Applications of Analytics

Unit - 4
 Retail Analytics
Retail Analytics
• Retail is the domain where volumes are large but margins are
usually thin.
• Retail analytics Comprises various elements that assist with
decision-making in the retail business.
 Business intelligence - typically this term is used to refer to the
collection and presentation of historical information in an easy-
to-understand manner, via reports, dashboards, scorecards, etc
 Advanced analytics - Predictive modeling is applied to data.
Retail Value chain
 Role of Analytics plays in retail
1. Consumer
2. Product
3. Workforce
4. Advertising

5. Consumer - Personalization is a key consumer-level

decision
 Personalized pricing by offering discounts via coupons to
select customers.
 Data collection via loyalty cards to better understand a
customer’s purchase patterns and willingness to pay and
uses that to offer personalized pricing
 Role of Analytics plays in retail
2. Product:
 Retail product decisions - single product Vs. group of
product decisions.
 Predictive modeling can be used to forecast the product
demand and the price-response function.
 Understand how customer reacts to price changes.
3. Human resources
 Number of employees needed in the store at various
times of the day and how to schedule them.
 Additional work like customer volume in the store
answering customer questions and manning checkout
counters
 Role of Analytics plays in retail

4. Advertising:
 Finding the best medium to advertise on
(online mediums such as Google Adwords,
Facebook, Twitter, and/or traditional
mediums such as print and newspaper
inserts)
 Best products to advertise
 Some Examples of Retail Analytics
• Analytics has revealed that a great number of
customer visits to online stores fail to convert at the
last minute
 Swedish e-commerce platform Klarna moved its
clients onto an invoicing model, where customers can
pay after the product is delivered.
 Sophisticated fraud prevention analytics are used to
make sure that the system cannot be manipulated by
those with devious intent.
• “Sentiment analysis,” using sophisticated machine
learning-based algorithms to determine the context
when a product is discussed
Examples of Analytics Applications in Retail Value chain
 Complications in Retail Analytics
1. Those that affect predictive modeling
 Retail firms only have access to sales information, not demand
information
 Nontrivial issue of inventory record inaccuracies i.e. the actual
number of products in an inventory differs from the number
expected as per the firm’s IT systems.
 Inaccuracy also affects decision making by impacting the timing of
order placement.
2. Those that affect decision-making
 Constraints on changing prices,
 Supplier lead times, supplier contracts, and
 Constraints on workforce scheduling.
 In particular, retail firms deal with many constraints on changing
prices.
 Data Collection
• Structured (spreadsheet with rows and
columns) and unstructured data can be
considered.
• Can be collected point-of-sale (POS) devices
and data supplied by third parties.
• Video cameras coupled with image detection
technology.
• Internet of Things (IoT)
 Methodologies
• Product-Based Demand Modeling –
1. Exponential smoothing and ARIMA models
• Focus on forecasting sales and may require uncensoring to
be used for decision-making.
• An alternate machine learning-based approach for forecasting
demand in an online fashion retail setting using regression
trees.
2. Regression trees are a nonparametric method that involves
prediction in a hierarchical manner by creating a number of
“splits” in the data
 Methodologies
• First, whether the price of the product is less than $100. If
not, then the demand is predicted as 30.

• Otherwise, the following question is asked: whether the

relative price of competing styles is less than 0.8 (i.e., is the
price of this style less than 80% of the average price of
competing styles); if the answer is no, then the demand is
predicted as 40. Otherwise, it is predicted as 50.
 Marketing Analytics
• Can be defined as a “high technology enabled
and marketing science model-supported
approach to harness the true values of the
customer, market, and firm level data to
enhance the effect of marketing strategies”
• Is the creation and use of data to measure and
optimize marketing decisions.
• Comprises tools and processes that can inform
and evaluate marketing decisions right from
product/service development to sales
Levels of Marketing Analytics Application
 Levels of Marketing Analytics Application
1. Firm
 Tools are applied to the firm as a whole
 Data envelopment analysis (DEA) can be used for all the units (i.e.,
finance, marketing, HR, operation, etc.)
2. Brand/product:
 Tools are applied to decide and evaluate strategies for a particular
brand/product.
 For example, conjoint analysis can be conducted to find the product
features preferred by customers or
 response analysis can be conducted to find how a particular brand
advertisement will be received by the market.
3. Customer
 Provide insights that help in segmenting and targeting customers.
 For example, customer lifetime value is a forward-looking customer
metric that helps assess the value provided by customers to the firm.
Marketing Analytics - Processes and Tools

1. Multivariate Statistical Analysis

2. Choice Analytics
3. Regression models
4. Time-Series Analytics
5. Nonparametric tools
6. Survival analysis
7. Sales force/sales analytics
8. Innovation Analytics
9. Conjoint analysis
10. Customer analytics
 Marketing Analytics - Processes and Tools

1. Multivariate Statistical Analysis

• Analysis of more than two variable
• Cluster analysis, factor analysis, perceptual maps, conjoint
analysis, discriminant analysis, and MANOVA are a part of
multivariate statistical analysis.
• These can help in target marketing and segmentation, optimizing
product features, etc., among other applications.
2. Choice Analytics:
• Provides insights on how customers make decisions.
• Understanding customer decision-making process
• Largely, Logistic & Probit, models are covered in this section
 Marketing Analytics - Processes and Tools
3. Regression models:
• Regression modeling establishes relationships between
dependent variables and independent variables.
• It can be used to understand outcomes such as sales and
profitability, on the basis of different factors such as price and
promotion.
• Univariate analysis, multivariate analysis, nonlinear analysis,
and moderation and mediation analysis are covered in this
section.
4. Time-Series Analytics
• Mainly deal with cross-sectional data
• Consists of auto-regressive models and vector auto
regressive models for time-series analysis.
• Can be used for forecasting sales, market share, etc.
 Marketing Analytics - Processes and Tools
5. Nonparametric tools:
• Used when the data belongs to no particular distribution.
• Data envelopment analysis (DEA) and stochastic frontier
analysis (SFA).
• Can be used for benchmarking, resource allocation, and
assessing efficiency.

6. Survival Analysis:
• Used to determine the duration of time until an event such
as purchase, attrition, and conversion happens.
• Baseline hazard model, proportional hazard model, and
analysis with time varying covariates are covered in this
section.
 Marketing Analytics - Processes and Tools

7. Sales force/Sales analytics

• Covers analytics for sales, which includes forecasting potential
sales, forecasting market share, and causal analysis.
• Comprises various methods such as chain ratio method,
Delphi method, and product life cycle analysis.
8. Innovation Analytics:
• Deals specifically with new products
• New product analysis differs from existing product analysis as
you may have little or no historical data either for product
design or sales forecasting.
• Bass model, ASSESSOR model, conjoint analysis can be
used for innovation analytics
 Marketing Analytics - Processes and Tools

9. Conjoint analysis:
• Measure customer preferences for various attributes
of a product or service.
• Used in various stages of a new product design,
segmenting customers and pricing.
10. Customer Analytics
• We probe customer metrics such as customer
lifetime value, customer referral value, and RFM
(recency, frequency, and monetary value) analysis.
• These can be used for segmenting customers and
determining value provided by customers.
 Applications of Marketing Analytics
• Customer relationship management (CRM)
• Marketing mix analytics
• Personalization
• Demand forecasting
• Assortment planning
• Distribution planning
• Media-mix planning
• Market segmentation, and search targeting
 Web Analytics

• Web usage mining (also called as Web analytics) is the extraction of useful
information from data generated through Web page visits and transactions.
• Analysis of the information collected by Web servers can help us better
understand user behavior. Analysis of this data is often called clickstream
analysis.
• By using the data and text mining techniques, a company might be able to
discern interesting patterns from the clickstreams. For example, it might learn
that 60 percent of visitors who searched for “hotels in Maui” had searched earlier
for “airfares to Maui.” Such information could be useful in determining where to
place online advertisements.
• Clickstream analysis might also be useful for knowing when visitors access a
site. For example, if a company knew that 70 percent of software downloads
from its Web site occurred between 7 and 11 p.m., it could plan for better
customer support and network bandwidth during those hours.
• Figure shows the process of extracting knowledge from clickstream data and
how the generated knowledge is used to improve the process, improve the Web
site, and, most important, increase the customer value.
Web Analytics
 Web Analytics Metrics
• While Web analytics provides a broad range of metrics, there are four categories of
metrics that are generally actionable and can directly impact your business
objectives (TWG, 2013). These categories include:
i. Website Usability: How were they using my Web site?
ii. Traffic sources: Where did they come from?
iii. Visitor profiles: What do my visitors look like?
iv. Conversion statistics: What does it all mean for the business?

1. Web Site Usability

a) Page views. The most basic of measurements, this metric is usually presented as the
“average page views per visitor.” If people come to your Web site and don’t view
many pages, then your Web site may have issues with its design or structure.
b) Time on site. Similar to page views, it’s a fundamental measurement of a visitor’s
interaction with your Web site. Generally, the longer a person spends on your
• Web site, the better it is.
 Web Analytics Metrics
c. Downloads. This includes PDFs, videos, and other resources you make available to your
visitors. Consider how accessible these items are as well as how well they’re promoted. If
your Web statistics, for example, reveal that 60 percent of the individuals who watch a demo
video also make a purchase, then you’ll want to strategize to increase viewership of that
video.
d. Click map. Most analytics programs can show you the percentage of clicks each item on
your Web page received. This includes clickable photos, text links in your copy, downloads,
and, of course, any navigation you may have on the page.
e. Click paths. Although an assessment of click paths is more involved, it can quickly reveal
where you might be losing visitors in a specific process. A well-designed Web site uses a
combination of graphics and information architecture to encourage visitors to follow
“predefined” paths through your Web site. These are not rigid pathways but rather intuitive
steps that align with the various processes you’ve built into the Web site. One process might
be that of “educating” a visitor who has minimum understanding of your product or service.
Another might be a process of “motivating” a returning visitor to consider an upgrade or
repurchase. A third process might be structured around items you market online.
 Web Analytics Metrics
2. Traffic Sources: Basic categories such as search engines, referral Web sites, and
visits from bookmarked pages (i.e., direct) are compiled with little involvement by the
marketer.
a. Referral Web sites. Other Web sites that contain links that send visitors directly to
your Web site are considered referral Web sites. Your analytics program will
identify each referral site your traffic comes from and a deeper analysis will help
you determine which referrals produce the greatest volume, the highest
conversions, the most new visitors, etc.
• Search engines. Data in the search engine category is divided between paid search
and organic (or natural) search. You can review the top keywords that generated
Web traffic to your site and see if they are representative of your products and
services. Depending upon your business, you might want to have hundreds (or
thousands) of keywords that draw potential customers.
• Direct. Direct searches are attributed to two sources. An individual who bookmarks
one of your Web pages in their favorites and clicks that link will be recorded as a
direct search. Another source occurs when someone types your URL directly into
their browser. This happens when someone retrieves your URL from a business
card, brochure, print ad, radio commercial, and so on. That’s why it’s good strategy
to use coded URLs.
• Online Campaigns : banner ad campaign, search engine advertising campaign, or
even e-mail campaign
 Web Analytics Metrics
4. Conversion Statistics
• New visitors : If you’re working to increase visibility, you’ll want to study the
trends in your new visitors data. Analytics identifies all visitors as either new or
returning.
• Returning visitors. If you’re involved in loyalty programs or offer a product that
has a long purchase cycle, then your returning visitors data will help you measure
progress in this area
• Leads. Once a form is submitted and a thank-you page is generated, you have
created a lead. Web analytics will permit you to calculate a completion rate (or
abandonment rate) by dividing the number of completed forms by the number of
Web visitors that came to your page.
• Sales/conversions. Depending upon the intent of your Web site, you can define a
“sale” by an online purchase, a completed registration, an online submission, or any
number of other Web activities.
 Web Analytics Metrics
3. Visitor Profiles
• Keywords : you can see what keywords visitors used in search engines to locate
your Web site. For example, the particular search phrase that was used can
indicate how well they understand your product or its benefits.
• Content groupings : Depending upon how you group your content, you may be
able to analyze sections of your Web site that correspond with specific products,
services, campaigns, and other marketing tactics. If you conduct a lot of trade
shows and drive traffic to your Web site for specific product literature, then your
Web analytics will highlight the activity in that section.
• Time of day. Web traffic generally has peaks at the beginning of the workday,
during lunch, and toward the end of the workday. It’s not unusual, however, to
find strong Web traffic entering your Web site up until the late evening. You can
analyze this data to determine when people browse versus buy and also make
decisions on what hours you should offer customer service.
 Social Media Analytics
• Social media refers to the enabling technologies of social interactions among people in
which they create, share, and exchange information, ideas, and opinions in virtual
communities and networks.

• Social media analytics involves gathering information from social networking sites such
as Facebook, LinkedIn and Twitter in order to provide businesses with better
understanding of customers.

• Social media analytics refers to the systematic and scientific ways to consume the vast
amount of content created by Web-based social media outlets, tools, and techniques for
the betterment of an organization’s competitiveness.

It helps in understanding
• Customer sentiment,
• Creating customer profiles
• Evolving appropriate strategies for reaching the right customer at the right time.
• the impact of advertising and the effect of mode of message delivery on the consumers.
• Can help in improving user experience leading to higher conversion rates.
 Measuring the Social Media Impact

• Once you decide on your goal for social media (what it is that you want to
accomplish), there is a multitude of tools to help you get there. These
analysis tools usually fall into three broad categories:
• Descriptive analytics: Uses simple statistics to identify activity
characteristics and trends, such as how many followers you have, how
many reviews were generated on Facebook, and which channels are being
used most often.
• Social network analysis: Follows the links between friends, fans, and
followers to identify connections of influence as well as the biggest
sources of influence.
• Advanced analytics: Includes predictive analytics and text analytics that
examine the content in online conversations to identify themes, sentiments,
and connections that would not be revealed by casual surveillance.
 How Do People Use Social Media?

• They listed six different engagement levels

 Web & Social Media Analytics

It involves four basic activities,

a) listening (aggregating what is being said on social
media),
b) Analyzing (such as identifying trends, shifts in
customer preferences and customer sentiments),
c) Understanding (gathering insights into customers,
their interests and preferences and sentiments) and
d) Strategizing (creating appropriate strategies and
campaigns to connect with customers with a view
to encourage sharing and commenting as well as
improving referrals).
 Some important Applications

• Display advertising in real time

• A/B experiments for measuring value of digital
media and handling e-retailing challenges
• Data-driven search engine advertising
• Analytics of digital attribution and strategies
 Some important Applications

1. Display Advertising in Real Time :

• The objective of display advertisement is to increase sales
and enhance brand visibility.
• All the actions of the user are trackable and quantifiable,
• The conversion and sales are instantaneous and achieved
with a single click
• Types of display advertisements are banner advertisement,
pop-ups , floating advertisements & wallpaper
advertisements.
 Some important Applications

2. A/B Experiments for Measuring Value of Digital Media and

Handling E-Retailing Challenges
• A/B testing (also called A/B splits or controlled
experimentation) is used to identify and quantify customer
preferences and priorities.
• It was called A/B splits because the approach was to change only
one variable at a time.
• These experimental designs use the concept of ANOVA
extensively, with appropriate modifications.
 Some important Applications
3. Data-Driven Search Engine Advertising
• Data-driven marketing strategies are based on insights
obtained from data collected through customer touch points,
customer interactions and customer demographics
• Approach helps companies to convey the right message at the
right time to the right target.
• Individual consumers can be identified and selected to
receive specific, highly focused messages based on their
behavioural patterns that will ultimately facilitate a conversion.
• Implementing dynamic advertisement online which enables
the consumer to interact can be a great source of obtaining first-
hand information from the customer.
 Some important Applications
4. Analytics of Digital Attribution
• Digital media constantly interacts with other media through
multichannel exposures, and they complement each other in
making the final sale.
• An attribution model is the rule, or set of rules, that
determines how credit for sales and conversions is assigned
to touch points in conversion paths.
• Digital attribution pertains to attributing credit to various
components for providing the marketing message in the online
world using various forms of media and online platforms.
 Some important Applications
• Attribution Models
a) Last Interaction/Last Click Attribution Model: the entire credit is
given to the last interaction or click just before the conversion
b) Last Non-direct Click Attribution Model: . It gives credit to the
campaign that was initiated just before conversion. These
campaigns can be referring sites, emails, displays on search
engines, social websites or even organic searches
c) Last Ad-Words Click Attribution Model : This model gives 100%
credit to the most recent Ad-Words ad before converting. This
model ignores the contribution of all other channels in the funnel. It
looks at only the paid search
d) First Interaction/First Click Attribution Model: This is reverse of
the last interaction/last click attribution model. The entire credit
is given to the so-called first click. While there is no ambiguity
about the last click, there is no certainty about the first click
 Important Questions

1. Critically analyze the applications of analytics in Retail Business

by citing appropriate examples.
2. What is Social Media Analytics? What are the reasons behind its
increasing popularity?
3. "Marketing Analytics is the creation and use of data to measure
and optimize marketing decisions" Illustrate this statement by
explaining various levels and applications of marketing analytics.
4. Critically analyze the applications of analytics in the Marketing
field by citing appropriate examples.
5. As a retail manager, can you pinpoint the critical touchpoints
within the retail value chain and how analytics contributes to the
effectiveness of each touchpoint in the retail value chain?“
6. Elaborate on the importance of web analytics in business growth.
7. What is regression analysis, and how does it help us understand
relationships between variables? Explain with a suitable example.
 Important Questions
8. A multinational hotel chain has been implementing analytics digital
marketing to its customers. However, the responses to the digital
campaigns have not been favorable, and the revenue generation has
not been as expected. Currently, they are trying to solve this problem
by focusing on similar campaigns that use the same promotional
content and changing these campaigns to suit the specific tastes of the
consumers in each nation.
Discuss how business analytics can be utilized by the hotel
management in this scenario.
What is the data required to facilitate good decisions?
Explain some important applications of social media analytics
9. What are the distinctions between correlation and regression, and
how do they function differently in statistical analysis? Can you provide
examples to illustrate the contrast between these two statistical
methods?"