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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
Copyright © 2018 Pearson Education, Inc.
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.
Copyright © 2018 Pearson Education, Inc.
Chapter 5: Marketing Analytics: Welcome to the Era of Big Data!
p. 126
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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
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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
Copyright © 2018 Pearson Education, Inc.
Part 2: Determine the Value Propositions Different Customers Want
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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
Copyright © 2018 Pearson Education, Inc.
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
Copyright © 2018 Pearson Education, Inc.
Part 2: Determine the Value Propositions Different Customers Want
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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
Copyright © 2018 Pearson Education, Inc.
Chapter 5: Marketing Analytics: Welcome to the Era of Big Data!
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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
Copyright © 2018 Pearson Education, Inc.
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
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p. 149
p. 150
p.
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
Copyright © 2018 Pearson Education, Inc.
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.
Copyright © 2018 Pearson Education, Inc.
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.
Copyright © 2018 Pearson Education, Inc.
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.
Copyright © 2018 Pearson Education, Inc.
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?
Copyright © 2018 Pearson Education, Inc.
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?
Copyright © 2018 Pearson Education, Inc.
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.
Copyright © 2018 Pearson Education, Inc.
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)
Copyright © 2018 Pearson Education, Inc.
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
Copyright © 2018 Pearson Education, Inc.
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
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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.
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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
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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?
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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?
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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
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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.
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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.
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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.
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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?
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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?
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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
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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
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