Class11 Make Sure You Can See This Screen and That You Are As Close As Possible SAS Has Small Fonts and Seeing the Code Clearly on This Screen Can Be a Problem

Class12 Marketing 8001: Database Marketing Class 1 Discovering and Utilizing Reliable Patterns in Customer Data

Class13 Today’s Agenda Tell Me About Yourself Gist of Course Data Versus Information Course Details Instructor Syllabus What Is Database Marketing (DBM)? How Does DBM Work…Class Customer Targeting Exercise Computer Stuff Introduction to SAS…GJC SAS Demonstration

Class14 Tell Me About Yourself On 3 x 5 card, please write… Name Name you go by Reason/why you are taking this course

Class15 Gist of Course Ability to use SAS and analytical methods for database marketing programs Finding and capitalizing on reliable patterns in customer data Learning data analysis skills that can be used in any data-oriented business environment Learn by doing!!!!

Class16 Data Versus Information Data becomes information when it reduces uncertainty in decision-making For example, designing and implementing a “readable” (i.e., statistically reliable) direct mail or “DM” copy test… –and, using the results to estimate the order rate expected for a large-scale promotion

Class17 Data Versus Information –Prospective employers want MBAs who have the skills to extract customer information from their databases –Former students have gotten jobs and/or internships because of practical analytical skills learned in this class –My goal is to hear the same from you.

Class18 Here’s An Example Online job opportunity listing from BassPro Shops, September 26, 2007

Class19 Customer Insights Manager Sportsman's Park Center- Springfield, MO We are seeking a seasoned individual to lead the customer insights team in performing portfolio-level analytics, including churn forecasting, predictive modeling, customer segmentation, profiling and program/campaign analysis. Responsibilities:  Provide direction and mentorship in the design, execution and delivery of analytic projects.  Generate ideas found from within the data to grow the customer's share of wallet or maintain loyalty to Bass Pro Shops.  Create and maintain dashboards for retail direct mail tabs, and Outdoor Rewards for management use to monitor the various marketing programs. < Requirements: The ideal candidate will have a degree in Statistics, Economics, Math, Psychology or related field. Masters degree preferred with 3-7 years prior database analytics. The individual should be a self-starter who is committed to results. Requires excellent communication skills and strong analytical skills. A solid working knowledge of SAS, Access or other database applications. From September 26, 2007

Class110 Course Details Class sessions will be mixture of: –Discussions of homework and readings –In-class computer analyses –Informal lectures 13 homework assignments…grade will be based on 11 best papers (25% of grade) 3 exams…grade based on 2 best exams (50%) Exam on last day of class (25%) Exams will be questions and problems, most using SAS or other software

Class111 Course Details Text Materials –Drozdenko & Drake (Optimal Database Marketing) –The Little SAS Book (LSB)…basic SAS reference You may want to keep this book…it’s an excellent reference for any future SAS work –Mizzou Media booklet (Cases & Readings) Thanks to Professor Maureen Morrin of Rutgers University for some of the material I have used or adapted for this course

Class112 Course Details SAS and Excel will be used for analysis –Assume you know Excel –Assume you’re not familiar with SAS …initially you will have existing SAS code to adapt –Assume you know fundamentals of marketing –Assume you remember basic statistics …but we’ll review anyhow We’ll learn command-level SAS…very useful even if you use SAS Enterprise Guide later in your career.

Class113 Course Details If interested in a position potentially involving analysis of data, I highly recommend obtaining SAS Certification –It’s taught by Ray Bacon from IT –It looks great on your resume!! If you already know SPSS, learning SAS should be easy.

Class114 Course Details Remember to save -- and backup -- all SAS code you create or I provide for you –Use Bengal Space, micro-drive, CD/DVD –If you have own PC, backup your files Adapting computer code is easier than creating new code Use “comments” in SAS code so that you’ll know what it does.

Class115 Course Details All examinations are open-book. This means you can consult textbooks, notes and any SAS code you have saved…but you cannot contact another person directly or indirectly during an exam. Students planning to pursue a career in database/direct marketing should look into… –The New Direct Marketing: How To Implement a Profit-Driven Database Marketing Strategy by David Shepard Associates –Statistical Modeling and Analysis for Database Marketing by Bruce Ratner (very technical)

Class116 Course Details You are responsible for material on class overheads even if we do not get to it during class.

Class117 Instructor Background –Summary: Extensive analytical experience in database/direct marketing, marketing research and educational research & evaluation –Ph.D., General-Experimental Psychology… minor in Quantitative Methods –Director, Quantitative Analysis, Home & Health Division at Reader’s Digest (14 yrs)…DBM research, segmentation, predictive modeling and targeting, statistical analysis –Marketing researcher (8 yrs)…sales incentive company and DuPont Corporate Marketing Research –MBA, from MU, in Marketing, 1981 –Behavioral science consulting company (9 yrs)…proposed, conducted and reported large federally-funded educational evaluation/ research projects…served as manager for analysis and managed technical services provided to clients

Class118 Syllabus

Class119 What Is DBM? “Marketing activities that utilize a marketing database” (D & D) Marketing approach in which data are systematically used to make marketing decisions about… –Specifically-defined groups of customers (i.e., “segments” and “lists”) –Specific individual customers or households within segments/lists

Class120 How Does DBM Differ from Traditional Aggregate Marketing? Aggregate marketing via mass media and traditional retail channels does not depend on data from individual customers –This is changing in retail…what will be the impact of RFID chips? DBMers maintain and utilize records of individual customers –e.g., Gerbes, L. L. Bean, Amazon

Class121 What’s DBM’s underlying premise? Not all customers are alike…they can differ greatly in terms of their potential profitability Data can be used to identify and target best prospects for marketing offers

Class122 The Major Premise Traditional Methods Versus DBM Targeting

Class123 What DBM Requires Identifying and gathering relevant data about customers and prospects –Promotion history –Order and payment history –Phone calls, credit card transactions, catalog and internet purchases, warranty cards, consumer surveys, magazine subscriptions, pay-per-view, video rentals, etc.

Class124 What DBM Requires Using database technology to transform raw data from diverse sources into accessible marketing information –Analysts and marketers need “analytic view” of customer…names in rows, variables in columns (like with Excel) –“Name” is marketing entity…can be customer or household

Class125 DBM Analytical Requirements: Focus of This Course Apply statistically-based methodologies to marketing practices and to the analysis of customer and prospect data and databases –Implement readable/reliable tests of products, promotion and offer alternatives –Use data to understand consumer behavior –Isolate relatively homogeneous market segments –Develop predictive models that can rank order names in terms of their probability of behaving in a variety of ways… Responding, paying, returning product, attriting form primary market, etc. –Use test results, data and models to improve profit

Class126 Customer Analytics Include Descriptive profiling… –Describe/understand customers…very important to any firm –Provide direction for product development and for creative folks on marketing team…”put a face on the customer” –Identify up-sell and cross-sell opportunities Lifetime customer value…you’ve had this in other courses

Class127 Customer Analytics Include Predictive modeling –RFM targeting…Recency, Frequency, Monetary Value –Regression-based targeting Ordinary least squares (OLS) Logistic regression –CHAID, neural networks, genetic algorithms, MARS, CART, etc. –Almost always profit advantages to targeting customers, regardless of method used –Let’s look at an example.

Class128 How Does DBM Work? Customer Targeting Exercise Facts –1,050,000 names on outside list (OL) –List rental cost is $100,000 –50,000 names tested…obtained 1% response rate –For those who ordered, average purchase was $75, with $50 contribution –CPM (“cost per 1000”) of promotion is $450, i.e., $0.45 per name –At 1% response, 10,000 buyers remain in list of 1.0MM names

Class129 How Does DBM Work? Customer Targeting Exercise If we promote all 1.0MM names… –10,000 buyers * $50 contribution = $500M –(1.0MM names * $0.45 per name) + $100M list cost = $550M mailing & list cost –$500M - $550M  Net loss  -$50M –Let’s see how we might do better if we had a model that can allow us to rank prospects from most to least profitable. Relevant documents on Blackboard are … –Class1CustomerTargetingExercise.doc –Class1CustomerTargetingExercise.xls

Class130 Customer Targeting Exercise Read the problem: –Class1CustomerTargetingExercise.doc Complete the spreadsheet: –Class1CustomerTargetingExercise.xls Identify optimal Mail Quantity (MQ) Comments –Profit –Risks

Class131 Introduction to SAS SAS is the analytical software system used by most businesses in the U.S. and, probably, world-wide SPSS is a competitive software package Two kinds of SAS processes –Data Step Applications –SAS Procedures (aka “Procs”)

Class132 Introduction to SAS: Data Step Applications –“Before SAS can analyze your data, the data must be in a special form called a SAS dataset” (LSB, p.4). –With SAS Data Step you can… Create SAS datasets by reading or inputting raw data…that is, data that are not “SAS datasets” –e.g.,text files, Excel files Process SAS datasets –Transform/ manipulate data –Create new and derived variables and data –Merge data –Create/output data

Class133 Introduction to SAS: Procedures (“Procs”) –With SAS “Procs” you can process and analyze SAS datasets… Proc Contents (shows contents of SAS files) Proc Sort (sorts SAS datasets) Proc Print (prints SAS datasets) Proc Import (import data from Excel) Proc Export (export data to Excel) Do statistical calculations…Frequencies, Means, Correlations, Regression, Logistic Regression, Scoring, Ranking, Tabulating…and many more –Can work with huge files, unlike Excel

Class134 Introduction to SAS Basic organization of SAS datasets… –Observations in rows, variables in columns…same as Excel –Variables can be numeric or character –Character variables awkward to use…in most cases we’ll use numeric data or create numeric variables from character variables –Like with Excel, we can create new variables

Class135 How Does SAS Process a Dataset in a Data Step? SAS reads ONE record into memory and does what your SAS code tells it to do…line-by- line…and stops at the end of the Data Step with the “Run;” statement. Then SAS erases memory and reads the next record and executes your program line-by- line…stopping at the end of the Data Step. Reading and processing continues to the end of the input dataset. This is easy for most of us to visualize if we think of an Excel spreadsheet.

Class136 How Does SAS Process a Dataset in a Data Step? Programmers may be familiar with programming languages that permit one to read an entire matrix of data into memory and then do calculations on this matrix…standard SAS does NOT do this! Remember => A SAS Data Step reads and processes one record at a time.

Class137 We’ll Learn SAS by Using It Use The Little SAS Book for the basics Detailed documentation online at SAS Institute => Advice: Backup anything important that cannot be easily re-created…especially programs Do not write over code that works, do Save As with new file name Use lots of comments to describe what your code does Most common error => Forgetting the semi-colon at the end of every SAS statement If your PC can handle it, recommend purchasing SAS license…about $25 Collaborate with classmate…butdo not specialize because you’ll need to know SAS for examinations

Class138 GJC SAS Demonstration (Later During This Class) Large SAS program Multiple Data and Proc steps Lots of comments Data steps and Procs are some of those we’ll use this semester…Currently on Blackboard –Save this code…adapting code that works is always easier than writing new code!

Class139 GJC SAS Demonstration Data on Blackboard SAS program is called… –SP2008M8001Class1SASExercise.sas Flat or text file containing each customer’s numeric ID and a code reflecting their response to a test promotion –HLResponseDataPrimSampleSP2008.txt SAS file containing variables describing customer at the time of selection before the promotion was mailed –HLPrimaryFFSampleSP2008Class1.sas7bdat

Class140 SAS Windows & Icons Editor -- Data step and Proc programs Log – Program execution documentation –Always check for errors Output – Display results of Procs –Results Tab can help you find desired output SAS Explorer Icon – Explore datasets, look at data Toolbar…be careful not to use the “new” icon by mistake

Class141 SAS Files.SAS7BDAT –“SAS dataset” that SAS can read & process –Double-clicking Opens SAS Get VIEWTABLE of data (names in rows, variables in columns) –In View…“Table View” most useful –In View…Can choose Column Labels or Column Names –Non-SAS files (.txt,.xls,.sav,.por, etc,) must be read in data step, imported or converted to a SAS file by Proc Convert

Class142 SAS Files.SAS –SAS program –Double-clicking Opens SAS SAS code in Editor window

Class143 Computer Stuff Here are my preferences, yours may differ. Logon computer Organize computer so software tools are easily available –SAS –Windows Explorer –C:\M8001 folder (for your SAS programs/data) –Excel (later this semester) Display file extensions Opening SAS and SAS datasets Get Blackboard files for class (none today)

Class144 Computer Stuff: SAS Create SAS shortcut icon on desktop –Start => Search => All Files or Folders –In file name box enter “sas.exe” –Right click on file name => Send to => Desktop (create shortcut) –Remember, desktop icons and files on C: drive may be gone next class period. –So, you may wish to place a SAS shortcut in your Bengal Space and on your own PC if you buy a SAS license.

Class145 Computer Stuff: Windows Explorer Create desktop Windows Explorer shortcut icon –Start => Search => All Files or Folders –In file name box enter “Explorer” –Locate Windows Explorer the right click on file name => Send to => Desktop (create shortcut) –Remember, desktop icons and files on C: drive may be gone next class period. –So, you may wish to place a Windows Explorer shortcut in your Bengal Space and on your own PC.

Class146 Computer Stuff: C:\M8001 Folder Create folder using Windows Explorer or My Computer Right click on C:\M8001 file name => Send to => Desktop (create shortcut) Remember, desktop icons and files on C: drive may be gone next class period. So, you may wish to place a Windows Explorer shortcut in your Bengal Space and on your own PC. Place all files related to class in this folder –SAS programs (.sas) –SAS datasets (.sas7bdat) –text files (.txt) –Word documents (.doc) –Excel spreadsheets (.xls)

Class147 Computer Stuff: File Extensions Double click on Windows Explorer icon –On toolbar select View => Details –On toolbar select Tools => Folder Options => View –“Hide extensions for known file types” should NOT be checked –File extensions identify types of files.sas files are SAS programs.sas7bdat files are SAS datasets.txt are text files (aka flat files).xls and.doc are Excel and Word files, respectively

Class148 Computer Stuff: Opening SAS Programs and SAS Files Double-clicking on a SAS program or a SAS dataset opens SAS –SAS program (.sas file) placed in Editor window –SAS dataset (.sas7bdat) placed in ViewTable window Alternate method –Use Windows Explorer to locate file of interest –Right-click on file and select “Open with SAS 9.1” To open.txt file, right click on file name and select “open with Wordpad”

Class149 SAS Exercises Online You can probably find lots of SAS exercises online but remember what you are seeing may/may not be correct. One source is => gory:SAS_Certification_Workshops gory:SAS_Certification_Workshops

Class150 Begin GJC SAS Demonstration Let’s start the SAS Demonstration Each student will run this next week in class…Not Now! If you’d like to get a head start before our next class session, you will need… –Analysis Questions from Blackboard Class2SASRunQuestionsSP2008.doc –SAS code from Blackboard SP2008M8001Class1SASExercise.sas –Data from Blackboard HLResponseDataPrimSampleSP2008.txt HLPrimaryFFSampleSP2008Class1.sas7bdat