Marketing

Analytics
 Analysis Vs Analytics
Analysis' looks backward and creates a historical view for marketers to
know what has happened in the past. 'Analytics', on the contrary, looks
forward to model the future tin order to predict a result.
Regardless of their respective natures, both are equally important
to marketers.
 Marketing Analytics?

Marketing analytics is the study of data

garnered through marketing campaigns
in order to discern patterns between
such things as how a campaign is
contributed to conversions,consumer
behaviour,regional preferences , creative
preferences and more.The goal of
marketing analytics is to use these
patterns and findings to optimize future
campaigns.
 Definition of Marketing
Analytics
Marketing analytics is the practice of measuring, managing and
analyzing marketing performance to maximize its effectiveness and
optimize return on investment (ROI).
Marketing Analytics

Marketing analytics is the study of data garnered through marketing campaigns in order to discern
patterns between such things as how a campaign contributed to conversions, consumer behavior,
regional preferences, creative preferences and much more.

This analysis allows marketers to achieve higher ROI on marketing investments by understanding
what is successful in driving either conversions, brand awareness, or both.

Importance of Marketing Analytics

• It allows marketing teams to serve the right ad, at the right time, on the right channel to move
consumers down the sales funnel.
 Types Of Marketing
Information Needed
● Internal Data (CRM, ERP, Web Analytics, Financial data)
● Competitive intelligence: competitive intelligence is the ethical
collection and analysis of competitor information.Companies
use the results to take strategic decisions , market advantage
and differentiation.
● Marketing Research
● Web Marketing (WordPress and Google Analytics): Visit, Unique
visitor, Page impression, Click per page (Adv.), Click-through rate,
Conversion rate, Bounce rate, Return visit
Application of Marketing
Analytics by Marketers
❖ The adoption and application of marketing analytics requires that the processes are continuously monitored.

❖ Individual-level interaction-related information needs to be collected for each customer.

❖ Such data may be collected through various touchpoints including traditional means (e.g., phone calls, revenue
obtained (from the customer), letters and e-mails), as well as technology-driven means (e.g., online-based data
obtained by tracking the movement and behavior of users on electronic platforms including the Internet).

❖ The tracking of user information needs to ensure that a holistic view of the consumer/customer emerges: attitudes
and behaviors need to be comprehensively represented in the databases that are created to house the information.

❖ Thereafter, appropriate analyses have to be undertaken to draw pertinent insights about the user/consumer.

❖ In addition to obtaining a holistic understanding about the consumer, another important application of marketing
analytics is to predict future behavior
Product Marketing Analytics
 How Organizations Use
Marketing Analytics?
● Product intelligence: taking a deep dive into products to
understand how products stack up within markets.
● Customer trends and preferences
● Product development trends
● Messaging and media
● Competition
● Predict future results
Data Storage in
companies?

● Servers and Data Centers

● Cloud Storage
● Data Lake
● Data Warehouses
● CRM
● ERP

CRM is the best approach in terms of relationship with your customer

it will give you the absolute solution of managing the data and also
give you the vast opportunity to utilize them to explore your business
for example SALESFORCE.
Analytics Ecosystem
Case Study
HOW NETFLIX USES BIG DATA?
● Machine learning helps Netflix to shape its catalog of movies
● Netflix uses ML to recommend users some of the most
relevant and similar movies that interest them
● ML used to optimize the production of original movies and
TV shows on Netflix’s growing studio
● ML powers Netflix’s advertising spending, channel mix, and
advertising creative helping them to find new subscribers
● Based on user data, Netflix knows what content to invest in
FACTS:
● Netflix first started using analytics tools in 2000 to recommend DVDs to users
● In 2006, launched Netflix Prize, a machine learning and data mining competition
with a $1 million dollar prize money
● The recommendation system influences 80% of the content we watch on Netflix
● Netflix estimates that its algorithm saves $1 billion a year in value from customer
retention
● Netflix reported a decline of 200,000 members in its first quarter and a 1 million
decline in 2nd quarter
● Netflix launched an Ads plan and Netflix games
 Understanding Pricing

Marketing mix: It is a selection of marketing tools that include several

areas of focus that can be combined to create a comprehensive plan with
combination of action and strategies to promote the brand or product.
A marketing mix refers to a framework that uses the four Ps of product,
price, placement, and promotion.

Price is the one element of the marketing mix that produces revenue; the
other elements produce costs.

It communicates the company’s intended value positioning of its product or

brand.

Pricing in Digital world (Challenges):

● Get instant price comparisons from thousands of vendors.

● Check prices at the point of purchase
● Name their price and have it met (Auction)
● Get products free (Freemium)
● Monitor customer behavior and tailor offers to individuals
What is Consumer personas?

“Personas are fictional representations of your ideal customers, based on real data about customer

demographics and offline & online behavior, along with educated speculation about their

personal histories, motivations, and concerns”

Why Consumer personas?
What are the benefits of customer
profiling?
❖ By developing a customer profile, businesses can analyze transactional data and detect patterns and correlations in the
customer behaviour according to the segment they belong to. The key benefits of customer profiling are,

Establish personalized communication with your customers

Get better response rates from customer outreach programs

Enhance customer experience and customer loyalty

Acquire new customers based on best performing profiles

Efficient resource allocation and customer engagements

❖ Customer profiles not only contain information on the demographics of your consumers, but also information about their
spending habits and behaviour. This provides a very accurate picture of your most profitable customers.

❖ Using this, you can develop the right marketing strategy, allocate resources more effectively and optimize your marketing
budget for better return of investment.
Example

❖ A retail store can collect information about the demographics of their consumers and their preferences.

❖ Offline method - Surveys and Observational

❖ Other method - through video analytics.

❖ Additionally, they can use loyalty cards, phone numbers and receipt scans to get further information

about how they spend their money and what products they buy the most.

❖ Data from various channels can be merged into a single customer profile that can provide valuable

insights to marketers.
Customer Segmentation
❖ Segmentation is the process of dividing potential markets or consumers
into specific groups.

❖ Market research analysis using segmentation is a basic component of

any marketing effort.

❖ It provides a basis upon which business decision makers maximize

profitability by focusing their company’s efforts and resources on those
market segments most favorable to their goals.
Types of Segmentation
Customer Segmentation

❖ There are four main types of segmentation used in market research

analysis:

A priori

Usage

Attitudinal

Need
Customer Segmentation Types … 1

A priori
❖ a priori is defined as relating to knowledge that proceeds from theoretical deduction rather than from observation
or experience.

❖ For purposes of market research analysis this means making certain assumptions about different groups that are
generally accepted as pertaining to that group.

❖ For example, deducing that adults over 50 are not as tech savvy as twenty somethings is a safe assumption based
on the reasoning that high tech devices were not as widely available to the older generation than they are to the
younger.

❖ However, be careful to check your assumptions since they can change over time. In 30 years, that statement may no
longer be true.
Customer Segmentation Types … 2

Usage Segmentation (also used frequently)

❖ Usage segmentation is completed either by decile or
pereto analysis.

❖ The former splits the groups into ten equal parts and
the latter distributes according to the top 20% and the
remaining 80%.

❖ Usage segmentation helps to drill down more deeply

than a priori because it indicates which priori group is
the heaviest user of your product.
Customer Segmentation Types … 3

Attitudinal (Cluster analysis)

❖ Using cluster analysis to create customer psychological profiles is difficult because it is limited by the input
data used.

❖ Demographic data is the least helpful, whereas preference data (scaling) is better suited toward this type of
analysis.

❖ However, once a usage segmentation is created, it’s exceptionally helpful to know the motivating factors behind
the purchasing decisions of the heaviest users of your product
Psychographic Segmentation

Developing Category Attitudes (statements)

Grouping respondents with similar

pattern of agreements on those statements

Christening segment from their endorsements

Sizing, profiling the various segments

Customer Segmentation Types … 4

Needs Based Segmentation

❖ Needs based segmentation is the concept that the market can be divided based on customer need.

❖ This type of analysis is used to develop products that sell rather than trying to sell products a business developed.

❖ Needs based segmentation uses conjoint analysis to separate the groups according to functional performance.

❖ Using cluster analysis, it’s goal is to determine the driving forces behind the performance data.
What is Cluster Analysis?

❖ A loose definition of Clustering - The process of organizing objects into groups whose

members are similar in some way.

❖ A cluster is therefore a collection of objects which are similar between them and are

dissimilar to the objects belonging to other clusters

❖ Cluster analysis helps in grouping the observations in the dataset.

❖ It is part of the unsupervised learning techniques since there is no target variable in the

dataset
Example of Cluster Analysis
❖ Banks use cluster analysis to group

their customers based on which they

could offer special services.

❖ In biology classification of plants and

animals given their features

❖ In Marketing finding groups of

customers with similar behavior given

a large database of customer data

containing their properties and past

buying records.
What is the Objective of Cluster Analysis?
What are the Techniques?

Cluster Analysis

Small Data (N<100) Large Data (N>100)

Hierarchical Clustering K-Means

What is Hierarchical Clustering?
❖ Hierarchical clustering, also known as hierarchical cluster analysis, is an algorithm that groups
similar objects into groups called clusters. The endpoint is a set of clusters, where each cluster is
distinct from each other cluster, and the objects within each cluster are broadly similar to each other.
K-Means Clustering
❖ The k-means algorithm is implemented in 4 steps (assumes partitioning criteria is: maximize
intra-cluster similarity and minimize inter-cluster similarity)

1. For a given number of partitions (say k), the partitioning method will create an initial
partitioning.

2. Then it uses the iterative reallocation technique to improve the partitioning by moving objects
from one group to other.

3. Initial centroids are often chosen randomly.

Clusters produced vary from one run to another.

4. The centroid is (typically) the mean of the points in the cluster.

Closeness is measured by Euclidean distance

❖ K-means will converge for common similarity measures as given above

Pitfalls in Pricing strategy:
- Calculate product cost and add industry’s traditional margins.
- Not revising price often enough to capitalize on market changes
- Setting price independently of the rest of the marketing program rather
than as an intrinsic element of market-positioning strategy
- Not varying price enough for different product items, market segments,
distribution channels, and purchase occasions

Consumer Psychology and Pricing:

- Reference Prices- (Fair price, Typical price, Last price paid, Upper
bound, Lower bound, Historical Competitor Prices, Usual Discounted
Price)
- Price-Quality Inferences- Consumers use price as an indicator of quality.
Lack of information on Quality.
- Price Endings-
- Consumer tend to process prices “left to right” rather than by rounding
- Price that end in 9 are more influential when consumers’ price knowledge
is poor, when they purchase the item infrequently or are new to the
category.
- Prices that end with 0 and 5 are also popular and are thought to be
easier for consumers to process and retrieve from memory
- One study showed that demand actually increased one-third when the
price of a dress rose from $34 to $39 but was unchanged when it rose
from $34 to $44
Use of analytics in pricing:

With data analytics, you can price according to your target market. Analytics
enables companies to dramatically improve profitability by developing
optimal pricing strategies to win more contracts and offer the most value to
customers

What is pricing analytics?

Pricing analytics are the metrics and associated tools used to understand
how pricing activities affect the overall business, analyze the profitability of
specific price points, and optimize a business’s pricing strategy for
maximum revenue.

How pricing analytics improve profitability?

- Acquire more insights on customers

- Pricing analytics show which customer segments are the most (and
least) profitable and which respond best to specific pricing strategies.
Aligning your pricing with those customer segments increases both
revenue and profit, keeping customers happy and helping reduce
churn.
How pricing analytics improve profitability?

- Data lets you quickly learn which customers are most likely to buy and
exactly how much they value your solution to their problems
- Identify quick pricing wins
- Nearly every company has holes in their pricing strategy just waiting to be
patched—pricing leaks, underpriced or overpriced product tiers, or missed
upsell opportunities.
- Pricing analytics tools combine through the data, finding the low-hanging
fruit that can be fixed quickly and creating extra revenue in just a few
short months
 Steps in Setting a Pricing Policy

1. Selecting the Pricing Objective

2. Determining Demand
3. Estimating Costs
4. Analyzing Competitors’ Costs, Prices, and Offers
5. Selecting a Pricing Method
6. Selecting the Final Price
 Pricing Objectives
Survival:
- Companies pursue survival as their major objective if they are plagued
with overcapacity, intense competition, or changing consumer wants.
- Survival is a short-run objective; in the long run, the firm must learn how
to add value or face extinction.

Maximum Current Profit:

- Here, company estimate the demand and costs associated with
alternative prices and choose the price that produces maximum current
profit, cash flow, or rate of return on investment
- This strategy assumes the firm knows its demand and cost functions; in
reality, these are difficult to estimate.

Maximum Market Share (market-penetration pricing):

- The market is highly price sensitive and a low price stimulates market
growth
- Production and distribution costs fall with accumulated production
experience
- a low price discourages actual and potential competition

Maximum Market Skimming

Product-Quality Leadership
 Determining Demand
Price Sensitivity:
- Price sensitivity is defined as how much the price of a product impacts the
customer’s demand or willingness to buy.
- In economics, price sensitivity is described in terms of elasticity of demand
- Price elasticity of demand = % change in quantity demanded / % change in
price
Price Elasticity Examples

● Salt- 0.1 (Very inelastic)

● Coffee- 0.25 (inelastic)
● Legal fees- 0.4 (inelastic)
● Tv sets- 1.2 (slightly elastic)
● Restaurant meals- 2.3 (elastic)
● Foreign travel- 4.0 (very elastic)

The formula for price elasticity is:

Price Elasticity = (% Change in Quantity) / (% Change in Price)

Let's look at an example. Assume that when gas prices increase by 50%,
gas purchases fall by 25%. Using the formula above, we can calculate that
the price elasticity of gasoline is:

Price Elasticity = (-25%) / (50%) = -0.50

Thus, we can say that for every percentage point that gas prices increase,
the quantity of gas purchased decreases by half a percentage point.

Price elasticity is usually negative, as shown in the above example. That

means that it follows the law of demand; as price increases quantity
demanded decreases. As gas price goes up, the quantity of gas demanded
will go down.
Another Example:

Widget Inc. decides to reduce the price of its product, Widget 1.0 from $100
to $75. The company predicts that the sales of Widget 1.0 will increase from
10,000 units a month to 20,000 units a month.

To calculate the price elasticity of demand, first, we will need to calculate the
percentage change in quantity demanded and percentage change in price.

% Change in Price = ($75-$100)/($100)= -25%

% Change in Demand = (20,000-10,000)/(10,000) = +100%

Therefore, the Price Elasticity of Demand = 100%/-25% = -4.

This means the demand is relatively elastic.

Factors That Reduce Price Sensitivity

● The product is more distinctive.

● Buyers are less aware of substitutes.
● Buyers cannot easily compare the quality of substitutes.
● The expenditure is a smaller part of the buyer’s total income.
● Part of the cost is borne by another party.
● The product is used in conjunction with assets previously
bought.
● The product is assumed to have more quality, prestige, or
exclusiveness.
● Buyers cannot store the product.

Estimating Demand

● Surveys
● Price experiments
● Statistical analysis
 Estimating Cost

Total costs consist of the sum of the fixed and variable costs for any
given level of production.

Fixed costs, also known as overhead, are costs that do not vary
with production level or sales revenue. A company must pay bills each
month for rent, heat, interest, salaries, and so on, regardless of output.

Variable costs vary directly with the level of production. These

costs tend to be constant per unit produced, but they’re called variable
because their total varies with the number of units produced.

Average cost is the cost per unit at that level of production; it

equals total costs divided by production.

The decline in the average cost with accumulated production

experience is called the experience curve or learning curve.
Analyzing Competitors’ Costs, Prices, and Offers
- A competitive pricing strategy helps a business adjust its pricing based
on the prices of its competitors in the market.
- The goal of competitive pricing is staying competitive with other
companies offering similar products or services in the same market. If
the firm's offer is similar to a major competitor's offer, then the firm will
have to price close to the competitor or lose sales
- However, if a company has a unique selling proposition, such as higher
quality or better service, it can set its prices higher than its competitors
without losing market share, leading to an increase in profits.

Steps to Competitive Pricing Analysis

- Identifying the direct and indirect competitors
- Gather data on their pricing strategies by visiting their websites and
physical stores or purchasing their products.
- Or use advanced tools such as PriceShape, Repricer, Quicklizard,
SYMSON to monitor competitors' prices and provide real-time updates
- Analysing the data to identify patterns and trends in their competitors'
pricing strategies. Look for pricing premiums, promotional, volume
discounts, and bundle pricing.
- Determine their pricing strategy. Competitive pricing analysis is an
ongoing process that requires monitoring competitors' pricing strategies
regularly. This allows businesses to stay up to date and adjust their
pricing strategy to remain competitive
 Linear & Nonlinear Pricing
Linear pricing is a pricing strategy in which companies charge a consistent
price for their goods or services, regardless of demand. This type of pricing is
common in industries where there is little to no competition and where
customers are less price-sensitive.
EXAMPLE: utilities (e.g., electricity, water, gas), public transportation (e.g.,
buses, trains, subways)
Advantage: Linear pricing is straightforward and easy to understand, it can
often be perceived as unfair by customers
Disadvantage: It does not take into account changes in demand or costs. This
can lead to revenue losses during periods of low demand.
Customer are discouraged to buy bulk quantities

Nonlinear pricing is a pricing strategy in which companies set different prices

for a product or service based on factors such as quantity, time, or location.
EXAMPLE: Quantity discounts, Time-based pricing, Location-based pricing
Advantage: Non-linear pricing can be used to encourage customers to
purchase a product during off-peak hours
Non-linear pricing can also be used to incentivize customers to purchase larger
quantities and increase willingness to pay
Disadvantage:
It reduces profit on per unit and thus is not a good strategy during peak hours
Complex to use and difficult to realise profit
 Selecting a Pricing Method

Types of Method

● Markup Pricing (LP)

● Target-Return Pricing (LP)
● Perceived-Value Pricing (NLP)
● Value Pricing (NLP)
● Everyday low pricing (EDLP)
● Going-Rate Pricing (NLP)
● Price Bundling (NLP)
 Price Bundling

Bundle pricing is a business strategy where companies group several products

together into a bundle and sell them at a single price, rather than attribute
individual prices to each item.
Bundle pricing focuses on the idea of consumer surplus and the notion that
customers typically have a predetermined price that they're willing to pay for an
item.
Consumer surplus is the difference between the price that the customer is willing
to pay and the amount that a business charges for a product. If they spend less
than their predetermined budget, the consumer is likely to believe they received
a good deal. Hence the customer always try to maximize their surplus.

Types of bundle pricing strategies:

Pure bundling is a pricing strategy where businesses sell particular items
exclusively with one another only.
Mixed bundling, or custom bundling, occurs when you offer customers the
option to purchase a bundle and the option to purchase the items individually.
Problem Statement
What is RFM Analysis?

❖ RFM stands for

✔ Recency,

✔ Frequency, and

✔ Monetary value,

each corresponding to some key customer trait.

❖ These RFM metrics are important indicators of a customer’s behavior because frequency and
monetary value affects a customer’s lifetime value, and recency affects retention, a measure of
engagement
RFM Metrics - Recency

❖ How recently did the customer purchase?

❖ Refers to the last time someone purchased from

your business.

❖ For apps, it can be opened. Any metric you wish to

increase.

❖ Even a category-related purchase can be part of it.

❖ What it means is a client who has bought recently

is more likely to repeat as compared to one who

hasn’t purchased for a long time.

RFM Metrics - Frequency

❖ How often do they purchase?

❖ Refers to the number of times a consumer/ customer

has purchased in a given period.

❖ Frequency helps with behavior patterns. Anything

which is done 5 times is different than done 1 time. So

customers with 5 purchases are different from

customers with 1 purchase.

❖ The logic here is a customer who buys often will

probably return in comparison to one who rarely

purchases.
RFM Metrics - Monetary

❖ How much do they spend?

❖ Refers to the amount a client has spent in the same

period.

❖ Obviously, one who has bought more is expected to

return more often than one who has not.

❖ Examples

Average Revenue per customer - ARPU.

In ecommerce should be LTV (Lifetime value) of the

customer.
 Recency, Frequency and Monetary value

To find out ‘best customers’ basis past purchase

behavior
‘Best Customer’ – More likely to purchase our products

Example-
• Database of 1000 customer
INTRODUCTION • Cost of send promotional mail - $1 per mail
• Profit/product sale - $10

Send 1000 emails for 2% conversion or

Send 300 emails for 5% conversion

What is more Profitable?

Questions for a Brand

❖ While working on improving metrics like conversion rate, retention rate or loyalty, average order value, a brand
need to answer the following questions –

Who are your best customers?

Who is most likely to churn?

Who has the potential to become the best customers?

Which of your customers can be retained?

Which of your customers are most likely to respond to engagement campaigns?

Goal of RFM Analysis

❖ Before starting with RFM Analysis, the main goal of the entire process is to find 8-10 actionable segments
to work on improving brand metrics.

❖ RFM analysis starts with customer data to Recency / Frequency / Monetary metrics, mapping users into
3X3X3 or 5X5X5 matrix and finally grouping segments to come up with 8-10 actionable segments.

❖ Before starting, we need to finalize 2 things –

Desired Event For Analysis

▪ Mostly purchase, but you can do for any desired event. You can also bifurcate purchase to focus on
purchase of category X and it’s patterns. But to keep things simple start with purchase.

Timeframe of Analysis

▪ Max 2 years. Although recency takes care of that, but still life time value will become lop sided for
taking very long timeframe for analysis.
Benefits …1

❖ The RFM model (RFM analysis) may work for small and medium scale enterprises because of Its’:

✔ Inherent simplicity

✔ Effectiveness in direct marketing campaigns

✔ Affordability

✔ DIY nature

❖ Large company having the wherewithal at your command, using RFM along with predictive analytics
models is highly recommended.

❖ Predictive analytics does a far better job at forecasting sales and offers a better RoI segmentation
based on RFM. But, then again, this is a costly method and not everyone can afford it.
Benefits …2

❖ Conducting an RFM analysis on your customer base and sending personalized campaigns to high
value targets has massive benefits for your eCommerce store.:

✔ Personalization: By creating effective customer segments, you can create relevant,

personalized offers.

✔ Improve Conversion Rates: Personalized offers will yield higher conversion rates because
your customers are engaging with products they care about.

✔ Improve unit economics

✔ Increase revenue and profits

 Recency, Frequency and Monetary value

Example
 Recency, Frequency and Monetary value

RFM has three parts

1. Recency – How recent was the last purchase

2. Frequency – How many times the customer has

purchased from us
CONCEPT
3. Monetary value – Average amount of purchases made
by the customer/year

Customer is rated on this three parameters from 1 to 5

5 for most likely to purchase and 1 for least likely to

purchase
 Recency, Frequency and Monetary value

Step 1: Rank customer on three parameters R, F and M

Step 2: Use historical data to find response rate of each

STEPS combination of RFM ranking

Step 3: Choose the categories with highest conversion

rate for marketing communication
Market Basket Analysis
What is Market Basket Analysis?

❖ Market Basket Analysis (Association Analysis) is a mathematical modeling technique based upon
the theory that if you buy a certain group of items, you are likely to buy another group of items.

❖ It is used to analyze the customer purchasing behavior and helps in increasing the sales and
maintain inventory by focusing on the point of sale transaction data.

❖ Given a dataset, the Apriori Algorithm trains and identifies product baskets and product association
rules
How does it help?
Why use it?

❖ Develop combo offers based on products sold together

❖ Organize and place associated products/categories nearby inside a store

❖ Determine the layout of the catalog of an ecommerce site

❖ Control inventory based on product demands and what products sell together
Market Basket Analysis
 Customer’s Lifetime Value

Customer lifetime value (CLV or CLTV) is a metric that

represents the total net profit a company can expect to
generate from a customer throughout their entire
relationship. It takes into account the customer's initial
purchase, repeat purchases, and the average duration of
their relationship with the company.
Customer’s Lifetime Value
Customer’s Lifetime Value
Customer’s Lifetime Value
THANK YOU!