(KMBN MK02) Unit 1 Marketing Analytic and Market Sizing

Meaning of Marketing Analytics 

Marketing analytics refers to the process of measuring, managing, and analyzing data related to marketing efforts to understand their effectiveness. It helps businesses figure out what’s working in their marketing campaigns and what’s not, so they can make smarter decisions.

Example: Imagine you run an online store and you are promoting your products through social media ads and email campaigns. You want to know:

• How many people clicked on your ads?
• How many people actually bought something after seeing the ad?
• Which platform (Facebook, Instagram, or email) brought in more customers?

Marketing analytics helps you answer these questions by collecting and analyzing data from these platforms. Based on the insights, you can invest more in the platform that brings the most sales or tweak the ads that aren’t performing well.

In simple terms, marketing analytics is like using a magnifying glass to closely examine how your marketing strategies are working so you can improve them and get better results.

Characteristics of Marketing Analytics

Here are the key characteristics of marketing analytics are:

• Data-Driven: It relies on numbers and data (like clicks, sales, and views) to analyze marketing performance. Example: If your social media ad got 1,000 clicks but only 10 people bought something, marketing analytics helps you figure out why.
• Performance Tracking: It tracks how well your marketing efforts are doing over time. Example: You run an email campaign every month. Marketing analytics can show if sales are increasing or decreasing because of those emails.
• Goal-Oriented: It measures success based on specific marketing goals, like increasing sales or getting more website visitors. Example: If your goal is to get 500 people to sign up for your newsletter, marketing analytics tells you if you’re reaching that target.
• Actionable Insights: It provides useful information that helps you make better marketing decisions. Example: If an Instagram ad is driving more traffic than a Facebook ad, analytics suggests you invest more in Instagram.
• Predictive: It can predict future trends based on past data, helping you plan your next move. Example: If your sales usually increase in December, marketing analytics can help you prepare for a holiday promotion.
• Customer Behavior Analysis: It helps in understanding how customers interact with your marketing content, what they like, and what they ignore. Example: If customers are clicking on your product links but not making purchases, analytics might suggest adjusting your product descriptions or prices.
• Real-Time Monitoring: It allows businesses to see how their marketing campaigns are performing in real-time, so they can make quick adjustments. Example: If you notice that a campaign isn’t getting clicks within the first few hours, you can change the ad or target a different audience right away.
• Cross-Channel Tracking: It tracks customer interactions across multiple marketing channels like social media, websites, email, and more. Example: If someone clicks on a Facebook ad, visits your website, and later buys through an email link, marketing analytics connects these actions to show the customer journey.
• Benchmarking: It compares your marketing performance with industry standards or past performance. Example: If your competitors are getting more clicks or sales with similar campaigns, benchmarking shows how you can improve to stay competitive.
• ROI Measurement: It calculates the return on investment (ROI) for marketing activities to ensure your spending is worthwhile. Example: If you spent ₹5,000 on a Google ad and earned ₹20,000 in sales from it, marketing analytics will show a high ROI, meaning your ad was successful.
• Segmentation: It helps in dividing customers into groups based on their behavior, preferences, or demographics to create more targeted marketing strategies. Example: Analytics might reveal that people aged 18-25 buy more of your product. You can then focus future ads on this age group.
• Optimization: It continuously improves marketing strategies by testing different versions of ads or campaigns (called A/B testing). Example: If you run two versions of an email with different subject lines, analytics will show which one gets more opens, helping you choose the better one for future emails.

These characteristics help businesses understand their marketing efforts better and improve them for more success.

Advantages and Disadvantages of Marketing Analytics

Market Data Sources (Primary and Secondary)

Market Sizing

Market sizing is the process of estimating the potential size of a market for a product or service. It helps businesses understand how many potential customers there are and how much money they could make if they successfully sell their product.

Why is Market Sizing Important?

• It helps businesses determine if it's worth entering a new market.
• It allows companies to plan their marketing and sales strategies.
• It helps in setting realistic sales goals.

Example of Market Sizing

Imagine a new company that wants to sell a fitness app. Here’s how they might size the market:

1. Identify the Target Market: The company decides to focus on people aged 18-40 who are interested in fitness.
2. Find Relevant Data: They look at statistics and research to find out how many people fall into this age group. Let’s say there are 10 million people in that age range in their country.
3. Estimate Adoption Rate: They estimate that about 20% of these people might be interested in downloading a fitness app. This Means 10,000,000 people×20%=2,000,000 potential users.
4. Calculate Potential Revenue: If the app costs $10 per month, the company can estimate potential revenue:  2,000,000 users×$10 per user=$20,000,000 per month.

Stakeholder

A stakeholder is any individual or group that has an interest in or is affected by the activities of a business or organization. This can include anyone who is impacted by or can influence the company's decisions.

Types of Stakeholders

• Internal Stakeholders: People within the organization, like employees and managers.
• External Stakeholders: People outside the organization, like customers, suppliers, investors, and the community.

Example of Stakeholders

Imagine a local bakery:

• Employees: The bakers and staff who work there. They are interested in job security, wages, and working conditions.
• Customers: People who buy bread and pastries. They want good quality products at reasonable prices.
• Suppliers: Companies that provide ingredients like flour and sugar. They are interested in getting paid on time and maintaining a good relationship.
• Investors: People who invested money in the bakery. They are interested in the bakery's profits and growth.
• Community: Local residents who may be affected by the bakery's operations, such as noise or traffic. They may also benefit from job creation.

Applications & Approaches to Market Sizing

There are two main approaches to market sizing: Top-Down and Bottom-Up. Each has its own applications and methods.

1. Top-Down Approach

Definition: The Top-Down approach starts with a broader market size and narrows it down to estimate the specific market for a product or service. It relies on existing data and research.

Application: This method is often used when there is ample secondary data available, such as industry reports or government statistics. Example: Market for Organic Food:

• A researcher finds that the total grocery market in a country is worth $100 billion.
• They know that organic food makes up 5% of the grocery market.
• Market Size Calculation: Organic Food Market Size=100billion×5%=5billion
• Result: The organic food market is estimated to be $5 billion.

2. Bottom-Up Approach

Definition: The Bottom-Up approach starts with specific data from individual segments and builds up to estimate the total market size. It often involves primary data collection.

Application: This method is useful when detailed information about specific customer segments is available, such as through surveys or interviews. Example: Market for a New Fitness App:

• A company conducts surveys and finds that 2,000 potential users in a city are interested in downloading their app.
• They estimate that their target city has 10 such cities in total.
• Market Size Calculation: Fitness App Market Size=2,000users/city×10cities=20,000potential users.
• If the app costs $10/month, the potential revenue could be: 20,000×10=200,000per month
• Result: The market for the fitness app is estimated to have 20,000 potential users, leading to a monthly revenue potential of $200,000.

In Short

• Top-Down: Starts with the overall market and narrows down (e.g., estimating the organic food market from total grocery sales).
• Bottom-Up: Starts with specific data and builds up (e.g., estimating the market for a fitness app based on potential users in multiple cities).

PESTLE Analysis

PESTLE Analysis is a tool used by businesses to understand the external factors that can impact their operations and strategy. It stands for Political, Economic, Social, Technological, Legal, and Environmental factors.

Why Use PESTLE Analysis?

• It helps identify opportunities and threats in the market.
• It aids in strategic planning and decision-making.
• It allows businesses to adapt to changes in the external environment.

Breakdown of PESTLE Factors

• Political: Government policies, regulations, and political stability that can affect business operations. Example: A new tax law that increases corporate taxes could reduce profits for a company.
• Economic: Economic conditions such as inflation, exchange rates, and economic growth. Example: During a recession, consumers may spend less, impacting sales for luxury goods.
• Social: Societal trends, demographics, and cultural aspects that influence consumer behavior. Example: An increase in health consciousness may boost demand for organic food products.
• Technological: Advancements in technology that can change how businesses operate or create new opportunities. Example: The rise of e-commerce platforms has allowed retailers to reach customers online.
• Legal: Laws and regulations that businesses must comply with, such as labor laws, consumer protection laws, and industry-specific regulations. Example: New data protection laws may require businesses to invest in cybersecurity measures.
• Environmental: Environmental factors, including climate change, sustainability, and environmental regulations. Example: Increasing consumer preference for eco-friendly products may drive companies to adopt sustainable practices.

Example of PESTLE Analysis

Imagine a company that produces plastic water bottles:

• Political: New regulations on plastic usage could limit production.
• Economic: Rising costs of raw materials might increase prices for consumers.
• Social: Growing awareness of environmental issues could lead to a shift toward reusable bottles.
• Technological: Innovations in biodegradable materials could provide new product options.
• Legal: Stricter recycling laws could affect how the company manages waste.
• Environmental: Climate change impacts could affect the availability of water sources.

In short,

PESTLE Analysis helps businesses understand the external environment in which they operate. By analyzing Political, Economic, Social, Technological, Legal, and Environmental factors, a company can make informed decisions and adapt to changes effectively. For example, a plastic bottle company might decide to develop reusable or biodegradable products in response to social and environmental trends.

Porter Five Force Analysis

Porter’s Five Forces Analysis is a framework used to understand the competitive forces that shape an industry. It helps businesses assess the level of competition and identify the potential profitability of entering a market. The model was developed by Michael E. Porter and focuses on five key forces.

The Five Forces

• Threat of New Entrants: How easy or difficult it is for new competitors to enter the market. Example: In the tech industry, the threat might be low due to high startup costs and the need for specialized knowledge, making it hard for new companies to compete with established firms like Apple or Microsoft.
• Bargaining Power of Suppliers: The power suppliers have over the prices of goods and services. Example: If a company relies on a single supplier for a critical component, that supplier has high bargaining power. If they increase prices, the company may have to pay more or look for alternatives.
• Bargaining Power of Buyers: The power customers have to influence pricing and quality.  Example: In the supermarket industry, consumers have high bargaining power because they can easily switch to another store if prices are too high or if they don’t like the product quality.
• Threat of Substitute Products or Services: The likelihood that customers will switch to alternative products or services. Example: In the beverage industry, soft drinks face competition from alternatives like water, tea, and energy drinks. If consumers prefer healthier options, the threat of substitutes increases.
• Rivalry Among Existing Competitors: The intensity of competition among current players in the market. Example: In the fast-food industry, companies like McDonald's, Burger King, and Wendy's compete fiercely, often lowering prices or running promotional campaigns to attract customers.

Example of Porter’s Five Forces Analysis

Consider the coffee shop industry:

• Threat of New Entrants: Moderate. While starting a coffee shop is relatively easy, established brands (like Starbucks) dominate the market and have strong brand loyalty.
• Bargaining Power of Suppliers: Low to moderate. Many suppliers provide coffee beans, so individual shops have options. However, premium suppliers might have more power if their product is unique.
• Bargaining Power of Buyers: High. Customers can easily switch to other coffee shops or brands, giving them significant power over pricing.
• Threat of Substitutes: High. Alternatives like tea, energy drinks, or homemade coffee can easily replace coffee shop products.
• Rivalry Among Existing Competitors: High. Numerous coffee shops compete in the same market, leading to price wars and frequent promotional offers.