#11/25: Principles of Marketing Engineering

Marketing Engineering: A systematic approach to harness data and knowledge to drive effective marketing decision making and implementation through a technology-enabled and model-supported decision process.

Market response models

  • Inputs: actions that the marketer can control + environment
  • Response model
  • Objectives: monitor/measure, etc.

Value = Benefits – Price

  • Benefits
    • function (does the job)
    • psychological (status)
    • economic (saves money)
  • Price
    • Monetary
    • Perceived risk
    • Inconvenience

Customer Need

  • subject and importance of need
  • temporal aspects of need (urgency, frequency and duration)

Measuring Customer Value

  • Objective Customer Value
    • Internal engineering assessment (internal estimate)
    • Indirect survey questions (pay for better quality, etc.)
    • Field value-in-use assessment (economic benefit): Not only marginal costs but initial investment, etc.
  • Perceptual Customer Value
    • Focus groups
    • Direct survey
    • Importance ratings
    • Conjoint analysis
    • Benchmarking
  • Behavioral Customer Value
    • Choice Models
    • Statistical models / Data mining

Segmentation -> Targeting -> Positioning

  • Creating
    • how does the segmentation fit into the strategy
    • which variables can be used
    • exclusive segments?
    • how many segments?
  • Traditional segmentation
    • reduce data (PCA)
    • develop measure of association
    • identify and remove outliers
    • form segments (cluster analysis): are they clear and robust?
    • profile segments & interpret

Positioning

  • Attribute-based perceptual maps
    • identify other products & attributes
    • get data from questionnaires
    • reduce
    • plot
  • Preference Maps
    • weights for attributes
  • Joint-Space Maps

Translating Preference to Choice

  • first choice rule: infrequent, expensive
  • Share of preference rule: often, cheap, etc.

For [target segment], the [offering] is [positioning claim], because [single most important support].

Forecasting

  • Judgmental Methods
    • Sales force composite estimates: let the sales force forecast
    • Jury of executive opinion: different stakeholders
    • Delphi method: anonymous and iterative
    • Chain ratio method: split up in its factors

Conjoint study

  • select attributes of product
  • develop bundles
  • do survey
  • segment customers based o part-worth function
  • design market simulation
  • select choice rule
  • adj market shares

Top 10 Lessons

  • Marking Engineering is Marketing
  • ME is a means to an end
  • frames the opportunity costs for alt. actions
  • requires judgment
  • whole greater than the sum of its parts
  • data & info do not automatically result in value
  • rapid prototyping
  • every model has its downside
  • ME requires lifelong learning
  • be a coach rather than a teacher

Insights for better Implementation

  • Be opportunistic
  • Start Simple; Keep it Simple
  • Work backward
  • score inexpensive victories
  • develop a program, not just a project

I really liked Principles of Marketing Engineering. The book gives a great overview over the topic and different approaches. It’s written like a textbook, so it can be a bit lengthy in parts but otherwise, a nice book.

#94/111: Don’t Just Roll the Dice

What is it about?

Pricing is highly critical and an in-depth topic. Can such a short book fulfill your needs? We will see. Neil Davidson is also famous for hosting Business of Software.

What can I learn?

Know your market segment: People work with relatives. If your competitor’s products cost between $10 and $20, you have a hard time sell yours for $2000. The first thing is to learn about your market segment. How high are competitor’s prices and why are they what they are. Learn about your customers. For example, software that cost less than $10 will be easily bought¬† by nearly anybody. If your software costs more than $50 some personal customers may get nervous. If you product costs more than $1000 your customer probably needs to talk to his superior. Even $1, $999 vs. $1000 can make a huge difference! Ideally, you should know about this by customer development.

Think about presentation:¬† Pricing is not just about setting a price. It’s also about product presentation, e.g. bundling. Do you sell other software? Which alternatives are there? Maybe you could sell with an complementary product? There are lots of different possibilities. Generally, selling just one product will produce a higher price.

Test, Test, Test: The most important thing, like expected, is testing your pricing. The best way to do so is by features. Take a look at software from 37signals or Microsoft. They got different product packages. For small and large businesses or personal users. You should avoid to charge different prices for the same product. This can really annoy users. One idea is that you sell your product for $x but display $x resp. $(x+y) as price. If enough users were willing to buy for $(x+y) you can increase your price and use this event as a nice marketing tool.

Conclusion

Firstly, you can read Don’t Just Roll the Dice for free! I liked the book, however it is just 80 pages or so. I think it got some nice ideas and is more to get a overview over the topic than really learning about it. You will find lots of articles on pricing on sites like Hacker News. In conclusion, great book for learning the basics but later you should look for other resources.