Big Data and the Future of Marketing

Transcription

1 Big Data and the Future of Marketing Florian Zettelmeyer Nancy L. Ertle Professor of Marketing Kellogg School of Management, Northwestern University First Data Leadership Summit 2013

2 Marketing using Big Data has become all the rage FROM THE BUSINESS PRESS - We need to grab this big data resource that has landed on our front step. Armed 1999 with more detailed information about their customers, companies can then promote more effectively and in a highly customized manner. - If there What is a phrase that is summarizes actually the situation, that phrase is "Data 1989 new about Explosion." The result over a one thousand fold increase in information and related data storage, display and utilization requirements. Big Data? - In the next 5 to 10 years there will be an order-of-magnitude increase in the amount of marketing data used 1979 and a similar tenfold increase in computer power available for marketing analysis. - The functioning of the organization requires that numerous urgent 1968 management measures be adopted which take into account a large quantity of data and complex calculations

3 What is new about Big Data? "Big" Data There is lots of it Quantity of data - Move from transactions to clicks, physical movements, and networks - Combination of seemingly unrelated databases - Tracking of pre-purchase behavior - Tracking of post-purchase usage behavior Computing - From mainframes to shared-nothing clusters - New tools (Hadoop, Pig, Mahout, Revolution R,...) - From on-site to the cloud Amazon Web Services IBM BigInsights,...

4 What is new about Big Data? Big "Data" Data enables customer analytics

5 "Big" is only a small part of big data Big Data Is about a big data mindset - Design all processes with measurement in mind - Use predictive & proactive analytics - R&D everywhere - Test everything - Challenge conventional wisdom A big data mindset is useful even if your data fits on just few servers

6 How do I leverage the big data mindset?

7 CASE STUDY: LOYALTY INCENTIVES Harrah s Entertainment until recently owned and operated 29 casinos across the US States FACTS ABOUT HARRAH'S Source for this and following slides: Harrah's presentation, HBS case analysis, press reports

8 CASE STUDY: LOYALTY INCENTIVES Harrah's had experienced rapid growth in the gaming market SAME STORE SALES GROWTH

9 CASE STUDY: LOYALTY INCENTIVES Harrah's outlook looks difficult prior to 1998 SITUATION - Competitors are placing their bets on flashy new properties - Investment required to compete on properties is huge - No expected increase in legal gaming markets How can Harrah's grow?

10 CASE STUDY: LOYALTY INCENTIVES Harrah's asks customers to get insights INSIGHTS 1. Customer engage in large amounts of cross-market play

11 CASE STUDY: LOYALTY INCENTIVES Harrah's asks customers to get insights INSIGHTS 1. Customer engage in large amounts of cross-market play but Harrah's receives small share (36%) of total gaming dollars

12 CASE STUDY: LOYALTY INCENTIVES Harrah's creates relationships with customers in local markets, then extend them to destination markets APPROACH - Cross-market revenues BASIC REQUIREMENTS - Identify customers across markets - Determine what a potentially good customer is - Create incentives for consumers to visit other properties

13 Meeting these basic requirements was nearly impossible CASE STUDY: LOYALTY INCENTIVES CHALLENGES - Each property had its own reward card and different rewards - Incentives for repeat visits applied only locally South Lake Tahoe --> comp rooms & meals at South Lake Tahoe Reno --> comp rooms & meals at Reno Key problem: - Each property has own P&L and resources - Property managers see customers as "theirs", not Harrah's - COO refers to them as "Feudal Lords", running "fiefdoms"

14 CASE STUDY: LOYALTY INCENTIVES The solution for Harrah's was to thing of the customer, not the property as the key source of value HARRAH'S APPROACH - New organizational form: Property managers report to COO, not CEO - IT integration - New branding ("exuberantly alive") Enables marketing with a big data mindset - Designed all processes with measurement in mind IT Integration / behavior tracking Total Reward Program - Use predictive analytics and test everything Forecast customer value Test incentives

15 CASE STUDY: LOYALTY INCENTIVES Harrah's is considered a great success for marketing with the big data mindset SUCCESS INDICATORS - In 1998: Share of gaming dollars of Harrah's customers: 36% - in 2004: Share of gaming dollars of Harrah's customers: 42% - Looks like a modest increase, except... 1% improvement equates into $40 million profit Marketing with the big data mindset affects the entire organization

16 Marketing with the big data mindset is not just about marketing any more SOURCE OF POTENTIAL - Looking at the customer, but not the service or product or department as the source of profits - Using every product and service to create and capture customer value

17 Traditionally, marketing is about the "4 Ps" CURRENT VIEW (Kellogg's Phil Kotler) - Product Design individual products & & services to to create customer value - Price Capture value from from individual products & & services services for firmfor firm - Promotion Advertise and and promote products & & services to to driver awareness, persuasion and and sales sales - Place Manage individual channels of of distribution to to maximize sales sales & & profits

18 To leverage the big data mindset marketing has to change FUTURE OF MARKETING - Product Design individual products & services to create customer value - Price Capture value from individual products & services for firm - Promotion Advertise and promote products & services to driver awareness, persuasion and sales - Place Product Ecosystems and Content Manage individual channels of distribution to maximize sales & profits

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20 FUTURE OF MARKETING - Product Design individual products Design & for services continuous to create engagement customer value Content no longer different from products/services - Price Capture value from individual products & services for firm - Promotion Advertise and promote products & services to driver awareness, persuasion and sales - Place Product Ecosystems and Content Manage individual channels of distribution to maximize sales & profits

21 FUTURE OF MARKETING - Product Design individual products Design & for services continuous to create engagement customer value Content no longer different from products/services - Price Capture value from individual products & services for firm - Promotion Advertise and promote products & services to driver awareness, persuasion and sales - Place Product Ecosystems and Content Revenue Models Manage individual channels of distribution to maximize sales & profits

22 0 % Free or subscription 97 % 53% 23% 15% 5% Transaction and subscription Transaction Free and transaction 3 % 3% 70/30 sharing Developers Content Developers

23 FUTURE OF MARKETING - Product Design individual products Design & for services continuous to create engagement customer value Content no longer different from products/services - Price Capture value from individual Price the system, products not & the product/service services for firm Separate value capture from value creation - Promotion Advertise and promote products & services to driver awareness, persuasion and sales - Place Product Ecosystems and Content Revenue Models Manage individual channels of distribution to maximize sales & profits

24 FUTURE OF MARKETING - Product Design individual products Design & for services continuous to create engagement customer value Content no longer different from products/services - Price Capture value from individual Price the system, products not & the product/service services for firm Separate value capture from value creation - Promotion Advertise and promote products & services to driver awareness, persuasion and sales - Place Product Ecosystems and Content Revenue Models Engagement Manage individual channels of distribution to maximize sales & profits

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26 FUTURE OF MARKETING - Product Design individual products Design & for services continuous to create engagement customer value Content no longer different from products/services - Price Capture value from individual Price the system, products not & the product/service services for firm Separate value capture from value creation - Promotion Advertise and promote Deep products insight & about services consumer to motivation driver awareness, persuasion Leverage and other sales consumer data - Place Product Ecosystems and Content Revenue Models Engagement Manage individual channels of distribution to maximize sales & profits

27 FUTURE OF MARKETING - Product Design individual products Design & for services continuous to create engagement customer value Content no longer different from products/services - Price Capture value from individual Price the system, products not & the product/service services for firm Separate value capture from value creation - Promotion Advertise and promote Deep products insight & about services consumer to motivation driver awareness, persuasion Leverage and other sales consumer data - Place Product Ecosystems and Content Revenue Models Engagement Access Everywhere Manage individual channels of distribution to maximize sales & profits

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29 FUTURE OF MARKETING - Product Product Ecosystems and Content Design individual products Design & for services continuous to create engagement customer value Content no longer different from products/services - Price Revenue Models Capture value from individual Price the system, products not & the product/service services for firm Separate value capture from value creation - Promotion Engagement Advertise and promote Deep products insight & about services consumer to motivation driver awareness, persuasion Leverage and other sales consumer data - Place Access Everywhere Manage individual channels Consumers of distribution don't think to channels; nor should you maximize sales & profits Design access for cross-channel customer

30 The future of marketing is one that enables the "big data mindset" BIG DATA MINDSET - Design all processes with measurement in mind - Use predictive & proactive analytics - R&D everywhere - Test everything - Challenge conventional wisdom

31 Thank you. Florian Zettelmeyer