Intro to Data Mining for Marketers - Part 1

Data mining can be defined as the process of "discovering patterns, meaning and insights in large datasets by using statistical and computational methods". Data mining works to analyze data stored in data warehouses that are used to store that data that is being analyzed. That particular data may come from all parts of business, from the production to the management. Managers also use data mining to decide upon marketing strategies for their product. They can use data to compare and contrast among competitors. Data mining interprets its data into real time analysis that can be used to increase sales, promote new product, or delete product that is not value-added to the company.

History

Data mining was born in the fields of Statistics and Computer Science (some might say Artificial Intelligence) and may also be referred as “Statistical Learning”. From a statistical perspective, most early and recent advances coming from Statistics have come from the Stanford Statistics department school of thoughts like  Bradley Efron, Jerome H. Friedman, Trevor Hastie and Robert Tibshirani. By the way, don’t forget that Stanford University is only 7 miles away from Google.

Stanford University ©

Data Mining Framework

Using data mining techniques, we, marketers, need to master an approach that will provide the decision makers with  a-priory knowledge about customers’ preferences and needs. Since there are many different kinds of customers with different kinds of needs and preferences, a simple, solid approach is meant to be a tool for performing market segmentation: divide the total market, choose the best segments, and design strategies for profitability serving the chosen segments better than the company’s competitors do. The example developed below is described for product development in auto industry, but it can be successfully implemented for any other applications where it is necessary to  find the correlations between the customer feelings or perceptions and the physical characteristics of a product. Yes, correlations, even through our statistics lenses. 

Yes,arithmophobia is over, my friend!

Understanding

Any data mining application should start by understanding the business goals of the application since the blind application of data mining techniques without  the requisite domain knowledge often leads to the discovery of irrelevant or meaningless patterns. In order to understand the target customers of an automotive company, it would be helpful to examine the relationships between the vehicle image/attributes and the customer emotional benefits that are tied to psychological needs, personality traits, and personal values. Thus, data mining can enable us to understand more completely how product specific characteristics relate to customer needs and the benefits a customer hopes to obtain from them. For instance, for many people, cars, homes, restaurants and vacations provide emotional benefits as well as rational benefits. However, for a wealthy person who has everything, the emotional benefits provided by status, prestige and superiority of an expensive automobile could outweigh rational benefits such as gas economy, lower maintenance and insurance costs, and resale value.  

A target audience perhaps? "Free to do anything, in control, confident, sporty but with family."

Therefore, it will be beneficial to have a tool that will help us to respond to questions such as: What and how many of the personality attributes used to describe the customer might be shaped by the vehicle’s image?  What kind of vehicle this customer or group of customers will buy?

Data selection

This step calls for targeting a database or selecting a subset of fields to be used for the data mining. The following issues should be considered in developing a plan for collecting data efficiently:

• Evaluation of existing data sources 
• Specification of research approaches 
• Data gathering (contact methods, sampling plans and instruments)

The survey research is a simple, efficient method to collect data. One of the advantages of the survey research is flexibility because it can be used to obtain many different kinds of information in many different situations. Furthermore, depending on the survey design, it may also provide information quicker at a lower cost compared to manual processing. The survey may be in the form of a questionnaire that is very flexible as there are many ways to ask questions. In preparing the questionnaire, only the questions contributing to the research objectives will be asked. The questions may be closed-ended, as they include all possible answers. In designing the survey, we also make sure that the questions are simple, direct and arranged in a logical order.  The first question should create interest if possible, and difficult or personal questions should be asked last so that respondents do not become defensive.

Instead of a traditional mail questionnaire, a more modern approach is the computer interviewing process, in which respondents sit down at a computer, read questions from a screen, and type their own answers into the computer at their own leisure. The beauty of this approach consists of its multiple benefits. As a first benefit, the respondents’ answers are automatically stored in a database. Furthermore, the survey is posted on the web and it can be accessible by an unlimited number of people. Filling out the survey becomes a non-time consuming task even for a busy person: the survey is on the web and it is accessible for anybody at any time; the submission of the completed survey requires only a ‘click on’ action executed by respondent, action possible  through an interactive survey implementation. 

Third, the computers might be located at different locations such as auto shows, dealerships, or retail locations. The biggest benefit is the collection of more relevant data since people present at those locations are most likely willing to answer correctly to the questions because they are interested in automobiles. The approach can be implemented such that the data is gathered from numerous computers  at different locations and stored in a unique and global database. As a fourth benefit, same survey format will be accessible to different categories of people: expert people (such as car designers) or people less familiar with auto domain characteristics. The large number of respondents and their diversity give more reliability on the results than small samples.


                                                      ...To be continued...

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Synergistic Marketing Campaigns

There are probably two important developments that helped evolve the media mix concept into what we now think of as multi-channel synergistic marketing campaigns:

• A transition by marketing and advertising professionals toward integrated communications. 

This marked a shift in focus from transactions to customer relationships. Even outside the marketing arena, engineers and statisticians were contributing by following the lead of successful Japanese industries that re-engineered business processes around customers’ needs. Power was then shifting to the consumer and the management of  communication processes was being elevated to strategic levels to help build customer relations and drive business results.  In addition, other market realities continued to fuel the trend toward relationship marketing through expanded communication and sales channels, such as:

1. Competition increased while the cost to acquire new customers soared, making it increasingly important to establish solid customer relationships, especially with those who projected high lifetime values.
2. Customers in a satisfied business relationship became clearly recognized as the best source of new business.
3. Privacy concerns and governmental actions placed greater focus on establishing true relationships rather than trying to blindly attract buyers with hit or miss, mass-communication tactics.

• The number of channels available to marketers increased. 

Not only was there now recognition of the importance of building customer relationships and integrating communications, but new electronic media such as web sites and e-mail also added channels. What’s more, there was less distinction between pure communication channels and sales channels. Increasingly,the two were becoming one and the same. What is evident is that consumers prefer personalized communications:

CAP VENTURES DATABASE

The New Era of Marketing: Personalization Über Alles

New methods of marketing are emerging that seek to more effectively use prospect and customer data to filter target lists, construct personalization rules and produce and execute marketing campaigns across and among the full range of media  channels available. The most successful campaigns reach consumers in a sequenced and extremely consistent manner. This creates an indirect benefit of enforcing and enhancing corporate branding.Therefore, organizations that can harness the power of other marketing channels and produce more personalized communications could put themselves in a good position to capture market share from those that don’t. There are two critical components to effective multi-channel marketing campaigns: Creating relevant offers via personalization and coordination and management of multiple marketing channels.

In a multi-channel marketing context (emails, newsletters, printed brochures, social media, etc.) personalization means using what is known about the recipient to create the offer, customize the messaging and deliver it to them in the form at requested. For channels other than telemarketing, this can include personalized greetings, relevant messages based on demographics and compelling graphics. Actually, response rates increase dramatically with an increase in the number of personalization elements. As the number of personalization elements increases from one to seven ,the click through rate more than triples, increasing from 4. 7% to 14. 8 % .

Source:YesMail

The other critical element lies  in the design and execution of campaigns that coordinate among the full breadth of channels available to reach prospective buyers. Much like personalization, this requires strategic and tactical planning. When marketers can sequence communications and “hit” prospective customers with consistent communications through various media channels, the effectiveness of campaigns increases greatly.

Data and Content Management

More than half the battle in effective marketing campaigns is acquiring and maintaining good prospect and customer data. It is important for sellers to build a repository that allows them to effectively utilize unique attributes to segment prospects and customers. Using these attributes, marketing managers can build the personalization rules and determine which prospects should receive proscribed offers, and more specifically, which messages. Once the campaign is designed, in many cases the seller (and often a third-party service provider such as an advertising agency) creates the content to support the marketing campaign.

Traditionally, sellers have created content specifically for each campaign in a tactical fashion, failing to leverage the messaging and graphical elements for other channels. Sellers are increasingly developing and managing content in a more strategic, collaborative fashion that enables content to be shared not only among media channels, but also across campaigns.

Strategies for Synergistic Marketing Campaigns

The Customer is King 

Just as an oil company would not blindly drill small holes in the earth in search of oil, your organization shouldn’t contact millions of consumers blindly, banking on a very small portion accepting your offer. Rather, seek out or build a repository that identifies which consumers are more likely to find your offer compelling.

Get Customers to Opt-in  

Companies that can build their own opt-in lists, or use qualified industry opt-in  resources, are  in  a  better  position to  communicate  and  market to  both  consumers and businesses. Explore methods, such as periodic e-mail newsletters, that provide valuable information and purchase opportunities simultaneously.

Invest in Personalizing Communications

The overwhelming response to the “do not call” registry underscores consumer frustration with intrusive, irrelevant communications. Research shows that by a ratio of over 3:1, recipients prefer personalized communications. Research also shows that the more personalized an offer is, the higher likelihood of response. It will require an increased investment in creating content and designing campaigns, but you can expect double-digit response rates.

Leverage More Effective Customer Channels 

Design and execute new marketing campaigns that leverage the full spectrum of marketing channels. Personalized direct mail, permission-based e-mail and Int e r n e t technologies can be employed to dramatically increase the returns on the marketing dollar. Coordinate marketing  campaigns using multiple  channels and take advantage  of the “multiplier effect.”

Simplify the Transition by Using Service Providers 

Personalizing communications and running multi-channel campaigns can be a challenge for those selling organizations that do not currently have the technology or process infrastructure to develop multi-channel strategies, manage customer data, manage marketing content and execute integrated campaigns. Sellers will find that there are several service providers that can help them transition from their current practices to leverage more effective marketing practices.

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