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Part 2: Determine the Value Propositions Different Customers Want

Chapter 5

Marketing Analytics: Welcome to the Era of Big Data!

I. CHAPTER OVERVIEW

In this chapter students learn that companies use CRM programs to establish relationships and

differentiate their behavior toward individual customers on a one-to-one basis through dialogue

and feedback. Success is often measured one customer at a time using the concepts of share of

customer, lifetime value of the customer, and customer equity. Big Data refers to data that are

growing in terms of both volume and velocity. It comes from a wider range of sources within

different functions within organizations as well as society at large. Marketing analytics offer

marketers the means of better understanding and analyzing the wealth of data that are now at

their disposal. With the proliferation of digital marketing and the speed at which data can be

captured and analyzed, marketers are able to gain insights at or near real time in regard to the

performance of their marketing investments. Marketing metrics provide marketers with the

means to further understand the performance of their marketing campaigns and channels and a

means of identifying potential red flags or opportunities as they arise.

II. CHAPTER OBJECTIVES

1. Explain how marketers increase long-term success and profits by practicing customer

relationship management.

2. Understand Big Data, data mining, and how marketers can put these techniques to good

use.

3. Describe what marketing analytics include and how organizations can leverage both

marketing analytics and predictive analytics to improve marketing performance.

Identify how organizations can use marketing metrics to measure performance and

achieve marketing control.

III. CHAPTER OUTLINE

►MARKETING MOMENT INTRODUCTION

Ask students about programs that involve systematically tracking consumers’ preferences and

behaviors over time in order to tailor the value proposition as closely as possible to each

individual’s unique wants and needs. Is this a desirable marketing activity or an invasion of

privacy?

p. 124 REAL PEOPLE, REAL CHOICES─HERE’S MY

PROBLEM AT TERADATA CORPORATION

Teradata was gearing up for the launch of Aprimo Marketing

Studio On Demand, a cloud-based platform. The launch of its

cloud product was strategically important to the company to

provide more flexible implementation and usage of its marketing

solutions. The launch was scheduled to happen within the quarter

Exhibit: Lisa

Arthur Photo

Part 2: Determine the Value Propositions Different Customers Want

during which Lisa joined the company, and the annual global user

conference was just six months away. Resources in the marketing

department were extremely limited, as the leadership team of the

company had awaited the arrival of the incoming CMO to staff

up. In Lisa’s strategic view, the Aprimo brand needed to be

refreshed, evolved, and invigorated. Clearly, this market was

ready for a true thought leader. The challenge was limited human

and capital resources and not much time to “relaunch the

company.”

Lisa considered their options:

1. Focus on the launch of the product for the short term to

provide more time and resources to relaunch the brand.

2. Launch a “two-prong” release. Aprimo could use the

revenue from the new cloud product to fund growth plans.

3. Delay the cloud product launch, accelerate efforts to

rebrand Aprimo, and launch both the cloud product and

the new brand together.

The vignette ends by asking the student which option he/she

would choose.

Lisa chose option #2.

Use website here: www.teradata.com

p. 126 1. CUSTOMER RELATIONSHIP MANAGEMENT (CRM):

A KEY DECISION TOOL FOR MARKETERS

Currently many highly successful marketing firms embrace

customer relationship management (CRM)

programs that involve systematically tracking consumers’

preferences and behaviors over time in order to tailor the value

proposition as closely as possible to each individual’s unique

wants and needs. CRM allows firms to talk to individual

customers and to adjust elements of their marketing programs in

light of how each customer reacts. The CRM trend facilitates

one-to-one marketing, which includes several steps.

1. Identify customers and get to know them in as much detail

as possible.

2. Differentiate these customers in terms of both their needs

and their value to the company.

3. Interact with customers and find ways to improve cost

efficiency and the effectiveness of the interaction.

4. Customize some aspect of the goods or services that you

offer to each customer.

A CRM strategy allows a company to identify its best customers,

stay on top of their needs, and increase their satisfaction.

Chapter 5: Marketing Analytics: Welcome to the Era of Big Data!

p. 126

p. 127

Mar-tech, a short term for “marketing technology,” is commonly

used to denote the fusion of marketing and technology. A

particular focus is placed on the application of marketing through

digital technologies.

1.1 CRM: A New Perspective on an Old Problem

CRM is about communicating with customers, and about

customers being able to communicate with a company “up close

and personal.” CRM systems are applications that use computers,

specialized computer software, databases, and often the Internet

to capture information at each touch point, which is any point

of direct interface between customers and a company (online, by

phone, or in person). It is through CRM that companies act upon

and manage the information they gather from their customers.

Marketing automation is a group of systems and technologies

that can be used to establish a set of rules for handling different

marketing related processes in an automated fashion.

CRM enables employees to maximize high-touch and personal

relationships with customers. It has become a driving philosophy

in many successful firms.

Exhibit:

Disney Magic

Band

p.129

p. 129

1.2 Customer-Related Metrics

In addition to having a different mind-set, companies that practice

CRM have different goals, use different measures of success, and

look at customers in different ways. CRM facilitates the

capability for users to look at three critical customer-related

metrics (see Figure 5.1): share of customer, customer lifetime

value (CLV), and customer prioritization.

1.2.1 Share of Customer

Historically, marketers have measured success in a product

category by their share of market. Because it is always easier and

less expensive to keep an existing customer than to get a new

customer, CRM firms focus on increasing their share of

customer—the percentage of an individual customer’s purchase

that is a single brand—not share of market.

1.2.2 Customer Lifetime Value

Customer lifetime value is the potential profit generated by a

single customer’s purchase of a firm’s products over the

customer’s lifetime.

Lifetime value is calculated by estimating a customer’s future

purchases across all products from the firm over the next 20 or 30

years. The goal is to try to figure out what profit the company

Figure 5.1

Snapshot:

CRM-Enabled

Customer Metrics

Part 2: Determine the Value Propositions Different Customers Want

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p. 131

P. 132

p. 132

p. 133

could make from the customer in the future. The lifetime value of

the customer would be the total profit the revenue stream

generates. It’s much more profitable to retain an existing customer

than to acquire a new one.

CLV calculations are complex because they factor in changes in

the relationship with a customer from one period to the next that

do not assume constant values over the whole relationship.

1.2.3 Customers Prioritization

Using a CRM approach, the organization prioritizes its customers

and customizes its communications to them accordingly.

Discussion question: What is CRM? How do firms practice

CRM?

Use website here: Iconoclast

www.iconocast.com

2. BIG DATA: TERABYTES RULE

Big Data is the popular term to describe the exponential growth

of data—both structured and unstructured—in massive amounts

that are hard or impossible to process using traditional database

techniques.

Big Data provides competitive advantages:

Identifying new opportunities through analytics that yield

greater return on investment (ROI) on marketing efforts.

Turning insights they gain into products and services that

are better aligned with the desires of consumers.

Delivering communications on products and services to

the marketplace more efficiently and effectively.

The Internet of Things refers to a system in which everyday

objects are connected to the Internet and communicate

information through an interconnected system.

2.1 Big Data Creation, Sources, and Usage

The millions of pieces of information that make up Big Data

originate from both direct and indirect paths.

2.1.1 Sources of Big Data for Marketers

Big Data can come from many sources within and outside of the

organization and created and compiled from different groups:

Social media sources

Web scraping uses computer software to extract large amounts of

data from websites. Sentiment analysis is a process of

identifying a follower’s attitude toward a brand by assessing the

Exhibit: College

Student at an

ATM

Table 5.1:

Examples of

Data Created on

Digital Platforms

Exhibit: Smart

refrigerators

Photo

Figure 5.2

Snapshot:

Sources of Big

Data for

Marketers

Chapter 5: Marketing Analytics: Welcome to the Era of Big Data!

p. 134

p. 136

context or emotion of comments provided, and other techniques

that analyze and map posts on Facebook, Twitter, and other

platforms to track comments about experiences with products and

services.

Corporate information technology sources

Different places and tools are used to store corporate data.

Government and nongovernmental organization sources

Ever-increasing types and amounts of government-generated data

are accessible and provide opportunities for marketers.

Commercial entity sources

Many companies today collect data in large quantities to sell to

organizations.

Partner database sources

A channel partner model has a two-way exchange of

information between purchasing organizations and their vendors

through shared or integrated IT systems.

2.2 Data Mining

Big Data can easily exacerbate the problem of information

overload, in which the marketer is buried in so much data that it

becomes nearly paralyzing. Data mining is a process in which

analysts sift through data (often measured in terabytes—much

larger than kilobytes or even gigabytes) to identify unique

patterns of behavior among different customer groups.

Data mining uses computers that run sophisticated programs so

that analysts can combine different databases to understand

relationships among buying decisions, exposure to marketing

messages, and in-store promotions. These operations are so

complex that often companies need to build a data warehouse

(sometimes costing more than $10 million) simply to store and

process the data.

►ETHICS CHECK

Should it be legal for companies to collect and sell your personal

information without your knowledge?

Find out what other students taking this course would do and why

at www.mymktlab.com

►ETHICS CHECK

Should social media companies who use algorithms to select news

stories for display and distribution on their platforms be required

to provide transparency into the inner workings of the related

algorithms?

Exhibit: Loyalty

Program

Exhibit: Nielsen

BAM

Exhibit: Data

Warehouses

Ripped from the

Headlines:

Ethical/

Sustainable

Decisions in the

Real World

Part 2: Determine the Value Propositions Different Customers Want

p. 137

p. 138

p. 139

p. 140

2.3 Primary Data Types for Data Mining

Structured data are what you might find in an Excel spreadsheet

or in a statistics table on a sports website (e.g., ESPN.com).

Unstructured data contain nonnumeric information that is

typically formatted in way that is meant for human eyes and not

easily understood by computers (e.g., an e-mail).

Advantages:

1. Advances in data-analytic technologies make unstructured data

analysis easier through computer logic that searches and extracts

patterns from data.

2. Analysis is more cost effective through automated processes.

3. Technologies give unstructured data a “structure,” enabling it to

be shared and leveraged when combining it with data sources held

elsewhere in an organization.

Emotion analysis is a sophisticated process for identifying and

categorizing the emotions a follower possesses in relation to a

product or brand by assessing the content of that communication.

2.4 Data Mining: Applications for Marketers

Data mining has four important applications for marketers:

Customer acquisition: Many firms include demographic

and other information about customers in their database.

Customer retention and loyalty: The firm identifies

big-spending customers and then targets them for special

offers and inducements other customers will not receive.

Customer abandonment: Strange as it may sound,

sometimes a firm wants customers to take their business

elsewhere because servicing them actually costs the firm

too much. Today, this is popularly called “firing a

customer.”

Market basket analysis: Develops focused promotional

strategies based on the records of which customers have

bought certain products.

2.5 Data Scientists: Transforming Big Data into Winning

Information

Being able to transform data into insights and leveraging data to

enhance the way that organizations interact with consumers is a

really challenging proposition.

A data scientist is an individual who searches through multiple,

disparate data sources to discover hidden insights that will

Figure 5.3

Process:

Structured and

Unstructured

Data Examples

Figure 5.4

Snapshot: Uses

of Data Mining

Chapter 5: Marketing Analytics: Welcome to the Era of Big Data!

p. 141

p. 142

p. 144

p. 145

p. 146

provide a competitive advantage.

3. MARKETING ANALYTICS

Marketing analytics comprises technologies and processes that

enable marketers to collect, measure, analyze, and assess the

effectiveness of marketing efforts.

3.1 Connect Digital Marketing Channels to Marketing

Analytics

Digital marketing channels are the paths of distribution through

which a company’s digital marketing communications can be

delivered to reach their respective audiences.

Figure 5.5 illustrates the relationship between the specific data

created and the data’s potential analytics-related applications.

An A/B test is a method to test the effectiveness of altering one

characteristic of a marketing asset (e.g., a web page, a banner

advertisement, or an e-mail).

3.1.1 Omni-channel Connectivity

Today’s consumer is an omni-channel media user who gets

information from computers, tablets, and phones, and moves from

one to another.

With more individuals on the Internet, digital marketing has

become an important element of the marketer’s toolbox. Figure

5.6 illustrates five major groupings of different digital marketing

channels.

Social networking sites offer advertisers access to analytic tools

and capabilities.

3.1.2 Business Models for Digital Marketing

Cost-per-click is an online ad purchase in which the cost of the

advertisement is charged only when an individual clicks on the ad

and is directed to the web page in the advertisement.

Cost-per-impression is an online ad purchase in which the cost

of the ad is charged each time the advertisement shows up on a

page that the user views.

3.2 Make Marketing Accountable: Determine the Value of

Digital Marketing Investments across Channels

Search engine optimization is a systematic process of ensuring

that your firm comes up at or near the top of lists of typical search

phrases related to your business.

Exhibit:

Retailers send

promotional

codes to mobile

phones to entice

customers to buy

online

Figure 5.5

Process: Digital

Marketing

Channel

Example

Figure 5.6

Snapshot : Major

Digital

Marketing

Channels

Table 5.2 Sample

Marketing

Performance

Calculation and

Comparison

Part 2: Determine the Value Propositions Different Customers Want

Marketing analytics help analyze the performance of all channels

to help you make the best investment of your marketing dollars.

Understanding each customer’s full story enables marketers to

better understand how to weave their own actions and

communications into the fabric of that story in a way that is

meaningful and compelling.

►Marketing Moment In-Class Activity

You have invested in different marketing channels, but some investments are paying off more

than others because they are engaging with your target audience and creating more sales. How

would you determine the reasons for this?

Use website here: Social Media Use over Time www.pewinternet.org

p. 148

p. 149

p. 150

150

3.3 Marketing Accountability within Nondigital

Marketing Channels

Marketing analytics generates insights related to nondigital

marketing channels, especially direct mail. A landing page is a

single page on a website that is built for a particular direct marketing

opportunity.

3.4 Predictive Analytics

An intriguing area for a marketer is the ability to predict the

future and better understand the value of marketing campaigns

even before implementing them.

Predictive analytics uses large quantities of data and variables

that the analysts know relate to one another to more accurately

predict specific future outcomes (the key with “predictive”

analytics is this focus on the future, not just the present).

The churn rate is the percentage of a company’s customers who

have cancelled their contract for a service or stopped shopping at

a related retail location.

4. METRICS FOR MARKETING CONTROL

In a data-rich and data-driven world, organizations have the ability

to gain an understanding of what’s going on inside and outside

their operations.

For marketers, this means having the ability to show a return on

their various investments and to develop and execute marketing

plans and strategies.

Marketing metrics are specific measures that help marketers

keep an eye on the performance of their marketing campaigns,

initiatives, and channels and, when appropriate, serve as a control

mechanism for when corrective action is necessary.

Marketing control means the ability to identify deviations in

Chapter 5: Marketing Analytics: Welcome to the Era of Big Data!

p. 151

expected performance, both positive and negative, as soon as they

occur, thus enabling marketers to adjust their actions before

greater losses or inefficiencies are realized.

► METRICS MOMENT

Three metrics relevant to Big Data and marketing analytics.

The click-through rate indicates the percentage of users

(viewers of an ad or the page that the link is on) who have

clicked on the ad to visit the website.

 Conversion, based on a consumer’s interaction with a

web page, might be the purchase of a product or a service

signing up for a mailing list, or becoming a follower of the

company via social media.

Cost-per-order indicates the cost of gaining an order in

terms of the investment made to turn a visitor to a website

into a customer.

Apply the Metrics

Consider the information by calculating click-through rate,

conversion rate, and cost-per-order.

How does knowledge of the results of calculating these

three aid marketers in making better investment decisions

in web strategies?

Do you think one of these metrics is more useful than the

others? If so, what leads you to this opinion?

Use website here: www.google.com

What metrics does Google use for its web strategies?

p. 152 4.1 Margin on Sales

Margin on sales represents the difference between the price at

which a product is sold and its cost.

4.2 Churn Rate

Churn rate is an important metric given the expense of acquiring

new customers compared to retaining current customers.

Reducing the churn rate is an important financial goal and a sign

that customer retention efforts are working.

Real People, Real Choices: Here’s My Choice…

Lisa chose option #2.

Part 2: Determine the Value Propositions Different Customers Want

IV. END-OF-CHAPTER ANSWER GUIDE

Chapter Questions and Activities

CONCEPTS: TEST YOUR KNOWLEDGE

5-1 What is CRM? How do firms practice CRM?

Customer Relationship Management are programs that allow companies to talk to the

individual customers and adjust elements of their marketing programs in light of how each

customer reacts to elements of the marketing mix. Firms practice CRM by communicating

with customers and customers being able to communicate with the company one-to-one.

There are four steps in CRM marketing:

Identify customers and get to know them in as much detail as possible.

Differentiate these customers in terms of both their needs and their value to the

company.

Interact with customers to find ways to improve cost efficiency and the effectiveness

of the interaction.

Customize some aspect of the products or services they offer to each customer.

5-2 Explain the concepts of share of customer, lifetime value of a customer, customer equity, and

customer prioritization.

Because it is always easier and less expensive to keep an existing customer than to get a new

customer, CRM firms focus on increasing their share of customer, not share of market. Share

of customers is the percentage of an individual customer’s purchase of a product that is a

single brand.

Chapter 5: Marketing Analytics: Welcome to the Era of Big Data!

Lifetime value of a customer is the potential profit generated by a single customer’s purchase

of a firm’s products over the customer’s lifetime. With CRM, a customer’s lifetime value is

identified and it the true goal.

Customer equity is the financial value of a customer relationship throughout the lifetime of

the relationship.

Using a CRM approach, the organization prioritizes its customers and customizes its

communications to them accordingly. For example, banks use CRM systems to generate a

profile of each customer based on factors such as value, risk, attrition, and interest in buying

new financial products. This automated system helps the bank decide which current or

potential customers it will target with certain communications or how much effort it will

expend to retain an account—all the while cutting its costs by as much as a third.

5-3 How would you describe Big Data? What are some of the most significant sources of

competitive advantage that Big Data offers?

Big Data is the popular term to describe the exponential growth of data—both structured and

unstructured—in massive amounts that are hard or impossible to process using traditional

database techniques.

Big Data provides competitive advantages:

Identifying new opportunities through analytics that yield greater return on investment

(ROI) on marketing efforts.

Turning insights they gain into products and services that are better aligned with the

desires of consumers.

Delivering communications on products and services to the marketplace more efficiently

and effectively.

5-4 Describe the various sources of Big Data for marketers.

Part 2: Determine the Value Propositions Different Customers Want

The millions of pieces of information that make up Big Data originate from both direct and

indirect paths. Big Data can come from many sources within and outside of the organization

and created and compiled from different groups:

Social media sources

Web scraping uses computer software to extract large amounts of data from websites.

Sentiment analysis is a process of identifying a follower’s attitude toward a brand by

assessing the context or emotion of comments provided, and other techniques that analyze

and map posts on Facebook, Twitter, and other platforms to track comments about

experiences with products and services.

 Corporate information technology sources

Different places and tools are used to store corporate data.

Government and nongovernmental organization sources

Ever-increasing types and amounts of government-generated data are accessible and

provide opportunities for marketers.

Commercial entity sources

Many companies today collect data in large quantities to sell to organizations.

Partner database sources

Many firms have a two-way exchange of information between purchasing organizations

and vendors.

5-5 What is data mining? For marketers, what are some of the most important applications?

Chapter 5: Marketing Analytics: Welcome to the Era of Big Data!

Data mining is a process in which analysts sift through data (often measured in terabytes—

much larger than kilobytes or even gigabytes) to identify unique patterns of behavior

among different customer groups. Data mining uses computers that run sophisticated

programs so that analysts can combine different databases to understand relationships

among buying decisions, exposure to marketing messages, and in-store promotions.

5-6 What is the difference between structured and unstructured data? What are some examples

of each?

Structured data are what you might find in an Excel spreadsheet or in a statistics table on a

sports website (e.g., ESPN.com).

Unstructured data contain nonnumeric information that is typically formatted in way that

is meant for human eyes and not easily understood by computers (e.g., an e-mail, Facebook,

Twitter).

5-7 What are marketing analytics, and what kinds of insights are enabled by today’s marketing

analytics solutions? What are predictive analytics?

Marketing analytics comprises technologies and processes that enable marketers to collect,

measure, analyze, and assess the effectiveness of marketing efforts. Marketing analytics

provide a level of analysis and a degree of accuracy and speed that is crucial. It takes Big

Data and makes sense out of it for decision making Marketers get a better sense of the ROI of

each of their marketing channels. Predictive analytics use large quantities of data and

variables that the analysts know relate to one another to more accurately predict specific

future outcomes (the key with “predictive” analytics is this focus on the future, not just the

present).

5-8 What is the difference between purchasing digital advertisements with a cost-per-impression

structure versus a cost-per-click structure? Is one better than the other?

Part 2: Determine the Value Propositions Different Customers Want

Cost-per-click charges apply only when an individual clicks on an ad. Cost-per-impression

applies charges each time an ad appears on a page that the user views. Cost-per -lick

purchases of advertisements are typically more expensive, as they demand a higher level of

interaction from the user (i.e., the users have actually visited the page on which the ad

appears and hence are one step closer to becoming a customer). Cost-per-impression

purchases of advertisements can provide a good value. However, advertisements that are

purchased with a cost-per-impression structure typically require a greater leap of faith

because it’s not so easy to measure the value of an impression (or view of an advertisement).

Being able to determine the effectiveness of digital marketing depends on having clear goals

that can be tracked and measured.

5-9 Define marketing metrics. How can marketing metrics help marketers understand the

performance of different marketing initiatives and provide greater control?

Marketing metrics are specific measures that help marketers keep an eye on the performance

of their marketing campaigns, initiatives, and channels and, when appropriate, serve as a

control mechanism for when corrective action is necessary. Marketing control means the

ability to identify deviations in expected performance, both positive and negative, as soon as

they occur, thus enabling marketers to adjust their actions before greater losses or

inefficiencies are realized.

5.10 What is a click-through rate, and how is it calculated?

The click-through rate indicates the percentage of users (viewers of an ad or the page that the

link is on) who have clicked on the ad to visit the website.

Click-through rate (%) = (Click-throughs (#)/Impressions (#)) × 100

Most digital marketing campaigns or initiatives use click-through rates as a means of

determining marketing effectiveness. Specifically, they indicate what percentage of users

who viewed the ad found it relevant and interesting enough to click on it in order to be

redirected to another web page.

Chapter 5: Marketing Analytics: Welcome to the Era of Big Data!

5-11 What is a conversion? What are some examples of conversions on an e-commerce website?

Conversion, based on a consumer’s interaction with a web page, might be the purchase of a

product or a service, signing up for a mailing list, or becoming a follower of the company via

social media. Conversion rate can be tracked on a day-to-day basis or provided as a

cumulative value and tied back to different marketing campaigns or channels in order to

measure the impact of those activities and to answer questions, such as what is bringing

customer to your site. It can also alert marketers to opportunities to take corrective action in

order to improve the performance of their marketing efforts.

5-12 What is a cost-per-order? What kind of information do marketers gain from this

Cost-per-order indicates the cost of gaining an order in terms of the investment made to turn

a visitor to a website into a customer. Within digital marketing, this metric can be broken

down by specific campaigns or marketing channels to help marketers to get a more precise

idea of how effective their marketing investments are:

Cost-per-order ($) = Advertising costs ($)/Orders (#)

For marketers, it provides a clearer idea of what the average cost in advertising dollars is to

generate an order. For instance, one might learn that Facebook ads have a lower cost-per-

order than YouTube video ads, and as a result more resources are directed toward Facebook.

ACTIVITIES: APPLY WHAT YOU’VE LEARNED

5-13 Further Research (Individual) For this assignment you are going to act as a manual

version of a software program that conducts sentiment analysis. Select a sample of

comments (between three and five that do not contain any explicit words or expressions)

Part 2: Determine the Value Propositions Different Customers Want

created by users in response to a specific brand’s post on Facebook page. Copy the

comments down and categorize the sentiment within each comment as “positive,”

“negative,” or “neutral.”

Include what specific elements of each comment most clearly support your categorization

of it (e.g., use of punctuation, context, inclusion of specific words, use of slang). What

insights should a marketing manager responsible for the related brand take away from these

comments?

Sentiment analysis is a process of identifying a follower’s attitude toward a product or

brand by assessing the context or emotion of comments they post, and other advanced

techniques that involve analyzing and mapping millions of posts on Facebook, Twitter, and

other social media platforms to track what people say about their experiences with products

and services. They depict the themes in these posts visually so that managers can easily see

the kinds of words customers use in their posts. Students can select a brand, read the

comments online, and categorize the prevailing sentiment as “positive,” “negative,” or

“neutral.” They can present their findings to the class as they offer insights for the brand

based on the comments they read.

5-14 Creative Homework/Short Project Imagine that you are building your own e-commerce

site. Having a keen understanding of the importance of defining and putting in place a set

of conversions and metrics in advance of launching the site, you have incorporated the

definitions and development of specific conversions for tracking into the planning of the

website. List which actions on the site would indicate a conversion for tracking purposes

and how they would align with the goals of your business. Since this is your website, feel

free to assume the inclusion of any sorts of features or elements (conventional or

Chapter 5: Marketing Analytics: Welcome to the Era of Big Data!

unconventional) that you believe would be valuable in terms of the website’s look and feel

that would enable better tracking and analysis of marketing performance.

Conversion, based on a consumer’s interaction with a web page, might lead to purchasing

a product or a service, signing up for a mailing list, or becoming a follower of the

company via social media. Students can brainstorm about creative ways to improve a

website’s look and achieve better tracking of marketing performance.

5-15 Creative Homework/Short Project Consider that you are in charge of all paid search

advertising through Google for your company. One of your colleagues is in charge of

Instagram advertising. Your boss is in the process of putting together the marketing budget

and has asked you to weigh in on how much should be allotted for Facebook advertising. He

tells you that he feels that the organization’s funds would be better put toward increasing

spending on Instagram as opposed to Google paid search advertisements. He says, “Pictures

on Instagram are just more compelling than little blocks of text in a search engine’s results.”

You couldn’t agree less with that sentiment, and you have the data to back it up.

a. How would you go about making the argument that Google paid search

advertisements should receive more of the marketing budget compared to

Instagram advertisements? What factors in your boss’s statement above are

potentially not taking this into consideration?

b. What metrics would you use to help make your case, and how would you

explain their relevance and importance?

MyMarketingLab for answers to Assisted Graded Questions.

5-16 In Class, 10–25 Minutes for Teams As an admissions manager for a college or university,

you are interested in exploring the use of predictive analytics within the admissions

process to bring in students with a higher likelihood of graduating from the school and

achieving greater levels of success both during and after their studies. With another

Part 2: Determine the Value Propositions Different Customers Want

student who is acting as your boss the admissions director, discuss the specific reasons that

predictive analytics might be of value to making admissions decisions on students. Be sure

to discuss any areas where you might need to proceed with caution.

Predictive analytics use large quantities of data and variables that the analysts know relate

to one another to more accurately predict specific future outcomes (the key with

“predictive” analytics is this focus on the future, not just the present). If marketers have

the ability to actually predict the future, they can better understand the value of their

marketing campaigns even before they implement them However, marketers need to

proceed with caution because of unexpected events that could alter the future. These events

include natural disasters, political upheavals, and terrorism.

APPLY MARKETING METRICS

In the chapter discussion about CRM, you read about four key characteristics of CRM: share

of customer, lifetime value of a customer, customer equity, and customer prioritization. Each

of these elements is discussed in the context of monitoring and assessing the effectiveness of a

CRM initiative. Consider JC Penney’s loyalty program, JCP Rewards. Go to their website

www.jcprewards.com and review the information about their reward program.

5-17 In what ways could JC Penney expect to measure the four elements of CRM above within the

context of a reward program such as this?

The chapter provides the following information regarding the four key CRM characteristics:

Share of customer: the percentage of an individual customer’s purchase of a product

that is a single brand.

Lifetime value of a customer: the potential profit a single customer’s purchase of a

firm’s products generates over the customer’s lifetime.

Chapter 5: Marketing Analytics: Welcome to the Era of Big Data!

Customer equity: the financial value of a customer throughout the lifetime of the

relationship.

Customer prioritization: using a CRM approach, the organization prioritizes its

customers and customizes its communications to them accordingly.

5-18 How would data be collected for each element, and how might management at JC

Penney utilize that data to provide loyal customers with a very strong relationship with the

firm?

Share of customer: In addition to its own purchase data for each customer, JC Penny

would need to survey the customer about purchasing competitor brands.

Lifetime value of a customer: JC Penny must first estimate a customer’s future

purchases across all products from the firm over the next 20 or 30 years. The goal is

to try to figure out what profit the company could make from the customer in the

future (obviously, this will just be an estimate).

Customer equity: JC Penny must compare the investments they make to acquire

customers and then to retain them to the financial return they will get on those

investments.

Customer prioritization: JC Penny can use CRM systems to generate a profile of each

customer based on factors such as value, risk, attrition, and interest in buying new

products. This automated system would help JC Penny decide which current or

potential customers it will target with certain communications or how much effort it

will expend to retain a customer—all the while cutting its costs.

JC Penny can build loyalty through <keyterm id=”ch7term033″ linkend=”gloss7_033″

preference=”0″ role=”strong”>customer relationship management

(CRM)</keyterm><link linkend=”ch7mn033″ preference=”1″/> programs

Part 2: Determine the Value Propositions Different Customers Want

that track consumers’ preferences and behaviors and tailor the value proposition as

closely as possible to each individual’s unique wants and needs. CRM facilitates

<emphasis>one-to-one marketing.</emphasis>.

CHOICES: WHAT DO YOU THINK?

5-19 Ethics CRM relies on data collected from customers to create customized or one-to-one

experiences for those customers. Data are collected at various touchpoints—places in

which the customer interfaces with the firm to provide information, such as at a checkout

lane, on the phone, on the website, and so on. Do firms have an obligation to explain to

customers that they are collecting information from them to populate and drive their CRM

initiative, or is it inherently obvious in today’s world that such practices are routine? In

general, what is your personal viewpoint of database-driven positioning strategies? What

are the potential pros and cons to the company and to the customer?

Students can have a lively debate about the pros and cons of database driven positioning

strategies. Students can discuss the privacy issues involved and whether it should be legal

for companies to collect and sell your personal information without your knowledge.

5-20 Critical Thinking Are there any potential challenges that could arise related to the use of

customer lifetime value (CLV) as a means of determining the allocation of resources to

current or potential customer groups? If so, what might these challenges be?

This question would make a good small-group exercise. Students could present the pros

and cons of CLV as a means of allocation of resources.

5-21 Ethics The Internet of Things means the increased proliferation of devices that are

connected to the Internet and that in turn can be connected to each other. While there are a

number of benefits to this level of connectivity for both society and businesses, there are

also a number of risks and ethical issues. What are some of the risks and ethical issues that

stem from this? Do the benefits outweigh the costs? What physical objects would you

consider not allowing to be connected through the Internet, and why?

Chapter 5: Marketing Analytics: Welcome to the Era of Big Data!

MyMarketingLab for answers to Assisted Graded Questions.

5-22 Ethics Many technology applications (such as social media platforms) are able to remain

free in part because they are able to monetize the data of those individuals who use the

technologies. Do you believe that there is a limit to what these companies should be

allowed to do with the data that they collect? If so, what specific uses of data should be off

limits?

Students can have a lively debate on privacy issues raised by the use of data.

5-23 Critical Thinking Spending on digital marketing has trended upward in recent years,

and with so many individuals using the Internet for extended periods of time, it is easy to

understand why. In some cases, some organizations spend more than half of their budget on

digital marketing. How do you think they justify committing more than half of their budget

to marketing to digital efforts? Do you believe that more companies should invest primarily

in digital marketing? What groups or factors would indicate to you that digital marketing

does not make sense as an investment?

MyMarketingLab for answers to Assisted Graded Questions.

5-24 Critical Thinking A study conducted by Adobe found that 77 percent of marketers surveyed

believe that data on customer purchase histories can improve marketing performance, yet

only 21 percent actually use it. Similarly, 88 percent believe that behavioral data can have a

similar impact, but only 20 percent use it. These statistics highlight a contradiction between

the perception of marketing analytics’ value and the actual frequency of execution of

marketing analytics. Why do you think this is? If you were in charge of implementing

marketing analytics into an organization, what hurdles would you expect to encounter and

from whom, and how would you overcome them?

Part 2: Determine the Value Propositions Different Customers Want

This question could be used as a role-play. Students can point out that marketing analytic

solutions provide marketers with a holistic means of looking at the performance of different

marketing initiatives. They provide a level of analysis and a degree of accuracy and speed

that is crucial in a world that is data-driven. Marketing analytics takes Big Data and makes

sense out of it for use in marketing decision making! The breadth and depth of information

that today’s marketers have at their disposal requires the ability to move through massive

data sets to provide useful information for decision-making and understanding the value of

their investments.

5-25 Critical Thinking if a company of which you are a customer suffered a data breach (in

which some of the data customers created or shared by customers with the company were

compromised), would your perceptions of that company change and if so, why? Would it

matter what type of data was compromised? Are there other factors that would lessen or

heighten your view of the severity of the event? If so, what might they include?

Using the Internet, students can find current examples of data breaches. Examples might

include WikiLeaks, files from the Democratic Party, and Wells Fargo. Having researched

current data breaches, students can discuss the questions above.

5-26 Ethics Do you believe it is right for companies to target a higher (or lower) cost service to

typically associated with a willingness to spend more (or less) money on the related

vice? Does this constitute a form of discrimination that would make you uncomfortable

a marketer who is exploring the possibility of employing this strategy? What about if you

were the consumer on the receiving end of it?

Whether intentionally or not, some marketers do violate their bond of trust with consumers,

and unfortunately the “dark side” of marketing often is the subject of harsh criticism. In

Chapter 5: Marketing Analytics: Welcome to the Era of Big Data!

the context of this question, students can review Chapter 1, p. 22—the dark side of

marketing.

MINI-PROJECT: LEARNING BY DOING

Different types of businesses use different approaches to engaging with both current and

potential consumers online. A company’s website is usually a key source of information for

potential and current customers. The purpose of this project is to gain a deeper understanding

of how marketing analytics can be implemented in order to gain greater insights into and

enable more effective control of marketing efforts.

a. Select three company websites. These should include one ecommerce site (e.g., Amazon),

one consulting company (e.g., IBM), and one consumer packaged goods company (e.g.,

Tide).

b. For each company’s website, list what you believe the objectives of the organization are

as communicated through the website and identify specific conversion actions on the

website that would most closely align with these goals. For example, customer

acquisition might be supported and ultimately achieved by getting users to sign up for an

e-mail newsletter, which would be defined as a conversion action.

5-27 Rank the conversion actions in order of importance and include an explanation of why

you have ordered them as such. Identify whether they are short-term oriented as they relate to

the organization’s objectives or long term-oriented (or, in some cases, both) and why.

Answers will vary in terms of ranking conversion actions:

The purchase of a product or a service (or multiple purchases in one sitting)

This is the most important action because a consumer is actually using the product or

service. Based on the consumer’s satisfaction level, he/she could make future purchases

and tell other potential consumers about the benefits received.

Part 2: Determine the Value Propositions Different Customers Want

The decision to become a follower of the company via social media.

This option is less desirable than a purchase, but indicates a strong interest in the

company and its products and services. This level of interest could very well convert an

onlooker into a customer and allow questions to be answered. Social media is very

powerful because a potential customer can find out the satisfaction level of others.

The choice to sign up for a mailing list.

This option shows some interest that might develop into a purchase, but it is only a

beginning of a possible customer relationship. It is a weaker relationship than the other

two options.

5-28 If you could choose only two marketing metrics (remember metrics, not conversions) to track

for each of these websites, identify which two you would select for each website and explain

why.

Answers will vary.

Share of customer: the percentage of an individual customer’s purchase of a product that

is a single brand. Amazon identifies an author or a brand that a customer has purchased

frequently and uses one-on-one marketing to inform a customer about a new work by the

same author or a new offering from the same brand. This activity increases customer

loyalty and frequency of purchase. Tide also uses CRM to develop a customer and offer

opportunities for frequency of purchase as well as the purchase of new offerings.

Lifetime value of a customer: the potential profit a single customer’s purchase of a

firm’s products generates over the customer’s lifetime. Amazon has the potential of

selling many books by the same author or the same genre (e.g., mystery, historical

fiction) or new products offered by the same brand over time. Over time, customers use a

large quantity of laundry detergent, which represents a substantial amount of money for

the company.

5-29 Some of the websites visited should have a request-for-information form on them. Often,

this is one of the ways that marketers begin to collect information on a customer to place

within their CRM system. Locate this form and identify what information it is asking for.

Chapter 5: Marketing Analytics: Welcome to the Era of Big Data!

Write down the different potential uses of this information for the organization and in what

ways it might be used by marketers to further engage with the customer. What are some

creative ways that you would recommend leveraging these data for each website analyzed in

terms of future communications?

Using the Internet, students can gather information from websites and identify the

information being sought. They can offer creative ways to use the data for each website.

V. MARKETING IN ACTION CASE: REAL CHOICES AT

NOVARTIS

Summary of Case

Novartis wants to collect information in the cloud whenever someone uses its Breezhaler inhaler.

The company has entered into an agreement with Qualcomm Life, Inc. to create an inhaler with

Internet connectivity that will transmit information when patients use the Breezhaler. The device

delivers chronic obstructive pulmonary disease (COPD) treatments. The companies will be able

to accumulate data concerning the user’s medical condition, the efficacy of the drug, and the

device itself from a huge number of patients. The collaboration may lead to broad healthcare

benefits, but patient confidentiality will be an important issue. When patients use the product, it

will send tracking information on their smartphones or tablets. Patient statistics transmit

wirelessly to a Novartis COPD mobile application, which then transmits the data to the cloud.

Despite the potential benefits, the collection of large amounts of patient data comes with

significant risk. This data creates an attractive opportunity for criminals to steal information.

Stolen medical data is handy to create fake IDs, buy medical equipment, or acquire drugs. In

addition, the criminals who hack the information systems can use the data to threaten the lives of

patients and blackmail the manufacturer.

Suggestions for Presentation

This case could be assigned for various online or in-class discussion activities.

Part 2: Determine the Value Propositions Different Customers Want

Online

Research Novartis via their website. Identify their current strategy and describe how they have

implemented it.

Evaluate if there are expansion opportunities for the pharmaceutical market.

In-Class

Companies with competing interests in this market include Pfizer and Medtronic. Evaluate each

of their strengths and weaknesses.

Discuss how a CRM program could help retain customers.

Conduct a brainstorming session to identify the key characteristics of potential customers that

would use the Breezhaler.

You Make the Call

5-30 What is the decision facing Novartis?

Students may come up with a number of different decisions that Novartis might make such

as:

How can Novartis develop methods to ensure that the data sharing is confidential yet will

still be of practical use to their researchers?

How should Novartis use the information to create medical benefits to both patients and

healthcare professionals and at the same time protect the sensitive data?

Chapter 5: Marketing Analytics: Welcome to the Era of Big Data!

5-31 What factors are important in understanding this decision situation?

The following factors are important in understand this decision situation:

Novartis wants to be the first pharmaceutical company to provide a connected delivery

device to give patients an easy-to-use and simple experience.

Novartis can use the medical information to understand the impact of medications on

COPD.

Novartis not the only company implementing Big Data.

The more information, the easier identity theft is.

Hackers can sell profiles to third parties.

The advent of Big Data has led to many privacy fears.

5-32 What are the alternatives?

Students might recommend a variety of different marketing strategies. Some possibilities

are:

Conduct research to evaluate how Novartis is positioned against other competitors in the

pharmaceutical industry.

Position its connected delivery device in different, nontraditional ways compared to its

current positioning.

Conduct extensive marketing research among non-customers to see what directions

Novartis can go in terms of its use of Big Data.

5-33 What decision(s) do you recommend?

Students may focus on several of the alternatives developed. They should be encouraged to

discuss which alternative actions are more critical.

5-34 What are some ways to implement your recommendation?

Part 2: Determine the Value Propositions Different Customers Want

Students may make a variety of suggestions for implementation depending on their

recommendations. These may include specific promotion activities, specific pricing, research

activities, and many others.

MY MARKETING LAB

Go to mymktlab.com for Auto-graded writing questions as well as the following

Assisted-graded writing questions:

5-35 Creative Homework/Short Project. Assume that a firm hires you as marketing manager for a

chain of retail bookstores. You believe that the firm should develop a CRM strategy. Outline

the steps you would take in developing that strategy.

5-36 Creative Homework/Short Project. Your boss has been hearing about the importance of Big

Data and data mining to marketers. Write a memo to your boss that describes the various

applications that data mining has for marketers in order to convince him that the company should

explore this topic.

WEB RESOURCES

Pearson Education Inc.: www.mymktlab.com

Teradata Inc.: www.teradata.com

Iconoclast: www.iconocast.com

Amazon.com: www.amazon.com

Chapter 5: Marketing Analytics: Welcome to the Era of Big Data!

Coca-Cola: www.cocacola.com

Nike: www.nike.com

Google: www.google.com

Pew Research: www.pewinternet.org

Hoovers online (provides subscribers with up-to-date information on private and public

companies worldwide): www.hoovers.com