can be applied to marketing data to
uncover patterns, correlations, and actionable insights that drive marketing strategy and
decision-making. By integrating marketing analytics with BI, organizations can leverage
data-driven insights to optimize marketing performance, enhance customer experiences, and
drive business growth.

1.10 MS Excel as a Tool for Conduction of Marketing Analytics:

Microsoft Excel is a versatile and widely used tool for conducting marketing analytics due to
its accessibility, flexibility, and powerful analytical capabilities. Here are some ways Excel
can be utilized in marketing analytics:

1.Data Management and Cleansing: Excel can be used to import, organize, and clean
marketing data from various sources such as CRM systems, website analytics platforms, and

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social media channels. Data cleaning functions in Excel, such as sorting, filtering, and
removing duplicates, help ensure data accuracy and consistency before analysis.

2. Data Analysis and Visualization: Excel offers a wide range of analytical functions and
tools for analyzing marketing data. Users can perform calculations, statistical analysis, and
data modeling using functions like SUM, AVERAGE, COUNT, IF, VLOOKUP, and
PivotTables. Excel's charting and graphing capabilities enable users to visualize trends,
patterns, and insights from marketing data, making it easier to communicate findings to
stakeholders.

3.Campaign Performance Tracking: Excel can be used to track and analyze the performance
of marketing campaigns by recording metrics such as clicks, conversions, impressions, and
ROI. By inputting campaign data into Excel spreadsheets and creating summary reports,
marketers can monitor campaign effectiveness over time and identify areas for improvement.

4.Customer Segmentation and Profiling: Excel can facilitate customer segmentation and
profiling by analyzing customer data such as demographics, behavior, and purchasing
patterns. Using Excel's sorting, filtering, and data analysis tools, marketers can segment
customers into groups based on common characteristics and preferences, allowing for
targeted marketing strategies.

5.Predictive Modeling and Forecasting: Excel can be used to develop simple predictive
models and forecast future marketing outcomes based on historical data. By using regression
analysis, time series analysis, and other statistical techniques, marketers can identify trends,
make predictions, and plan future marketing initiatives with greater accuracy.

6.A/B Testing and Experimentation: Excel can support A/B testing and experimentation by
comparing the performance of different marketing strategies, messages, and offers. Marketers

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can use Excel to design experiments, track results, and analyze data to determine which
variations produce the best outcomes and optimize marketing campaigns accordingly.

7.Budgeting and Resource Allocation: Excel can be used for budgeting and resource
allocation in marketing by creating budget spreadsheets, tracking expenses, and analyzing
ROI. Marketers can input budget data, allocate resources to various marketing channels and
activities, and monitor spending against predefined targets to ensure optimal allocation of
resources.

8.Competitive Analysis: Excel can support competitive analysis by collecting and analyzing
data on competitors' marketing strategies, performance metrics, and market share. Marketers
can use Excel to create comparative analyses, benchmark their performance against
competitors, and identify opportunities for differentiation and improvement.

Overall, Microsoft Excel serves as a powerful and cost-effective tool for conducting
marketing analytics, enabling marketers to leverage data-driven insights to optimize
marketing strategies, improve decision-making, and drive business growth.

1.11 Using MS Excel to organise and Summarise Marketing Data:

Microsoft Excel is an excellent tool for organizing and summarizing marketing data due to its
user-friendly interface and robust data management capabilities. Here's a step-by-step guide
on how to use Excel to organize and summarize marketing data:

1.Import Your Data: Start by importing your marketing data into Excel. You can do this by
copying and pasting data from other sources, importing data from CSV files, or connecting
Excel directly to databases or CRM systems using built-in data connection features.

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2.Organize Data into Worksheets: Once your data is imported, organize it into separate
worksheets within the Excel workbook. For example, you might have one worksheet for
customer data, another for campaign performance metrics, and another for sales data.

3.Clean and Format Data: Before summarizing the data, it's essential to clean and format it to
ensure accuracy and consistency. Use Excel's data cleaning tools such as sorting, filtering,
removing duplicates, and text-to-columns to clean up any inconsistencies or errors in the
data.

4.Identify Key Metrics: Determine the key marketing metrics you want to analyze and
summarize. These could include metrics such as leads generated, conversion rates, customer
acquisition costs, ROI, etc.

5.Create Summary Tables and PivotTables: Use Excel's PivotTable feature to create
summary tables that aggregate and summarize your marketing data based on selected criteria.
To create a PivotTable, select your data range, go to the "Insert" tab, and click on
"PivotTable." Then, choose the fields you want to summarize and drag them into the
appropriate areas of the PivotTable layout.

6.Calculate Totals and Averages: Use Excel's built-in functions to calculate totals, averages,
and other summary statistics for your marketing data. For example, you can use the SUM
function to calculate the total number of leads generated or the AVERAGE function to
calculate the average conversion rate.

7.Visualize Data with Charts and Graphs: Excel offers a variety of chart types and graphing
tools that allow you to visualize your marketing data effectively. Create charts and graphs to
represent key metrics and trends visually, making it easier to interpret and communicate
insights to stakeholders.

1.12 Organising data using pivot table

Pivot tables in Excel are a versatile reporting tool that makes it easy to extract information
from large tables of data without the use of formulas. Pivot tables are extremely user-friendly.

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They move, or pivot, fields of data from one location to another so that data can be looked at
in a number of different ways.

Enter the Pivot Table Data

The first step in creating a pivot table is to enter the data into the worksheet.

Create the Pivot Table

Follow these steps to create a pivot table using the tutorial data:

Highlight cells

Select Insert.

In the Tables group, select PivotTable to open the Create PivotTable dialog box.

Choose Existing Worksheet for the location of the pivot table.

Place the cursor in the Location text box.

Select a cell in the worksheet to enter that cell reference into the location line.

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Select OK.

A blank pivot table appears on the worksheet with the top left corner of the pivot table in cell.
The PivotTable Fields panel opens on the right side of the Excel window.

At the top of the PivotTable Fields panel are the field names (column headings) from the data
table. The data areas at the bottom of the panel are linked to the pivot table.

1.12.1 Add Data to the Pivot Table

The data areas in the PivotTable Fields panel are linked to corresponding areas of the pivot
table. As you add the field names to the data areas, data is added to the pivot table.
Depending on which fields are placed in which data area, different results are obtained.

You have two choices when it comes to adding data to the pivot table:

Drag the field names from the PivotTable Fields panel and drop them on the pivot table in the
worksheet.

Drag the field names to the bottom of the PivotTable Fields panel and drop them in the data
areas.

Drag the following field names to the noted data areas:

Total Sales to the Filters area.

Region to the Columns area.

Sales Rep to the Rows area.

Orders to the Values area.

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Filter the Pivot Table Data

The pivot table has built-in filtering tools that fine-tune the results shown in the pivot table.
Filtering data involves using specific criteria to limit what data is displayed by the pivot table.

Select the Column Labels down arrow in the pivot table to open the filter's drop-down list.

Remove the check mark next to Select All to remove the check mark from all the boxes in the
list.

Place a check mark next to West and North.

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 UNIT-II
SUMMARIZING MARKETING DATA

1. Summarize Revenue Data

In a report, we can add both detail and summary aggregation. Detail aggregation, which is
supported only for relational data sources, specifies how a data item is totalled at the lowest
level in a report. In lists, detail aggregation specifies how the values that appear in the rows
are totalled. In crosstabs, detail aggregation specifies how the values in the cells are totalled.
For example, detail aggregation for a measure like Revenue might be Total in both lists and
crosstabs. In the following list report, this means that the values seen for the Revenue column
represent the total revenue for each product type.

Figure 1. A list showing product line, product type, and revenue

a list showing product line, product type, and revenue

Summaries, which are supported for all data sources, specify how data items are totalled in
the headers and footers of a list and in the total rows and columns of a crosstab. For list
reports, these summaries only summarize the data that is visible on that page of the report.

1.2 How To Summarize Data in Excel:

To summarize revenue data using Excel, one can use various functions and features
depending on what exactly one want to achieve. Here's a general guide on how to summarize
revenue data:

Organize data: Ensure revenue data is organized in a spreadsheet with columns for different
categories such as dates, sales amounts, products/services, etc.

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 Use PivotTables: PivotTables are powerful tools in Excel for summarizing and analyzing
data. One can use them to quickly summarize revenue data by various criteria such as date,
product, region, etc. To create a PivotTable, select data range, then go to the "Insert" tab, and
click on "PivotTable". Follow the prompts to set up one can PivotTable, then drag and drop
fields to the rows and columns to summarize revenue data.

Use SUM and other functions: Use Excel functions like SUM, AVERAGE, MAX, MIN,
COUNT, etc., to calculate summary statistics of revenue data. For example, one can use the
SUM function to calculate the total revenue, the AVERAGE function to find the average
revenue per day or per product, and so on.

Charts and graphs: Visualizing revenue data can help one can understand trends and patterns.
Excel offers various chart types such as column charts, line charts, pie charts, etc. Select data
range and then go to the "Insert" tab to insert a chart. Choose the appropriate chart type based
on data and what one can want to convey.

Conditional formatting: One can use conditional formatting to highlight certain cells based
on criteria one can define. For example, one can use conditional formatting to highlight cells
with the highest or lowest revenue, cells that meet certain sales targets, etc. Select data range,
go to the "Home" tab, and click on "Conditional Formatting" to apply conditional formatting
rules

2. To summarize month-wise product-wise data in Excel,

One use PivotTables along with grouping by months and products. Here's a step-by-step
guide:
Organize data: Make sure data is organized with columns for the month, product, and
revenue (or any other relevant metrics).

Insert a PivotTable: Select data range, then go to the "Insert" tab, and click on
"PivotTable". Choose where one want the PivotTable to be placed (either on a new worksheet
or existing worksheet) and click "OK".

Configure the PivotTable fields:

Drag the "Month" field to the rows area.
Drag the "Product" field to the rows area below the "Month" field.
Drag the "Revenue" field (or any other relevant metric) to the values area. This will
automatically sum up the revenue for each month and product combination.

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Grouping by month: Excel may have automatically grouped the dates by months. If not, one
can manually group them:

Right-click on any date in the "Month" field.

Choose "Group" from the context menu.
In the grouping dialog, select "Months" and "Years" and click "OK".

Format the PivotTable: One can format the PivotTable to make it more readable and
understandable:
Apply number formatting to the revenue values.
Rename the fields if necessary to make them more descriptive.
Adjust column widths and row heights as needed.

Optional: Add filters or slicers: One can add filters or slicers to one can PivotTable to
make it easier to analyse specific months or products.

Analyse the data: Now one can have a PivotTable summarizing one can revenue data month-
wise and product-wise. One can easily see how revenue is distributed across different
products each month and identify any trends or patterns.

Using PivotTables in Excel provides a flexible and efficient way to summarize and analyses
large datasets, such as month-wise product-wise revenue data.

3. Slicing and dicing data

Slicing and dicing data are techniques used in data analysis to examine and manipulate
datasets from different perspectives. These techniques are commonly used in tools like Excel,
databases, and business intelligence software. Here's what each term means:

Slicing: Slicing involves filtering or narrowing down a dataset to focus on a specific subset
of data. When one can slice data, one is essentially selecting a portion of the dataset that
meets certain criteria or conditions. This could involve filtering data based on specific values,
dates, categories, or any other relevant factors. Slicing allows one to examine a particular
segment of a data in isolation, making it easier to analyses and draw insights from that subset.

Dicing: Dicing involves breaking down a dataset into smaller, more granular components.
When one can dice data, it is essentially dividing it into smaller parts based on various
dimensions or attributes. This could involve splitting the data by different categories, time
periods, geographical regions, or any other relevant factors. Dicing allows to explore the
dataset in more detail and analyses it from multiple angles, helping one can gain a deeper
understanding of the underlying.

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In summary, slicing focuses on narrowing down the dataset to a specific subset, while dicing
involves breaking down the dataset into smaller, more granular components. These
techniques are fundamental to data analysis and are commonly used to explore and analyse
datasets in various fields such as business, finance, marketing, and science.

4. The Pareto Principle

Also known as the 80/20 rule, is a concept named after the Italian economist Vilfredo Pareto,
who observed that roughly 80% of the effects come from 20% of the causes. In other words,
it suggests that a significant majority of outcomes (80%) are typically driven by a minority of
inputs (20%).

The Pareto Principle has been applied in various fields and contexts, including business,
economics, quality management, and personal productivity. Some common applications
include:

Business Management: In business, the Pareto Principle is often used to prioritize efforts
and resources. It suggests that a small portion of customers typically contribute to the
majority of revenue (80% of sales come from 20% of customers), or that a small number of
products generate the majority of profits (80% of profits come from 20% of products). By
identifying and focusing on the most important customers, products, or activities, businesses
can optimize their strategies for maximum impact.

Time Management: In personal productivity, the Pareto Principle can be applied to

prioritize tasks and activities. It suggests that 80% of results can be achieved by focusing on
the most important 20% of tasks. By identifying the most high-impact tasks and allocating
time and resources accordingly, individuals can improve their efficiency and effectiveness.

Quality Management: In quality management, the Pareto Principle is often used in the
context of identifying and addressing problems. It suggests that 80% of defects or issues are
typically caused by 20% of the root causes. By identifying and addressing the most
significant root causes, organizations can improve quality and efficiency.

Resource Allocation: The Pareto Principle can also be applied to resource allocation in
various contexts. For example, it can be used to optimize marketing budgets by focusing
resources on the most effective channels or target audiences, or to prioritize investments
based on the potential for high returns.

Overall, the Pareto Principle is a useful concept for understanding and optimizing the
distribution of resources, efforts, and outcomes in various aspects of life and business. While
the exact proportions may vary in different situations, the underlying idea of focusing on the
most significant factors for maximum impact remains relevant across different contexts

29
The Pareto Principle, also known as the 80/20 rule, is a concept named after the Italian
economist Vilfredo Pareto, who observed that roughly 80% of the effects come from 20% of
the causes. In other words, it suggests that a significant majority of outcomes (80%) are
typically driven by a minority of inputs (20%).

4.1 Application of Pareto Principle

The Pareto Principle has been applied in various fields and contexts, including business,
economics, quality management, and personal productivity. Some common applications
include:

Business Management: In business, the Pareto Principle is often used to prioritize efforts
and resources. It suggests that a small portion of customers typically contribute to the
majority of revenue (80% of sales come from 20% of customers), or that a small number of
products generate the majority of profits (80% of profits come from 20% of products). By
identifying and focusing on the most important customers, products, or activities, businesses
can optimize their strategies for maximum impact.

Time Management: In personal productivity, the Pareto Principle can be applied to

prioritize tasks and activities. It suggests that 80% of results can be achieved by focusing on
the most important 20% of tasks. By identifying the most high-impact tasks and allocating
time and resources accordingly, individuals can improve their efficiency and effectiveness.

Quality Management: In quality management, the Pareto Principle is often used in the
context of identifying and addressing problems. It suggests that 80% of defects or issues are
typically caused by 20% of the root causes. By identifying and addressing the most
significant root causes, organizations can improve quality and efficiency.

Resource Allocation: The Pareto Principle can also be applied to resource allocation in
various contexts. For example, it can be used to optimize marketing budgets by focusing
resources on the most effective channels or target audiences, or to prioritize investments
based on the potential for high returns.

Overall, the Pareto Principle is a useful concept for understanding and optimizing the
distribution of resources, efforts, and outcomes in various aspects of life and business. While
the exact proportions may vary in different situations, the underlying idea of focusing on the
most significant factors for maximum impact remains relevant across different contexts.

30
 5. Using filters and slicers in summarising data.

Filters and slicers are powerful tools in Excel that allow one to dynamically control and
manipulate the data displayed in one can tables, PivotTables, and PivotCharts. They provide
an interactive way to analyze and summarize data based on specific criteria. Here's how one
can use filters and slicers to summarize data:

Filters:

Filters allow one can to selectively display data based on certain criteria.
To apply a filter, select the column one can want to filter by, then go to the "Data" tab
and click on the "Filter" button.
Excel will add drop-down arrows to the column headers. Clicking on these arrows
allows one can to filter the data based on the values in that column.
One canfilter by specific values, text filters, number filters, date filters, and more.
Filters are useful for focusing on specific subsets of data based on certain conditions.

Slicers:
Slicers are visual filters that provide a more user-friendly way to interact with data.
Slicers are especially useful for PivotTables and PivotCharts but can also be used with
regular tables.
To insert a slicer, select PivotTable or PivotChart, then go to the "Insert" tab and click on
"Slicer".
Choose the field one can want to create a slicer for and click "OK". Excel will insert a
slicer box containing buttons for each unique value in that field.
Clicking on a button in the slicer filters the data to show only the values associated with
that button.
One can use multiple slicers to filter data based on different criteria simultaneously.
Slicers are visually appealing and intuitive for users to interact with, making them ideal
for creating interactive dashboards and reports.

By using filters and slicers, one can dynamically summarize and analyze data based on
specific criteria without the need to manually update tables or charts. This allows for more
flexible and interactive data exploration and presentation in Excel.

6. Demographic Analysis:

Demographic analysis gathers and analyzes demographic data. Business marketers utilize it
to find the best ways to reach + analyze customers.

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Demography studies human populations and how their numbers change due to things like
migration, births, and deaths. Demography means “describing people” in Greek, where
demographic analysis comes from.

Businesses often use it as a marketing tool to figure out how to reach customers best and
what they do. By using demographics to divide a population into groups, companies can
determine the size of a potential market.

So, this field is about the characteristics of the population. It looks at the ratio of men to
women, the age structure, the composition, how people spread out in space, and the
population density.

Demographic analysis is the process of collecting and studying information about the general
traits of a group of people. It is the study of a group based on age, race, and gender.

This report presents statistical data on employment, education, income, rates of marriage,
rates of birth and mortality, and other socioeconomic indicators.

The population estimates from demographic analysis don’t depend on the decennial census.
The results are used to estimate the net coverage error, which is the percent difference
between the number of people counted in the census and the number of people estimated by
the DA.

Demographic analysis is a way for the government, political parties, and companies that
make consumer goods to get information about how people live. When conducting
demographic analysis, it’s crucial to identify and understand target audience to tailor
marketing strategies effectively.

Polls about everything, from age to favourite toothpaste, help the government and businesses
figure out who the public is and what they need and want. The government census is the
biggest demographic survey of people’s lives every ten years.

For example, advertisers on TV are always trying to figure out how to reach “the 18-to-24-
year-old demographic.”

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6.1 Analysing sales data by demographics

Involves examining how sales performance varies among different demographic groups such
as age, gender, income level, geographic location, etc. Here's a step-by-step approach to
conducting a demographic analysis of sales data:

Collect and Organize Data:

Gather sales data, ensuring it includes relevant demographic information such as age,
gender, income, location, etc. Organize the data in a structured format such as a spreadsheet
with columns for each demographic variable and corresponding sales figure.

Segmentation:

Segment sales data based on different demographic variables. For example, create
separate groups for different age ranges, gender categories, income brackets, or geographic
regions.Grouping data allows one can to compare sales performance across various
demographic segments.

Calculate Key Metrics:

Calculate relevant sales metrics for each demographic segment. Common metrics
include total sales revenue, average order value, number of transactions, conversion rates, etc.
Analyze how these metrics vary across different demographic groups to identify trends and
patterns

7. Constructing cross-tabs

Cross-tabulationsinvolve summarizing and analysing data by two or more categorical

variables. In the context of demographic variables, cross-tabs help understand how different
demographic groups interact with each other or how they relate to other variables, such as
sales, preferences, behaviours, etc. Here's how one can construct cross-tabs of two
demographic variables:

Organize Data:

Ensure dataset includes the relevant demographic variables toanalyse. For example, age
groups, gender, income levels, education levels, etc. Make sure dataset also includes the
variable one can want to cross-tabulate with the demographic variables. This could be sales
data, preferences, behaviours, or any other relevant metric.

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Identify Variables:

Choose the two demographic variables to cross-tabulate. For example, age group and
gender, or income level and education level.

Create Cross-Tabulation Tables:

In Excel, create cross-tabulation tables using PivotTables:

Select data range.
Go to the "Insert" tab and click on "PivotTable".

In the PivotTable Field List, drag one demographic variables to the rows area and the
other to the columns area.Drag the variable one want to analyze (e.g., sales data) to the values
area. Excel will automatically calculate summary statistics (e.g., sum, count) for each
combination of the demographic variables.

Analyze the Cross-Tabulation Tables:

Examine the cross-tabulation tables to understand how the variables interact with each
other.Look for patterns, trends, and differences among different demographic groups. Pay
attention to cells with high or low values, as they may indicate areas of interest or potential
insights.

Visualize the Data:

Create charts or graphs to visualize the cross-tabulated data for better interpretation.
Bar charts, stacked bar charts, or heatmaps are often used to visualize cross-tabulated
data.

Draw Insights and Make Recommendations:

Interpret the findings from the cross-tabulation analysis.Identify any significant relationships
or differences between the demographic variables and the variable of interest.

Use these insights to make data-driven decisions or recommendations, such as targeting

specific demographic groups with marketing campaigns, adjusting product offerings, or
tailoring services to better meet the needs of certain segments.

By constructing cross-tabulation tables of two demographic variables, one can gain valuable
insights into how different demographic groups interact with or relate to other variables,
helping inform strategic decision-making and business planning.

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From the above example, one cansee the distinctive connection between age and the purchase
of electronic gadgets. Certainly, it is interesting to see the correlation between the two
variables through the data collected. Within Survey Research, Cross Tab allows for going
deep and analyzing the probable data, making it simpler to identify trends and opportunities
without getting inundated with all the data gathered from the responses.

8. THE GETPIVOTDATA

The get pivot data function in Excel retrieves data from a PivotTable based on specific
criteria. It allows one to extract summarized data from a PivotTable and use it in other parts
of worksheet. Here's how one can use the GETPIVOTDATA function:

Understand the Syntax:

The syntax of the GETPIVOTDATA function is:

=GETPIVOTDATA(data_field, pivot_table, [field1, item1], [field2, item2], ...)

Identify Parameters:

data_field: This is the name of the field (column) in the PivotTable from which one can want
to retrieve data.

pivot_table: This is a reference to the PivotTable.

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 [field1, item1], [field2, item2],...: These are optional pairs of field and item names (criteria)
that filter the data. Include multiple pairs to specify additional criteria.

Locate the PivotTable:

Before using the GETPIVOTDATA function, have a PivotTable in one worksheet.

Identify the cell range or reference that contains the PivotTable.

Retrieve Data:

In a cell where one can want to display the extracted data, enter the GETPIVOTDATA
function. Provide the data field argument as the name of the field one can want to retrieve
data from in the PivotTable.

Reference the PivotTable cell or range in the pivot table argument. Optionally, specify
additional criteria by providing field and item names in pairs.

Example:

Let's say one can have a PivotTable summarizing sales data by region and product
category. One can want to retrieve the total sales for the "Electronics" category in the "West"
region.

The formula would be:

=GETPIVOTDATA("Sales", PivotTable, "Region", "West", "Category", "Electronics")

Replace "Sales" with the name data field, "PivotTable" with the reference to one
PivotTable, and "Region" and "Category" with the names of field headers.

Automatic Generation:

Click on cells within the PivotTable while typing the formula, and Excel will automatically
generate the GETPIVOTDATA function with the appropriate arguments based on the cell
one can clicked.

By using the GETPIVOTDATA function, one can dynamically retrieve summarized data
from PivotTable and use it in calculations, charts, or other parts of worksheet.

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 8.1 Adding Data Labels:

In Excel, add data labels and data tables to insert charts to provide additional context and
clarity to visualizations. Here's how one can do it:

Select the chart to which data labels need to added.

Right-click on any data point in the chart and select "Add Data Labels".

Alternatively, click the "Chart Elements" button (the plus sign icon usually located near the
upper-right corner of the chart) and check the "Data Labels" option.

By default, Excel will add data labels displaying the values of each data point. One
cancustomize the appearance and position of the data labels by right-clicking on them and
selecting "Format Data Labels".

Customizing Data Labels:

One cancustomize data labels in several ways, including changing their font size, font colour,
number format, position, etc.

To format data labels, right-click on any data label and select "Format Data Labels". In
the Format Data Labels pane that appears on the right side of the screen, one can make
various formatting adjustments. Also choose to display different information in the data
labels, such as category names, percentages, or a combination of values.

8.2 Adding Data Tables:

Data tables provide a tabular representation of the data plotted in the chart. They can be
added to most chart types in Excel.

Select the chart to which one want to add a data table.

Go to the "Chart Elements" button (the plus sign icon usually located near the upper-
right corner of the chart) and check the "Data Table" option.

Excel will add a table below or beside the chart, depending on the chart type, displaying
the data values that correspond to each data series in the chart.

Customize the appearance of the data table, such as font size, font colour, and border style, by
selecting the table and using the formatting options available in the "Home" tab.

37
Adding data labels and data tables to charts in Excel can enhance the readability and
interpretability of visualizations by providing viewers with direct access to the underlying
data.

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 UNIT-3
CUSTOMER ANALYTICS

1`.CUSTOMER ANALYTICS

A customer journey map is a visual storyline of every engagement a customer has with a
service, brand, or product. The customer journey mapping process puts the organization
directly in the consumer's mind to better understand the customer's processes, needs, and
perceptions.

The customer journey is broadly defined as the steps a potential buyer could take toward
becoming customer. For most brands, this will be comprised of Awareness, Consideration,
Conversion, Loyalty, and Advocacy.

Customer journey mapping is essential for organizations of all sizes. The expectation of
customers vary for all sized businesses, and omnichannel strategy is the only way to address
their pain points.

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The customer journey map is one of the most powerful tools for understanding customer
expectations and delivering on their needs. It helps marketer understand customer’s
experience, which is a crucial factor in building an effective customer experience.

Understanding customers journey, is helpful in better plan product or service offerings to

meet their expectations and deliver on their needs. In this article, let’s look at what is meant
by customer journey map, its various elements, and how to create one and turn data into a
winning customer experience.

One of the foremost ways forward in delivering the best for customers is a customer journey
map. This is a graphic that depicts the path of a customer from the time they initiate contact
with business until they complete the purchase of product or service.

The purpose of a customer journey map is to highlight customers’ experience from the time
they arrive on a website/app, interact with content, and contact .

1.2 Different Types of Customer Journey Maps

There are at least three types of customer journey maps:

Traditional Journey Maps

Customer Experience Maps

Voice of Customer (VOC) Maps

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Traditional Journey Maps: A traditional customer journey map is simple and shows the
general path a customer takes from their first encounter with your product to purchase.A
traditional customer journey map shows what happens to a customer. It also shows the
general path from the first encounter with your product to purchase.

This is now considered to be a largely outdated way of mapping.

Customer Experience Maps: The Customer Experience Map is a visual representation of

the customer’s experience with a company.Customer Experiences Maps are becoming an
increasingly important tool for companies to determine how they’re perceived by their
customers. A Customer Experience Map is another type of customer journey map that shows
the different steps along your customer’s path. It may show the steps a customer takes to get
to a purchase.

This type of map does not show where a customer starts the journey. A customer experience
map is an effective way of visualizing complex customer interactions in business.Like all
customer journey maps, a Customer Experience Map is not just for new customers. It is
useful for those with loyal customers as well. That is, this map does not show a traditional
funnel.Instead, it shows the different touchpoints and how customers interact with product or
service as they use it.

Because this map does not show where a customer starts the journey, it may show customers
at different stages of their journey as they move through your product or service.

Voice of Customer (VOC) Maps: This is a customer journey map that shows the different
steps along your customer’s path to finding a new product or service.

It may show the steps a customer takes as he is searching for a solution to his problem. In this
example, a customer starts by filling out a form on the company’s website. He may then
watch a video and continue his journey by reading written information. He may then take a
test and continue his journey. This customer journey map illustrates the different steps along
a customer’s path.

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It does not show where a customer starts the journey. The end of the customer journey is
when the customer ends up with a decision to buy the product.

3. Metrics for tracking customer experience:

Customer experience metrics measure how easy, enjoyable, and useful customers find their
experience with your business across the entire customer journey. Measuring and optimizing
for improved customer experience results in increased customer loyalty and customer
satisfaction. Kick off your successful CX program by tracking these seven crucial customer
experience metrics:

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Customer satisfaction score (CSAT): measures user satisfaction with a product, website, or
service that lets users rate their overall satisfaction on a scale of 1-5

Customer effort score (CES): measures the amount of effort a customer has to exert to
perform an action, rated on a scale from very difficult to very easy

Net Promoter Score (NPS): measures customer loyalty and satisfaction by asking customers
how likely they are to recommend your product or service to others on a scale of 0 to 10

Customer churn and retention rate: churn measures the percentage of customers who stop
subscribing to or buying products from a company, while retention measures a business’s
ability to keep its customers over time

First response time (FRT): measures the average time it takes customer support teams to
respond to a customer issue or request

Average resolution time (ART): measures the average time it takes a customer success team
to successfully resolve each customer support request

Customer lifetime value (CLTV or LTV): a revenue metric popular with CX teams that
measures the average revenue a customer is expected to bring to your company over time.

1.4. Customer feedback metrics:

Customer feedback metrics are essential in marketing analytics because they provide direct
insights into customer perceptions, satisfaction, and experiences. These metrics help
businesses understand how their products, services, and marketing efforts are received,
guiding improvements and strategic decisions. Here are some key customer feedback metrics
commonly used in marketing analytics:

1. Net Promoter Score (NPS): Measures customer loyalty by asking how likely
customers are to recommend a company’s product or service to others. The score is

43
 derived from the percentage of Promoters (score 9-10) minus the percentage of
Detractors (score 0-6).
2. Customer Satisfaction Score (CSAT): Assesses how satisfied customers are with a
specific interaction, product, or service. Typically measured through a simple survey
question like “How satisfied are you with your recent purchase?” on a scale from 1 to
5 or 1 to 10.
3. Customer Effort Score (CES): Evaluates how easy or difficult it was for customers
to resolve an issue or complete a transaction. The question usually asked is, “How
much effort did you personally have to put forth to handle your request?” with
responses on a scale from “Very Low Effort” to “Very High Effort.”
4. Churn Rate: The percentage of customers who stop using a product or service over a
specific period. High churn rates often indicate dissatisfaction or better options
elsewhere.
5. Retention Rate: Measures the percentage of customers who continue to engage with
a product or service over time. It helps assess customer loyalty and the effectiveness
of retention strategies.
6. Customer Feedback Volume: The amount of feedback received through various
channels (e.g., surveys, social media, customer service interactions). Higher volumes
can indicate increased customer engagement or potential issues.
7. Sentiment Analysis: Uses natural language processing (NLP) to analyze customer
feedback and social media mentions, categorizing them into positive, negative, or
neutral sentiments. This helps understand the overall customer mood.
8. Product/Service Ratings: Numerical ratings given by customers for specific
products or services. These ratings can be aggregated to provide average scores and
identify trends over time.
9. Review Analysis: Examining qualitative feedback in customer reviews to identify
common themes, issues, or areas of satisfaction. This involves analyzing the content
of reviews for recurring comments and concerns.
10. Response Rate: The percentage of customers who respond to feedback requests or
surveys. Higher response rates can indicate effective engagement strategies and more
representative feedback.
11. Resolution Rate: Measures how effectively customer issues or complaints are
resolved. This can be tracked through customer service metrics and follow-up
surveys.
12. Customer Advocacy Metrics: Includes metrics like the number of customer referrals
or the frequency of positive testimonials. These metrics indicate how likely customers
are to act as advocates for the brand.

By analyzing these customer feedback metrics, businesses can gain valuable insights into
customer experiences and preferences, which can inform marketing strategies, improve
customer satisfaction, and drive better business outcomes.

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CFM: customer feedback metrics

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1.5 . Behavior-derived customer metrics

Behavior-derived customer metrics are key performance indicators (KPIs) used to evaluate
and understand customer behavior and its impact on a business. These metrics go beyond
basic demographic data and focus on the actions and interactions of customers. Here are
some important behavior-derived customer metrics:

1. Customer Lifetime Value (CLV or LTV): Measures the total revenue a business can
expect from a customer over their entire relationship with the company. It helps in
understanding the long-term value of acquiring and retaining customers.
2. Customer Acquisition Cost (CAC): The cost associated with acquiring a new
customer. It includes marketing expenses, sales costs, and any other resources used to
gain a new customer. Comparing CAC to CLV can help assess the efficiency of
customer acquisition strategies.
3. Churn Rate: The percentage of customers who stop using a product or service during
a given period. A high churn rate indicates issues with customer satisfaction or
product fit.
4. Retention Rate: The percentage of customers who continue using a product or
service over a specific period. High retention rates usually reflect customer
satisfaction and loyalty.
5. Repeat Purchase Rate: The proportion of customers who make more than one
purchase. This metric is useful for understanding customer loyalty and the
effectiveness of retention strategies.
6. Average Order Value (AOV): The average amount of money spent per transaction.
It helps in evaluating purchasing behavior and can be used to assess the impact of
pricing strategies or promotions.
7. Customer Engagement: Measures how actively customers interact with your brand
through various channels (e.g., social media, email, website visits). Higher
engagement often correlates with stronger customer relationships and brand loyalty.
8. Net Promoter Score (NPS): A measure of customer satisfaction and loyalty based on
the likelihood of customers recommending your product or service to others. It's often
used to gauge overall customer sentiment.
9. Purchase Frequency: The average number of purchases made by a customer within a
specific time frame. This metric helps in understanding buying habits and can inform
strategies to increase purchase frequency.
10. Product Usage Frequency: For subscription-based or usage-based businesses, this
metric tracks how often customers use the product or service. It can provide insights
into product adoption and value.
11. Time to First Purchase: The average time it takes for a new customer to make their
first purchase. Shorter times can indicate effective on boarding or marketing efforts.
12. Conversion Rate: The percentage of potential customers who complete a desired
action, such as making a purchase or signing up for a newsletter. It’s a key indicator
of the effectiveness of marketing and sales strategies.

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1.6. CUSTOMER PERSONA

A customer persona, also known as a buyer persona, is a semi-fictional representation of an

ideal customer based on market research and real data about existing customers. Creating
detailed customer personas helps businesses understand their target audience better, allowing
them to tailor their marketing, sales strategies, and product development to meet the specific
needs and preferences of different customer segments.

Here’s a guide on how a marketer create and use customer personas effectively:

1. Gather Data

By collecting both qualitative and quantitative data about your customers. This can include:

 Demographics: Age, gender, income, education level, job title, etc.

 Behavioral Data: Purchase history, website interactions, product usage patterns.
 Psychographics: Interests, values, lifestyle, attitudes, and challenges.
 Feedback: Customer surveys, reviews, and interviews.

2. Segment Your Audience

Divides customers into distinct groups based on common characteristics. Segmentation can
be based on:

 Demographics: Age, gender, location, income level.

 Behavior: Purchasing habits, product usage, brand loyalty.
 Psychographics: Values, interests, lifestyle.

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3. Develop Persona Profiles

Creates detailed profiles for each customer segment. A well-rounded persona includes:

 Name: A fictional name to make the persona relatable.

 Demographic Information: Age, gender, occupation, income, education.
 Background: Brief history, job responsibilities, and career background.
 Goals and Objectives: What the persona aims to achieve in relation to your product
or service.
 Challenges and Pain Points: The main problems or frustrations your persona faces.
 Values and Motivations: What drives their decision-making process and what they
value.
 Buying Behavior: How they make purchasing decisions, where they shop, and what
influences their choices.

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49
1.7.Customer Lifetime Value (CLV)

Customer Lifetime Value (CLV) is a key metric in business and marketing that estimates the
total revenue a company can reasonably expect from a single customer account throughout
the business relationship. Understanding CLV helps businesses make informed decisions
about customer acquisition, retention, and overall marketing strategies.

Components of CLV

1. Average Purchase Value (APV): The average amount a customer spends per
purchase.
2. Average Purchase Frequency Rate (APFR): The average number of times a
customer makes a purchase in a given period.
3. Customer Value (CV): The average value of a customer during a specific period. It
can be calculated as: CV=APV×APFRCV = APV \times APFRCV=APV×APFR
4. Average Customer Lifespan (ACL): The average number of periods a customer
continues to purchase from the company.
5. Customer Lifetime Value (CLV): The total value a customer brings to the company
over their entire relationship. It can be calculated as: CLV=CV×ACLCLV = CV
\times ACLCLV=CV×ACL

Creating a basic customer value template

Calculation Example

Let's assume the following values for a hypothetical business:

 Average Purchase Value (APV): $50

 Average Purchase Frequency Rate (APFR): 4 purchases per year
 Average Customer Lifespan (ACL): 5 years

1. Calculate Customer Value (CV): CV=50×4=200CV = 50 \times 4 =

200CV=50×4=200
2. Calculate Customer Lifetime Value (CLV): CLV=200×5=1000CLV = 200 \times 5 =
1000CLV=200×5=1000

Thus, the CLV for this business would be $1,000.

Importance of CLV

1. Customer Acquisition: Knowing the CLV helps businesses determine how much
they can afford to spend on acquiring new customers.
2. Customer Retention: Companies can identify and focus on retaining high-value
customers.
3. Marketing Strategies: Helps in allocating marketing resources more effectively by
focusing on channels that bring in higher CLV customers.

50
 4. Product Development: Insights from CLV can guide product enhancements and the
development of new products tailored to high-value customers.

Improving CLV

1. Enhancing Customer Experience: Providing excellent customer service and

experiences to encourage repeat purchases.
2. Personalization: Tailoring marketing efforts and communications to individual
customer preferences.
3. Loyalty Programs: Implementing rewards programs to incentivize repeat purchases.
4. Upselling and Cross-selling: Encouraging customers to buy additional or more
expensive items.
5. Reducing Churn: Identifying and addressing reasons why customers stop buying
from the company.

Understanding and leveraging CLV can significantly impact a company's profitability and
long-term success.

51
52
 Marketing Strategies based on CLV

Difference Between Stochastic and Machine Learning CLV Models

53
 UNIT-IV

Pricing Analytics

1.1. Pricing:
Pricing is a crucial aspect of any business strategy. It involves determining the value that will
be exchanged for a product or service. Effective pricing strategies take into account various
factors such as costs, customer demand, market conditions, and competitor pricing.

Goals of Pricing

1. Profit Maximization: The primary goal for most businesses is to set a price that
maximizes profit. This involves finding the right balance between price, cost, and
volume.
2. Revenue Maximization: In some cases, businesses aim to maximize revenue, even if
it doesn't lead to the highest profit. This might be done to increase market share or to
establish a customer base.
3. Market Penetration: Setting a lower price to enter a new market or to attract a large
number of customers quickly. This strategy aims to gain market share and build a
customer base.
4. Market Skimming: Setting a high price initially and then gradually lowering it. This
strategy aims to maximize profit from early adopters before targeting more price-
sensitive customers.
5. Survival: In times of economic downturn or when facing intense competition,
businesses may set prices just to cover costs and stay afloat.
6. Quality Leadership: Setting a higher price to signal superior quality or to position
the product as a premium offering in the market.
7. Customer Loyalty: Offering consistent pricing to build and maintain a loyal
customer base. Stable prices can foster trust and long-term relationships with
customers.
8. Competitive Pricing: Setting prices based on what competitors are charging. This
strategy aims to ensure that a company remains competitive in the market.
9. Target Return Pricing: Setting prices to achieve a specific return on investment.
This goal focuses on ensuring that pricing aligns with the company's financial
objectives.
10. Social and Ethical Considerations: In some cases, pricing decisions are influenced
by social responsibility and ethical considerations. For example, pricing essential
goods affordably to ensure they are accessible to all segments of the population.

54
Factors Influencing Pricing Decisions

1. Cost of Production: Includes fixed and variable costs associated with producing a
product or service.
2. Market Demand: The level of demand for a product influences how much customers
are willing to pay.
3. Competition: Competitors' pricing strategies can impact how a company sets its
prices.
4. Customer Perception of Value: The perceived value of a product to customers can
justify a higher or lower price.
5. Market Conditions: Economic conditions, market trends, and the overall industry
environment play a role in pricing.
6. Regulatory Environment: Legal and regulatory factors can influence pricing
decisions, such as price controls and antitrust laws.
7. Marketing Strategy: The overall marketing strategy, including positioning, branding,
and promotional activities, impacts pricing decisions.

Pricing Strategies

1. Cost-Plus Pricing: Adding a standard markup to the cost of the product.

2. Value-Based Pricing: Setting prices based on the perceived value to the customer
rather than on the cost of production.
3. Penetration Pricing: Setting a low price to attract customers to a new product or
service.
4. Price Skimming: Charging a high price initially and then lowering it over time.
5. Competitive Pricing: Setting prices based on competitors' strategies.
6. Psychological Pricing: Using pricing techniques that have a psychological impact,
such as $9.99 instead of $10.00.
7. Dynamic Pricing: Adjusting prices in real-time based on demand and supply
conditions.
8. Bundle Pricing: Offering multiple products or services together at a lower price than
if purchased separately.
9. Freemium Pricing: Offering basic products or services for free while charging for
premium features.

Effective pricing requires a deep understanding of the market, customer behavior, and the
competitive landscape. By aligning pricing strategies with business goals, companies can
optimize their revenue and profitability.

1.2. Price elasticity of demand (PED)

Price elasticity of demand (PED) is a measure used in economics to show the responsiveness,
or elasticity, of the quantity demanded of a good or service to a change in its price. More
specifically, it measures how much the quantity demanded changes in response to a change in
price.

55
Formula for Price Elasticity of Demand

The price elasticity of demand is calculated using the following formula:

PED=% Change in Quantity Demanded% Change in Price\text{PED} = \frac{\%\text{

Change in Quantity Demanded}}{\%\text{ Change in
Price}}PED=% Change in Price% Change in Quantity Demanded

Interpretation of PED Values

 Elastic Demand (PED > 1): The quantity demanded changes by a greater percentage
than the price change. This means consumers are highly responsive to price changes.
 Inelastic Demand (PED < 1): The quantity demanded changes by a smaller
percentage than the price change. This means consumers are not very responsive to
price changes.
 Unitary Elastic Demand (PED = 1): The percentage change in quantity demanded is
exactly equal to the percentage change in price.
 Perfectly Elastic Demand (PED = ∞): Consumers will only buy at one price and no
quantity at any other price.
 Perfectly Inelastic Demand (PED = 0): Quantity demanded does not change
regardless of price changes.

Factors Affecting Price Elasticity of Demand

1. Availability of Substitutes: Products with many substitutes tend to have higher

elasticity because consumers can easily switch if the price changes.
2. Necessity vs. Luxury: Necessities usually have inelastic demand, while luxuries have
more elastic demand.
3. Proportion of Income: If a product takes up a large portion of a consumer's income,
its demand tends to be more elastic.
4. Time Period: Over the long term, demand is usually more elastic because consumers
have more time to find substitutes or alter their behavior.
5. Brand Loyalty: Strong brand loyalty can make demand inelastic because loyal
customers are less sensitive to price changes.

Examples

1. Elastic Demand: Luxury cars often have elastic demand. If the price of a luxury car
increases significantly, the quantity demanded usually decreases substantially because
consumers may opt for less expensive alternatives.
2. Inelastic Demand: Basic necessities like bread or insulin typically have inelastic
demand. Even if prices increase, the quantity demanded does not decrease
significantly because these goods are essential.

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Importance of Price Elasticity

1. Pricing Decisions: Understanding elasticity helps businesses set optimal prices. If

demand is elastic, a price decrease could lead to higher total revenue, whereas if
demand is inelastic, a price increase could lead to higher total revenue.
2. Revenue Forecasting: Helps predict how changes in price will affect total revenue.
3. Taxation Policies: Governments use elasticity to predict the impact of taxes on goods
and services and their effect on consumer behavior and tax revenue.
4. Supply Chain Management: Helps in planning inventory and production levels
based on expected changes in demand due to price fluctuations.

Practical Application

To determine if a product has elastic or inelastic demand, businesses and economists often
conduct market research and analyze historical sales data in relation to price changes. This
analysis helps in making informed decisions about pricing strategies, marketing campaigns,
and overall business strategy.

57
1.3 Estimating Linear and Power demand curve:
Estimating demand curves involves collecting data, transforming it appropriately, and using
regression analysis to find the parameters. Linear demand curves are simpler and easier to
interpret, while power demand curves can better capture non-linear relationships. Both types
of demand curves provide valuable insights into how quantity demanded responds to price
changes, aiding in pricing and business strategy decisions.

Understanding Demand Curves

It's a graphical representation of the relationship between the price of a good or service and
the quantity demanded.

 Linear demand curve: A straight line that shows a constant change in quantity
demanded for a given change in price.
 Power demand curve: A curved line that shows a changing rate of change in
quantity demanded for a given change in price.

Steps to Estimate Demand Curves

1. Data Collection:
o Historical sales data: Gather information on price, quantity sold, and other
relevant factors (e.g., income, competition, advertising) for a specific period.
o Market research: Conduct surveys or experiments to understand consumer
behavior and preferences.
2. Data Analysis:
o Descriptive statistics: Calculate mean, median, standard deviation, and
correlation coefficients to understand data patterns.
o Regression analysis: Use statistical software to estimate the parameters of the
demand equation.
 Linear demand curve: Q = a - bP
 Power demand curve: Q = aP^b
o Model selection: Compare different models (linear, power, logarithmic, etc.)
using statistical criteria like R-squared, adjusted R-squared, and Akaike
Information Criterion (AIC).
3. Model Validation:
o Out-of-sample testing: Use data not used in model estimation to assess its
predictive power.
o Sensitivity analysis: Test the model's robustness to changes in assumptions
and data.

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Challenges and Considerations

 Data quality: Ensure data is accurate, complete, and representative of the target
market.
 Other factors: Consider incorporating other variables (e.g., income, competitor
prices, advertising) to improve model accuracy.
 Dynamic nature of demand: Demand curves can shift over time due to changes in
consumer preferences, economic conditions, and other factors.
 Model complexity: While power demand curves might better fit some data, they can
be more complex to estimate and interpret.

Example: Estimating a Linear Demand Curve in Excel

Let's assume you have data on price and quantity sold for a product.

1. Create a scatter plot: Plot price on the x-axis and quantity on the y-axis.
2. Add a trendline: Right-click on a data point, select "Add Trendline," and choose
"Linear."
3. Display equation: Check the box to display the equation on the chart.

The equation of the line will be in the form y = mx + b, where y is quantity, x is price, m is the
slope, and b is the intercept. This gives you a basic linear demand curve.

 Use specialized software: Statistical software like SPSS, STATA, or R offer

advanced regression techniques and model selection tools.
 Consider elasticity: Price elasticity of demand measures the responsiveness of
quantity demanded to price changes. It can help refine demand curve estimation.
 Incorporate qualitative insights: Combine quantitative data with qualitative

information from market research to enhance understanding.

1.4. Using Excel Solver to Optimize Price

Excel Solver is a powerful tool that can be used to optimize various business problems,
including price optimization. It works by finding the best possible value for a target cell (e.g.,
profit) by changing the values of specific cells (e.g., price) within certain constraints.

Steps to Optimize Price Using Excel Solver:

1. Set up your Excel Sheet:
o Demand Function: Create a formula that calculates the quantity demanded based on
the price. You can use a linear, power, or other demand function based on your data
and analysis.
o Revenue: Calculate total revenue by multiplying price by quantity demanded.
o Cost: Calculate total cost based on fixed and variable costs.
o Profit: Calculate profit as revenue minus cost.
2. Enable Solver Add-in:

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 o Go to File -> Options -> Add-ins.
o In the Manage box, select Excel Add-ins and click Go.
o Check the Solver Add-in box and click OK.
3. Set up Solver Parameters:
o Go to the Data tab and click Solver.
o In the Set Objective field, select the cell containing your profit.
o Set the optimization to Max (to maximize profit).
o In the By Changing Variable Cells field, select the cell containing the price.
o Add constraints as needed (e.g., minimum and maximum price, production capacity).
4. Solve:
o Click Solve. Excel will find the optimal price that maximizes profit based on your
constraints.

Example:

Let's assume a linear demand function:

 Quantity demanded (Q) = 100 - 2 * Price (P)

 Fixed cost = $100
 Variable cost per unit = $20

Your Excel sheet might look like this:

Cell Formula

B2 Price

B3 =100-2*B2

B4 =B2*B3

B5 =100+20*B3

B6 =B4-B5

Export to Sheets

To optimize price, you would set the objective to maximize cell B6 (profit) by changing cell
B2 (price).

Additional Considerations:
 Demand Function: The accuracy of demand function is crucial. Use historical data and
market research to estimate it effectively.
 Constraints: Consider other factors that might limit pricing decisions, such as competitor
prices, customer willingness to pay, and production capacity.
 Sensitivity Analysis: Analyze how changes in demand, cost, or other factors affect the
optimal price.

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1.5. Price Bundling

Price Bundling: A Strategic Approach to Boost Sales

Price bundling is a pricing strategy where multiple products or services are combined and
offered at a discounted price compared to buying them individually. This tactic can be a
powerful tool for businesses to increase sales, improve customer satisfaction, and optimize
revenue.

How Does Price Bundling Work?

By bundling products together, businesses create perceived value for customers. This
perceived value often drives purchases, as customers feel they are getting more for their
money.

Key elements of price bundling:

 Product selection: Carefully choose complementary products that appeal to the target
audience.
 Discount structure: Determine the appropriate discount to incentivize purchases without
sacrificing profitability.
 Bundle composition: Consider creating different bundle options to cater to various customer
segments.

Types of Price Bundling

There are two primary types of price bundling:

1. Pure bundling: Products are only available as a bundle, not individually.

o Example: Cable TV packages with a set of channels.
2. Mixed bundling: Customers can purchase products individually or as a bundle.
o Example: Fast-food combo meals with options to buy items separately.

Benefits of Price Bundling

 Increased sales: Bundling can encourage customers to purchase additional products.
 Higher average order value: Bundles often lead to larger purchase amounts.
 Improved customer satisfaction: Customers perceive greater value and convenience.
 Inventory management: Helps to clear slow-moving inventory.
 Competitive advantage: Can differentiate a business from competitors.

Challenges and Considerations

 Profitability: Careful pricing is essential to maintain profitability.

 Customer preferences: Understanding customer needs and preferences is crucial for
effective bundling.
 Product compatibility: Products in a bundle should complement each other.
 Cannibalization: Bundling might cannibalize sales of individual products.

61
Examples of Price Bundling

 Technology: Software suites, smartphone plans with data and calling bundles.
 Retail: Meal kits, travel packages, beauty product bundles.
 Services: Gym memberships with additional classes, cable TV packages.

1.6. Bundling Prices to Extract Consumer Surplus

Understanding Consumer Surplus

Consumer surplus is the difference between what a customer is willing to pay for a product
or service and

the actual price they pay. It's a measure of consumer satisfaction. When consumers perceive
they've gotten a good deal, their consumer surplus is high.

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How Bundling Affects Consumer Surplus

Bundling can have a complex impact on consumer surplus. It depends on several factors:

 Individual valuations: If consumers value the bundled products differently, bundling

can increase consumer surplus for some. For example, if someone values product A
highly but has little interest in product B, they might benefit from a bundle if the price
is right.
 Bundle price: If the bundle price is significantly less than the combined price of
individual items, consumer surplus increases for most buyers.
 Consumer preferences: If the bundle includes products that consumers don't want, it
can decrease consumer surplus.

Capturing Consumer Surplus Through Bundling

The primary goal of bundling for businesses is to capture more of the consumer surplus. By
offering products together at a discounted price, businesses can:

 Increase revenue: By enticing customers to buy multiple products.

 Reduce price sensitivity: As customers perceive a better deal, they may be less likely
to haggle over price.
 Improve profit margins: By bundling less popular products with more popular ones,
businesses can increase sales of both.

Example: Software Suites

Software companies often bundle multiple applications into suites. This strategy can be
highly effective because:

 Different user needs: Different users have varying needs. Some might primarily use
word processing, while others rely on spreadsheets.
 Price sensitivity: Offering a bundle at a discount can attract customers who might
otherwise purchase only one or two applications.
 Increased usage: By including additional software, users might discover new
features and increase their overall software usage.

Key Considerations for Effective Bundling

 Consumer research: Understand customer preferences and valuations for different

products.
 Cost analysis: Ensure that bundling is profitable by considering production and
distribution costs.
 Competitive analysis: Evaluate competitors' bundling strategies.
 Flexibility: Offer mixed bundling (option to buy individual products or bundles) to
cater to different customer segments.

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1.7. Mixed Bundling: A Deeper Dive

Mixed bundling is a pricing strategy where customers have the option to purchase products
individually or as a bundle. It's a flexible approach that combines the benefits of pure
bundling (capturing consumer surplus) with the advantages of individual pricing (catering to
diverse customer preferences).

How Mixed Bundling Works

 Individual pricing: Customers can purchase each product separately at its individual price.
 Bundle pricing: Customers can purchase a bundle of products at a discounted price
compared to buying them individually.

Advantages of Mixed Bundling

 Maximizes revenue: By offering both options, businesses can capture revenue from different
customer segments.
 Customer satisfaction: It provides flexibility to customers, allowing them to choose the
option that best suits their needs.
 Price discrimination: By setting the bundle price strategically, businesses can extract more
consumer surplus from high-value customers.

Example of Mixed Bundling

 Software industry: Microsoft Office offers individual applications like Word, Excel, and
PowerPoint, as well as bundled suites like Office Home & Student.
 Telecommunications: Cable TV providers offer individual channels, internet, and phone
services, as well as bundled packages.
 Fast food: Restaurants often offer combo meals with discounts compared to buying
individual items.

Key Considerations for Mixed Bundling

 Bundle discount: The discount offered on the bundle should be attractive enough to
encourage customers to choose the bundle over individual purchases.
 Product compatibility: The bundled products should complement each other to increase the
perceived value of the bundle.
 Customer segmentation: Identify different customer segments and tailor the bundle to their
preferences.
 Competitive analysis: Analyze competitors' bundling strategies and adjust accordingly.

Challenges of Mixed Bundling

 Cannibalization: The bundle might cannibalize sales of individual products.
 Complexity: Managing pricing and inventory for both individual products and bundles can
be complex.

64
Optimal Pricing for Mixed Bundling

Determining the optimal prices for individual products and the bundle is a complex task that
often involves mathematical modeling and optimization techniques. The goal is to maximize
overall revenue while considering factors such as customer valuations, production costs, and
competitive pressures.

1.8. Using Excel Solver for Optimal Bundle Pricing

Understanding the Problem

Before diving into the Excel setup, let's recap the problem:

 We have multiple products.

 We want to determine the optimal prices for individual products and a bundle.
 The goal is to maximize revenue or profit.
 We have constraints:
o Prices cannot be negative.
o Bundle price should be less than or equal to the sum of individual product prices.

Setting Up the Excel Model

1. Input Data:

 Create columns for product names, individual prices, and quantities sold.
 Create a row for the bundle price and quantity sold.
 Create a column for total revenue for each product and the bundle.
 Create a cell for total revenue.

2. Demand Functions:

 While ideal, having accurate demand functions is often challenging. We can use historical
data or market research to estimate demand elasticity.
 For simplicity, we can start with linear demand functions:
o Quantity demanded = a - b * Price

3. Calculations:

 Calculate revenue for each product and the bundle based on price and quantity sold.
 Calculate total revenue by summing up the revenue for all products and the bundle.

4. Solver Setup:

 Go to the Data tab and click Solver.

 Set the objective to maximize total revenue.
 Set the changing variable cells to the individual product prices and the bundle price.
 Add constraints:
o Prices must be greater than or equal to zero.
o Bundle price must be less than or equal to the sum of individual product prices.

65
 o Quantity demanded cannot be negative.
 Choose the evolutionary solver as it's better suited for non-linear problems.

In this example, you would:

 Set the objective to maximize total revenue (cell with the formula for total revenue).
 Set changing variable cells to prices of A, B, and the bundle.
 Add constraints:
o Price A >= 0, Price B >= 0, Bundle Price >= 0
o Bundle Price <= Price A + Price B
o Quantity A, Quantity B, Bundle Quantity >= 0 (assuming demand functions
are used)

Important Considerations

 Demand Functions: Accurate demand functions are crucial for optimal results.
Consider using non-linear functions if appropriate.
 Solver Options: Experiment with different solver options (population size, mutation
rate, etc.) to improve results.
 Sensitivity Analysis: Analyze how changes in input parameters affect the optimal
solution.
 Constraints: Add more constraints if necessary (e.g., minimum profit margin).
 Iterative Process: Optimization is often an iterative process. You might need to
refine your model and data over time.

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1.9. Price Skimming

Price Skimming: A Pricing Strategy

Price skimming is a pricing strategy where a company sets a high initial price for a new or
innovative product to maximize profits from early adopters. As demand from these early
adopters decreases, the price is gradually lowered to attract a wider customer base.

How Price Skimming Works

 Identify early adopters: These are customers willing to pay a premium for a new product.
 Set a high initial price: This captures the maximum value from early adopters.
 Monitor demand: As demand from early adopters declines, reduce the price.
 Target new market segments: Lower prices attract price-sensitive customers.

Advantages of Price Skimming

 Maximizes profits: Captures maximum revenue from early adopters.

 Recovers development costs: Quickly recoups investment in the product.
 Creates image of exclusivity: High initial price can position the product as premium.
 Price discrimination: Charges different prices to different customer segments.

Disadvantages of Price Skimming

 Attracts competitors: High profits may encourage competitors to enter the market.
 Dissatisfaction among early adopters: Early buyers may feel cheated if the price drops
significantly.
 Requires careful market analysis: Understanding customer segments and demand is crucial.

When to Use Price Skimming

 Innovative products: New products with unique features and benefits.
 Limited competition: When there are few or no competitors.
 High consumer demand: When there is a strong initial demand for the product.
 Product life cycle: Effective in the introduction stage of the product life cycle.

Examples of Price Skimming

 Technology products: New smart phones, gaming consoles, and laptops often use price
skimming.
 Pharmaceutical industry: New drugs are typically priced high and then reduced over time.

67
 UNIT-V

SEGMENTATION ANALYTICS

1.1 Segmentation Analytics :

Segmentation analytics is a marketing technique that, based on common

characteristics, allows you to split your customers or products into different
groups. This in return gives the ability to create tailor-made and relevant
advertisement campaigns, products or to optimize overall brand positioning.

1.2 Cluster Analysis: A Powerful Tool for Marketing Analytics

Cluster analysis is a data mining technique that groups similar data points
together. In the realm of marketing, it's a potent tool for understanding customer
behavior, preferences, and demographics. By identifying distinct customer
segments, businesses can tailor their marketing strategies for maximum impact.

How Cluster Analysis Works in Marketing

Data Collection: Gather relevant customer data, such as demographics, purchase

history, website behavior, and preferences.

Data Preparation: Clean and preprocess the data to ensure accuracy and
consistency.

Cluster Formation: Apply clustering algorithms (like K-means, hierarchical, or

density-based) to group customers based on similarities.

Cluster Profiling: Analyze the characteristics of each cluster to identify distinct

customer segments.

Actionable Insights: Develop targeted marketing strategies for each segment.

68
Applications of Cluster Analysis in Marketing

Customer Segmentation: Identify distinct customer groups based on factors like

demographics, purchasing behavior, and preferences. This allows for tailored
marketing campaigns and product recommendations.

Market Basket Analysis: Discover products frequently purchased together,

helping in cross-selling and product placement strategies.

Customer Lifetime Value (CLTV) Prediction: Group customers based on their

spending patterns and predict their future value to the business.

Price Sensitivity Analysis: Identify customer segments with different price

sensitivities to optimize pricing strategies.

New Product Development: Understand customer needs and preferences within

specific segments to guide product innovation.

Campaign Optimization: Evaluate the effectiveness of marketing campaigns

across different customer segments.

Example: E-commerce Retailer

An e-commerce retailer might use cluster analysis to identify three customer

segments:

Price-conscious shoppers: These customers prioritize low prices and discounts.

Targeted marketing could focus on promotional offers and value-oriented
product bundles.

Brand loyalists: These customers are attached to specific brands. Marketing

efforts could highlight brand collaborations and exclusive products.

Trendsetters: These customers are early adopters of new products. Marketing

should emphasize product launches, limited editions, and influencer
partnerships.

69
Challenges and Considerations

Data Quality: The accuracy of clustering results depends on the quality of the
data.

Choice of Clustering Algorithm: Different algorithms may produce different

results. Experimentation is often necessary.

Interpretation of Clusters: Understanding the characteristics of each cluster is

crucial for effective marketing strategies.

Dynamic Nature of Segments: Customer behavior evolves over time, requiring

regular re-evaluation of clusters.

By effectively leveraging cluster analysis, businesses can gain a deeper

understanding of their customers, optimize marketing efforts, and drive
increased revenueCluster analysis is a data mining technique that groups similar
data points together. In the realm of marketing, it's a potent tool for
understanding customer behavior, preferences, and demographics. By
identifying distinct customer segments, businesses can tailor their marketing
strategies for maximum impact.

How Cluster Analysis Works in Marketing

Data Collection: Gather relevant customer data, such as demographics, purchase

history, website behavior, and preferences.

Data Preparation: Clean and preprocess the data to ensure accuracy and
consistency.

Cluster Formation: Apply clustering algorithms (like K-means, hierarchical, or

density-based) to group customers based on similarities.

Cluster Profiling: Analyze the characteristics of each cluster to identify distinct

customer segments.

Actionable Insights: Develop targeted marketing strategies for each segment.

Applications of Cluster Analysis in Marketing

70
Customer Segmentation: Identify distinct customer groups based on factors like
demographics, purchasing behavior, and preferences. This allows for tailored
marketing campaigns and product recommendations.

Market Basket Analysis: Discover products frequently purchased together,

helping in cross-selling and product placement strategies.

Customer Lifetime Value (CLTV) Prediction: Group customers based on their

spending patterns and predict their future value to the business.

Price Sensitivity Analysis: Identify customer segments with different price

sensitivities to optimize pricing strategies.

New Product Development: Understand customer needs and preferences within

specific segments to guide product innovation.

Campaign Optimization: Evaluate the effectiveness of marketing campaigns

across different customer segments.

Example: E-commerce Retailer

An e-commerce retailer might use cluster analysis to identify three customer

segments:

Price-conscious shoppers: These customers prioritize low prices and discounts.

Targeted marketing could focus on promotional offers and value-oriented
product bundles.

Brand loyalists: These customers are attached to specific brands. Marketing

efforts could highlight brand collaborations and exclusive products.

Trendsetters: These customers are early adopters of new products. Marketing

should emphasize product launches, limited editions, and influencer
partnerships.

71
Challenges and Considerations

Data Quality: The accuracy of clustering results depends on the quality of the
data.

Choice of Clustering Algorithm: Different algorithms may produce different

results. Experimentation is often necessary.

Interpretation of Clusters: Understanding the characteristics of each cluster is

crucial for effective marketing strategies.

Dynamic Nature of Segments: Customer behavior evolves over time, requiring

regular re-evaluation of clusters.

By effectively leveraging cluster analysis, businesses can gain a deeper

understanding of their customers, optimize marketing efforts, and drive
increased revenue

1.3. Location-Wise Clustering in Marketing Analytics

Location-wise clustering, often referred to as geographic segmentation, is a

powerful application of cluster analysis in marketing. It involves grouping
customers or potential customers based on their geographic location. This
segmentation allows businesses to tailor their marketing strategies to specific
regions, cities, or even neighborhoods.

Key Benefits of Location-Wise Clustering

Improved Targeting: By understanding the characteristics of customers in

different geographic areas, businesses can deliver more relevant messages and
offers.

Optimized Resource Allocation: Marketing budgets can be allocated more

effectively to regions with higher potential returns.

Enhanced Customer Experience: Localizing marketing efforts can create a

stronger connection with customers and build brand loyalty.

Competitive Advantage: Gaining a deeper understanding of local markets can

help businesses identify opportunities and outmaneuver competitors.

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Data Considerations for Location-Wise Clustering

Geographic Data: Accurate and detailed geographic information is essential,

such as ZIP codes, city, state, country, latitude, and longitude.

Customer Data: Information about customer demographics, purchasing

behavior, preferences, and online activity is crucial for creating meaningful
clusters.

External Data: Incorporating data from external sources, such as census data,
economic indicators, and weather patterns, can enrich the analysis.

Clustering Techniques for Geographic Segmentation

K-Means Clustering: This method is suitable for large datasets and can
efficiently identify geographic clusters based on factors like population density,
income level, and consumer spending.

Hierarchical Clustering: This technique can be used to explore different levels

of geographic granularity, from broad regions to specific neighborhoods.

Density-Based Clustering: This approach is helpful for identifying irregularly

shaped clusters, such as urban areas with dispersed populations.

Applications of Location-Wise Clustering in Marketing

Store Location Optimization: Identify optimal locations for new stores or retail
outlets based on customer density and spending patterns.

Local Marketing Campaigns: Develop targeted marketing campaigns for

specific geographic regions, considering factors like local culture, climate, and
competition.

Geofencing: Use location-based technology to deliver personalized offers and

messages to customers in specific geographic areas.

Delivery and Logistics Optimization: Improve delivery routes and optimize

logistics operations based on customer location and order patterns.

Example: Retail

A retail chain can use location-wise clustering to identify different customer

segments based on geographic location. For example:

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Urban Centers: Customers in urban areas may have higher disposable incomes
and a preference for premium brands.

Suburban Areas: Customers in suburban areas might be more family-oriented

and value convenience and affordability.

Rural Areas: Customers in rural areas may have different shopping habits and
preferences based on local factors.

By understanding these differences, the retailer can tailor its product assortment,
pricing, and marketing messages to each segment.

1.4.Using Excel Solver for Optimal Clusters

While Excel Solver is a powerful tool for optimization problems, it's generally
not the best fit for finding optimal clusters in marketing analytics because of
following reasons.

Complexity: Cluster analysis involves finding the best way to group data points,
which is a complex optimization problem with a vast solution space. Excel
Solver might struggle with large datasets or intricate clustering algorithms.

Non-linearity: Many clustering algorithms, like K-means, involve non-linear

optimization problems. Excel Solver, while capable of handling non-linearity,
might not be the most efficient or accurate approach.

Alternative Tools: Specialized data mining and machine learning software

packages (like Python with libraries like Scikit-learn or R) offer dedicated
algorithms and optimization techniques tailored for clustering. These tools are
often more efficient and accurate.

When Might Excel Solver Be Considered?

There might be specific, simplified scenarios where Excel Solver could be used
as a starting point or for exploratory analysis:

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Small Datasets: For very small datasets with a limited number of variables,
Excel Solver might be sufficient.

Custom Clustering Criteria: If you have a unique, well-defined optimization

objective that can be expressed as a mathematical formula, Excel Solver could
be explored.

Educational Purposes: Understanding the basics of optimization and clustering

through Excel Solver can be beneficial for learning purposes.

Recommended Approach: Specialized Clustering Algorithms

For most marketing analytics tasks, using specialized clustering algorithms

implemented in dedicated software packages is the preferred approach. These
tools offer:

Efficiency: Optimized algorithms for handling large datasets.

Accuracy: Advanced techniques to find better cluster solutions.

Scalability: Ability to handle complex data structures and multiple variables.

Visualization: Tools to explore and interpret clustering results effectively.

Potential Workarounds

If you're determined to use Excel Solver, consider these workarounds (with

caution):

Simplified Clustering: Reduce the complexity of the problem by using a

simplified clustering algorithm or fewer variables.

Heuristic Approaches: Implement heuristic methods (like random initialization

or iterative improvement) to find approximate solutions.

Add-ins: Explore third-party Excel add-ins that offer clustering capabilities.

1.5. Conjoint Analysis: Unpacking Consumer Preferences

Conjoint analysis is a powerful market research technique used to understand

how consumers value different attributes of a product or service. By asking

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respondents to choose between various product profiles, researchers can
determine the relative importance of each attribute and the optimal combination
of features.

How Does it Work?

Identify Attributes: Determine the key features or characteristics of a product or

service that influence consumer choice.

Create Levels: Define the specific options or variations for each attribute.

Design Profiles: Create hypothetical product or service profiles by combining

different levels of attributes.

Collect Data: Present these profiles to respondents and ask them to rank or
choose their preferred options.

Analyze Data: Use statistical methods to estimate the utility or importance of

each attribute level.

Types of Conjoint Analysis

Full Profile Conjoint: Respondents evaluate complete product profiles.

Adaptive Conjoint Analysis: Respondents answer questions based on their

previous choices, reducing survey length.

Choice-Based Conjoint: Respondents choose the most preferred option from a

set of profiles.

1.6. Using conjoint analysis to segment a market/Applications of Conjoint

Analysis

Product Development: Identify desired product features and benefits.

Pricing Strategy: Determine optimal pricing for different product

configurations.

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Market Segmentation: Identify customer segments with different preferences.

Concept Testing: Evaluate the appeal of new product concepts.

Example: Smartphone Market

A smartphone manufacturer might use conjoint analysis to understand how

consumers value different features like screen size, camera quality, battery life,
and price. By presenting various combinations of these attributes, the company
can determine which features are most important to consumers and how much
they are willing to pay for them

1.7.Decision Trees

What is a Decision Tree?

A decision tree is a supervised machine learning algorithm used for both

classification and regression tasks. It resembles a flowchart-like structure where
each internal node represents a test on an attribute, each branch represents the
outcome of the test, and each leaf node represents a class label (for
classification) or a value (for regression).

How Does it Work?

Selecting the best attribute: The algorithm chooses the attribute that best splits
the dataset into subsets with similar values for the target variable. Metrics like
Gini impurity, entropy, or information gain are used for this selection.

Splitting the dataset: The dataset is divided into subsets based on the chosen
attribute.

Repeating the process: The process is recursively applied to each subset until a
stopping criterion is met (e.g., all instances in a node belong to the same class,
or a predefined depth is reached).

Advantages of Decision Trees

Easy to understand and interpret: The decision-making process can be

visualized and explained in simple terms.

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Handles both numerical and categorical data: No need for data normalization or
creation of dummy variables.

Can handle multi-output problems.

Requires little data preparation.

Disadvantages of Decision Trees

Prone to overfitting: Complex trees might not generalize well to unseen data.

Sensitive to small variations in data: Slight changes in data can lead to different
trees.

Not suitable for all types of problems: Linear relationships might be better
captured by other algorithms.

Applications

Customer churn prediction: Identify customers likely to leave.

Fraud detection: Detect fraudulent transactions.

Medical diagnosis: Assist in diagnosing diseases based on symptoms.

Market segmentation: Identify customer groups with similar preferences.

Risk assessment: Evaluate the risk associated with loans or insurance claims.

Improving Decision Trees

Pruning: Removing unnecessary branches to reduce overfitting.

Ensemble methods: Combining multiple decision trees (e.g., Random Forest,

Gradient Boosting) to improve performance.

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 Decision tree

1.8.Decision Trees for Market Segmentation

Decision trees are an effective tool for market segmentation, allowing

businesses to identify distinct customer groups based on their characteristics and
behaviors. By creating a hierarchical structure of decisions, decision trees can
help businesses understand the factors driving customer preferences and
segmentation.

How Decision Trees Work for Market Segmentation

Data Collection: Gather relevant customer data, including demographics,

purchase history, website behavior, and other relevant attributes.

Data Preparation: Clean and preprocess the data to ensure accuracy and
consistency.

Tree Construction: Build a decision tree using algorithms like ID3, C4.5, or
CART. The tree is constructed by selecting attributes that best split the data into
homogeneous groups.

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Segment Identification: The leaf nodes of the decision tree represent different
customer segments. Each segment shares similar characteristics based on the
attributes used in the tree.

Segment Analysis: Analyze the characteristics of each segment to understand

their needs, preferences, and behaviors.

Advantages of Decision Trees for Market Segmentation

Easy to Interpret: Decision trees are visually intuitive, making it easy to

understand the segmentation logic.

Handles Both Categorical and Numerical Data: Can accommodate various data
types without extensive preprocessing.

Identifies Important Attributes: Helps uncover the key factors driving customer
segmentation.

Can Be Used for Predictive Modeling: In addition to segmentation, decision

trees can be used to predict customer behavior.

Example: Retail Market Segmentation

A retail company might use a decision tree to segment customers based on

factors like age, income, purchase frequency, and product category preference.
The tree might identify segments such as:

Young, affluent customers who frequently purchase high-end fashion items.

Middle-aged, family-oriented customers with a focus on groceries and

household products.

Senior citizens with a preference for health and wellness products.

Challenges and Considerations

Overfitting: Decision trees can be prone to overfitting, leading to inaccurate

segmentation. Pruning techniques can help mitigate this issue.

Data Quality: The quality of the data significantly impacts the effectiveness of
the segmentation.

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Choice of Algorithm: Different decision tree algorithms might produce different
results. Experimentation is often necessary.

By effectively utilizing decision trees for market segmentation, businesses can

gain valuable insights into customer behavior, tailor marketing campaigns, and
improve customer satisfaction.

Decision tree for market segmentation for Cars

1.9. Promotion Analytics:

Promotion analytics is the systematic process of measuring and evaluating the

effectiveness of marketing promotions to optimize future campaigns and
maximize return on investment (ROI). By analyzing promotion data, businesses
can gain valuable insights into consumer behavior, pricing elasticity, and the
overall impact of promotional activities.

Key Metrics and Analysis

Sales Lift: Measures the increase in sales directly attributable to the promotion.

Incremental Profit: Calculates the additional profit generated by the promotion

after accounting for costs.

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Customer Acquisition Cost (CAC): Determines the cost of acquiring new
customers through the promotion.

Customer Lifetime Value (CLTV): Evaluates the long-term value of customers

acquired through the promotion.

Promotion Elasticity: Measures the sensitivity of sales to promotional discounts.

Cannibalization: Assesses the impact of the promotion on sales of other

products or during other periods.

Customer Behavior: Analyzes how promotions influence customer purchasing

patterns, frequency, and basket size.

Common Promotion Analysis Techniques

A/B Testing: Compares the performance of two different promotion variants.

Lift Analysis: Measures the incremental impact of a promotion on sales.

Time Series Analysis: Identifies trends and patterns in sales data over time.

Customer Segmentation: Analyzes promotion effectiveness across different

customer groups.

Attribution Modeling: Determines the contribution of various marketing

channels to promotion success.

Benefits of Promotion Analytics

Optimized Promotion Spend: Allocate budgets to the most effective promotions.

Improved Profitability: Increase revenue and profitability through targeted

promotions.

Enhanced Customer Understanding: Gain insights into customer preferences

and behavior.

Reduced Promotion Cannibalization: Minimize negative impacts on other

products or periods.

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Data-Driven Decision Making: Make informed decisions based on quantitative
analysis.

Example: Retail Promotion Analysis

A retail company might use promotion analytics to evaluate the impact of a

discount on a new product. By comparing sales during the promotion period to a
similar period without the promotion, the company can calculate the sales lift,
incremental profit, and customer acquisition cost. Additionally, analyzing
customer purchase behavior can help identify which customer segments
responded best to the promotion.

1.10.Promotions and types of promotions in marketing

Promotions in Marketing:

Promotion is one of the four key elements of the marketing mix (Product, Price,
Place, and Promotion). It involves communicating value to customers and
building relationships with them.

Types of Promotions

There are several types of promotions used in marketing:

1. Advertising

Paid, non-personal communication about an organization or product.

Channels: Television, radio, newspapers, magazines, outdoor advertising,

digital media (social media, online ads, etc.).

Examples: TV commercials, billboards, Google AdWords, social media ads.

2. Sales Promotion
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Short-term incentives to encourage purchase or sales.

Types: Discounts, coupons, contests, free samples, loyalty programs, trade

promotions, rebates, point-of-purchase displays.

Examples: Buy-one-get-one-free offers, seasonal discounts, loyalty card

rewards.

3. Public Relations (PR)

Building good relations with the company's various publics.

Involves: Press releases, media coverage, sponsorships, events, crisis

management.

Examples: Press conferences, charity events, product launches, media

interviews.

4. Personal Selling

Direct, person-to-person communication with prospects or customers.

Involves: Sales presentations, demonstrations, handling objections, closing

sales.

Examples: Sales representatives, door-to-door sales, telemarketing.

5. Direct Marketing

Direct communication with customers to generate a response.

Channels: Mail, email, telemarketing, SMS, direct mail.

Examples: Email marketing campaigns, catalogs, telemarketing calls.

6. Digital Marketing

Promotion of products or services using digital channels.

Includes: Search engine optimization (SEO), pay-per-click (PPC) advertising,

social media marketing, content marketing, email marketing.

Examples: Influencer marketing, viral videos, social media contests.

Choosing the Right Promotion

The choice of promotion depends on various factors:

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Target audience

Product or service characteristics

Budget

Promotional goals

Stage of product life cycle

By effectively combining these promotional tools, businesses can build strong

brand awareness, generate leads, and drive sales.

1.11 Discounting: A Powerful Tool in Marketing

Discounting is a pricing strategy that reduces the original selling price of a

product or service to stimulate demand, clear inventory, or attract new
customers.

While it can be a powerful tool, it's essential to use discounting strategically to

avoid eroding profit margins.

Types of Discounts

Percentage Discounts:

A fixed percentage reduction on the original price.

Common during sales and promotions.

Example: 20% off all items.

Dollar Discounts:

A fixed amount is subtracted from the original price.

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Often used for high-ticket items.

Example: $50 off a purchase of $200 or more.

Quantity Discounts:

Price reductions for purchasing larger quantities.

Encourages bulk buying.

Example: Buy 2, get 1 free.

Seasonal Discounts:

Price reductions offered during specific times of the year.

Helps clear inventory and stimulate demand.

Example: Winter sale on winter clothing.

Cash Discounts:

A reduction in price for paying in cash or within a specific timeframe.

Encourages faster payment.

Example: 2% discount for payment within 10 days.

Trade Discounts:

Price reductions offered to intermediaries (wholesalers, retailers) for purchasing

products in bulk.

Encourages stocking and promotion of products.

Example: 25% discount for wholesalers.

Loyalty Discounts:

Price reductions offered to repeat customers.

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Encourages customer loyalty.

Example: 10% discount for members of the loyalty program.

Considerations for Effective Discounting

Target Audience: Identify the specific customer segment to benefit from the
discount.

Discount Amount: Determine the optimal discount level to attract customers

without sacrificing profit margins.

Promotion: Effectively communicate the discount to the target audience.

Timing: Consider the best time to offer the discount based on market conditions
and competitor activity.

Evaluation: Track the performance of the discount to measure its effectiveness.

1.12Measuring the Effectiveness of Advertising

Measuring the effectiveness of advertising is crucial for optimizing marketing

campaigns and maximizing ROI. Here are key metrics and strategies to assess
your advertising performance:

Key Metrics

Reach: The number of people exposed to your ad.

Frequency: The average number of times a person is exposed to your ad.

Impressions: The total number of times your ad is displayed.

Click-Through Rate (CTR): The percentage of people who click on your ad.

Conversion Rate: The percentage of people who take a desired action (e.g.,
purchase, sign-up).

Cost Per Click (CPC): The amount paid for each click on your ad.

Cost Per Acquisition (CPA): The cost to acquire a new customer.

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Return on Ad Spend (ROAS): The revenue generated for every dollar spent on
advertising.

Brand Awareness: Measures how familiar people are with your brand.

Brand Recall: Measures how well people remember your brand.

Lead Generation: The number of leads generated from the ad.

Measuring Effectiveness

Set Clear Objectives: Define specific, measurable, achievable, relevant, and

time-bound (SMART) goals for your campaign.

Track Key Metrics: Monitor relevant metrics to assess campaign performance.

A/B Testing: Compare different ad variations to identify the most effective

elements.

Customer Surveys: Gather feedback on ad perception and effectiveness.

Attribution Modeling: Determine the impact of different marketing channels on

conversions.

ROI Analysis: Calculate the return on investment to evaluate campaign

profitability.

Benchmarking: Compare your performance to industry standards or

competitors.

Challenges and Considerations

Attribution Difficulty: Accurately attributing conversions to specific ads can be

challenging.

Data Privacy: Advertisers must comply with data privacy regulations.

Changing Consumer Behavior: Adapting to evolving consumer preferences is

essential.

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1.13. The Adstock Model: A Deeper Dive

Understanding Adstock

Adstock is a concept in marketing that recognizes that the impact of an

advertisement doesn't vanish immediately after it stops running. Instead, its
effect lingers or "stocks" for a period. This lingering impact is crucial to
consider when evaluating advertising effectiveness.

Why Adstock Matters

Accurate Measurement: Adstock helps correct for the delayed impact of

advertising on sales or other metrics.

Optimized Media Planning: Understanding adstock allows for better media

planning and allocation of advertising budgets.

Improved ROI: By accounting for adstock, businesses can more accurately

assess the return on their advertising investments.

How Adstock Works

The adstock model typically uses a decay function to represent the diminishing
impact of advertising over time. Common functions include:

Geometric Decay: The simplest form, assuming a constant decay rate.

Exponential Decay: Allows for a more flexible decay pattern.

Custom Decay: Tailored to specific campaign characteristics.

Incorporating Adstock into Analysis

Adstock is often used in conjunction with marketing mix models (MMM) to

analyze the impact of various marketing activities on sales or other key metrics.
MMMs incorporate adstock to account for the delayed and lingering effects of
advertising.

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Challenges and Considerations

Determining the Optimal Decay Rate: Finding the right decay rate can be
complex and requires careful analysis.

Data Quality: Accurate and reliable data is essential for building an effective
adstock model.

Other Factors: Adstock is just one factor influencing sales; other variables like
price, promotions, and competitors also play a role.

Example: Adstock in Action

Imagine a TV advertising campaign for a new smartphone. The campaign runs

for four weeks. While sales might spike during the campaign, the adstock effect
suggests that sales will continue to increase for several weeks after the
campaign ends due to brand awareness and product consideration.

By incorporating adstock into the analysis, marketers can better understand the
true impact of the campaign and make informed decisions for future advertising
efforts.

1.14. Pay-Per-Click (PPC) Advertising

Pay-per-click (PPC) is an internet advertising model where advertisers pay a

publisher (typically a search engine, website owner, or a network of websites)
when the ad is clicked. Essentially, you're paying for targeted visits to your
website (or landing page or app).

How Does PPC Work?

Keyword Research: Identify relevant keywords and phrases that potential

customers might use to search for your products or services.

Ad Creation: Develop compelling ad copy that aligns with your target

keywords.

Bidding: Set a maximum bid for each keyword. Advertisers compete for ad
placement based on bids and ad quality.

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Ad Placement: Ads appear on search engine results pages (SERPs) or other
relevant websites.

Click and Conversion: When a user clicks on your ad, you pay the agreed-upon
amount. If the user takes a desired action (e.g., purchase, sign-up), it's
considered a conversion.

Types of PPC Advertising

Search Engine Advertising (SEA): Displaying ads on search engine results

pages.

Google Ads

Bing Ads

Social Media Advertising: Promoting content on social media platforms.

Facebook Ads

Instagram Ads

LinkedIn Ads

Twitter Ads

Display Advertising: Placing ads on websites and apps.

Google Display Network

Banner ads

Video ads

Benefits of PPC Advertising

Immediate Results: PPC campaigns can generate traffic and leads quickly.

Measurable ROI: Track key metrics to determine campaign effectiveness.

High Targeting: Reach specific audiences based on demographics, interests, and

behaviors.

Flexibility: Adjust bids, ad copy, and targeting in real-time.

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Challenges of PPC Advertising

Competitive Bidding: Costs can fluctuate based on competition.

Ad Quality: Maintaining high ad quality is crucial for good ad rank.

Click Fraud: Protecting against fraudulent clicks is important.

Ongoing Management: PPC campaigns require constant monitoring and

optimization.

Key Metrics

Click-Through Rate (CTR): Percentage of clicks on your ad.

Conversion Rate: Percentage of clicks that result in desired actions.

Cost Per Click (CPC): Amount paid for each click.

Cost Per Acquisition (CPA): Cost to acquire a customer.

Return on Ad Spend (ROAS): Revenue generated for every dollar spent.

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