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Praise forCutting-Edge Marketing Analytics“Cutting-Edge Marketing Analytics presents managers with an excellent roadmap for marketingresource allocation. Based on my experience advising firms, I believe that the material presented in thebook strikes the right balance of rigorous analysis and strategic relevance. Case studies presented in thebook provide the necessary context for the application of statistical tools and allow managers and MBAstudents to learn the challenges in implementing analytics.”—V. Kumar, Executive Director, Center for Excellence in Brand and Customer Management,and Director of the Ph.D. Program in Marketing, J. Mack Robinson College of Business,Georgia State University“This is exactly the book I have been looking for to teach customer analytics! It will fill an importantgap in the market as it teaches practical approaches to gain customer insights based on big data that isincreasingly available to organizations.”—Harald J. van Heerde, MSc, Ph.D., Research Professor of Marketing, Massey University, School ofCommunication, Journalism, and Marketing“Retail’s transformation is still in the early innings. The Internet and mobile have combined to createunprecedented insight into consumer behavior and customer preferences unbound by time or space.Mastery of marketing and customer analytics has become ‘table stakes’ for understanding and pleasingthe customer—job one in retail. Practitioners looking for real world applications with a balancedoverview of the underlying theory would be well served by reading this book.”—Matt Kaness, Chief Strategy Officer, Urban Outfitters“I strongly recommend Cutting-Edge Marketing Analytics for managers seeking to build an analyticsdriven marketing function. In this book, the authors have struck the right balance of analyticalsophistication and managerial relevance. The case studies provide a good opportunity for applying theanalytics techniques to real problems.”—Nino Ninov, Vice President, Strategic Research and Analysis, Rosetta Stone

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Cutting-EdgeMarketing AnalyticsReal World Cases and Data Sets forHands On LearningRajkumar VenkatesanBank of America Research Professor of Business Administration,Darden Graduate School of Business Administration,University of VirginiaPaul FarrisLandmark Communications Professor of Business Administration,Darden Graduate School of Business Administration,University of VirginiaRonald T. WilcoxEthyl Corporation Professor of Business Administration,Darden Graduate School of Business Administration,University of Virginia

Associate Publisher: Amy NeidlingerExecutive Editor: Jeanne Glasser LevineOperations Specialist: Jodi KemperCover Designer: Alan ClementsManaging Editor: Kristy HartSenior Project Editor: Betsy GratnerCopy Editor: Karen AnnettProofreader: Katie MatejkaIndexer: Tim WrightSenior Compositor: Gloria SchurickManufacturing Buyer: Dan Uhrig 2015 by Rajkumar Venkatesan, Paul Farris, and Ronald T. WilcoxPublished by Pearson Education, Inc.Upper Saddle River, New Jersey 07458For information about buying this title in bulk quantities, or for special sales opportunities (which may include electronicversions; custom cover designs; and content particular to your business, training goals, marketing focus, or brandinginterests), please contact our corporate sales department at corpsales@pearsoned.com or (800) 382-3419.For government sales inquiries, please contact governmentsales@pearsoned.com.For questions about sales outside the U.S., please contact international@pearsoned.com.Company and product names mentioned herein are the trademarks or registered trademarks of their respective owners.All rights reserved. No part of this book may be reproduced, in any form or by any means, without permission in writingfrom the publisher.Printed in the United States of AmericaFirst Printing July 2014ISBN-10: 0-13-355252-7ISBN-13: 978-0-13-355252-2Pearson Education LTD.Pearson Education Australia PTY, Limited.Pearson Education Singapore, Pte. Ltd.Pearson Education Asia, Ltd.Pearson Education Canada, Ltd.Pearson Educación de Mexico, S.A. de C.V.Pearson Education—JapanPearson Education Malaysia, Pte. Ltd.Library of Congress Control Number: 2014937240

We dedicate this book to our students for beinga constant source of inspiration.

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ContentsForeword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xivIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1Why Marketing Analytics? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .What Is in This Book? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Organization of the Book . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1344Section IResource Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5Chapter 1A Resource-Allocation Perspective for Marketing Analytics. . . . . . . . . . . . .6Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6The Resource-Allocation Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6An Illustration of the Resource-Allocation Framework . . . . . . . . . . . . . . . . . . . 8Measuring ROI: Did the Resource Allocation Work? . . . . . . . . . . . . . . . . . . . 12Working with Econometrics: IBM and Others . . . . . . . . . . . . . . . . . . . . . . . . . 14Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Chapter 2Dunia Finance LLC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Dunia: Into the World . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Dunia: How Its World Worked . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .New Customers and a Dunia Credit Bureau of Sorts . . . . . . . . . . . . . . . . . . . .New Customer Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Strategic Analytics Unit and Customer Retention. . . . . . . . . . . . . . . . . . .Booking a Cross-Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cross-Selling and Growth Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Assignment Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1819202223242627282932

viiiCUTTING-EDGE MARKETING ANALYTICSSection IIProduct Analytics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33Chapter 3Cluster Analysis for Segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .An Example. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cluster Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Chapter 4Segmentation at Sticks Kebob Shop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Sticks Story . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Planning for Expansion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Fast-Food Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Sticks’s Existing Marketing Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Assignment Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Chapter 54344444649505153A Practical Guide to Conjoint Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . .55Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Anatomy of a Conjoint Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Experimental Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Data Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Interpreting Conjoint Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Conjoint Analysis Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Chapter 634343642425556565758596464Portland Trail Blazers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Portland Sports Market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Multigame Ticket Packages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Designing the Research Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Study Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cost of Multigame Packages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Assignment Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .656667686970717276