Class1 1

Make Sure You Can See This Screen and That You Are As

Close As Possible

SAS Has Small Fonts and Seeing the Code Clearly on

This Screen Can Be a Problem

Class1 2

Marketing 8001:Database Marketing

Class 1

Discovering and Utilizing Reliable Patterns in Customer Data

Class1 3

Today’s Agenda

• Tell Me About Yourself• Gist of Course• Data Versus Information• Course Details• Instructor• Syllabus• What Is Database Marketing (DBM)?• How Does DBM Work…Class Customer Targeting

Exercise• Computer Stuff• Introduction to SAS…GJC SAS Demonstration

Class1 4

Tell Me About Yourself

• On 3 x 5 card, please write…

• Name

• Name you go by

• Reason/why you are taking this course

Class1 5

Gist of Course

• Ability to use SAS and analytical methods for database marketing programs

• Finding and capitalizing on reliable patterns in customer data

• Learning data analysis skills that can be used in any data-oriented business environment

• Learn by doing!!!!

Class1 6

Data Versus Information

• Data becomes information when it reduces uncertainty in decision-making

• For example, designing and implementing a “readable” (i.e., statistically reliable) direct mail or “DM” copy test…– and, using the results to estimate the order

rate expected for a large-scale promotion

Class1 7

Data Versus Information

– Prospective employers want MBAs who have the skills to extract customer information from their databases

– Former students have gotten jobs and/or internships because of practical analytical skills learned in this class

– My goal is to hear the same from you.

Class1 8

Here’s An Example

• Online job opportunity listing from BassPro Shops, September 26, 2007

Class1 9

Customer Insights ManagerSportsman's Park Center-Springfield, MO

We are seeking a seasoned individual to lead the customer insights team in performing portfolio-level analytics, including churn forecasting, predictive modeling, customer segmentation, profiling and program/campaign analysis.

Responsibilities:

Provide direction and mentorship in the design, execution and delivery of analytic projects.

Generate ideas found from within the data to grow the customer's share of wallet or maintain loyalty to Bass Pro Shops.

Create and maintain dashboards for retail direct mail tabs, and Outdoor Rewards for management use to monitor the various marketing programs. <Requirements:

The ideal candidate will have a degree in Statistics, Economics, Math, Psychology or related field. Masters degree preferred with 3-7 years prior database analytics. The individual should be a self-starter who is committed to results. Requires excellent communication skills and strong analytical skills. A solid working knowledge of SAS, Access or other database applications.

From www.Basspro.com, September 26, 2007

Class1 10

Course Details

• Class sessions will be mixture of:– Discussions of homework and readings– In-class computer analyses– Informal lectures

• 13 homework assignments…grade will be based on 11 best papers (25% of grade)

• 3 exams…grade based on 2 best exams (50%)

• Exam on last day of class (25%)• Exams will be questions and problems, most

using SAS or other software

Class1 11

Course Details

• Text Materials– Drozdenko & Drake (Optimal Database Marketing)– The Little SAS Book (LSB)…basic SAS reference

• You may want to keep this book…it’s an excellent reference for any future SAS work

– Mizzou Media booklet (Cases & Readings)

• Thanks to Professor Maureen Morrin of Rutgers University for some of the material I have used or adapted for this course

Class1 12

Course Details• SAS and Excel will be used for analysis

– Assume you know Excel– Assume you’re not familiar with SAS

• …initially you will have existing SAS code to adapt

– Assume you know fundamentals of marketing– Assume you remember basic statistics

• …but we’ll review anyhow

• We’ll learn command-level SAS…very useful even if you use SAS Enterprise Guide later in your career.

Class1 13

Course Details

• If interested in a position potentially involving analysis of data, I highly recommend obtaining SAS Certification– It’s taught by Ray Bacon from IT– It looks great on your resume!!

• If you already know SPSS, learning SAS should be easy.

Class1 14

Course Details

• Remember to save -- and backup -- all SAS code you create or I provide for you– Use Bengal Space, micro-drive, CD/DVD– If you have own PC, backup your files

• Adapting computer code is easier than creating new code

• Use “comments” in SAS code so that you’ll know what it does.

Class1 15

Course Details

• All examinations are open-book. This means you can consult textbooks, notes and any SAS code you have saved…but you cannot contact another person directly or indirectly during an exam.

• Students planning to pursue a career in database/direct marketing should look into…– The New Direct Marketing: How To Implement a

Profit-Driven Database Marketing Strategy by David Shepard Associates

– Statistical Modeling and Analysis for Database Marketing by Bruce Ratner (very technical)

Class1 16

Course Details

• You are responsible for material on class overheads even if we do not get to it during class.

Class1 17

Instructor Background– Summary: Extensive analytical experience in database/direct

marketing, marketing research and educational research & evaluation

– Ph.D., General-Experimental Psychology… minor in Quantitative Methods

– Director, Quantitative Analysis, Home & Health Division at Reader’s Digest (14 yrs)…DBM research, segmentation, predictive modeling and targeting, statistical analysis

– Marketing researcher (8 yrs)…sales incentive company and DuPont Corporate Marketing Research

– MBA, from MU, in Marketing, 1981– Behavioral science consulting company (9 yrs)…proposed,

conducted and reported large federally-funded educational evaluation/ research projects…served as manager for analysis and managed technical services provided to clients

Class1 18

Syllabus

Class1 19

What Is DBM?

• “Marketing activities that utilize a marketing database” (D & D)

• Marketing approach in which data are systematically used to make marketing decisions about…– Specifically-defined groups of customers (i.e.,

“segments” and “lists”)– Specific individual customers or households

within segments/lists

Class1 20

How Does DBM Differ from Traditional Aggregate Marketing?

• Aggregate marketing via mass media and traditional retail channels does not depend on data from individual customers– This is changing in retail…what will be the

impact of RFID chips?

• DBMers maintain and utilize records of individual customers– e.g., Gerbes, L. L. Bean, Amazon

Class1 21

What’s DBM’s underlying premise?

• Not all customers are alike…they can differ greatly in terms of their potential profitability

• Data can be used to identify and target best prospects for marketing offers

Class1 22

The Major PremiseTraditional Methods Versus DBM Targeting

Class1 23

What DBM Requires

• Identifying and gathering relevant data about customers and prospects

– Promotion history– Order and payment history– Phone calls, credit card transactions,

catalog and internet purchases, warranty cards, consumer surveys, magazine subscriptions, pay-per-view, video rentals, etc.

Class1 24

What DBM Requires

• Using database technology to transform raw data from diverse sources into accessible marketing information– Analysts and marketers need “analytic view”

of customer…names in rows, variables in columns (like with Excel)

– “Name” is marketing entity…can be customer or household

Class1 25

DBM Analytical Requirements:Focus of This Course

• Apply statistically-based methodologies to marketing practices and to the analysis of customer and prospect data and databases– Implement readable/reliable tests of products,

promotion and offer alternatives– Use data to understand consumer behavior– Isolate relatively homogeneous market segments– Develop predictive models that can rank order names

in terms of their probability of behaving in a variety of ways…

• Responding, paying, returning product, attriting form primary market, etc.

– Use test results, data and models to improve profit

Class1 26

Customer Analytics Include

• Descriptive profiling…– Describe/understand customers…very

important to any firm– Provide direction for product development

and for creative folks on marketing team…”put a face on the customer”

– Identify up-sell and cross-sell opportunities

• Lifetime customer value…you’ve had this in other courses

Class1 27

Customer Analytics Include

• Predictive modeling– RFM targeting…Recency, Frequency, Monetary

Value– Regression-based targeting

• Ordinary least squares (OLS)• Logistic regression

– CHAID, neural networks, genetic algorithms, MARS, CART, etc.

– Almost always profit advantages to targeting customers, regardless of method used

– Let’s look at an example.

Class1 28

How Does DBM Work?Customer Targeting Exercise

• Facts– 1,050,000 names on outside list (OL)– List rental cost is $100,000– 50,000 names tested…obtained 1% response rate– For those who ordered, average purchase was $75,

with $50 contribution– CPM (“cost per 1000”) of promotion is $450, i.e.,

$0.45 per name– At 1% response, 10,000 buyers remain in list of

1.0MM names

Class1 29

How Does DBM Work?Customer Targeting Exercise

• If we promote all 1.0MM names…– 10,000 buyers * $50 contribution = $500M– (1.0MM names * $0.45 per name) + $100M list cost =

$550M mailing & list cost– $500M - $550M Net loss -$50M – Let’s see how we might do better if we had a model

that can allow us to rank prospects from most to least profitable.

• Relevant documents on Blackboard are …– Class1CustomerTargetingExercise.doc– Class1CustomerTargetingExercise.xls

Class1 30

Customer Targeting Exercise

• Read the problem:– Class1CustomerTargetingExercise.doc

• Complete the spreadsheet:– Class1CustomerTargetingExercise.xls

• Identify optimal Mail Quantity (MQ)

• Comments– Profit– Risks

Class1 31

Introduction to SAS

• SAS is the analytical software system used by most businesses in the U.S. and, probably, world-wide

• SPSS is a competitive software package

• Two kinds of SAS processes– Data Step Applications– SAS Procedures (aka “Procs”)

Class1 32

Introduction to SAS:Data Step Applications

– “Before SAS can analyze your data, the data must be in a special form called a SAS dataset” (LSB, p.4).

– With SAS Data Step you can…• Create SAS datasets by reading or inputting raw

data…that is, data that are not “SAS datasets”– e.g.,text files, Excel files

• Process SAS datasets– Transform/ manipulate data– Create new and derived variables and data– Merge data– Create/output data

Class1 33

Introduction to SAS:Procedures (“Procs”)

– With SAS “Procs” you can process and analyze SAS datasets…

• Proc Contents (shows contents of SAS files)• Proc Sort (sorts SAS datasets)• Proc Print (prints SAS datasets)• Proc Import (import data from Excel)• Proc Export (export data to Excel)• Do statistical calculations…Frequencies, Means,

Correlations, Regression, Logistic Regression, Scoring, Ranking, Tabulating…and many more

– Can work with huge files, unlike Excel

Class1 34

Introduction to SAS

• Basic organization of SAS datasets…– Observations in rows, variables in columns…

same as Excel– Variables can be numeric or character– Character variables awkward to use…in most

cases we’ll use numeric data or create numeric variables from character variables

– Like with Excel, we can create new variables

Class1 35

How Does SAS Process a Dataset in a Data Step?

• SAS reads ONE record into memory and does what your SAS code tells it to do…line-by-line…and stops at the end of the Data Step with the “Run;” statement.

• Then SAS erases memory and reads the next record and executes your program line-by-line…stopping at the end of the Data Step.

• Reading and processing continues to the end of the input dataset.

• This is easy for most of us to visualize if we think of an Excel spreadsheet .

Class1 36

How Does SAS Process a Dataset in a Data Step?

• Programmers may be familiar with programming languages that permit one to read an entire matrix of data into memory and then do calculations on this matrix…standard SAS does NOT do this!

• Remember => A SAS Data Step reads and processes one record at a time.

Class1 37

We’ll Learn SAS by Using It• Use The Little SAS Book for the basics• Detailed documentation online at SAS Institute =>

http://v8doc.sas.com/sashtml/ • Advice: Backup anything important that cannot be easily

re-created…especially programs• Do not write over code that works, do Save As with new

file name• Use lots of comments to describe what your code does• Most common error => Forgetting the semi-colon at

the end of every SAS statement• If your PC can handle it, recommend purchasing SAS

license…about $25• Collaborate with classmate…butdo not specialize

because you’ll need to know SAS for examinations

Class1 38

GJC SAS Demonstration(Later During This Class)

• Large SAS program

• Multiple Data and Proc steps

• Lots of comments

• Data steps and Procs are some of those we’ll use this semester…Currently on Blackboard– Save this code…adapting code that works is

always easier than writing new code!

Class1 39

GJC SAS Demonstration

• Data on Blackboard• SAS program is called…

– SP2008M8001Class1SASExercise.sas • Flat or text file containing each customer’s

numeric ID and a code reflecting their response to a test promotion– HLResponseDataPrimSampleSP2008.txt

• SAS file containing variables describing customer at the time of selection before the promotion was mailed– HLPrimaryFFSampleSP2008Class1.sas7bdat

Class1 40

SAS Windows & Icons

• Editor -- Data step and Proc programs• Log – Program execution documentation

– Always check for errors

• Output – Display results of Procs– Results Tab can help you find desired output

• SAS Explorer Icon – Explore datasets, look at data

• Toolbar…be careful not to use the “new” icon by mistake

Class1 41

SAS Files

• .SAS7BDAT– “SAS dataset” that SAS can read & process– Double-clicking

• Opens SAS• Get VIEWTABLE of data (names in rows, variables

in columns)– In View…“Table View” most useful– In View…Can choose Column Labels or Column Names

– Non-SAS files (.txt, .xls, .sav, .por, etc,) must be read in data step, imported or converted to a SAS file by Proc Convert

Class1 42

SAS Files

• .SAS– SAS program– Double-clicking

• Opens SAS• SAS code in Editor window

Class1 43

Computer Stuff

• Here are my preferences, yours may differ.• Logon computer• Organize computer so software tools are easily

available– SAS– Windows Explorer– C:\M8001 folder (for your SAS programs/data)– Excel (later this semester)

• Display file extensions• Opening SAS and SAS datasets• Get Blackboard files for class (none today)

Class1 44

Computer Stuff: SAS

• Create SAS shortcut icon on desktop– Start => Search => All Files or Folders – In file name box enter “sas.exe”– Right click on file name => Send to =>

Desktop (create shortcut)– Remember, desktop icons and files on C:

drive may be gone next class period.– So, you may wish to place a SAS shortcut in

your Bengal Space and on your own PC if you buy a SAS license.

Class1 45

Computer Stuff: Windows Explorer

• Create desktop Windows Explorer shortcut icon– Start => Search => All Files or Folders – In file name box enter “Explorer”– Locate Windows Explorer the right click on file name

=> Send to => Desktop (create shortcut)– Remember, desktop icons and files on C: drive may

be gone next class period.– So, you may wish to place a Windows Explorer

shortcut in your Bengal Space and on your own PC.

Class1 46

Computer Stuff: C:\M8001 Folder• Create folder using Windows Explorer or My Computer• Right click on C:\M8001 file name => Send to =>

Desktop (create shortcut)• Remember, desktop icons and files on C: drive may be

gone next class period.• So, you may wish to place a Windows Explorer shortcut

in your Bengal Space and on your own PC.• Place all files related to class in this folder

– SAS programs (.sas)– SAS datasets (.sas7bdat)– text files (.txt)– Word documents (.doc)– Excel spreadsheets (.xls)

Class1 47

Computer Stuff: File Extensions

• Double click on Windows Explorer icon– On toolbar select View => Details– On toolbar select Tools => Folder Options => View– “Hide extensions for known file types” should NOT be

checked– File extensions identify types of files

• .sas files are SAS programs• .sas7bdat files are SAS datasets• .txt are text files (aka flat files)• .xls and .doc are Excel and Word files, respectively

Class1 48

Computer Stuff: Opening SAS Programs and SAS Files

• Double-clicking on a SAS program or a SAS dataset opens SAS– SAS program (.sas file) placed in Editor window– SAS dataset (.sas7bdat) placed in ViewTable window

• Alternate method– Use Windows Explorer to locate file of interest– Right-click on file and select “Open with SAS 9.1”

• To open .txt file, right click on file name and select “open with Wordpad”

Class1 49

SAS Exercises Online

• You can probably find lots of SAS exercises online but remember what you are seeing may/may not be correct.

• One source is => http://wiki.binghamton.edu/index.php/Category:SAS_Certification_Workshops

Class1 50

Begin GJC SAS Demonstration

• Let’s start the SAS Demonstration• Each student will run this next week in class…

Not Now!• If you’d like to get a head start before our next

class session, you will need…– Analysis Questions from Blackboard

• Class2SASRunQuestionsSP2008.doc– SAS code from Blackboard

• SP2008M8001Class1SASExercise.sas– Data from Blackboard

• HLResponseDataPrimSampleSP2008.txt• HLPrimaryFFSampleSP2008Class1.sas7bdat