Big Data and the
Future of Marketing
Florian Zettelmeyer
Nancy L. Ertle Professor of Marketing
Kellogg School of Management, Northwestern University
First Data Leadership Summit 2013
Copyright © 2013 Florian Zettelmeyer
Marketing using Big Data has become all the rage
FROM THE BUSINESS PRESS
- “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 effectively and in a highly customized manner.”
1999
- “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.”
What is actually
1989 new about
”?
Big
Data
- “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
1979
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”
1968
Copyright © 2013 Florian Zettelmeyer
What is new about Big Data?
"Big"
Big Data
There is lots of it
Quantity of data
Computing
- Move from transactions to clicks,
physical movements, and networks
- From mainframes to
shared-nothing clusters
- Combination of seemingly unrelated
databases
- New tools
(Hadoop, Pig, Mahout, Revolution R, ...)
- Tracking of pre-purchase behavior
- From on-site to the cloud
• Amazon Web Services
• IBM BigInsights, ...
- Tracking of post-purchase usage
behavior
Copyright © 2013 Florian Zettelmeyer
What is new about Big Data?
Big "Data"
Data enables customer analytics
Copyright © 2013 Florian Zettelmeyer
"Big" is only a small part of big data
Big Data
Is about a big data mindset
- Design all processes with measurement in mind
- Use predictive & proactive analytics
- R&D everywhere
- Test everything
- Challenge conventional wisdom
A big data mindset is useful even if your data fits
on just few servers
Copyright © 2013 Florian Zettelmeyer
How do I leverage the big data mindset?
Copyright © 2013 Florian Zettelmeyer
CASE STUDY: LOYALTY INCENTIVES
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
Copyright © 2013 Florian Zettelmeyer
CASE STUDY: LOYALTY INCENTIVES
Harrah's had experienced rapid growth in the gaming
market
SAME STORE SALES GROWTH
Copyright © 2013 Florian Zettelmeyer
CASE STUDY: LOYALTY INCENTIVES
Harrah's outlook looks difficult prior to 1998
SITUATION
- Competitors are placing their bets on flashy
new properties
- Investment required to compete on
properties is huge
- No expected increase in legal gaming markets
How can Harrah's grow?
Copyright © 2013 Florian Zettelmeyer
CASE STUDY: LOYALTY INCENTIVES
Harrah's asks customers to get insights
INSIGHTS
1. Customer engage in large amounts of cross-market play
Copyright © 2013 Florian Zettelmeyer
CASE STUDY: LOYALTY INCENTIVES
Harrah's asks customers to get insights
INSIGHTS
1. Customer engage in large amounts of cross-market play
but ...
2. Harrah's receives small share (36%) of total gaming dollars
Copyright © 2013 Florian Zettelmeyer
CASE STUDY: LOYALTY INCENTIVES
Harrah's creates relationships with customers in local
markets, then extend them to destination markets
APPROACH
BASIC REQUIREMENTS
- Cross-market revenues
- Identify customers across
markets
- Determine what a potentially
good customer is
- Create incentives for consumers
to visit other properties
Copyright © 2013 Florian Zettelmeyer
CASE STUDY: LOYALTY INCENTIVES
Meeting these basic requirements was nearly
impossible
CHALLENGES
- Each property had its own reward card and different rewards
- Incentives for repeat visits applied only locally
• South Lake Tahoe --> comp rooms & meals at South Lake Tahoe
• Reno
--> comp rooms & meals at Reno
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"
Copyright © 2013 Florian Zettelmeyer
CASE STUDY: LOYALTY INCENTIVES
The solution for Harrah's was to thing of the customer,
not the property as the key source of value
HARRAH'S APPROACH
- New organizational form:
Property managers report to COO, not CEO
- IT integration
- New branding ("exuberantly alive")
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
Copyright © 2013 Florian Zettelmeyer
CASE STUDY: LOYALTY INCENTIVES
Harrah's is considered a great success for marketing
with the big data mindset
SUCCESS INDICATORS
- 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... 1% improvement equates into
$40 million profit
Marketing with the big data mindset affects the
entire organization
Copyright © 2013 Florian Zettelmeyer
Marketing with the big data mindset is not just about
marketing any more
SOURCE OF POTENTIAL
- 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
Copyright © 2013 Florian Zettelmeyer
Traditionally, marketing is about the "4 Ps"
CURRENT VIEW (Kellogg's Phil Kotler)
- Product
• Design
• Design
individual
individual
products
products
& services
& services
toto
create
create
customer
customer
value
value
- Price
• Capture
• Capture
value
value
from
from
individual
individual
products
products
& & services
services
for firmfor firm
- Promotion
• Advertise
• Advertise
and
and
promote
promote
products
products
& services
& services
toto
driver
driver
awareness,
awareness,
persuasion
persuasion
and
and
sales
sales
- Place
• Manage
• Manage
individual
individual
channels
channels
of of
distribution
distribution
toto
maximize
maximize
sales
sales
& profits
& profits
Copyright © 2013 Florian Zettelmeyer
To leverage the big data mindset marketing has to
change
FUTURE OF MARKETING
- Product
Product Ecosystems and Content
• 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
Copyright © 2013 Florian Zettelmeyer
FUTURE OF MARKETING
- Product
Product Ecosystems and Content
• Design individual products
services
to create
• Design&for
continuous
engagement
customer value • Content no longer different from products/services
- 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
Product Ecosystems and Content
• Design individual products
services
to create
• Design&for
continuous
engagement
customer value • Content no longer different from products/services
- Price
Revenue Models
• 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
0%
Free or
subscription
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subscription
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70/30 sharing
Developers
Content
Developers
Copyright © 2013 Florian Zettelmeyer
FUTURE OF MARKETING
- Product
Product Ecosystems and Content
• Design individual products
services
to create
• Design&for
continuous
engagement
customer value • Content no longer different from products/services
- Price
Revenue Models
• Capture value from• individual
productsnot
& the product/service
Price the system,
services for firm • Separate value capture from value creation
- 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
Product Ecosystems and Content
• Design individual products
services
to create
• Design&for
continuous
engagement
customer value • Content no longer different from products/services
- Price
Revenue Models
• Capture value from• individual
productsnot
& the product/service
Price the system,
services for firm • Separate value capture from value creation
- Promotion
Engagement
• 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
Copyright © 2013 Florian Zettelmeyer
FUTURE OF MARKETING
- Product
Product Ecosystems and Content
• Design individual products
services
to create
• Design&for
continuous
engagement
customer value • Content no longer different from products/services
- Price
Revenue Models
• Capture value from• individual
productsnot
& the product/service
Price the system,
services for firm • Separate value capture from value creation
- Promotion
Engagement
• Advertise and promote
products
services
to
• Deep
insight&about
consumer
motivation
driver awareness, persuasion
sales
• Leverageand
other
consumer data
- Place
• Manage individual channels of distribution to
maximize sales & profits
Copyright © 2013 Florian Zettelmeyer
FUTURE OF MARKETING
- Product
Product Ecosystems and Content
• Design individual products
services
to create
• Design&for
continuous
engagement
customer value • Content no longer different from products/services
- Price
Revenue Models
• Capture value from• individual
productsnot
& the product/service
Price the system,
services for firm • Separate value capture from value creation
- Promotion
Engagement
• Advertise and promote
products
services
to
• Deep
insight&about
consumer
motivation
driver awareness, persuasion
sales
• Leverageand
other
consumer data
- Place
Access Everywhere
• Manage individual channels of distribution to
maximize sales & profits
Copyright © 2013 Florian Zettelmeyer
Copyright © 2013 Florian Zettelmeyer
FUTURE OF MARKETING
- Product
Product Ecosystems and Content
• Design individual products
services
to create
• Design&for
continuous
engagement
customer value • Content no longer different from products/services
- Price
Revenue Models
• Capture value from• individual
productsnot
& the product/service
Price the system,
services for firm • Separate value capture from value creation
- Promotion
Engagement
• Advertise and promote
products
services
to
• Deep
insight&about
consumer
motivation
driver awareness, persuasion
sales
• Leverageand
other
consumer data
- Place
Access Everywhere
• Manage individual•channels
of distribution
Consumers
don't thinkto
channels; nor should you
maximize sales & profits
• Design access for cross-channel customer
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
Copyright © 2013 Florian Zettelmeyer
Thank you.
Florian Zettelmeyer
f-zettelmeyer@kellogg.northwestern.edu
Copyright © 2013 Florian Zettelmeyer