Marketing Analytics

AP. Ankita Sharma

 Learning Objective
• Understanding about marketing analytics, its
models and metrics.
• Understanding different types marketing
terminologies.
Chapter 1:
Introduction to Marketing
Analytics
 Content
• Introduction to Marketing Analytics
– Models
– Metrics

• Marketing Insight
– Market Sizing
– Pestle Market Analysis
– Porter Five Force Model
– Market Segmentation
 Basics
• Analytics – A collection of techniques such as artificial
intelligence, machine learning and deep learning and tools used
for creating value from data.

• Artificial Intelligence (AI) : Algorithms and systems that exhibit

human-like intelligence.

• Machine Learning (ML): Subset of AI that can learn to perform

a task with extracted data and/or models.

• Deep Learning (DL): Subset of machine learning that imitate the

functioning of human brain to solve problems.
Relationship between AI, ML, and DL
 Analytics
Analytics refers to the systematic discovery,
interpretation, and communication of meaningful
patterns and insights from data. It involves the
use of statistical, mathematical, and
computational techniques to analyze large sets of
data, with the goal of understanding trends,
making informed decisions, and predicting
future outcomes.
Analytics can be applied to various domains, including business, finance,
healthcare, marketing, sports, and many others. It typically involves the
following steps:

• Data collection: Gathering relevant data from various sources, such as

databases, spreadsheets, sensors, or online platforms.
• Data cleaning and preparation: Processing the data to remove errors,
inconsistencies, or missing values, and transforming it into a suitable
format for analysis.
• Data analysis: Applying statistical and mathematical methods to identify
patterns, relationships, and trends within the data. This can involve
techniques such as data mining, statistical modeling, machine learning,
and predictive modeling.
• Data visualization: Presenting the analyzed data in a visual format, such as
charts, graphs, or dashboards, to facilitate understanding and insights.
• Interpretation and decision-making: Interpreting the results of the analysis
and using the insights gained to inform decision-making, optimize
processes, and drive improvements.
 Type of Analytics
Analytics can range from descriptive analytics,
which focuses on summarizing and describing
historical data, to predictive analytics, which
uses historical data to make predictions about
future events, and prescriptive analytics, which
suggests actions or decisions to optimize
outcomes.
 Marketing Analytics
• Marketing analytics refers to the practice of using data analysis
techniques and tools to measure, analyze, and interpret marketing
performance and outcomes. It involves the collection, processing, and
analysis of data related to marketing activities and initiatives, with the
goal of improving marketing effectiveness, optimizing strategies, and
maximizing return on investment (ROI).

• Marketing analytics leverages various data sources, such as customer

data, campaign data, website analytics, social media metrics, sales data,
and market research, to gain insights into consumer behavior, market
trends, and the effectiveness of marketing efforts. By examining these
data sets, marketers can make data-driven decisions and take actions to
enhance their marketing strategies and achieve better results.
 Areas where Marketing Analytics can be
applied
• Customer segmentation and targeting: By analyzing customer data, marketers can
identify distinct customer segments based on demographics, behavior, or preferences.
This allows them to tailor marketing campaigns and messages to specific target
audiences, improving the relevance and effectiveness of their marketing efforts.

• Campaign performance analysis: Marketing analytics helps assess the performance of

marketing campaigns by tracking key metrics such as conversion rates, click-through
rates, engagement levels, and customer acquisition costs. This information enables
marketers to measure the success of their campaigns, identify areas for improvement,
and optimize their strategies.

• Return on investment (ROI) analysis: Marketing analytics enables marketers to

measure the effectiveness and ROI of their marketing activities. By analyzing the
relationship between marketing spend and business outcomes, such as sales revenue
or customer lifetime value, marketers can evaluate the profitability of their marketing
efforts and allocate resources more efficiently.
• Customer journey analysis: Marketing analytics allows marketers to
understand the customer journey by analyzing the various touchpoints and
interactions customers have with their brand. This helps identify
opportunities to improve customer experience, optimize marketing channels,
and drive customer loyalty and retention.

• Predictive modeling and forecasting: Marketing analytics can leverage

predictive modeling techniques to forecast future trends, customer behavior,
and market demand. This allows marketers to anticipate market changes,
make informed decisions, and develop proactive marketing strategies.

• Marketing analytics can be facilitated by various tools and technologies,

including data analytics software, customer relationship management (CRM)
systems, marketing automation platforms, and data visualization tools. These
tools help marketers collect, analyze, and visualize data, making it easier to
derive insights and take actionable steps to improve marketing performance.
 Marketing Analytics Model
There are various marketing analytics models and frameworks that marketers can
use to analyze and understand their marketing efforts. Here are a few commonly
used models in marketing analytics:

• Customer Segmentation: This model involves dividing customers into distinct

segments based on shared characteristics, such as demographics, behavior, or
preferences. By segmenting customers, marketers can tailor their marketing
strategies to each segment's specific needs, enabling more targeted and
personalized marketing campaigns.

• Funnel Analysis: The marketing funnel model maps the customer journey from
awareness to purchase. It visualizes the different stages of the customer's path
and identifies potential areas of improvement. Funnel analysis helps marketers
understand where they might be losing customers at each stage and optimize
their marketing efforts to increase conversion rates.
• Customer Lifetime Value (CLV): CLV is a metric that predicts the net
profit a business can expect to generate from a customer over their
entire relationship with the company. This model helps marketers
understand the long-term value of their customers and informs
decisions related to customer acquisition, retention, and loyalty
programs.
• Attribution Modeling: Attribution modeling aims to determine which
marketing channels and touch points contribute to conversions or
desired outcomes. It helps marketers understand the impact and
effectiveness of each marketing channel and allocate resources
accordingly.
• Marketing Mix Modeling: Marketing mix modeling (MMM) analyzes
the impact of different marketing activities on business outcomes, such
as sales or revenue. It quantifies the contribution of various marketing
elements, including advertising, pricing, promotions, and distribution,
to understand their effectiveness and optimize marketing spend.
• A/B Testing: A/B testing involves comparing two versions of a marketing
element (such as a webpage, ad, or email) to determine which one
performs better in terms of desired outcomes. By testing different
variations, marketers can make data-driven decisions and optimize their
marketing materials for maximum impact.

• Predictive Modeling: Predictive modeling uses historical data and

statistical techniques to forecast future trends and behaviors. In marketing
analytics, predictive modeling can help predict customer behavior, identify
potential churn, optimize pricing strategies, or forecast sales demand.
 Marketing Analytics Metrics
Marketing analytics metrics are key performance indicators (KPIs) that marketers
use to measure and evaluate the effectiveness and impact of their marketing efforts.
These metrics help track progress, identify trends, and make data-driven decisions
to optimize marketing strategies. Here are some commonly used marketing
analytics metrics:

• Conversion Rate: The conversion rate measures the percentage of users or

visitors who complete a desired action, such as making a purchase, filling out a
form, or subscribing to a newsletter. It helps assess the effectiveness of
marketing campaigns and the ability to convert prospects into customers.

• Customer Acquisition Cost (CAC): CAC calculates the average cost incurred to
acquire a new customer. It considers the marketing expenses associated with
acquiring new customers, such as advertising costs, sales team salaries, and
campaign costs. By comparing CAC with customer lifetime value (CLV),
marketers can determine the profitability of their customer acquisition efforts.
• Return on Investment (ROI): ROI measures the profitability of a marketing
campaign or activity by comparing the generated revenue or profit with the cost of
the campaign. It helps assess the financial impact of marketing initiatives and
determine the effectiveness of allocated resources.

• Customer Lifetime Value (CLV): CLV is the estimated net profit generated over the
entire relationship with a customer. It helps marketers understand the long-term
value of customers and guides decisions related to customer acquisition, retention,
and loyalty programs. Increasing CLV indicates successful customer relationship
management.

• Customer Churn Rate: Churn rate measures the percentage of customers who
discontinue or cancel their relationship with a brand over a specific period. It
indicates customer retention and loyalty levels. Tracking churn rate helps identify
customer dissatisfaction or potential areas for improvement in marketing and
customer experience.
• Website Traffic: Website traffic metrics, such as the number of unique
visitors, page views, and time spent on site, help evaluate the reach and
engagement of marketing campaigns. These metrics can be analyzed to
understand user behavior, identify popular content, and optimize website
design and user experience.

• Social Media Engagement: Social media metrics, including likes, shares,

comments, and followers, gauge the level of engagement and interaction
with social media content. Analyzing these metrics helps measure brand
awareness, reach, and audience engagement on various social media
platforms.

• Click-Through Rate (CTR): CTR measures the percentage of users who

click on a specific link or call-to-action (CTA) within an advertisement,
email, or webpage. It indicates the effectiveness of marketing messages
and the appeal of CTAs. Higher CTR suggests more compelling and
relevant content.
• Cost per Click (CPC): CPC measures the average cost incurred for each
click on a paid advertising campaign. It helps evaluate the efficiency and
cost-effectiveness of paid advertising efforts, such as search engine
marketing (SEM) or display ads.

• Email Open Rate and Click Rate: These metrics track the percentage of
email recipients who open an email and click on links within the email,
respectively. They help assess the effectiveness of email marketing
campaigns, content relevance, and audience engagement.
 Market Insight
Market data source:

Market data sources refer to the various types of data

that marketers can access and analyze to gain insights
about the market, target audience, and competitors.
These data sources provide valuable information for
market research, trend analysis, and decision-making.
Here are some common market data sources:
• Market Research Reports: Market research firms and agencies produce
comprehensive reports on specific industries, markets, and consumer trends.
These reports provide data on market size, growth rates, consumer behavior,
competitor analysis, and other relevant insights.

• Government Databases: Government agencies often publish data related to

demographics, economic indicators, industry statistics, and trade
information. Examples include the U.S. Census Bureau, Bureau of Labor
Statistics, and national statistical offices of other countries.

• Syndicated Data Providers: Syndicated data providers collect and aggregate

data from various sources and make it available for purchase. These
providers offer datasets on consumer behavior, market trends, sales data, and
more. Examples include Nielsen, IRI, Kantar, and Euromonitor International.

• Online Analytics Tools: Platforms like Google Analytics, Adobe Analytics,

and social media analytics tools provide data on website traffic, user
behavior, conversions, social media engagement, and other online marketing
metrics.
• Social Media Listening Tools: Social media listening tools, such as Brand watch,
Sprout Social, and Hootsuite, gather data from social media platforms and provide
insights on brand mentions, sentiment analysis, customer feedback, and
competitor analysis.

• Customer Surveys: Conducting surveys among target customers helps gather data
on preferences, opinions, buying behavior, and satisfaction levels. Online survey
platforms like SurveyMonkey, Typeform, and Google Forms make it easy to
create and distribute surveys.

• Internal Company Data: Companies can leverage their own internal data sources,
such as customer databases, sales data, CRM systems, and transaction records, to
gain insights into customer behavior, purchase patterns, and other relevant
metrics.

• Industry Associations: Industry associations and trade organizations often publish

reports, studies, and market insights specific to their respective industries. These
sources can provide valuable data and insights for market analysis.
• Secondary Research: Secondary research involves using existing published
data and sources like books, academic papers, news articles, industry
journals, and whitepapers. These sources can provide historical data,
industry analysis, and expert insights.

• Online Platforms and APIs: Many online platforms and APIs offer access
to data relevant to specific industries or markets. For example, e-commerce
platforms like Amazon and eBay provide access to sales and product data,
while financial platforms like Bloomberg offer market and financial data.
 Market Sizing
Market sizing is the process of estimating the total market
potential or market value for a specific product, service, or
industry. It involves determining the size, volume, and value of a
market in terms of sales, revenue, or units. Market sizing is a
crucial step in market research and strategic planning, as it
provides valuable insights for business decision-making, target
setting, and market opportunity assessment.
Some common approaches to market sizing:

• Top-down Approach: In this approach, the market size is estimated by

starting with the total addressable market (TAM) and then narrowing it
down based on relevant factors. This can involve using industry reports,
government data, or market research studies to determine the overall
market size and then adjusting it based on factors like target audience,
geographical scope, and market share.

• Bottom-up Approach: In the bottom-up approach, the market size is

estimated by aggregating data from individual market segments or
customer segments. This can involve analyzing customer data, conducting
surveys, or studying specific regions or industry sectors. The estimates for
each segment are then summed up to calculate the total market size.
• Proxy Indicators: Sometimes, market sizing can be derived from proxy
indicators that correlate with the market size. For example, in the case of
e-commerce, the number of online shoppers or the volume of online
transactions can be used as indicators to estimate the market size.

• Expert Opinions and Interviews: Expert opinions and interviews with

industry experts, market participants, or key stakeholders can provide
valuable insights and estimates regarding the market size. These
qualitative inputs can be combined with quantitative data to arrive at a
more accurate market size estimation.

• Comparative Analysis: Market sizing can be done by comparing the

target market to a similar existing market or industry. By studying the
size and growth rates of similar markets, one can extrapolate and
estimate the market size of the target market.
 PESTLE Market Analysis
PESTLE analysis is a framework used to assess the external factors that can
impact a business or market. It provides a systematic approach to analyzing
the political, economic, socio-cultural, technological, legal, and environmental
factors that can influence a company's operations, industry trends, and market
conditions. PESTLE analysis helps businesses understand the broader macro-
environmental factors that can affect their strategies, decision-making, and
overall business environment.
• Political Factors: These factors include government policies,
regulations, political stability, and geopolitical factors that can
impact a business or market. It involves analyzing aspects such
as taxation policies, trade regulations, political stability,
government stability, and the influence of political parties on
the industry.

• Economic Factors: Economic factors examine the economic

conditions, trends, and indicators that can affect businesses and
markets. This includes factors like economic growth, inflation
rates, interest rates, exchange rates, consumer spending
patterns, and the overall health of the economy.
• Sociocultural Factors: Sociocultural factors focus on social and cultural
influences on businesses and markets. This includes demographic
trends, consumer attitudes, lifestyles, cultural norms, social values, and
consumer behavior. It also considers factors like population
demographics, education levels, social attitudes, and cultural shifts that
can impact market demand and customer preferences.

• Technological Factors: Technological factors involve analyzing the

impact of technology on businesses and markets. This includes
advancements in technology, rate of technological change, research and
development activities, automation, digitalization, and innovation.
Technological factors can influence market dynamics, disrupt industries,
and create new opportunities or threats.
• Legal Factors: Legal factors encompass laws, regulations, and legal
frameworks that impact businesses and markets. This includes industry-
specific regulations, employment laws, intellectual property protection,
consumer protection laws, health and safety regulations, and competition
laws. Understanding the legal landscape is important for compliance and
risk management.

• Environmental Factors: Environmental factors consider the ecological and

environmental aspects that can affect businesses and industries. This
includes factors like environmental regulations, sustainability practices,
climate change, natural disasters, and the impact of a company's
operations on the environment. Environmental factors have become
increasingly important in today's business landscape, as companies are
expected to adopt environmentally sustainable practices.
By conducting a PESTLE analysis, businesses can gain insights
into the external factors that may influence their strategies,
operations, and market conditions. It helps identify opportunities,
anticipate potential challenges or risks, and inform decision-
making for adapting to the changing business environment.
 Porter Five Force Analysis
Porter's Five Forces analysis is a framework developed by Michael
Porter, a renowned business strategist, to assess the competitive
dynamics and attractiveness of an industry or market. The model
helps businesses understand the competitive forces that shape the
industry and determine its potential profitability. The five forces
analyzed in this framework are:

• Threat of New Entrants: This force examines the barriers to entry

for new competitors in the industry. Factors such as high capital
requirements, economies of scale, government regulations, and
brand loyalty can deter new entrants. A higher threat of new
entrants typically intensifies competition and reduces profitability.
• Bargaining Power of Suppliers: This force assesses the influence and
bargaining power of suppliers over the industry. Factors such as the
concentration of suppliers, availability of substitutes, and switching
costs can impact supplier power. When suppliers have more power,
they can raise prices, limit supply, or dictate terms, reducing
profitability for businesses.

• Bargaining Power of Buyers: This force analyzes the influence and

bargaining power of customers or buyers in the industry. Factors
such as buyer concentration, availability of substitute products, and
buyer switching costs can impact buyer power. When buyers have
more power, they can negotiate for lower prices, higher quality, or
better terms, reducing profitability for businesses.
• Threat of Substitute Products or Services: This force examines the
likelihood of customers switching to alternative products or services.
Factors such as the availability of substitutes, their quality, and price-
performance trade-offs determine the threat of substitutes. When there are
many substitutes available, businesses may face price pressure and reduced
profitability.

• Intensity of Competitive Rivalry: This force assesses the level of

competition among existing players in the industry. Factors such as the
number of competitors, industry growth rate, product differentiation, and
exit barriers influence the intensity of rivalry. High competition can lead to
price wars, aggressive marketing, and reduced profitability.
By analyzing these five forces, businesses can understand the
competitive landscape and make strategic decisions to
navigate the industry effectively. The analysis helps identify
competitive advantages, assess industry attractiveness, and
formulate strategies to mitigate threats and capitalize on
opportunities. It also helps businesses understand the overall
industry dynamics and anticipate changes in the competitive
environment.
 Market Segmentation
Market segmentation is the process of dividing a broad target
market into smaller, more homogeneous groups of consumers or
businesses based on shared characteristics, needs, or behaviors.
The purpose of market segmentation is to better understand and
cater to the diverse needs and preferences of different customer
segments. By segmenting the market, businesses can tailor their
marketing strategies, products, and services to specific segments,
leading to more effective and targeted marketing efforts.
• Demographic Segmentation: This segmentation is based on
demographic factors such as age, gender, income, occupation,
education, and family size. Demographic segmentation helps
businesses target specific customer groups that may have distinct
preferences and needs based on their demographic characteristics.

• Psychographic Segmentation: Psychographic segmentation

focuses on the psychological and lifestyle characteristics of
customers. It considers factors such as personality traits, values,
attitudes, interests, opinions, and behavioral patterns.
Psychographic segmentation helps understand the motivations
and preferences that drive consumer behavior.
• Geographic Segmentation: Geographic segmentation divides the
market based on geographical factors such as location, region,
climate, urban/rural areas, or population density. Geographic
segmentation helps businesses adapt their marketing strategies to
specific geographical markets and tailor products or services to local
preferences or needs.

• Behavioral Segmentation: Behavioral segmentation divides

customers based on their behavior, usage patterns, or buying habits.
It considers factors such as brand loyalty, purchase frequency, usage
occasion, benefits sought, or response to marketing stimuli.
Behavioral segmentation helps businesses target customers based on
their specific behaviors and tailor marketing messages accordingly.
• Firmographic Segmentation: Firmographic segmentation is primarily
used in B2B markets and involves segmenting businesses based on
characteristics such as industry, company size, revenue, location, or
customer base. Firmographic segmentation helps businesses target
specific industries or types of organizations that may have distinct
needs or purchasing behaviors.

• Benefit Segmentation: Benefit segmentation groups customers based

on the specific benefits or solutions they seek from a product or
service. It identifies different customer segments based on the
primary value propositions or desired outcomes they are looking for.
Benefit segmentation helps businesses tailor their offerings and
messaging to meet the unique needs of different customer segments.
Market segmentation allows businesses to develop targeted
marketing campaigns, create customized products or services,
optimize pricing strategies, and improve overall customer
satisfaction. By understanding the diverse needs and
preferences of different segments, businesses can enhance
their competitiveness, strengthen customer relationships, and
drive growth in their target markets.
 Cluster Analysis
Cluster analysis is a statistical technique used to group a set of
objects or data points into meaningful clusters based on their
similarities and dissimilarities. The goal of cluster analysis is to
identify homogeneous groups within a larger dataset, where the
objects or data points within each cluster are more similar to each
other compared to those in other clusters. Cluster analysis helps
to uncover patterns, structures, or relationships in the data,
enabling meaningful insights and understanding of the
underlying characteristics or groupings.
 Segmentation using Cluster Analysis
Cluster analysis can help businesses identify distinct customer
segments and understand the characteristics, preferences, and
behaviors that differentiate these segments. Here's an overview of how
cluster analysis can be used for market segmentation:

• Data Collection: Gather relevant data on customers or businesses,

depending on the target market. This data can include demographic
information, psychographic data, behavioral data, or any other
relevant variables that can differentiate customer segments.
• Data Preprocessing: Clean and prepare the data for analysis. This
may involve removing outliers, handling missing values, and
transforming variables as necessary.
• Variable Selection: Select the variables that will be used for clustering.
These variables should capture meaningful differences among customers
or businesses and contribute to segment formation.

• Choosing a Clustering Algorithm: Select an appropriate clustering

algorithm based on the nature of the data and the goals of the analysis.
Commonly used algorithms include k-means clustering, hierarchical
clustering, and DBSCAN (Density-Based Spatial Clustering of
Applications with Noise).

• Cluster Analysis: Apply the selected clustering algorithm to the dataset.

The algorithm will group similar entities into clusters based on the
selected variables. The number of clusters can be determined beforehand
or through techniques like the elbow method or silhouette analysis.
• Interpretation and Profiling: Analyze the resulting clusters to understand
their characteristics and profiles. Examine the variables that differentiate
the clusters and identify the key attributes, preferences, or behaviors that
define each segment.

• Validation: Assess the quality and validity of the clusters by using

appropriate validation techniques. This can include internal validation
measures such as the silhouette coefficient or external validation through
expert judgment or comparison with known market segments.

• Marketing Strategy: Develop targeted marketing strategies for each

identified segment based on their unique characteristics. Tailor marketing
messages, product offerings, pricing strategies, and distribution channels
to effectively reach and serve each segment.
 Example
Example of using cluster analysis for market segmentation in the context of a
retail business. Imagine a clothing retailer that wants to segment its customer
base to better understand and cater to different customer preferences. Here's how
cluster analysis can be applied:

• Data Collection: The retailer collects data on its customers, including

demographic information (age, gender, location), purchase history
(frequency, amount spent), and preferences (product categories, style
preferences).

• Data Preprocessing: The collected data is cleaned, eliminating any duplicates

or missing values. Variables are appropriately transformed and standardized,
if necessary.

• Variable Selection: The retailer selects relevant variables for clustering, such
as customer age, average purchase amount, and preferred product categories.
• Choosing a Clustering Algorithm: The retailer decides to use k-
means clustering, a commonly used algorithm for cluster
analysis. It will group customers based on similarities in the
selected variables.

• Cluster Analysis: The k-means clustering algorithm is applied to

the customer dataset. It iteratively assigns customers to clusters
based on minimizing the within-cluster sum of squares. The
number of clusters is determined, such as four clusters, based on
the analysis.

• Interpretation and Profiling: The resulting clusters are analyzed

and interpreted. The retailer discovers four customer segments:
• Cluster 1: Young Fashion Enthusiasts: Customers in this segment are
typically younger, have a higher frequency of purchases, and prefer trendy
and fashionable clothing.

• Cluster 2: Value Shoppers: Customers in this segment are price-conscious,

make infrequent purchases, and prioritize discounts and sales.

• Cluster 3: Classic Style Seekers: Customers in this segment are typically

older, have moderate purchase frequency, and prefer classic and timeless
clothing styles.

• Cluster 4: High-Spending Elite: Customers in this segment have a high

average purchase amount, shop frequently, and prefer luxury or high-end
brands.