(BMB MK02) Unit 4: Retailing, Advertising & Web Analytics Retail Analytics
Market Basket Analysis
- Place bread and butter closer together on the shelves, making it easier for customers to buy both.
- Offer a discount if a customer buys chips and soda together.
Computing two-way and three-way lift
Two-Way Lift
- Support(A and B) is the percentage of transactions where both A and B are bought together.
- Support(A) is the percentage of transactions where A is bought.
- Support(B) is the percentage of transactions where B is bought.
Example: Let's say in a store:
- 20% of the transactions have both Milk and Bread.
- 50% of the transactions have Milk.
- 60% of the transactions have Bread.
Now, calculate the Lift:
Three-Way Lift
- Support(A, B, and C) is the percentage of transactions where A, B, and C are bought together.
- Support(A), Support(B), and Support(C) are the percentages of transactions where each product is bought independently.
Example: Let’s now say that:
- 10% of the transactions have Milk, Bread, and Butter bought together.
- 50% of the transactions have Milk.
- 60% of the transactions have Bread.
- 30% of the transactions have Butter.
Now, calculate the Lift:
Summary:
- A two-way lift tells you if two products are likely to be bought together.
- Three-way lift extends this to three products.
- A Lift > 1 means the products are likely to be bought together, while a Lift < 1 means they are less likely to be bought together than expected.
RFM Analysis
- Recency (R): This measures how recently a customer made a purchase. The idea is that customers who bought recently are more likely to buy again soon. Example: A customer who bought something last week is considered more valuable than someone who bought it six months ago.
- Frequency (F): This tracks how often a customer makes a purchase. The more often a customer buys, the more valuable they are to the business. Example: A customer who buys every month is more valuable than someone who makes a purchase once a year.
- Monetary (M): This looks at how much money a customer spends. Customers who spend more are considered more valuable. Example: A customer who spends $100 on each purchase is more valuable than someone who spends $10.
Example in Marketing: Let’s say you're a marketer for an online clothing store.
- Customer A: Last bought 2 weeks ago (recency), buys every month (frequency), and spends $100 each time (monetary).
- Customer B: Last bought 6 months ago (recency), buys once a year (frequency), and spends $10 (monetary).
How businesses use RFM
For example:
- High Recency, High Frequency, High Monetary: These are your best customers. You might send them exclusive offers to keep them coming back.
- Low Recency, Low Frequency, Low Monetary: These are the customers who haven't bought much. You might try to win them back with special discounts.
Allocating Retail Space and Sales Resources
1. Allocating Retail Space: This refers to the distribution of available space within a retail store to various products or product categories. The goal is to optimize the layout for customer flow and maximize sales.
- Product Category Demand: High-demand products should be given more space.
- Profitability: Allocate more space to high-margin products.
- Seasonal Trends: For example, giving more space to winter clothing during colder months.
- Store Layout: The space allocation also depends on the store’s design, such as the front or back of the store.
2. Allocating Sales Resources: This refers to assigning salespeople, managers, or promotional efforts to different areas within the store or to different product lines based on their potential to generate sales.
- Traffic Flow: Assign more salespeople to areas with higher foot traffic.
- Product Expertise: Sales resources are often allocated to product categories where staff have specialized knowledge.
- Customer Service: More salespeople can be assigned to help customers in busy areas or for high-value products.
Identifying the Sales-to-Marketing Effort Relationship
Sales and marketing work together to generate leads, convert prospects, and build customer loyalty. However, the way they interact varies depending on the business strategy. The relationship between sales and marketing is critical for business success. Marketing efforts help generate awareness, interest, and demand for a product or service, while sales efforts focus on converting that interest into actual purchases.
The relationship can be understood in the following steps:
- Marketing's Role: Marketing activities such as advertising, promotions, content creation, and brand positioning aim to create a demand for the product or service.
- Sales Role: Sales efforts focus on closing deals with potential customers by providing them with detailed information, addressing their needs, and persuading them to purchase.
- Marketing Drives Awareness: Marketing strategies like advertising, content marketing, social media, and SEO are designed to create awareness about products or services.
- Sales Convert Leads: Once marketing creates awareness, sales teams engage with leads, nurture relationships, and close deals. Sales efforts focus on converting leads into actual revenue.
- Feedback Loop: Sales teams provide feedback to marketing about customer preferences, objections, and market trends, which helps marketers refine their strategies.
Key Metrics to Measure the Relationship
To identify the relationship between sales and marketing efforts, key metrics are tracked:
- Lead Generation: The number of leads generated by marketing campaigns.
- Conversion Rate: The percentage of leads that sales teams successfully convert into paying customers.
- Customer Acquisition Cost (CAC): The cost incurred by the company to acquire a new customer through marketing and sales efforts.
- Return on Investment (ROI): The revenue generated from marketing and sales efforts compared to the cost of those efforts.
Modeling the Sales-to-Marketing Effort Relationship
Once the relationship between sales and marketing is identified, it can be modeled using various methods. One common approach is a linear regression model.
Example: Sales and Marketing Efforts Relationship
Let’s say a company wants to model how their marketing efforts (e.g., advertising spend) affect sales. The company collects data over several months:
To model the relationship between Marketing Spend and Sales Revenue, a linear regression model can be used:
Y = a + bX
Where:
Y = Sales Revenue
X = Marketing Spend
a = intercept (constant)
b = slope (the change in sales revenue for each unit change in marketing spend)
Calculation: Let’s assume after analysis, the model is found to be:
Sales Revenue = 50,000 + 2 * Marketing Spend
This equation implies that for every ₹1 spent on marketing, sales revenue increases by ₹2.
Evaluating the Model
To evaluate the accuracy of the model, you would use metrics such as:
- R-squared (R²): Measures how well the independent variable (Marketing Spend) explains the variance in sales revenue.
- P-value: Tests whether the relationship between sales and marketing spend is statistically significant.
a. Define Key Variables
- Marketing Effort (M): The total effort invested in marketing activities such as advertising spend, content creation, social media engagement, etc.
- Sales Volume (S): The total number of units or revenue generated from sales efforts.
b. Data Collection
- Marketing budget and spending details.
- Corresponding sales figures.
- External factors like market conditions, competition, seasonality, etc.
c. Correlation Analysis
d. Regression Modeling
e. Interpretation
- Marketing Effort (M): The company invests $100,000 in online advertising, TV commercials, and social media campaigns over a quarter.
- Sales (S): As a result, the sales for that quarter amount to $1 million.
S=100,000+9⋅M
S=100,000+9⋅200,000=1,900,000
4. Limitations
- External Factors: Other factors like economic conditions or competition might influence sales, but they aren’t captured in the model.
- Diminishing Returns: After a certain point, increasing marketing efforts might not yield proportional increases in sales.
- Sales Process Complexity: Sales performance might depend on factors beyond marketing, such as sales team effectiveness or customer service.
Optimizing Sales Effort
Example: Imagine a store selling shoes. Instead of trying to sell every shoe to every customer, the salesperson focuses on customers who are most likely to buy shoes. They might do this by:
- Identifying Best Customers: They notice that customers who are looking for running shoes are more likely to make a purchase. So, they focus on showing running shoes to people who need them.
- Targeting High-Value Customers: Instead of wasting time on customers who aren't interested, the salesperson spends more time with people who are already showing interest in shoes.
- Improving Communication: The salesperson makes sure to explain the features and benefits of the shoes clearly, answer questions quickly, and suggest options based on what the customer needs, saving time and increasing the chances of a sale.
- Using Technology: The store might use a system to track customer preferences, so when a regular customer comes in, the salesperson can recommend shoes based on past purchases, making the interaction faster and more relevant.
Advertising Analysis
Key aspects of advertising analysis
- Target Audience: Who is the ad trying to reach? For example, if an ad is about baby food, the target audience might be new parents.
- Message: What is the ad trying to communicate? Is it about how the product works, or is it focusing on emotions like happiness or safety?
- Visuals: How does the ad look? Are there colors, pictures, or people that grab attention? For example, an ad for a vacation spot might show beautiful beaches to attract people looking to relax.
- Tone and Style: What feeling does the ad create? Is it serious, fun, or inspiring? For instance, an ad for a car might be serious and focus on safety, while an ad for a soft drink might be fun and playful.
- Call to Action: Does the ad encourage the viewer to do something, like buy the product, sign up for a service, or visit a website?
Example of Advertising Analysis
Imagine an ad for a fitness gym. The target audience is likely people who want to get fit. The message might be: "Join now and get your first month free!" The visuals could show people working out, looking happy and healthy. The tone is motivational and energetic. The ad’s call to action might be: "Sign up today and start your fitness journey!"
In this example, the analysis would focus on how well the ad speaks to the target audience (people looking to get fit), how the visuals and tone help communicate the message, and whether the call to action encourages people to act.
Measuring the Effectiveness of Advertising
- Sales Increase: One way to measure effectiveness is by looking at if there was an increase in sales after the ad campaign. For example, if a store runs an ad about a sale and sees a rise in customers buying products during the sale period, it indicates the ad worked.
- Brand Awareness: Another way is by seeing how many people recognize the brand after the campaign. For example, a new soft drink brand might run a TV ad. After a few weeks, they may survey people to see how many have heard of the brand or can recall the ad.
- Customer Engagement: This measures how much people interacted with the ad. For instance, if a clothing brand runs an ad on social media and gets lots of likes, shares, or comments, it shows people are engaged and interested in the ad.
- Return on Investment (ROI): This checks if the money spent on the ad brings in more money. For example, if a company spends $1,000 on an online ad and earns $5,000 in sales from it, the ROI is high, meaning the ad was effective.
- Customer Feedback: Sometimes, businesses ask customers how they found out about the product. This helps measure how many people were influenced by the advertisement. Example: A restaurant runs a TV ad promoting a new dish. When customers visit, the waiter might ask, "How did you hear about our new dish?" If many people say, "We saw the ad," this shows the ad was effective in getting people to visit.
- Website Traffic: If the ad directs people to a website, the business can measure how many people visited the website after seeing the ad. Example: An online shoe store runs a social media ad, offering a discount for first-time customers. If there is a spike in website visits and people making purchases, the store can see that the ad led to more traffic and sales.
Pay per Click (PPC) Online Advertising
Pay per Click (PPC) online advertising is a way for businesses to get their ads shown to people on search engines (like Google) or websites, and they only pay when someone clicks on the ad.
Here's how it works:
- Advertisers create ads: Businesses design ads for their products or services and choose keywords that people might search for. For example, if a shoe store sells running shoes, they might choose keywords like "buy running shoes" or "best running shoes."
- Ads appear in search results or on websites: When someone types in those keywords on a search engine, like Google, the ads appear on the search results page, usually at the top or bottom, or on other websites that allow ads.
- Advertisers pay for clicks: If someone sees the ad and clicks on it, the business pays the advertising platform (like Google) a certain amount of money for that click. The price depends on the competition for those keywords and the quality of the ad.
In simple terms, PPC is like paying for a chance to show your ad, but you only pay if someone actually shows interest by clicking on it.
Introduction to Web Analytics
Web Analytics means collecting, measuring, analyzing, and reporting data about how visitors use a website. It helps businesses understand user behavior and improve website performance to achieve goals like more sales, sign-ups, or visits.
In simple words: Web analytics tells you who visits your website, what they do, how they found you, and what makes them stay or leave.
Importance of Web Analytics
- Helps track website performance
- Understands visitor behavior and preferences
- Improves user experience (UX)
- Measures success of digital marketing campaigns
- Helps in data-driven decisions
- Increases conversion rates (sales, leads, signups)
Key Terms in Web Analytics
| Term | Meaning in Simple Words | Example | 
|---|---|---|
| Visitor / User | A person who visits your website | 1 user visiting www.amazon.in | 
| Session | The total time a user spends on a website in one visit | Browsing for 15 minutes = 1 session | 
| Page View | Each time a web page is loaded | 5 pages opened = 5 page views | 
| Hit | Every request made to the server (like loading an image or file) | 1 webpage with 3 images = 4 hits | 
| Bounce Rate | % of visitors who leave after viewing only one page | If 60% of people leave from homepage, bounce rate = 60% | 
| Traffic Source | The channel from which users came to your website | Google, Facebook, Email, Direct visit | 
| Conversion | When a visitor completes a goal (like a purchase or sign-up) | Buying a product or filling a form | 
| CTR (Click-Through Rate) | % of people who click on a link/ad | 100 views, 10 clicks = 10% CTR | 
Web Analytics Process
| Step | Description | 
|---|---|
| 1. Define Goals | What do you want to achieve? (e.g., sales, leads, page views) | 
| 2. Collect Data | Use web analytics tools to track visitor activity | 
| 3. Process Data | Clean and organize the collected data | 
| 4. Analyze Data | Study patterns — who visits, what they like, where they drop off | 
| 5. Report Findings | Share insights through dashboards and reports | 
| 6. Optimize Website | Improve design, content, or ads based on results | 
Offsite vs. Onsite Web Analytics
| Type | Meaning | Example / Purpose | 
|---|---|---|
| Offsite Web Analytics | Analysis of a website’s visibility and performance outside your website | Social media reach, backlinks, SEO ranking | 
| Onsite Web Analytics | Analysis of user behavior within your website | Tracking clicks, page views, bounce rate | 
- Offsite = how people find your website.
- Onsite = what they do after arriving.
Common Web Analytics Tools
| Tool | Description | 
|---|---|
| Google Analytics 4 (GA4) | Most widely used tool to track website visitors, traffic sources, and conversions | 
| Google Search Console | Tracks website performance in Google search results | 
| Adobe Analytics | Enterprise-level tool for deep data insights | 
| Hotjar | Provides heatmaps to see where users click or scroll | 
| SEMRush / Ahrefs | Used for offsite analytics like SEO, backlinks, and competitors | 
| Matomo / Piwik | Open-source analytics tools with strong privacy features | 
Important Web Metrics
| Metric | What It Shows | Why It’s Important | 
|---|---|---|
| Hits | Total server requests | Basic measure of activity (less used now) | 
| Page Views | Number of pages viewed | Shows content popularity | 
| Bounce Rate | % of visitors who leave quickly | Indicates user engagement or poor UX | 
| Traffic Source | Where visitors come from | Helps identify effective marketing channels (Organic, Paid, Direct, Referral, Social) | 
| Average Session Duration | Time spent per visit | Measures engagement level | 
| Conversion Rate | % of visitors completing a goal | Indicates marketing success | 
Conclusion
- Web analytics is the backbone of digital marketing success.
- It helps organizations make data-driven decisions, improve user experience, and increase ROI by understanding what works and what doesn’t on their websites.
In Summary
| Topic | Key Point | 
|---|---|
| Definition | Process of analyzing website visitor behavior | 
| Process | Define → Collect → Analyze → Report → Optimize | 
| Types | Offsite (outside data) & Onsite (user interaction) | 
| Metrics | Hits, Page views, Bounce rate, Traffic source | 
| Tools | Google Analytics, Hotjar, Adobe Analytics, SEMRush | 
What is Google Analytics?
It provides data on:
- Who is visiting (location, device, age, gender, etc.)
- How they found your site (traffic source)
- What they do on your site (pages viewed, time spent, actions taken)
- Whether they completed goals (purchase, signup, form submission)
KPIs (Key Performance Indicators)
Need for KPIs in Google Analytics
| Reason | Explanation | 
|---|---|
| Measure Performance | Track if your marketing efforts are achieving desired results. | 
| Identify Weak Areas | Helps detect pages or campaigns with poor performance. | 
| Make Data-Driven Decisions | Helps in strategic planning and marketing budget allocation. | 
| Improve ROI | Understand which channels bring the highest returns. | 
| Set Benchmarks | Establish standards for comparing future performance. | 
Characteristics of Effective KPIs
| Characteristic | Description | 
|---|---|
| Specific | Clearly defines what is being measured (e.g., “conversion rate from email campaign”). | 
| Measurable | Quantifiable with data (e.g., “5% growth in website traffic”). | 
| Achievable | Realistic and practical to accomplish. | 
| Relevant | Directly linked to business or marketing goals. | 
| Time-Bound | Can be tracked over a specific period (daily, weekly, monthly). | 
Perspectives of KPIs in Google Analytics
| Perspective | Focus Area | Example KPI | 
|---|---|---|
| Traffic Perspective | Measures volume of visitors | Sessions, Users, Page Views | 
| Engagement Perspective | Measures interaction level | Average Session Duration, Bounce Rate | 
| Conversion Perspective | Measures goal achievement | Conversion Rate, Sales, Leads | 
| Acquisition Perspective | Measures traffic sources | Organic, Paid, Social, Direct traffic | 
| Behavioral Perspective | Measures how users navigate the site | Top Pages, Exit Pages, Click Paths | 
Usage of KPIs in Google Analytics
| Purpose | Example Metric / KPI | 
|---|---|
| To measure website popularity | Total Visitors, Page Views | 
| To check engagement | Bounce Rate, Average Time on Page | 
| To analyze marketing effectiveness | Source/Medium, CTR | 
| To track conversions | Goal Completions, Revenue, ROI | 
| To study customer retention | Returning Users, Session Frequency | 
Custom Campaigns in Google Analytics
Custom Campaigns help track the effectiveness of specific marketing campaigns (emails, ads, social media posts, influencer links, etc.) by adding UTM parameters to URLs.
Example: https://www.pratapsolution.com/?utm_source=facebook&utm_medium=social&utm_campaign=DiwaliSale
- utm_source=facebook → Source of traffic
- utm_medium=social → Type of channel
- utm_campaign=DiwaliSale → Campaign name
Benefits of Custom Campaigns
- Measures which ad or post drives the most traffic
- Compares performance across channels (Email vs. Instagram vs. YouTube)
- Tracks ROI for each marketing campaign
- Helps optimize future promotions
Content Reports in Google Analytics
Types of Content Reports
| Report Type | Purpose | Example Insight | 
|---|---|---|
| All Pages Report | Shows performance of every page | Top 10 most visited blog posts | 
| Content Drilldown | Groups content by folders or sections | “/blog/marketing/” performs best | 
| Landing Pages Report | Pages where visitors first arrive | Homepage vs. Campaign landing pages | 
| Exit Pages Report | Where users leave your website | High exit rate → page needs improvement | 
Metrics Used
- Page Views
- Unique Page Views
- Average Time on Page
- Bounce Rate
- % Exit
Summary Table
| Concept | Meaning / Use | 
|---|---|
| Google Analytics | Tool to track and analyze website traffic and performance | 
| KPIs | Key metrics used to measure success | 
| Need for KPIs | Measure performance, ROI, and identify weak points | 
| Characteristics of KPIs | SMART – Specific, Measurable, Achievable, Relevant, Time-bound | 
| Perspectives | Traffic, Engagement, Conversion, Acquisition, Behavioral | 
| Custom Campaigns | Track performance of specific marketing campaigns using UTM tags | 
| Content Reports | Analyze how visitors engage with website content | 
In Simple Words: Google Analytics and its KPIs help businesses understand what’s working online, which campaigns drive results, and how to improve customer engagement and conversions.