Part 1 of a Review of “Marketing Analytics – A Practical Guide to Real Marketing Science” (Mike Grigsby Kogan)

Part 1 of a Review of “Marketing Analytics – A Practical Guide to Real Marketing Science” (by Mike Grigsby Kogan)

http://www.amazon.com/Marketing-Analytics-Practical-Guide-Science/dp/0749474173

A while back, I got a book from my Skillsoft learning library, with the above title. As a statistician/analyst at a university, I was curious about how the statistical techniques that I use on a routine basis are applied in the marketing world. And as someone who is involved in a small publishing venture, I was also curious about the theory and practice of marketing in general, and how it might be used to sell more novels :) . So, I thought I would read the book and do a write-up for the blog, to help fix ideas in my own mind and inform blog readers as well.

Naturally, if the book interests you, you should go to the source. The Amazon link is given above. The book sells for about 20 bucks, in both e-book and paperback form. Though the content gets somewhat technical, given the subject matter, the writer maintains a very readable style in my opinion.

The author is attempting to explain the subject to an audience with no prior knowledge of statistics, marketing or consumer behavior. Naturally, it is difficult for me to say how well he achieves his goal, at least in the statistical domain, as I use similar methods to those he explains, on a frequent basis. But the overall effect of the book seemed pretty good to me. I learned some new things about marketing and consumer behavior and gained some insights into how marketers in the private sector use statistical methods. It even refreshed my memory on a statistical technique or two, that I haven’t used a lot.

Since the book is fairly long, a proper look at it will take at least two blogs, maybe three. So, here is a synopsis of Part One of the book, in point form. Additional thoughts and observations of my own are in bolded italics.

Part One - Overview

1. Chapter 1 - A brief review of elementary statistics.

This chapter went over some basic ideas and terminology from elementary statistics, as outlined below.

• Measures of central tendency - Mean, median, mode.
• Measures of dispersion - Range, variance, standard deviation.
• Measures of association - Covariance, correlation.
• Probability and sampling - Sampling distribution of the mean.

Chapter 2 - Marketing principles.

This chapter went over some basic marketing principles, outlining some of the basic theory of the art and science of marketing.

• Focus on the customer, not your competition. The interaction with the latter will take care of itself, if the interaction with the former is good.
  
  
• Giving consumers “what they want” is simplistic:
• Wide variation in wants.
• Might conflict with company's goals.
• They might not really know what they want.
• Note that there are examples of producing a product, then finding the customers for it (e.g. minivan, Apple products), but it is chancy to go this route.
• For Indie writers and publishers, this is the choice between “Write to an established market” vs “Write the book of the heart”. As is common in many areas of life, a middle ground is probably best, assuming that commercial success is a goal.
  
  
•  Consumer behaviour principles (assuming they are rational utility maximizers)
• Consumers have preferences.
• These are modified by constraints (usually budget).
• The interaction of these, results in actual choices.
• There are a number of economics textbook assumptions, baked into this.
• Preferences are complete, transitive, and more is better.
• The actual decision making process of consumers depends on whether the item is high or low priced, how long the person expects to live with the choice, and the cost of making a bad choice.
• Expensive, long-lived purchases go through a more exacting decision making process, of careful comparison shopping, pricing calculations, consumer aids such as product guides, etc.
• A more limited decision making process applies to inexpensive, short-lived items. It is less formal, “good enough”, and tends to be based on past practice, informal advice from friends, etc.
• Amazon and e-books have probably fundamentally altered the decision process for books. Expensive, hard-cover books in the physical bookstore probably got more of the exacting treatment, while inexpensive e-books get the more limited treatment. Making a mistake doesn't matter so much if the book only cost a few bucks and doesn't take up shelf space. Also, “advice from friends” has widened to include reader reviews, which are of first importance in the on-line world, facebook likes, twitter retweets and similar engagement indicators on social media.
  
  
• Stages of consumer decisions – marketing can come into any and all of these stages:
• Need recognition – consumer realizes that he or she lacks something (e.g. I am bored and need something to read). Marketing tries to identify wants and needs at this early stage and even manufacture them.
• Search for information – consumer searches out information about products or services to meet that need (e.g. I will see what's interesting on Amazon). Marketing tries to provide the necessary information, in a form favorable to the marketer.
• Information processing – the consumer weighs information carefully and logically. Marketing tries to shape this process. Advertising and marketing often even try to short-circuit this stage; so that consumers fall back on habit (e.g. should I just check the best seller lists and ignore the rest, or should I cast around a bit further, via keyword searches or also-boughts?).
• Pre-purchase evaluation of alternatives. (E.g. Is this book really going to be good enough for the investment of my time and money?). Marketing tries to close the deal, here.
• Purchase (e.g. sure, I will buy this Kati of Terra book sci-fi romance book, it looks like the kind of book I usually like).
• Post-purchase evaluation – comparing reality to expectations, which creates loyalty (that was good, I would buy a book from that writer again). Marketing continues at this stage, to try to convince the consumer that the choice was a good one.
  
  

• Basic marketing strategies (Porter):
• Compete on costs (consumers looking for low prices).
• Focus on the high end (consumers who are not so price sensitive, but are interested in high quality, status, etc.).
• Focus on a niche (consumers who have very particular wants, needs, or interests).
• Independent writers and publishers (Indies) usually compete on costs or focus on a niche, while traditional big publishers (Trads) can do all three, though their cost structure and need for mass appeal can pose problems.
   

• Basic Competitive Strategies, firm to firm
• Bypass attack (the attacking firm expands into one of our product areas) and the correct counter is for our firm to constantly explore new areas.
• Think of Indies moving into traditional publishing's territory, via e-books and retailers like Amazon. Trads have moved into new territories, from their point of view, such as hugely expanding the backlist on Amazon and other venues.
• Encirclement attack (the attacking firm tries to overpower us with larger forces) and the correct counter is to message how our products are superior/unique and of more value.
• Again, thinking of Indies and Trads, there has been a constant refrain on the part of Trads about quality, curation and nurturing.
• Flank attack (the attacking firm tries to exploit out weakness) and the correct response is to not have any weaknesses, again via messaging of our superior value.
• Thinking of Indies and Trads, this is just more about messages reinforcing the notions of curation and reliable quality.
• Frontal attack (the attacking firm aims at our strength) and the correct counter is to attack back in the opposing firm's territory.
• Trads have made many attempts to attack Amazon (e.g. collusion to enforce agency pricing). They have also “attacked” Indie writers by mechanisms such as thinly veiled threats to boycott writers who go Indie, and co-opting successful Indies, when possible, with Trad contracts. The response for Indies might be to point out that the publishing world itself has been caught up in collusion scandals.

In a later blog, I will go through some of the statistical techniques that he explains, adding some of my own analytic experience, especially as it pertains to the book publishing domain.

–------------------------------------------------------

And, since this is a book themed blog, here is your chance to buy a book. This is a travelogue, featuring a statistician and a truck driver, on a long haul trip, taking lumber to Texas and oilfield equipment to Alberta. So, you get content that alludes to the theme of the blog – statisticians and markets. :).  Plus, you get to enjoy an interesting road trip.

On the Road with Bronco Billy - A Trucking Journal

Kindle Edition

Amazon U.S. http://www.amazon.com/gp/product/B00X2IRHSK

Amazon U.K. http://www.amazon.co.uk/gp/product/B00X2IRHSK

What follows is an account of a ten day journey through western North America during a working trip, delivering lumber from Edmonton Alberta to Dallas Texas, and returning with oilfield equipment. The writer had the opportunity to accompany a friend who is a professional truck driver, which he eagerly accepted. He works as a statistician for the University of Alberta, and is therefore is generally confined to desk, chair, and computer. The chance to see the world from the cab of a truck, and be immersed in the truck driving culture was intriguing. In early May 1997 they hit the road.

Some time has passed since this journal was written and many things have changed since the late 1990’s. That renders the journey as not just a geographical one, but also a historical account, which I think only increases its interest.

We were fortunate to have an eventful trip - a mechanical breakdown, a near miss from a tornado, and a large-scale flood were among these events. But even without these turns of fate, the drama of the landscape, the close-up view of the trucking lifestyle, and the opportunity to observe the cultural habits of a wide swath of western North America would have been sufficient to fill up an interesting journal.

The travelogue is about 20,000 words, about 60 to 90 minutes of reading, at typical reading speeds.

Kati of Terra Book Two - Assignment to the Planet of the Exalted - on Kindle Countdown this week

Kati of Terra Book Two - Assignment to the Planet of the Exalted - on Kindle Countdown this week

"Kati of Terra Book Two - Assignment to the Planet of the Exalted" is on a Kindle Countdown deal this week (Jan 27, 2016 to Jan 31, 2016) in the U.S. and U.K. Amazon stores.  That means that the price is reduced during this time period - for example, for the next couple of days it will be 99 cents.  After that, it goes to 1.99, then 2.99, until it reaches the regular price of 3.99, and the sale is over.

U.S.  http://www.amazon.com/gp/product/B00D0H15CC
U.K.  http://www.amazon.co.uk/gp/product/B00D0H15CC

Here's the summary:

After narrowly escaping the pursuit of the slave trader Gorsh on Makros III, the Drowned Planet, Kati of Terra has arrived on the planet Lamania, the home world of her alien companion and fellow escapee, Mikal r’ma Trodden. The bureaucracy of the Lamanian Social Services, however, insists that the two be separated for half-a-Lamanian year, to ensure that this Wilder woman is not being exploited by her more urbane lover, who is also a Star Federation agent. In principle a worthy policy, it has left Kati without Mikal’s company while dealing with the loss of her connection to her young son Jake, and the knowledge that she will never be able to return home to Earth.

While exploring her new environment, she is confronted with the realization that Gorsh has spread his tentacles into the Star Federation. She identifies and rescues a young victim of the slave trade, using knowledge gained during her and Mikal’s period of captivity on Gorsh’s ship.

She agrees to take the lead role in an undercover investigation of the venerable Federation planet, Vultaire, which seems to be implicated in the lawlessness. Apparently the members of the planet’s upper class, known as the Exalted Citizens, have grown corrupt, some of them even taking up slave-ownership, alongside numerous other vices. With three companions, Kati forms the Unofficial Investigative Team into the Conditions on the Planet Vultaire. The team members make their way, clandestinely, there, and undertake their investigation while posing as an itinerant Entertainment Troupe. Secretly, they make common cause with the downtrodden locals, including elements of the resistance to the oligarchy.

Meanwhile, Mikal, the Federation agent, is sent to explore the Xeonsaur connection to the slave trade. It has to do with a captive member of the lizard species who has been forced to navigate Slaver Gorsh’s space ship through vast distances during its slave-snatching operations. Mikal too must make common cause; he does so with a beautiful female of the reptilian/humanoid race, the life-partner to the unhappy Xeonsaur captive.

Kati and Mikal must make their separate ways and overcome separate obstacles and dangers, before re-uniting in the struggle on Vultaire. Their reunion as battlers against the slave trade coincides with the end of their forced separation, ushering in a time of new connection. However, together on Vultaire, they need all the resources and ingenuity that they and their companions have, to stay alive, and to help heal the Vultairian society, as well as the very planet itself from the sickness that the corruptions have caused.

This is a full-length novel of about 260,000 words (equivalent to a paperback of about 500 pages). Please note that the Kati of Terra novels are written so that they can be read as stand-alone books. Kati of Terra Book 2 can be enjoyed by readers who have not yet read Kati of Terra Book 1. Naturally, we encourage people to read both novels to experience all the adventure and romance of the Kati of Terra series.

Planet X9 from Outer (Solar System) Space?

Planet X9 from Outer Space?

This week’s (Jan 20, 2016) Astrophysical Journal has a paper by two researchers (K. Bayugin and M. Brown) announcing the possible discovery of another planet in the solar system. I say possible, because the planet’s existence is deduced from the orbits of several dwarf planets, beyond the orbit of Pluto (Kuiper Belt objects or KBOs). They argue that the orbits of those bodies are best explained by a large (Neptunish sized) planet in the far reaches of the solar system, which is perturbing the orbits of the smaller dwarf planets.

This is a well-established planet hunter technique, going back to the discovery of Neptune, which was based on orbital anomalies in the orbit of Uranus. The search for Pluto was also motivated by gravitational arguments, though it turns out to be too small to have the effects thought to have been seen in the orbit of Neptune. Mostly, its discovery was fortuitous – gravitational arguments just happened to lead Claude Tombaugh to look in the general area where Pluto happened to be. However, many extra-solar planets have also been discovered via gravitational means, usually the effect of large planets close in to their star, which creates a sort of jitter in the stars motion, which can be detected from Doppler shifts in the star’s spectrum.

I am calling this planet X9, as a bit of an astrophysics/science fiction gag on my part. The X can stand for “unknown”. But it can also stand for 10, as in Roman numerals, since it would be the 10^th planet under the old system, which had Pluto as the 9^th. But, since Pluto has been demoted to “dwarf planet”, the new planet is really number 9. Thus, via a sort of planet naming mash-up, I will call it Planet X9. Plus it reminds one of “Plan 9 from Outer Space”, one of the all-time best good-bad science fiction movies.

I will do my best to interpret their paper in the text below, though with only a humble B.Sc. in physics, I am no expert on orbital mechanics (or automobile mechanics, for that matter).

One reason for thinking there may be another planet out there, is evident in the following picture, from their paper:

The image can be thought of as looking at the solar system from a view above the plane of the ecliptic (the common plane in which the planets orbit around the sun), rather like looking at the Earth from far above the north pole might be. The ellipses (ovals) show the orbits of some large KBOs. As you can see, their perihelia (the closest point of the orbit to the sun) are all clustering on the same side of the sun, in a fairly narrow range. The authors of the paper have calculated that this is a very unlikely configuration, an almost certainly not based on pure chance, so there must be something behind the process. They think that a large planet in the far reaches of the solar system would produce this result.

There is some possibility that this result is due to observational bias (the tendency to see more things in one area of the sky because that’s where you spend the most time looking), but the authors say that is unlikely – though some bias might be present due to there being an observational bias towards the plane of the ecliptic, that doesn’t explain the clustering in ecliptic longitude that is seen.

The paper then goes into both an analytical analysis and a numeric analysis of what gravitationally perturbing bodies might account for the behaviour of the KBOs. The former involves a lot equations based on standard gravitational theory, which demonstrate that the observed behaviour can be produced by the presence of an unseen planetary mass. However, they note that the analytical solution has many simplifying assumptions built in to it, so some skepticism is warranted.

They then offer a numeric solution via computer simulations - in other words direct N-body simulations of the solar system. With this method, they could vary inputs to the model, see how the computer simulation evolved, then compare that to the known observations. They could then derive such parameters as the distance to the perturbing planet, the planets orbital eccentricity and relationship to the KBOS, and planetary mass. The surprising result of this analysis, is that the perturbing planet is favoured to be opposite to the KBOs, as this image from a CBC story shows:

They tried simulations using various masses for the unseen planet. Though an Earth size mass could work, a larger mass planet (10 Earth masses) fit the simulations much better and is therefore considered a more realistic choice.

Simulations also show that the perihelion (closest approach to the sun) of such a planet would be very distant – something on the order of 250 AU (astronomical units, equal to the distance of the Earth’s orbit from the sun). For comparison, Pluto’s perihelion is about 30 AU, so this planet would be about 8 times farther away.

Finally, the simulations indicate that the unknown planet’s orbit may be inclined to the plane of the ecliptic, but probably not by a very large amount. In other words, it may be orbiting in a different plane than the Earth but not radically different (within a few tens of degrees). Again for comparison, Pluto is inclined to the plane of the ecliptic by about 17 degrees.

The paper notes that this theory has some testable implications, as more KBOs are discovered, in terms of their inclinations, and so forth. It also notes that the ultimate test of the theory is to actually observe the possible planet. The paper acknowledges that the search space is still very wide, based on the theory developed. But, who knows, once the search starts in earnest, we may have a result sooner than we expect.

As for the origin of such a large planet at this great distance from the sun, they speculate that it may be that this is a gas giant that was ejected from the inner solar system (inner relative to 250+ AU) during the early stages of its evolution.

Here's a link to the article:

http://iopscience.iop.org/article/10.3847/0004-6256/151/2/22/meta

There are now thought to be potentially billions of rogue planets in the galaxy, based on micro-lensing findings. Could this be one of these? The paper doesn’t speculate about that, but it seems to me that's a possibility worth thinking about.

One would expect a world so far from the sun to be extremely cold, but some of the theoretical work on rogue planets has indicated that they could in fact have warm interiors under a layer of ice, perhaps even liquid oceans. Maybe this planet is the same, if it exists. But it would take an awfully long time for a space probe to get there and do some close-in measurements, should we ever pin its location down.

----------------------------------------------------------------------

And here’s a science fiction novel which includes plenty of action on an unexplored planet, in the far reaches of the galaxy. It's only $3.99 :)

http://www.amazon.com/gp/product/B008PNIRP4

http://www.amazon.co.uk/gp/product/B008PNIRP4

Postmedia Stock target goes to zero

Postmedia Stock target goes to zero

I started writing this blog a few days ago (Jan 17), based on the news below:

http://www.theglobeandmail.com/globe-investor/investment-ideas/analyst-cuts-price-target-on-postmedia-to-zero/article28182322/

Persistently underwhelming revenues ahead of a looming maturity wall prompted RBC Dominion Securities to cut its price target on Postmedia Network Canada Corp. to zero from $0.50.

Postmedia operates Canada’s largest newspaper chain and various digital media properties, including the National Post.

“While management continues to evaluate options with respect to the capital structure, it is difficult to attribute positive equity value to the shares absent a meaningful improvement in underlying operating trends ahead of significant debt maturities in August 2017 ($313-million first-lien notes) and July 2018 ($359-million second-lien notes,” wrote analysts led by Haran Posner.

…

It’s rare but not unprecedented to see an analyst slap a price target of zero on a stock. RBC’s move puts Postmedia in the same unenviable company as Radioshack.com LLC and General Motors Co.

Globe and Mail Report on Business, Jan 15, 2016

That article had reminded me of something that I had read in political pundit and campaign strategist Warren Kinsella’s blog a few weeks earlier:

Warren Kinsella – Dec 27, 2015

More than anything, I wanted to be a journalist. I started creating my own newspapers – ironically enough, about professional wrestling – when I was 10 years old.

During law school, I had the privilege of working for the Calgary Herald before Conrad Black and his henchmen gutted it. Before, during and after being called to the bar, I had the privilege of working at the Ottawa Citizen before things got bad there, too. 

…

In 2016, I anticipate the end of the Sun chain in the first quarter, and the end of the Postmedia chain in the third… It will be bad for a lot of amazing people – and for our democracy, too. 

…

http://warrenkinsella.com/2015/12/ink-stained/

In only two days, events have caught up and passed me, with the following on the CBC website today:

Postmedia cuts 90 jobs, merges newsrooms in Vancouver, Edmonton, Calgary, Ottawa

'We will continue to operate separate brands in each of these markets,' CEO Paul Godfrey says

Newspaper chain Postmedia today announced sweeping changes to its operations, cutting 90 jobs across the country and merging newsrooms from multiple newspapers into one each in Vancouver, Calgary, Edmonton and Ottawa.

…

At least 90 editorial jobs are being cut as a result of the process.

They partially break down as follows:

·         35 in Edmonton.

·         25 in Calgary.

·         12 in Ottawa.

·         5 at the National Post.

http://www.cbc.ca/news/business/postmedia-job-cuts-1.3410497

Is this to be the common fate of much print media (including big book publishers) in the new world?  It’s hard to say.  Postmedia had some unique problems related to taking on a lot of debt a few years back, as outlined in an earlier blog that I did:

http://dodecahedronbooks.blogspot.ca/2015/08/some-recent-news-about-postmedia-major.html

It looks like they aren’t going to be able to pay that debt off, given current economic circumstances and ongoing disruption in the newspaper business.  There is an irony here – the National Post and associated newspapers have been great at scolding governments for taking on too much debt over the years, as well as average consumers.   So, some people are bound to be feeling a bit of schadenfreude about their current troubles.

Of course, it is possible that the debt-holders could give them a break on the interest rates, when the debt matures in 2017 and 2018.  In a normal business, facing a normal cyclical downturn, that could be the case.  But the debt-holders, a couple of asset management funds (Canso and Golden Tree), are known to be pretty hard-headed types, so giving a break to a heavily indebted company that is in an industry that is being badly disrupted by technological change might not be high on their to-do list.

As for me, I will miss the New York Times crossword puzzle that they carried, as well as a few decent columnists.  It will be interesting to see how the next period plays out, as the loans still have a while, before they can be called in totally, if I recall correctly.  But it looks like there will be a Last Post playing, soon enough.

In military tradition, the Last Post is the bugle call that signifies the end of the day's activities. It is also sounded at military funerals to indicate that the soldier has gone to his final rest and at commemorative services such as ANZAC Day and Remembrance Day.May 3, 2012

https://en.wikipedia.org/wiki/Last_Post

And here's an xkcd comic, about the transitory nature of all media, including newspapers: