Chapter 1

Question 1

what does a good decision require

Answer 1

reasoned choice among competing alternatives

Question 2

what is good decision making essential in?

Answer 2

essential in business

Question 3

what does the marketing decision follow? and what’s the risk?

Answer 3

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

Question 4

define marketing engineering

Answer 4

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

Question 5

define conceptual marketing

Answer 5

when decision maker relies solely on their mental models

Question 6

define automated marketing

Answer 6

to automate decision process using a sophisticated information system

Question 7

what yields the best results when solving marketing problems

Answer 7

mix of decision support tools.

Question 8

what does the marketing engineering approach require in an organizational setting?

Answer 8

requires design and construction of decision models and implementation of those models in the form of marketing management support systems (MMSS)

Question 9

what’s the purpose of marketing engineering

Answer 9

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.

Question 10

why did engineer marketing have short-lived successes in the past

Answer 10

lack of tech available

Question 11

what helped to make marketing analytics more central to decision making architectures?

Answer 11

Enterprise-wide systems for resource planning (ERP) and Customer relationship management (CRM)

Question 12

what’s the marketing engineering approach?

Answer 12

1. data –> database management
2. information n –> decision model; mental model
3. Insights –> Judgement under uncertainty
4. Decisions –> financial, human + other organizational resources
5. Implementation

Question 13

what’s a problem for marketing

Answer 13

too much data - how to quickly transform data into insights

Question 14

what is there a disconnect between? what does that suggest?

Answer 14

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.

Question 15

how do decision-support tools and mental models assist each other

Answer 15

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

Question 16

data-driven vs knowledge-driven marketing engineering

Answer 16

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.

Question 17

benefits fo marketing enegineering

Answer 17

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

Question 18

what’s the challenge of ROI in marketing investment?

Answer 18

defining what the total costs associated with an investment is. direct + indirect costs

ROI doesn’t include a natural time frame

Question 19

formula for ROI

Answer 19

ROI % = [($gains from investment - $ cost of investment)/$cost of investment]

Question 20

formulas for breakeven analysis formulas

Answer 20

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

Question 21

why is understanding the fixed and variable cost structure

Answer 21

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.

Question 22

smart vs dumb model

Answer 22

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

Question 23

define market response models

Answer 23

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

Question 24

how do response models function?

Answer 24

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

Question 25

type of response models

Answer 25

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

Question 26

define parameters

Answer 26

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

Question 27

define calibration

Answer 27

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

Question 28

objective vs subjective calibration

Answer 28

objective calibration =

subjective calibration = rely on judgement calls

Question 29

r-square in marketing model

Answer 29

how well the model represents the data

Question 30

define carryover effect

Answer 30

influence of a current marketing expenditure on sales in future periods

Question 31

types of carry over effects

Answer 31

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

Question 32

brand sales formula

Answer 32

market sales x brand market share = brand sales

Question 33

effects of marketing action

Answer 33

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

Question 34

define attraction models

Answer 34

determine the attraction of a brand on the basis of its marketing mix

Question 35

formula for a share based on attraction model

Answer 35

share = attractiveness of offering / (attractiveness of Offering + attractiveness of competitive offerings)

Question 36

how can individuals and groups of individuals be modeled in a marketing engineering framework

Answer 36

managers must specify objectives that must specify the time horizon, deal with future uncertainty, and address the issue of which objectives to pursue.

Question 37

define discretionary costs

Answer 37

those associated with the marketing activity under study

Question 38

what’s the simplest and common tactical objective for improving firm performance?

Answer 38

maximizing short-run profit

Question 39

what ae the relevant costs

Answer 39

fixed and discretionary

Question 40

define fixed costs

Answer 40

plant + overhead expenditurs that should be allocated appropriately to marketing activity

Question 41

what are the 2 questions regarding fixed costs

Answer 41

are fixed costs really fixed?

are profits greater than fixed costs?

Question 42

the marketing engineering approach facilitates the process of decision making by…

Answer 42

suggesting the values of the independent variables that will offer the best opportunity to achieve these goals

Question 43

define shared experience models

Answer 43

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

Question 44

define qualitative response models

Answer 44

represents qualitative knowledge and insights

Question 45

what factors are used to evaluate a model?

Answer 45

model specification - contain the right variable to represent the decision situation?

model calibration

model validity

value, model useability

Question 46

marketing engineering approach characteristics

Answer 46

centers on interactive decision models - customizable, computerized representations of marketing phenomena to enhance managerial decision making