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
Copyright © 2013 Florian Zettelmeyer
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"
Copyright © 2013 Florian Zettelmeyer
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
Copyright © 2013 Florian Zettelmeyer
What is new about Big Data?
Data enables customer analytics
"Data"
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"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
Copyright © 2013 Florian Zettelmeyer
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
Copyright © 2013 Florian Zettelmeyer
SAME STORE SALES GROWTH
Harrah's had experienced rapid growth in the gaming market
CASE STUDY: LOYALTY INCENTIVES
Copyright © 2013 Florian Zettelmeyer
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
CASE STUDY: LOYALTY INCENTIVES
How can Harrah's grow?
Copyright © 2013 Florian Zettelmeyer
Harrah's asks customers to get insights
INSIGHTS
CASE STUDY: LOYALTY INCENTIVES
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
Copyright © 2013 Florian Zettelmeyer
Harrah's asks customers to get insights
CASE STUDY: LOYALTY INCENTIVES
but ...
INSIGHTS
Copyright © 2013 Florian Zettelmeyer
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
CASE STUDY: LOYALTY INCENTIVES
Copyright © 2013 Florian Zettelmeyer
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"
CASE STUDY: LOYALTY INCENTIVES
Copyright © 2013 Florian Zettelmeyer
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
CASE STUDY: LOYALTY INCENTIVES
- 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")
Copyright © 2013 Florian Zettelmeyer
- 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
CASE STUDY: LOYALTY INCENTIVES
Marketing with the big data mindset a!ects the entire organization
Copyright © 2013 Florian Zettelmeyer
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
• 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
- 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
To leverage the big data mindset marketing has to change
Product Ecosystems and Content
FUTURE OF MARKETING
- 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
Product Ecosystems and Content
• Design for continuous engagement• Content no longer di!erent from products/services
FUTURE OF MARKETING
- 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
FUTURE OF MARKETING
Product Ecosystems and Content
• Design for continuous engagement• Content no longer di!erent from products/services
Revenue Models
Copyright © 2013 Florian Zettelmeyer
• 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
• 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
Product Ecosystems and Content
• Design for continuous engagement• Content no longer di!erent from products/services
Revenue Models
• Price the system, not the product/service• Separate value capture from value creation
FUTURE OF MARKETING
- 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
Product Ecosystems and Content
• Design for continuous engagement• Content no longer di!erent from products/services
Revenue Models
• Price the system, not the product/service• Separate value capture from value creation
Engagement
FUTURE OF MARKETING
- 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
Product Ecosystems and Content
• Design for continuous engagement• Content no longer di!erent from products/services
Revenue Models
• Price the system, not the product/service• Separate value capture from value creation
Engagement
• Deep insight about consumer motivation• Leverage other consumer data
FUTURE OF MARKETING
- 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
Product Ecosystems and Content
• Design for continuous engagement• Content no longer di!erent from products/services
Revenue Models
• Price the system, not the product/service• Separate value capture from value creation
Engagement
• Deep insight about consumer motivation• Leverage other consumer data
Access Everywhere
FUTURE OF MARKETING
- 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
Product Ecosystems and Content
• Design for continuous engagement• Content no longer di!erent from products/services
Revenue Models
• Price the system, not the product/service• Separate value capture from value creation
Engagement
• Deep insight about consumer motivation• Leverage other consumer data
Access Everywhere
• Consumers don't think channels; nor should you
• Design access for cross-channel customer
FUTURE OF MARKETING
Copyright © 2013 Florian Zettelmeyer
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