as below

Chapter 3: Top Seven Analytics Methodologies

THIS CHAPTER WILL TALK ABOUT:

The top seven commonly used analytics methodologies.

When to use which methodology.

Typical use cases of analytics methodologies applied to marketing, as well as product and customer service operations.

Larger View

You are the owner of Gable Wines. The small winery is doing well. Along with producing and selling wine, you host weddings at your beautiful vineyards. With $1 million in annual revenues from your wedding business, you are looking to increase the flow of business. You now spend a small marketing budget of $27,000 on a variety of promotional vehicles, mainly search engines and online wedding portals, but you aren’t confident that you’re getting the most impact from this approach. Which marketing vehicles are delivering the best leads and sales?

This is a straightforward challenge for business analytics—marketing channel optimization. All you need to do is analyze the results from each promotion vehicle you have invested in, compare the results with the cost, and see which delivered the most conversions at the lowest price to determine the most efficient lead generators.

You start by asking some exploratory questions. What channels are generating good leads? How much should we invest in each of these sources? Should the marketing mix be changed to get better returns?

Your goal is to identify the business questions: Where do good leads come from? How do we get more of these good leads? The next step is to come up with hypotheses on what the answers to these questions could be. Then, we will do an analysis to determine the optimal solution.

Every business has situations like that of Gable Wines—probably multiple situations. These are ideal situations for applying simple data analytics. It doesn’t have to be time consuming or costly, and it certainly isn’t rocket science. In Chapter 5, we will get into what could be considered borderline rocket science or magic—predictive analytics. You can be the judge then.

THE SEVEN MOST COMMONLY USED ANALYTICS METHODOLOGIES

You can use analytics any time you are facing a management decision that involves data. There is only a short list of analytics methodologies to solve common business problems. The specific business question you are wrestling with will dictate which methodology you adopt. Below we’ll introduce the common analysis methodologies and the contexts of their uses. The top seven are shown in Exhibit 3-1; the first four are the most commonly used.

METHODOLOGY	DESCRIPTION	APPLICATION
Aggregate Analysis	Used to describe a population or a segment or to compare two segments.	Descriptive analysis, profiling, campaign analysis, winner-loser analysis.
Correlation Analysis	Looks for the relationship between two or more things with the prospect of being able to explain or drive one with other.	Pre and post, test-control, drivers, dashboard.
Trends Analysis	Aggregate or correlation analysis over time, that is, trends over a period of time.	Trends of sales, revenues, breaks in trend and segments or drivers over a period of time.
Sizing/Estimation	Structured approach to make a near-accurate guesstimate in the absence of historical data.	Business case with limited internal data or one that is dependent on external data and assumptions.
Predictive Analytics/Time Series	Looks at both current and historical data to make predictions about future events.	Drivers of conversion or consumer engage- ment, forecasting.
Segmentation	Groups customers or products into meaningful segments, usually to enable better targeting for the purpose of driving higher value through customization.	Grouping customers or products for targeting and customization.
Customer Life Cycle	Looks at the different stages of the purchase process to determine what stage a group of customers is at and decide how to move them up to the next stage in the purchase process.	Customer progress stages from consideration through purchase to use, sales funnel.

EXHIBIT 3-1: Seven Most Common Analytics Methodologies (Top 4 are the Most Commonly Used)