MARKETING ANALYTICS- UNIT-5

Market Basket Analysis

Market Basket Analysis is one of the most common and useful types of data analysis for
marketing and retailing. The purpose of market basket analysis is to determine what products
customers purchase together. It takes its name from the idea of customers throwing all their
purchases into a shopping cart (a “market basket”) during grocery shopping. Knowing what
products people purchase as a group can be very helpful to a retailer or to any other company. A
store could use this information to place products frequently sold together into the same area,
while a catalog or World Wide Web merchant could use it to determine the layout of their
catalog and order form. Direct marketers could use the basket analysis results to determine
what new products to offer their prior customers.

Once it is known that customers who buy one product are likely to buy another, it is possible
for the company to market the products together, or to make the purchasers of one product the
target prospects for another. If customers who purchase diapers are already likely to purchase
beer, they’ll be even more likely to if there happens to be a beer display just outside the diaper
aisle. Likewise, if it’s known that customers who buy a sweater and casual pants from a certain
mail-order catalog have a propensity toward buying a jacket from the same catalog, sales of
jackets can be increased by having the telephone representatives describe and offer the jacket
to anyone who calls in to order the sweater and pants. Still better, the catalogue company can
provide an additional 5% discount on a package containing the sweater, pants, and jacket
simultaneously and promote well the complete package. The dollar amount of sales is
guaranteed to go up. By targeting customers who are already known to be likely buyers, the
effectiveness of marketing is significantly increased – regardless of if the marketing takes the
form of in-store displays, catalog layout design, or direct offers to customers. This is the
purpose of market basket analysis – to improve the effectiveness of marketing and sales tactics
using customer data already available to the company.

1
 Store layout
It is the process of managing the floor space adequately to facilitate the customers and to
increase the sale. Since store space is a limited resource, it needs to be used wisely.
Space management is very crucial in retail as the sales volume and gross profitability depends
on the amount of space used to generate those sales.

Optimum Space Use

While allocating the space to various products, the managers need to consider the following
points −

1. Product Category-Profit builders− High profit margins-low sales products. Allocate

quality space rather than quantity.Star performers− Products exceeding sales and profit
margins. Allocate large amount of quality space.Space wasters− Low sales-low profit margins
products. Put them at the top or bottom of shelves.Traffic builders− High sales-low profit
margins products. These products need to be displayed close to impulse products.
2. Size, shape, and weight of the product.
3. Product adjacencies − It means which products can coexist on display?
4. Product life on the shelf.
Retail Floor Space
Here are the steps to take into consideration for using floor space effectively −

● Measure the total area of space available.

● Divide this area into selling and non-selling areas such as aisle, storage, promotional displays,
customer support cell, (trial rooms in case of clothing retail) and billing counters.
● Create a Planogram, a pictorial diagram that depicts how and where to place specific retail
products on shelves or displays in order to increase customer purchases.
● Allocate the selling space to each product category. Determine the amount of space for a
particular category by considering historical and forecasted sales data. Determine the space for

2
 billing counter by referring historical customer volume data. In case of clothing retail, allocate
a separate space for trial rooms that is near the product display but away from the billing area.
● Determine the location of the product categories within the space. This helps the customers to
locate the required product easily.
● Decide product adjacencies logically. This facilitates multiple product purchase. For example,
pasta sauces and spices are kept near raw pasta packets.
● Make use of irregular shaped corner space wisely. Some products such as domestic cleaning
devices or garden furniture can stand in a corner.
● Allocate space for promotional displays and schemes facing towards road to notify and attract
the customers. Use glass walls or doors wisely for promotion.

Store Layout and Design

Customer buying behavior is an important point of consideration while designing store layout.
The objectives of store layout and design are −
● It should attract customers.
● It should help the customers to locate the products effortlessly.
● It should help the customers spend longer time in the store.
● It should motivate customers to make unplanned, impulsive purchases.
● It should influence the customers’ buying behavior.
Store Layout Formats
The retail store layouts are designed in way to use the space efficiently. There are broadly three
popular layouts for retail stores –

Grid Layout − Mainly used in grocery stores.

3
Loop Layout − Used in malls and departmental stores.

Free Layout − Followed mainly in luxury retail or fashion stores.

Visual Merchandising
It is the activity of developing floor plans and three-dimensional displays in order to engage
customers and boost sales. Both, products or services can be displayed to highlight their features
and benefits.

It is based on the idea that good looks pay off. It requires creativity and an eye for presenting
the products or services aesthetically so that the customers find it appealing and are motivated
towards buying. Visual merchandising involves displaying products or services aesthetically
using various objects, colors, shapes, materials, designs, and styles to attract the customers.

4
 Identifying the Sales to Marketing Effort Relationship and its Modeling

Sales and Marketing are both working towards the same goal: securing business and helping
their company grow.
Sales is a direct process in which the salesperson talks to the customer and steers them towards
making a purchase. This might be in person, over the phone, or using a digital communication
medium like email or even social media. The process might be very long, taking place over
multiple conversations in which the salesperson learns about the customer and their pain points,
and helps them understand how the product on offer can help solve them.
It could also be a very short process consisting of a single conversation in which the salesperson
lays out the terms of the deal and processes the sale.
Marketing is a much more holistic process that is designed to increase awareness of a brand or
product to the target consumer as a whole. Rarely will a marketer deal one-on-one with a
customer.
The methods, tactics, and channels used by the marketing department look very little like they
did even 15 years ago. It’s primarily digital, including (but not limited to):

● Content marketing
● Social media marketing (SMM)
● Email marketing
● Organic traffic and search engine optimization (SEO)
● PPC ads
● Influencer marketing

1. Collaborate on sales content creation- A recent CSO Insights study showed that 32% of a
sales rep’s time was spent looking for or creating sales content. Creating content that sales teams
can use in their proposals and throughout the selling process is a major factor in an outstanding
sales enablement strategy.Both sales and marketing need to work together to understand their
audience and create targeted content that speaks directly to customers.

5
2. Inform outbound emails- In an ideal world, all sales would be inbound with customers lining
up to get their hands on your product or service. But the reality is that, at some point, sales needs
to be in charge of sourcing and contacting their own leads.
3. Systemize lead scoring- Both sales and marketing teams need to create one system for scoring
and evaluating. The system is entirely conditional and depends entirely on the product, the
audience, and the buying cycle. Turning an MQL into an SQL too soon can hurt conversion, so
you need to find the sweet spot in the life cycle. This can only be found by trial and error,
communication, and evolution.
4. Develop buyer personas- Sales is the front line of any successful company. They know who’s
buying and why those customers are motivated to buy in the first place. Marketing understands
the industry at large and who they should be targeting. The best buyer personas are born from a
mixture of marketing research and insights from your actual customer base.
The sales team can provide important insights and generalizations on the leads they’re
interacting with the most, while marketing research can inform broader insights like patterns
and commonalities. Sales and marketing must direct their efforts at the same prospects and be
completely aligned on decisions and pricing.
5. Leverage marketing to showcase your sales team’s expertise- Ideally, sales teams are
brilliant at lead generation and closing sales but aren’t always their own best advocates when it
comes to selling themselves. That’s why they need your marketing team’s power to create
materials that showcase their expertise.
6. Hold regular meetings- Even the most amicable and aligned departments need actual face time
to develop their internal relationships and sense of how the other works. Hold regular meetings
to discuss new strategies, go over the results of current campaigns, and learn more about each
team’s processes. An added benefit is getting marketing’s feedback and insight on the sales
team’s agenda, and vice versa.
7. Break down barriers
Aligning your sales and marketing teams may require more than weekly meetings, and it might
take a refresh in terminology and perspective. Break down departmental barriers and replace
the concept of a sales funnel with a revenue cycle.
6
8. Use collaborative analysis
When you’re trying to align two departments, it’s not enough to just focus on KPIs and
collaborative practices. When you’re breaking down departmental barriers, the lines will likely
blur between what the marketing and sales teams are working on.
MARKETING MIX MODELING (MMM)
Marketing mix modeling (MMM) is statistical analysis such as multivariate regressions on sales
and marketing time series data to estimate the impact of various marketing tactics (marketing
mix) on sales and then forecast the impact of future sets of tactics. It is often used to optimize
advertising mix and promotional tactics with respect to sales revenue or profit.

Marketing mix modeling is an analytical approach that uses historic information, such as
syndicated point-of-sale data and companies’ internal data, to quantify the sales impact of
various marketing activities. Mathematically, this is done by establishing a simultaneous
relation of various marketing activities with the sales, in the form of a linear or a non-linear
equation, through the statistical technique of regression. MMM defines the effectiveness of each
of the marketing elements in terms of its contribution to sales-volume, effectiveness (volume
generated by each unit of effort), efficiency (sales volume generated divided by cost) and ROI.
These learnings are then adopted to adjust marketing tactics and strategies, optimize the
marketing plan and also to forecast sales while simulating various scenarios.
Components of Marketing mix modeling (MMM)
Marketing-mix models decompose total sales into two components:

● Base Sales: This is the natural demand for the product driven by economic factors like pricing,
long-term trends, seasonality, and also qualitative factors like brand awareness and brand
loyalty.
● Incremental Sales: Incremental sales are the component of sales driven by marketing and
promotional activities. This component can be further decomposed into sales due to each
marketing component like Television advertising or Radio advertising, Print Advertising
(magazines, newspapers etc.), Coupons, Direct Mail, Internet, Feature or Display Promotions

7
and Temporary Price Reductions. Some of these activities have short-term returns (Coupons,
Promotions), while others have longer term returns (TV, Radio, Magazine/Print).
Elements measured in Marketing mix modeling (MMM)
(i) Base and incremental volume- The very break-up of sales volume into base (volume that
would be generated in absence of any marketing activity) and incremental (volume generated
by marketing activities in the short run) across time gain gives wonderful insights. The base
grows or declines across longer periods of time while the activities generating the incremental
volume in the short run also impact the base volume in the long run.
(ii) Media and advertising- Market mix modeling can determine the sales impact generated by
individual media such as television, magazine, and online display ads. In some cases it can be
used to determine the impact of individual advertising campaigns or even ad executions upon
sales.
(iii) Trade promotions- Trade promotion is a key activity in every marketing plan. It is aimed
at increasing sales in the short term by employing promotion schemes which effectively
increases the customer awareness of the business and its products. The response of consumers
to trade promotions is not straight forward and is the subject of much debate.
(iv) Pricing- Price increases of the brand impact the sales volume negatively. This effect can
be captured through modeling the price in MMM. The model provides the price elasticity of the
brand which tells us the percentage change in the sales for each percentage change in price.
Using this, the marketing manager can evaluate the impact of a price change decision.
(v) Distribution- For the element of distribution, we can know how the volume will move by
changing distribution efforts or, in other words, by each percentage shift in the width or the
depth of distribution. This can be identified specifically for each channel and even for each kind
of outlet for off-take sales.
(vi) Launches- When a new product is launched, the associated publicity and promotions
typically results in higher volume generation than expected. This extra volume cannot be
completely captured in the model using the existing variables. Often special variables to capture
this incremental effect of launches are used.

8
(vii) Competition-The impact of competition on the brand sales is captured by creating the
competition variables accordingly. The variables are created from the marketing activities of
the competition like television advertising, trade promotions, product launches etc. The results
from the model can be used to identify the biggest threat to own brand sales from competition.
The cross-price elasticity and the cross-promotional elasticity can be used to devise appropriate
response to competition tactics.
Measuring Advertising Effectiveness | Pretesting and Post Testing
The managerial responsibility in the area of advertising does not come to an end with the
execution of an advertising programme. Any sound managerial effort is finally interested in
goal attainment and, therefore, always ready to evaluate the results.

Evaluation of advertising or advertising effectiveness refers to the managerial exercise aimed at

relating the advertising results to the established standard of performance and objectives so as
to assess the real value of the advertising performance.

This evolution exercise is also known as advertising research. It is an attempt to know whether
the message designed properly has reached the greatest number of prospects at the least practical
cost.

It is an attempt to measure whether the time, talent and the treasure invested in the creative
activity has resulted in attaining the goals of profit maximization to the advertiser and
satisfaction to the consumers at large.
What is to be measured?
It is quite obvious that in the area of ad effectiveness evaluation, the advertiser is to measure the
ad effectiveness.However, it is not clear as to what is ‘ad effectiveness’?
Ad effectiveness evaluation is a research activity and by its very nature, it is to establish the
cause and effect relation between the efforts and the results. This ad effectiveness is to be seen
in five areas namely, markets, motives, messages, media and overall results.

9
In each area, one is to look in for the advertising ability and the achievements in the light of
preset objectives. Advertising testing is indispensable because, it enables to get down to the
facts, to decide on spending to guard against the mistaken notion that you have to keep in touch
with latest trends, to separate wheat from the chaff, the sheep from goats, the winning ideas
from the duds, to multiply the results from the rupee investments so made.
When to test?
Testing of ad effectiveness is possible at any stage of advertising process. It can be done before
the advertising campaign begins or during its run or after the campaign is fully run. Pre-testing
gives the maximum safety as much is not lost; concurrent testing makes him to lose little more
as the advertising process has advanced.

Post-testing results in maximum loss if it fails as the whole show is over and he gets the post-
mortem report, as to what has happened. Nothing is certain unless and until, we are sure about
the accuracy and reliability of feed-back that the advertiser gets from such research.
How to test?
Fortunately, the advertising has wide range of testing techniques or the methods to choose for
evaluation purpose. What methods or techniques he is going to use is dependent on when he is
going to measure the ad effectiveness.

Accordingly, there can be three sets of methods to meet his needs namely, pre-testing,
concurrent testing and post-testing methods.
A. Pre-testing methods
1. Check-list test- A check-list is a list of good qualities to be possessed by an effective
advertisement. A typical check- list provides rating scale or basis for ranking the ads in terms
of the characteristics.
These characteristics may be honesty, attention getting, readability, reliability, convincing
ability, selling ability and the like. The ad that gets highest score is considered as the best.

10
2. Opinion test- Opinion test or consumer jury test is one that obtains the preference of a
sample group of typical prospective consumers of the product or the service for an ad or part
of it. The members of the jury rate the ads as to their head-lines, themes, illustrations, slogans,
by direct comparison.
Getting preference from a juror is better than getting it from a member of general public or an
ad expert.
Jury’s preference is arrived at by seeking answers to the questions as to which ad was seen first?
Which was most convincing?
Which was most interesting? And so on.
Accordingly, the top ranking ad gets selected.
3. Dummy magazine and port-folio test
Dummy magazines are used to pre-test the ads under conditions of approximation resembling
normal exposure. A dummy magazine contains standard editorial material, control ads that have
been already tested and the ads to be tested. The sample households receive these magazines
and the interviews are conducted to determine recall scores.

Port-folio test is like that of dummy magazine test except that the test ads are placed in a folder
that contains control ads. The respondents are given these folders for their reading and reactions.
The test scores are determined in the interview. The ad with highest score is taken as the best.

4. Inquiry test
It involves running two or more ads on a limited scale to determine which is most effective in
terms of maximum inquiries for the offers made. These inquiry tests are used exclusively to test
copy appeals, copies, illustrations, and other components.

Any of these elements may be checked. The point that is to be checked is changed and all other
components are unaltered, to get the score.

11
 5. Mechanical tests
These mechanical tests are objective in nature unlike the one already explained. These help in
provide good measures as to how respondent are eyes and emotions reaching a given
advertisement.
The most widely used mechanical devices are:

● Eye Movement Camera

● Perceptoscope
● Psycho-galvanometer and
● Tachistoscope.

B. Concurrent Testing Methods

1. Co-incidental surveys
This is called as coincidental telephone method also whereby a sample of households is selected,
calls are made during the time programme broadcast, the respondents are asked whether their
radio or television is on, and if so, to what station or programme it is tuned? The results of the
survey are used to determine the share of response for the advertisement or the programme.

2. Consumer diaries
This method involves giving the families selected in advance of diary or individual diaries to
the members of the family. The selected families and individual respondents are asked to record
the details about the programme they listen or view. The diaries are collected periodically to
determine the scores.

3. Mechanical devices
The mechanical devices used to measure the ad differences concurrently are more common to
broadcast media.

These are:

12
● Audio meters
● Psychogalvanometer
● Tachistoscope and
● Truck Electronic Unit.

4. Traffic counts
Traffic counts are of special applicability to outdoor advertising. One can get good deal of
information through traffic counts. This counting is done by independent organisations may be
private or public. This work is also undertaken by advertising agencies. For instance, how many
automobiles and other vehicles were exposed to a bulletin board or a poster or a wall painting
and how many times? Can be determined.

C. Post-testing methods

1. Inquiry tests
It is controlled experiment conducted in the field. In inquiry test, the number of consumer
inquiries produced by an advertising copy or the medium is considered as to the measure of its
communication effectiveness.

Therefore, the number of inquiries is the test of effectiveness which can be produced only when
the ad copy or the medium succeeds in attracting and retaining reader or viewer attention. To
encourage inquiries, the advertiser offers to send something complimentary to the reader or the
viewer, if he replies.

2. Split-run test
A split-run test is a technique that makes possible testing of two or more ads in the same
position, publication, issued with a guarantee of each ad reaching a comparable group of readers.
It is an improvement over the inquiry test in that the ad copy is split into elements like appeal
layout headline and so on. Here also, the readers are encouraged to reply the inquiries to the
keyed or the given address.

13
3. Recognition tests
Recognition is a matter of identifying something as having seen or heard before. It is based on
the memory of the respondent. It attempts to measure the ad effectiveness by determining the
number of respondents who have read or seen the ads before. To arrive at the results, readership
or listenership surveys are conducted.

4. Recall tests
Recalling is more demanding than recognizing as a test of memory. It involves respondents to
answer as to what they have read, seen or heard without allowing them to look at or listen to the
ad while they are answering.

There are several variations of this test. One such test is Triple Association Test which is
designed to test copy themes or the slogans and reveals the extent to which they have
remembered.

5. Sales tests
Sales tests represent controlled experiment under which actual field conditions than the
simulated are faced. It attempts to establish a direct relationship between one or more variables
and sales of a product or service. It facilitates testing of one ad against another and one medium
against another.

To sum-up, ad effectiveness testing is a must to avoid costly mistakes, to select the best
alternative from the apparently equal alternatives, to resolve the differences of opinion and to
add to the store of knowledge having deep bearing on advertising effectiveness and efficiency.
Ad effectiveness testing can be at three levels namely, prior to, during and after the release of
an ad.

There are many methods to choose. The final results depend on the validity, reliability and the
relevance of each method employed. Testing, if done in good faith, can payout its costs and rich
dividends too.

14
 Optimizing Advertising

The purpose of quick advertising optimization is to find slices of inventory that provide a
positive return-on-investment (ROI) for your campaigns. With Exact Drive you can optimize to
a Cost per Click (CPC) or Cost per Acquisition (CPA).

The concept of advertising optimization isn’t very complicated: it’s taking past performance
and applying it to a future goal, such as cost per click (CPC) or cost per acquisition (CPA). If
you’re likely to get a click, spend a lot; if you’re not, spend a little or don’t buy at all.

Even though it appears easy to provide example advertising optimization that way, in practice
it can be hard to do. Should we calculate the click through rate for a whole website or a specific
section? Does the creative itself make a difference to performance? Does frequency? Recency?
Should we break out click through rate by day of the week? Geographic region? Can we bucket
groups of similar sites with low volume and still optimize (apply a click through rate) to that?
These are just a handful of questions that can be related to advertising optimization.

There’s one more piece to consider, and that’s the “Learning Stage.” Before you can decide
how to calculate or optimize click through rates or conversion rates or any other performance
metric, you have to get some initial data of some kind. Basically, buying ad impressions to learn
on usually has a much lower return on investment (ROI) than buying “optimized” because you
are flying relatively blind, so you want to strategize a bit when buying and bidding in the learn
stage.

All of this makes advertising optimization more complex than it seems. Good advertising
optimization has a lot of “levers” that can be tweaked, and we would like to offer our clients the
ability to tweak them using their own intuition and experience in combination with our analytics
and reporting system.

Here are some of the types of things you can affect your campaign within the Exact Drive
advertising optimization system:
15
(i) Learn budget: We recommend starting with roughly 20% of your campaign budget if you
need a ballpark figure, but you can choose how much to spend on learn.

(ii) Learn bids: We use a specially calculated metric called Estimated Average Price to get
started bidding.

(iii) Throttling: We cap bids according to how confident we are in our performance
calculations. This means, basically how much data we have to base click through rates and
conversion rates on. A good rule of thum is to dial your throttling up or down according to how
fast you need or want data.

(iv) Copy or pre-populate Learn: If you have learn data from other sources, we can get you
started ahead of the game.

(v) Getting out of Learn: How much data do you need to be confident of performance
accuracy? You can trust us or adjust the number of events you need to get out of learn.

(vi) Frequency-Recency Modifier: All bids, learn or optimized, are adjusted via a frequency-
recency modifier.

(vii) Projected learn modifier: This can affect how fast you decide to “give up” on certain
inventory or get out of learn and into optimized bidding.

(viii) Targeted Inventory: We optimize to groups of objects, such as a creative-campaign-

pixel-inventory tag bucket. If you target different inventory types, such as above and below the
fold, in different campaigns, you will effectively break out optimization.

Pay Per Click (PPC) Online Advertising

16
PPC is an online advertising model in which advertisers pay each time a user clicks on one of
their online ads.There are different types of PPC ads, but one of the most common types is the
paid search ad. These ads appear when people search for things online using a search engine
like Google – especially when they are performing commercial searches, meaning that they’re
looking for something to buy. This could be anything from a mobile search (someone looking
for “pizza near me” on their phone) to a local service search (someone looking for a dentist or
a plumber in their area) to someone shopping for a gift (“Mother’s Day flowers”) or a high-end
item like enterprise software. All of these searches trigger pay-per-click ads.

In pay-per-click advertising, businesses running ads are only charged when a user actually clicks
on their ad, hence the name “pay-per-click.”
Working
As its name implies, the Ad Auction is a bidding system. This means that advertisers must bid
on the terms they want to “trigger,” or display, their ads. These terms are known as keywords.

Say, for example, that your business specializes in camping equipment. A user wanting to
purchase a new tent, sleeping bag, or portable stove might enter the keyword “camping
equipment” into a search engine to find retailers offering these items.

At the moment the user submits their search query, the search engine performs the complex
algorithmic calculations that the Ad Auction is based upon. This determines which ads are
displayed, in which order, and by which advertiser.

Since you have to pay for each click on your ads, it’s imperative to only bid on keywords that
are relevant to your business, so you can be sure to get ROI from your ad spend. A keyword
tool can help you find the right keywords to bid on that are both likely to drive sales or
conversions, and are not prohibitively expensive.

17