Marketing Analytics

By Ms.Himanshi
 Customer Analytics

• Customer analytics refers to the processes and

technologies that give organizations the customer
insight necessary to deliver offers that are
anticipated, relevant and timely.
• Customer analytics (or consumer analytics for B2C) is
the process of collecting and analyzing behavioral
customer data across a range of channels, devices,
and interactions. These analytics give you the insight
necessary to form strategies, products, and services
that your customers will want to engage with.
 The importance of customer analytics
• Customer analytics is becoming critical. To understand why, consider this: Customers are more
empowered and connected than ever. And becoming more so. Customers have access to information
anywhere, any time – where to shop, what to buy, how much to pay, etc. That makes it increasingly
important to obtain customer insight to understand how they will behave when interacting with your
organization, so you can respond accordingly. The deeper your understanding of customers' buying
habits and lifestyle preferences, the more accurate your predictions of future buying behaviors will be
– and the more successful you will be at delivering relevant offers that attract rather than alienate
customers.
• Some business benefits of the different types of customer analytics are:
• Higher customer satisfaction and retention
• Lower lead generation and acquisition costs
• Increased sales and revenue
• Better brand awareness
• Increased user/customer engagement
• That’s because data tells you what you need to do to achieve each and every revenue and growth
goal — from how to encourage customer engagement to how to promote customer loyalty. You can’t
improve what you can’t measure, as the saying goes. 
• And this is especially because consumers are more informed and selective than ever. To truly
understand them, and their needs, you need the right data.
• It’s no coincidence that successful companies are heavily data-driven. According to McKinsey,
companies making intensive use of customer analytics are 
2.6 times more likely to have a significantly higher ROI and three times as likely to generate above-ave
rage revenue growth
 than competitors.
 What you can do with customer analytics

• Increase response rates, customer loyalty and, ultimately,

ROI by contacting the right customers with highly relevant
offers and messages.
• Reduce campaign costs by targeting those customers
most likely to respond.
• Decrease attrition by accurately predicting customers
most likely to leave and developing the right proactive
campaigns to retain them.
• Deliver the right message by segmenting customers more
effectively and better understanding target populations.
 How do customer analytics work?

• Customer analytics gives companies full visibility into how customers use their
products. Analytics is particularly useful for companies with technology offerings because
they can collect step-by-step data on how customers, users, or subscribers flow through their
sites or apps. At a macro-level, this exposes major trends such as how users discover their
product, which features they like best, where they find value, and what causes them to
leave. At a micro-level, customer analytics allows companies to understand who their users
are as individuals. They can segment users by demographics, interests, and behaviors and
view their unique journeys. This knowledge helps businesses better cater to each customer
persona. Elavon, for example, is a mobile payment app that found its users were complaining
they couldn’t download the app. Using Mixpanel’s customer analytics software they were
able to instantly identify all users trying to download the app on incompatible OS systems,
reach out, and suggest a fix. Another Mixpanel customer, STARZ PLAY, was able to segment
their customers by behavior to detect fraud and reduce it by a factor of 1,000. Which teams
have a need for customer analytics?
• Marketing can create segments and look-alike audiences.
• Sales can scores leads, prospects, and users.
• Product can measure features, usage, and customer journeys.
What questions can customer analytics answer?

• Customer analytics platforms can answer questions on anything that can be measured or tracked. That said, the
answers they provide are only as good as the questions asked of them. Open-ended, subjective, or relative questions
like, “Is our product the best?” are difficult to clearly answer. Good questions are concrete, easily proved or
disproved, and tie back to core business objectives like acquisition, revenue, retention, and engagement. Examples
of common customer analytics questions:

• Acquisition
Which channels drive the most new customers?
What is the most common customer journey from awareness to advocacy?
• Revenue
What are our most profitable revenue channels?
Which users are the most profitable?
• Retention
Where do we lose customers and why?
What behaviors are correlated with high retention rates?

• Engagement
What features resonate with which customers?
What is the optimal experience for users?
• To receive accurate answers from their customer analytics platforms, businesses capture and analyze their data. For
this, proper implementation is key.
 What can you do with customer analytics?

• Once you begin tracking and analyzing customer data, you can use them
to answer questions about customer behavior and make important
business decisions. For example, you can identify ways to:
• Increase personalization (both of content and product)
• Send the right message at the right time
• Focus the right campaigns to the right audience
• Make sure experiences throughout the customer journey are positive
• Aid product development, and marketing and sales as a whole
• One thing to consider is, given the many different types of analytics (that
we’ll see below), you’ll need buy-in from multiple teams and data from a
range of disparate sources to complete the full picture. To do this, you
can use the
 unified customer view that customer experience platforms offer.
 The 4 main categories of customer analytics

• Here are the four categories of analytics with customer analytics examples:
• Descriptive analytics. Gives you insight into past customer behavior.
(Example: 30 percent of customers returned product X within a month of
purchase).
• Diagnostic analytics. Helps you understand the “why” behind customer
behavior. (Example: 50 percent of customers think product X is not what
they expected).
• Predictive analytics. Helps you predict future customer behavior. (Example:
In the fall of 2020, purchases of product X are expected to decline).
• Prescriptive analytics. Provides suggestions on how you can influence or
address customer behavior. (Example: Social media campaigns and online
ads can increase sales of product X by 25 percent).
 What Is Customer Lifetime Value (CLV)?

• Customer lifetime value (CLV) is a measure of the total

income a business can expect to bring in from a typical
customer for as long as that person or account remains a
client.
• Customer lifetime value (CLV) is a business metric that
measures how much a business can plan to earn from the
average customer over the course of the relationship.
Differences in products, costs, purchase frequencies and
purchase volumes can make customer lifetime value
calculations complex. However, with the right tools, you
can find customer lifetime value in just a few clicks.
 Key Takeaways

• Customer lifetime value (CLV) is a measure of the average

customer’s revenue generated over their entire
relationship with a company.
• Comparing CLV to customer acquisition cost is a quick
method of estimating a customer’s profitability and the
business’s potential for long-term growth.
• Businesses have several marketing tools to help them
improve CLV over time.
• Looking at CLV by customer segment may offer expanded
insights into what’s working well and what isn’t working as
well for your organization.
 Why Is Customer Lifetime Value Important to Busine sses? Why Does It Matter?

• You Can’t Improve What You Don’t Measure: Once you start measuring customer lifetime value and breaking down the
various components, you can employ specific strategies around pricing, sales, advertising and customer retention with a goal
of continuously reducing costs and increasing profit.
• Make Better Decisions on Customer Acquisition Costs: When you know what you will earn from a typical customer, you can
increase or decrease spending to ensure you maximize profitability and continue to attract the right types of customers.
• Improved Forecasting: CLV forecasts help you make forward-looking decisions around inventory, staffing, production capacity
and other costs. Without a forecast, you could unknowingly overspend and waste money or underspend and put yourself in a
bind where you struggle to keep up with demand.
• Advantages of Customer Lifetime Value
• Improve Customer Retention: One of the biggest factors in addressing CLV is improving customer retention and avoiding 
customer attrition. Tracking these details with accurate segmentation can help you identify your best customers and determine
what’s working well.
• Drive Repeat Sales: Some retailers, tech companies, restaurant chains and other businesses have loyal customer bases that
come back again and again. You can use CLV to track the average number of visits per year or over the customer lifetime and
use that data to strategize ways to increase repeat business.
• Encourage Higher-Value Sales: Netflix is an example of a business that improved CLV through higher pricing but learned years
ago that increasing costs too quickly may scare off long-time customers. The right balance is key to success here.
• Increase Profitability: Overall, a higher CLV should lead to bigger profits. By keeping customers longer and building a business
that encourages them to spend more, you should see the benefit show up on your bottom line.
• Challenges of Customer Lifetime Value
• It Can Be Hard to Measure: If you don’t have quality tracking systems in place, calculating CLV can be difficult. An 
enterprise resource planning (ERP) or customer relationship management (CRM) system can make this information easily
available on an automated dashboard that tracks KPIs.
• High-Level Results May Be Misleading: Looking at a business’s total CLV can be a helpful data point, but it can also cover up
problems in certain customer segments. Breaking down the data by customer size, location and other segments may provide
more useful data.
 How to Measure Customer Lifetime Value

• Customer Lifetime Value = (Customer Value * Average

Customer Lifespan) To find CLTV, you need to calculate the
average purchase value and then multiply that number by
the average number of purchases to determine customer
value. Then, once you calculate the average customer
lifespan, you can multiply that by customer value to
determine customer lifetime value.
• Customer Lifetime Value = (Customer Value * Average
Customer Lifespan)
• where Customer Value = Average Purchase Value *
Average Number of Purchases
 Customer Lifetime Value Formulas
• Average Purchase Value
• Calculate this number by dividing your company's total revenue in a period
(usually one year) by the number of purchases throughout that same period.
• Average Purchase Frequency Rate
• Calculate this number by dividing the number of purchases by the number of
unique customers who made purchases during that period.
• Customer Value
• Calculate this number by multiplying the average purchase value by the average
purchase frequency rate.
• Average Customer Lifespan
• Calculate this number by averaging the number of years a customer continues
purchasing from your company.
• Customer Lifetime Value (CLTV)
• Multiply customer value by the average customer lifespan. The multiplication
will give you the revenue you can reasonably expect an average customer to
generate for your company throughout their relationship with you.
 CUSTOMER CHOICE MODEL
• The Customer Choice (Logit) model is an individual-level response model that helps
to analyze and explain the choices individual customers make in the market. The
Customer Choice model helps firms to understand the extent to which such factors
as price of a brand or its ease of installation influence a customer's choice of a
brand. A brand's purchase probability at the individual level is equivalent to the
brand's market share at the market level.
• Firms can use Customer Choice analysis to develop marketing programs that are
tailored to specific market segments, or even tailored to individual customers.
• For each customer, the data that goes into this model is a set of ratings on various
attributes of each alternative (either single alternative "yes/no" response, or
multiple alternatives "chose one of N" response) involved in the study, and the
alternative that the customer chose in each period. For the "Single
Alternative/Boolean" option, this would be a 1 or 0, depending on whether or not
the customer chose this alternative. For the "Multiple Alternatives" option, one
alternative would be a 1 to indicate the alternative chosen during this period, while
the others remain 0 to indicate that this particular customer did not choose the
other alternatives.