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.

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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.