Chapter 1 Flashcards
what does a good decision require
reasoned choice among competing alternatives
what is good decision making essential in?
essential in business
what does the marketing decision follow? and what’s the risk?
follows an intuitive decision-making process comprised of judgement calls based on manager’s mental models of the world, developed in their own experience. this is prone to systematic errors - bias, skewed to certain POVs
define marketing engineering
systematic translation of data and knowledge into tools used to enhance marketing decision making.
systematic approach to harness data and knowledge to drive effective marketing decision making and implementation through a technology enabled and model supported interactive decision process
define conceptual marketing
when decision maker relies solely on their mental models
define automated marketing
to automate decision process using a sophisticated information system
what yields the best results when solving marketing problems
mix of decision support tools.
what does the marketing engineering approach require in an organizational setting?
requires design and construction of decision models and implementation of those models in the form of marketing management support systems (MMSS)
what’s the purpose of marketing engineering
to simplify the decision context and create a decision architecture to help focus on the key issues
aid managers in assessing the what if - opportunity costs.
why did engineer marketing have short-lived successes in the past
lack of tech available
what helped to make marketing analytics more central to decision making architectures?
Enterprise-wide systems for resource planning (ERP) and Customer relationship management (CRM)
what’s the marketing engineering approach?
- data –> database management
- information n –> decision model; mental model
- Insights –> Judgement under uncertainty
- Decisions –> financial, human + other organizational resources
- Implementation
what’s a problem for marketing
too much data - how to quickly transform data into insights
what is there a disconnect between? what does that suggest?
disconnect between the resources CMOs plan to invest in customer analytics and the business performance they expect to attain from that investment
suggests both an opportunity and increasing interest in deploying systematic, analytics processes to generate insights, guide creative thinking for developing more effective marketing programs and measure outcomes.
how do decision-support tools and mental models assist each other
mental models can incorporate idiosyncratic aspects of a decision situation but they may force fit new cases into old patterns
decision models may be consistent and unbiased, but they can underweight or ignore idiosyncratic aspects of the situation
data-driven vs knowledge-driven marketing engineering
data-driven: supports tool answers to what if questions on the basis of a quantified market response model.
knowledge-driven decision support tool captures the qualitative knowledge available about a particular domain.
benefits fo marketing enegineering
managers can explore more decision options, consider decision options more distant form the “base solutions, assess the relative impact of different marketing decision variables more precisely, facilitate group decision making, and enhance their own subjective mental models of market behaviour -
marketing engineering approach leads to better and more systematic marketing decision making
what’s the challenge of ROI in marketing investment?
defining what the total costs associated with an investment is. direct + indirect costs
ROI doesn’t include a natural time frame
formula for ROI
ROI % = [($gains from investment - $ cost of investment)/$cost of investment]
formulas for breakeven analysis formulas
total revenue - quantity sold * price = qp
total cost = fixed cost + variable cost = FC + VC(q) = FC + cq
profit = (total revenue - total cost) = qp - FC - cq
0 = BEp - FC - BEC
BE = FC/(p-c) fixed cost/unit margin
why is understanding the fixed and variable cost structure
important for determine the relative importance of volume versus price as a strategic focus of marketing and for understanding the ease with which potential competitors could enter the market.
smart vs dumb model
smart model - spreadsheet embeds an equation or response model - which the manager uses to consider the effect of advertising on both sales and revenues and determine if increases or decreases in advertising are justified
define market response models
ingredients that can transform dumb spreadsheet model into a smart one
response models = important for systematically addressing many recurring strategic and tactical decision problems in marketing (in assessing the opportunity costs of the decision at hand)
the link from inputs to measurable output of concern to the firm
how do response models function?
in a framework of marketing decision models
a firm’s marketing actions with actions of competitors and environmental conditions, combine to drive the market response, leading to key outputs. those outputs must be evaluated relative to the objectives of the firms and the firm then adapts or changes its marketing actions, depending on how well it’s doing
type of response models
by number of marketing variables
by whether they include competition
by the nature of the relationship between input and output variables
by whether the models reflect individual or aggregate responses
by the level of demand analyzed
define parameters
parameters: the constants (a’s and b’s in math equations) in the mathematical representation of models. - must estimate the paramter values which infuse life into an abstract model and often have direct marketing referents
define calibration
process of determining appropriate values for the parameters
to calibrate a model, a marketer might use statistical methods, judgmental process, or a combination of approaches
objective vs subjective calibration
objective calibration =
subjective calibration = rely on judgement calls
r-square in marketing model
how well the model represents the data
define carryover effect
influence of a current marketing expenditure on sales in future periods
types of carry over effects
delayed response effect: arises from delays between when marketing dollars are spent and their impact - evident in industrial markets
customer-holdover effect - arises when new customers created by marketing expenditures remain customer for many subsequent periods so their later purchases should be credited to some extent to the earlier marketing expenditures. some percentage of these new customers will be retained in each subsequent period = phenomenon gives rise to customer retention rate + customer decay rate.
new tier effect - sales reach a peak before settling down to a steady state, are common for frequently purchase products - many customer try new brand but few become regular uses
stocking effects - when a sales promotion not only attracts new customers but also encourages existing customers to stock up or buy ahead - often leads to sales drop in period following the promotion
brand sales formula
market sales x brand market share = brand sales
effects of marketing action
may result in no effect at all, or it may provoke a competitive response - increasing total product class sales but lowers firm’s share in that market
define attraction models
determine the attraction of a brand on the basis of its marketing mix
formula for a share based on attraction model
share = attractiveness of offering / (attractiveness of Offering + attractiveness of competitive offerings)
how can individuals and groups of individuals be modeled in a marketing engineering framework
managers must specify objectives that must specify the time horizon, deal with future uncertainty, and address the issue of which objectives to pursue.
define discretionary costs
those associated with the marketing activity under study
what’s the simplest and common tactical objective for improving firm performance?
maximizing short-run profit
what ae the relevant costs
fixed and discretionary
define fixed costs
plant + overhead expenditurs that should be allocated appropriately to marketing activity
what are the 2 questions regarding fixed costs
are fixed costs really fixed?
are profits greater than fixed costs?
the marketing engineering approach facilitates the process of decision making by…
suggesting the values of the independent variables that will offer the best opportunity to achieve these goals
define shared experience models
pool the experience of a wide range of businesses and develop norms or guidelines for response behaviour from the pooled data. - using benchmarking 9comparing operations against acknowledged good alternatives) which facilitates systematic comparisons with a strong outside comparison point
define qualitative response models
represents qualitative knowledge and insights
what factors are used to evaluate a model?
model specification - contain the right variable to represent the decision situation?
model calibration
model validity
value, model useability
marketing engineering approach characteristics
centers on interactive decision models - customizable, computerized representations of marketing phenomena to enhance managerial decision making
