marketing data analytics

Copyright: Canvass 2013-2016

Marketing Data Analytics – The future of Marketing Success


Successful Marketing is

• sending right content• over right channel • at right time • with right frequency • to right customersAnalytics can help you determine what is

RIGHT!


From identifying your best customers to deciding where to invest your marketing budget, data analytics gives you better actionable insight than ever before.

Source: www.novotech.com


Simple steps to get you started with Data Analytics


Collect Data about your CustomerWhat to collect? • Contact information (name, email, mobile)

• Demographic indicators such as age, gender, address, marital status.

• Behavioral indicators such as purchase preferences, preferred medium of communication & brand engagement, etc.


Collect Data about your CustomerWhere to collect?

• Website• Social media• Landing pages• In-store tablets• Marketing tools capturing user behavior


Clean up the Data

• Remove duplicate data

• Ensure consistency in formatting of the data• Age is defined in same units – years/months• Gender is Male/Female across the file

• Update missing data• Contact customer and get missing information• Find similar profiles in your database and estimate

• Analyze outlier data separately


Precautions while cleaning up data

•Do not use average/median values to fill empty spaces

•Personal Biases to fill missing data can result in significant errors

•Do not run math operations on abstract data- Abstract data such as City names (Mumbai, Hyderabad,

Bangalore) are assigned numbers 1,2,3 and then averaging may reveal 2 as the most common city. (Huge mistake in analysis)


Your data is ready.

Let’s generate insight into your customers


Easy & Effective Analytical techniques

•RFM (Recency, Frequency, Monetary)Will help you identify your best customers

•LTVC (Life Time Value of a Customer)Will help you evaluate customer cost of acquisition

•Segmentation & ClusteringWill help you run targeted marketing campaigns


RFM(Recency, Frequency, Monetary)


What is RFM?RFM analysis is a marketing technique used to determine your best customers quantitatively by using information about: • Recency - How recent was the purchase• Frequency - How often does the customer purchase • Monetary - How much has the customer spent

Source: http://searchdatamanagement.techtarget.com/definition/RFM-analysis


How can RFM benefit you?

80% of your business comes from 20% of your customers

your most important customers more

accurately


How can you run RFM?

Using RFM analysis

Step 1: Assign your customers a ranking number of 1,2,3,4, or 5 (with 5 being highest) for each RFM parameter.

Step 2: The three scores together are referred to as an RFM "cell" .

Step 3: The database is sorted to determine which customers were "the best customers" in the past, with a cell ranking of "555" being ideal.


How can you run RFM?

Example:

Let’s say you own a clothing store and have been in business for a year.

Some of your customers have bought from the store on 10 occasions in the year while some have bought only once.

Total amount spent by each customer ranges from $100 to $5000.

Let’s assume you had sales every day in this last year.


RFM Step 1 - Rank Customers

We need to rank individuals for the individual metrics of Recency, Frequency & Monetary. For the example considered, the following ranking mechanism could work:

Recency Ranking

Recency (Days since last purchase)

5 70 days

4 71 - 140 days

3 141 - 210 days

2 211- 280 days

1 281 - 365 days

Frequency Ranking

Frequency (number of purchases)

5 more than 8 times

4 5-7 times

3 3-4 times

2 2 times

1 once

Monetary Ranking

Monetary (amount spent)

5 more than $ 4000

4 $ 3000 - $3999

3 $ 2000 - $2999

2 $1000 - $1999

1 less than $1000


RFM Step 2 – Generate RFM ScoreUsing the scoring system used in the previous slide, we can generate the RFM Cell Score for all the customers. Customer Information

RFM Cell ScoreRecency

(Days since last purchase)

Frequency Monetary

555 45 days 10 times $4500

451 123 days 9 times $950

324 156 days 2 times $3600

232 250 days 4 times $1650

111 350 days once $500


RFM Step 3 – Identify Top Customers

We need to sort the RFM Cell Score for all the customers

Customers with RFM score as 555 are your best customers while those with 111 are the least desirable customers


How can you use the RFM Results? Reach out to your best customers and

make them feel special

Make them your brand ambassadors

Align your marketing expenses better


Common mistakes in using RFM Results

Do not over-solicit high ranking customers.

Low ranking customers should not be neglected. Concerted efforts should be made to nurture these customers and make them loyal


LTVC(Life Time Value of a Customer)


What is LTVC?

LTVC (Lifetime value of your customer) is a great way to identify how much value your customer will bring to you over his/her lifetime.


How can LTVC benefit you? Determining the right amount of money to

invest in acquiring a customer

Analyze customer acquisition strategy and solidify your marketing budget


Calculating LTVC – Step 1Lets take an example

You are a coffee shop owner and have 100 customers visit you every week. Most customers are regulars and visit you 5 times a week. On every visit, they spend about $3.

Source: http://josephratliff.com/blog/calculating-lifetime-value-of-the-customer/


Calculating LTVC – Step 2

Let’s make the following assumptions: On an average, these individuals will

remain coffee consumers for 12 years. 80% of the customers will repurchase from

you in the following year. You make 20% profit margin on every

customer visit Rate of Inflation is about 10%


Calculating LTVC – Step 3

As can be seen from Appendix 1, simple calculations can help you determine the Lifetime value of your customers

LTVC has been calculated as $4992 per customer in this example


Using LTVC Results & Refining it As long as the LTVC > Customer cost of

acquisition, your marketing expense in acquiring the customer was well spent

All your customers are not the same! Repeat the exercise for different groups/segments of your customers to get even better results from LTVC


Segmentation & Clustering


What is Segmentation & Clustering?

Customer Segmentation is the subdivision of a market into discrete customer groups that share similar characteristics

Clustering is putting together these similar individuals to target them better and scalably


How can Segmentation benefit you?

Segmenting allows you to predict behavior of new customers by simply categorizing them into a particular cluster

This helps you run targeted marketing and service activities helping you increase your ROI significantly


How can you cluster and segment? Pick different criteria like age, gender,

education, spending patterns, communication preferences, etc. to segment the customers

Your clustering results depend directly on your creativity in picking the right parameters and the amount of data you collect about your customer

Tools like ME-XL, SPSS, JMP, SAS are relatively low cost and work very well in converting the data into tangible results


Example - Clusters using Age, Income & Recency


Have you done a good job?Identifiability

Are you able to easily differentiate between segments

Substantiality Are your clusters big enough

Accessibility Are you able to reach your customers

Stability Will these clusters remain stable with time

Actionable Are the segments helping with marketing direction

Source: http://www.bisolutions.us/Cluster-Analysis-vs.-Market-Segmentation.php


Simple yet smart marketing data Simple yet smart marketing data analytics will really help optimize analytics will really help optimize your marketing spend and ensure your marketing spend and ensure you are focusing on the right set of you are focusing on the right set of customers for your business!customers for your business!


Ankur NanduCOO, Canvass [email protected] All-in-one Marketing Software


Appendix 1: Calculating LTVCAverage revenue per customer over the 12 years52 weeks * 5 visits/wk * $ 3/ visit * 12 years= $9360

Average profit per customer over the 12 years20% profit margin * Avg. Revenue per customer/yr =

$1872

LTVC Avg. profit/customer * (80% retention rate) / (1+10%inflation-

80%retention rate)= 1872*0.8/(1+0.1-0.8) = $4992

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