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Models in marketing

Models in Marketing
27E02000

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CONTENTS:
1. INTRODUCTION
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1.1 Course objectives and relevant literature


1.2 Marketing Engineering why ?
1.3 Data Mining
1.4 What is a model - different types of models
1.5 Model Benefits
References and readings

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Contents

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Models in marketing

1.1 Course objectives and relevant


literature:
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To learn how to
gather data
outline research designs of questionnaires
analyse and utilize the data
to support decision making in marketing
problems
To learn to identify different models and tools in
marketing problems
To learn what kind of data there exists

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Course objectives and relevant


literature

The role of questionnaire data among


customer databases
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The data that questionnaires produce can be


supplemented into marketing databases
Surveys often carried out for a specific purpose
E.g. segmentation information can be
supplemented into customer database
The procedures introduced e.g. factor analysis,
cluster analysis can be used in e.g. transactions
data

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Models in marketing

Relevant literature for todays topic


L&R
Lilien & Rangaswamy: Marketing Engineering, 2nd
ed. 2003, www.mktgeng.com
The new edition is more generally businessoriented.
L&K&M
Lilien, Kotler, Moorthy: Marketing Models, 1992
Both of the books have a new edition dating from
2003.
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Course objectives and relevant


literature

1.2 Marketing engineering - why


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At the heart of marketing management is the ability to


understand customers and markets and to translate
this understanding into decisions and actions that
produce desirable exchanges in the marketplace.
Marketing engineering offers tools for both
understanding and translating

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Marketing engineering - why

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Models in marketing

What is marketing engineering


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Use of decision models for making marketing


decisions

Conceptual marketing: relying only on mental


models (combining known facts with intuition,
reasoning and experience)

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Marketing engineering - why

1.3 Data Mining


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Data warehousing aims at creating an object


oriented database that includes relevant data.The
database serves the companys different
departments
Data mining means a process with which data in
warehouses is refined into novel business
information that can be used in decision support
(statistical and artificial intelligence approaches)
Big data requires special databases.

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Data Warehouse and Data


Mining

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Models in marketing

1.4 What is a model - different types


of models
q A model is a stylized representation of reality that is easier to
deal with and explore for a specific purpose than reality
itself.
q There are many types of models:

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Verbal
Box and Arrow
Graphical
Mathematical
Spreadsheets

What is a model - different types


of models

Verbal Model
Sales of a new product often start slowly as
innovators in the population adopt the
product. The innovators influence
imitators, leading to accelerated sales
growth. As more people in the population
purchase the product, sales continue to
increase but sales growth slows down.

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What is a model - different types


of models

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Models in marketing

Box and Arrow Model


Fixed
Population Size

Innovators

Imitators

Innovators
Influence
Imitators

Timing of Purchases by
Imitators

Timing of Purchases by
Innovators

Pattern of Sales Growth


of New Product

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What is a model - different types


of models

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Graphical Model
Cumulative Sales
of a Product
Fixed
Population Size

Time
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What is a model - different types


of models

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Models in marketing

Mathematical Model
dxt = (a + bx )(N x )
t
t
dt
xt = Total number of people who have adopted
product by time t
N = Population size
a,b = Constants to be determined. The actual path of
the curve will depend on these constants
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What is a model - different types


of models

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1.5 Model Benefits


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assist in understanding the problem


may increase the understanding of feasible
solutions
available data can be put in use
encourage to gather useful information
provide framework for discussions
give directions to research (what info we need)
can decrease consumption of time in solving
problems

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Model Benefits

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Models in marketing

What are the areas of science connected


with marketing models
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Economics, consumer theory


Statistics, econometrics
Psychology, how people behave
Management science combines theories, expert
knowledge as well as mathematical models to
produce relevant information to support decision
making

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