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Copyright © 2013 Florian Zettelmeyer

Big Data and the Future of Marketing

Florian ZettelmeyerNancy L. Ertle Professor of MarketingKellogg School of Management, Northwestern University

First Data Leadership Summit 2013


FROM THE BUSINESS PRESS

Marketing using Big Data has become all the rage

- “We need to grab this big data resource that has landed on our front step. Armed with more detailed information about their customers, companies can then promote more e!ectively and in a highly customized manner.”

- “If there is a phrase that summarizes the situation, that phrase is "Data Explosion." The result is over a one thousand fold increase in information and related data storage, display and utilization requirements.”

- “In the next 5 to 10 years there will be an order-of-magnitude increase in the amount of marketing data used and a similar tenfold increase in computer power available for marketing analysis.”

- “The functioning of the organization requires that numerous urgent management measures be adopted which take into account a large quantity of data and complex calculations”

1999

1989

1979

1968

What is actually new about “ ”?Big Data

Big Data"Big"


What is new about Big Data?

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, ...

Big


What is new about Big Data?

Data enables customer analytics

"Data"


"Big" is only a small part of big data

- Design all processes with measurement in mind

- Use predictive & proactive analytics

- R&D everywhere

- Test everything

- Challenge conventional wisdom

Is about a big data mindset

A big data mindset is useful even if your data fits on just few servers

Big Data


How do I leverage the big data mindset?


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

CASE STUDY: LOYALTY INCENTIVES


SAME STORE SALES GROWTH

Harrah's had experienced rapid growth in the gaming market



Harrah's outlook looks di!cult prior to 1998

- Competitors are placing their bets on flashy new properties

- Investment required to compete on properties is huge

- No expected increase in legal gaming markets

SITUATION


How can Harrah's grow?


Harrah's asks customers to get insights

INSIGHTS


1. Customer engage in large amounts of cross-market play

1. Customer engage in large amounts of cross-market play

2. Harrah's receives small share (36%) of total gaming dollars


Harrah's asks customers to get insights


but ...

INSIGHTS


Harrah's creates relationships with customers in local markets, then extend them to destination markets

- Cross-market revenues

APPROACH BASIC REQUIREMENTS

- Identify customers across markets

- Determine what a potentially good customer is

- Create incentives for consumers to visit other properties



Meeting these basic requirements was nearly impossible

- Each property had its own reward card and di!erent rewards

- Incentives for repeat visits applied only locally

• South Lake Tahoe --> comp rooms & meals at South Lake Tahoe

• Reno --> comp rooms & meals at Reno

CHALLENGES

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"



The solution for Harrah's was to thing of the customer, not the property as the key source of value

HARRAH'S APPROACH

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

- New organizational form:Property managers report to COO, not CEO

- IT integration

- New branding ("exuberantly alive")


- 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...

SUCCESS INDICATORS

1% improvement equates into $40 million profit

Harrah's is considered a great success for marketingwith the big data mindset


Marketing with the big data mindset a!ects the entire organization


SOURCE OF POTENTIAL

Marketing with the big data mindset is not just about marketing any more

- 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

- 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

• Manage individual channels of distribution to maximize sales & profits Copyright © 2013 Florian Zettelmeyer

CURRENT VIEW (Kellogg's Phil Kotler)

Traditionally, marketing is about the "4 Ps"

- Product


- Price


- Promotion


- Place

• Manage individual channels of distribution to maximize sales & profits

- Product


- Price


- Promotion


- Place

• Manage individual channels of distribution to maximize sales & profits Copyright © 2013 Florian Zettelmeyer

To leverage the big data mindset marketing has to change

Product Ecosystems and Content

FUTURE OF MARKETING

- Product


- Price


- Promotion


- Place




• Design for continuous engagement• Content no longer di!erent from products/services

FUTURE OF MARKETING

- Product


- Price


- Promotion


- Place



FUTURE OF MARKETING



Revenue Models


• Apple launched iTunes in 2003 and sold 1 million songs the first week

• In 2008 Apple launched the App Store, offering software applications for iOS devices

• It created a developer community that has produced over 700,000 apps for iOS devices

• These devices are now linked through iCloud

Free or subscription

Transaction Free and transaction

Transaction and subscription

Developers Content Developers

70/30 sharing

53% 5%23% 15%

3%

iOS device owners have downloaded over 35 billion apps

97 %

3 %

0 %

- Product


- Price


- Promotion


- Place





Revenue Models

• Price the system, not the product/service• Separate value capture from value creation

FUTURE OF MARKETING

- Product


- Price


- Promotion


- Place





Revenue Models


Engagement

FUTURE OF MARKETING

- Product


- Price


- Promotion


- Place





Revenue Models


Engagement

• Deep insight about consumer motivation• Leverage other consumer data

FUTURE OF MARKETING

- Product


- Price


- Promotion


- Place





Revenue Models


Engagement


Access Everywhere

FUTURE OF MARKETING

- Product


- Price


- Promotion


- Place





Revenue Models


Engagement


Access Everywhere

• Consumers don't think channels; nor should you

• Design access for cross-channel customer

FUTURE OF MARKETING


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


Thank you.

Florian [email protected]

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