Marketing engineering is currently defined as "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".

History

The term ''marketing engineering'' can be traced back to Lilien et al. in "The Age of Marketing Engineering" published in 1998; in this article the authors define ''marketing engineering'' as the use of computer

decision model A decision model in decision theory is the starting point for a decision method within a formal (axiomatic) system. Decision models contain at least one action axiom. An action is in the form "IF is true, THEN do ". An action axiom tests a condi ...

s for making

marketing Marketing is the process of exploring, creating, and delivering value to meet the needs of a target market in terms of goods and services; potentially including selection of a target audience; selection of certain attributes or themes to emph ...

decisions.

Marketing manager Marketing management is the organizational discipline which focuses on the practical application of marketing orientation, techniques and methods inside enterprises and organizations and on the management of a firm's marketing resources and ac ...

s typically use "conceptual marketing", that is they develop a

mental model A mental model is an explanation of someone's thought process about how something works in the real world. It is a representation of the surrounding world, the relationships between its various parts and a person's intuitive perception about thei ...

of the decision situation based on past experience, intuition and reasoning. That approach has its limitations though: experience is unique to every individual, there is no objective way of choosing between the best judgments of multiple individuals in such a situation and furthermore judgment can be influenced by the person position in the firm's hierarchy. In the same year Lilien G. L. and A. Rangaswamy published ''Marketing Engineering: Computer-Assisted Marketing Analysis and Planning'', ''Fildes and Ventura'' praised the book in their review, while noting that a fuller discussion of market share models and

econometric model Econometric models are statistical models used in econometrics. An econometric model specifies the statistical relationship that is believed to hold between the various economic quantities pertaining to a particular economic phenomenon. An econometr ...

s would have made the book better for teaching and that "conceptual marketing" should not be discarded in the presence of marketing engineering, but that both approaches should be used together. Leeflang and Wittink (2000) have identified five era of model building in marketing: # (1950-1965) The first era of application of

operations research Operations research ( en-GB, operational research) (U.S. Air Force Specialty Code: Operations Analysis), often shortened to the initialism OR, is a discipline that deals with the development and application of analytical methods to improve decis ...

and

management science Management science (or managerial science) is a wide and interdisciplinary study of solving complex problems and making strategic decisions as it pertains to institutions, corporations, governments and other types of organizational entities. It is ...

to marketing # (1965-1970) Adaptation of models to fit marketing problems # (1970-1985) Emphasis on models that are an acceptable representation of reality and are easy to use # (1985-2000) Increase interest in marketing decision support systems,

meta-analyses A meta-analysis is a statistical analysis that combines the results of multiple scientific studies. Meta-analyses can be performed when there are multiple scientific studies addressing the same question, with each individual study reporting m ...

and studies of the generalizability of results # (2000- . ) Growth of new exchange systems (ex:

e-commerce E-commerce (electronic commerce) is the activity of electronically buying or selling of products on online services or over the Internet. E-commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain managem ...

) and need for new modeling approaches How to build market models and how to develop a structured approach to marketing questions has been an issue of active discussion between researchers, L. Lilien and A. Rangaswamy (2001) have observed that while having data gives a competitive advantage, having too much data without the models and systems for working with it may turn out to be as bad as not having the data. Lodish (2001) observed that the most complicated and elegant model will not necessarily be the one adopted in the firm, good models are the ones who capture the

trade-off A trade-off (or tradeoff) is a situational decision that involves diminishing or losing one quality, quantity, or property of a set or design in return for gains in other aspects. In simple terms, a tradeoff is where one thing increases, and anot ...

s of decision making, subjective

estimate Estimation (or estimating) is the process of finding an estimate or approximation, which is a value that is usable for some purpose even if input data may be incomplete, uncertain, or unstable. The value is nonetheless usable because it is de ...

s may be necessary to complete the model, risk needs to be taken into account, model complexity must be balanced versus ease of understanding, models should integrate tactical with strategic aspects. Migley (2002) identifies four purposes in codifying marketing knowledge: # To facilitate the progress of marketing as a

science Science is a systematic endeavor that Scientific method, builds and organizes knowledge in the form of Testability, testable explanations and predictions about the universe. Science may be as old as the human species, and some of the earli ...

# To promote the discipline within its institutional and professional environments # To better educate and credential the potential manager # To provide competitive advantage to the firm Lilien et al.(2002)Lilien L.G., Rangaswamy A., van Bruggen Gerrit H.,Wierenga B., Bridging the marketing theory-practice gap with marketing engineering, Journal of Business Research 2002 define marketing engineering as "the systematic process of putting marketing data and knowledge to practical use through the planning, design, and construction of decision aids and marketing management support systems (MMSSs)". One the driving factors toward the development of marketing engineering are the use of high-powered personal computers connected to LANs and WANs, the exponential growth in the volume of data, the reengineering of marketing functions. The effectiveness of the implementation of marketing engineering and MMSSs in the firm depend on the decision situation characteristics(demand), the nature of the MMSS (supply), match between supply and demand, design characteristics of the MMSS, characteristics of implementation process. Wider adoption depend on difference between end-user systems and high-end systems, user training and the growth of the

Internet The Internet (or internet) is the global system of interconnected computer networks that uses the Internet protocol suite (TCP/IP) to communicate between networks and devices. It is a '' network of networks'' that consists of private, pub ...

Market response models

All market response models include: Lilien G. L., Rangaswamy A., De Bruyn A., Principles of Marketing Engineering, Decision Pro 2013 *Inputs:

price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the ...

advertising Advertising is the practice and techniques employed to bring attention to a product or service. Advertising aims to put a product or service in the spotlight in hopes of drawing it attention from consumers. It is typically used to promote a ...

, selling effort, product design,

market size In economics, a market is a composition of systems, institutions, procedures, social relations or infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offeri ...

, competitive environment *Response Model: links inputs to outputs such as product perceptions,

sales Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. The seller, or the provider of the goods or services, completes a sale in ...

, profits *Objectives: used to evaluate actions such as sales

Models

In marketing engineering methods and models can be classified in several categories:

Customer value In management, business value is an informal term that includes all forms of value that determine the health and well-being of the firm in the long run. Business value expands concept of value of the firm beyond economic value (also known as economi ...
assessment

*Objective measures: internal engineering assessment, indirect

survey Survey may refer to: Statistics and human research * Statistical survey, a method for collecting quantitative information about items in a population * Survey (human research), including opinion polls Spatial measurement * Surveying, the techniq ...

questions, field value-in-use assessment *Perceptual measures:

focus group A focus group is a group interview involving a small number of demographically similar people or participants who have other common traits/experiences. Their reactions to specific researcher/evaluator-posed questions are studied. Focus groups are ...

s, direct

questions, importance

rating A rating is an evaluation or assessment of something, in terms of quality, quantity, or some combination of both. Rating or ratings may also refer to: Business and economics * Credit rating, estimating the credit worthiness of an individual, c ...

conjoint analysis Conjoint analysis is a survey-based statistical technique used in market research that helps determine how people value different attributes (feature, function, benefits) that make up an individual product or service. The objective of conjoint an ...

, benchmarking *Behavioral measures: choice models, data mining

Segmentation and targeting

*Reducing data:

factor analysis Factor analysis is a statistical method used to describe variability among observed, correlated variables in terms of a potentially lower number of unobserved variables called factors. For example, it is possible that variations in six observed ...

*Association measures: cluster analysis * Outlier detection and removal *Forming Segments: cluster analysis *Profiling Segments:

discriminant analysis Linear discriminant analysis (LDA), normal discriminant analysis (NDA), or discriminant function analysis is a generalization of Fisher's linear discriminant, a method used in statistics and other fields, to find a linear combination of features ...

Positioning

* Perceptual maps: similitarity-based methods, attribute-based methods *Preference maps: ideal-point model, vector model *Joint-space maps: averaged ideal-point model, averaged vector model, external analysis

Forecasting Forecasting is the process of making predictions based on past and present data. Later these can be compared (resolved) against what happens. For example, a company might estimate their revenue in the next year, then compare it against the actual ...

*Judgmental methods: sales force composite estimates, jury of executive opinion,

Delphi method } The Delphi method or Delphi technique ( ; also known as Estimate-Talk-Estimate or ETE) is a structured communication technique or method, originally developed as a systematic, interactive forecasting method which relies on a panel of experts. The ...

scenario analysis Scenario planning, scenario thinking, scenario analysis, scenario prediction and the scenario method all describe a strategic planning method that some organizations use to make flexible long-term plans. It is in large part an adaptation and gener ...

*Market and Survey Analysis: buyer intentions,

Product testing File:Consumer Reports - product testing - electric light longevity and brightness testing.tif, Testing electric light longevity and brightness testing File:Consumer Reports - product testing - television testing laboratory.tif, Television testin ...

, chain ratio *Time Series: naive methods,

moving average In statistics, a moving average (rolling average or running average) is a calculation to analyze data points by creating a series of averages of different subsets of the full data set. It is also called a moving mean (MM) or rolling mean and is ...

exponential smoothing Exponential smoothing is a rule of thumb technique for smoothing time series data using the exponential window function. Whereas in the simple moving average the past observations are weighted equally, exponential functions are used to assign expo ...

Box–Jenkins method In time series analysis, the Box–Jenkins method, named after the statisticians George Box and Gwilym Jenkins, applies autoregressive moving average (ARMA) or autoregressive integrated moving average (ARIMA) models to find the best fit of a time- ...

, decompositional methods *Causal analyses:

regression analysis In statistical modeling, regression analysis is a set of statistical processes for estimating the relationships between a dependent variable (often called the 'outcome' or 'response' variable, or a 'label' in machine learning parlance) and one ...

input-output model In computing, input/output (I/O, or informally io or IO) is the communication between an information processing system, such as a computer, and the outside world, possibly a human or another information processing system. Inputs are the signals ...

s, multivariate ARMA, neural networks *New product forecasting models: Bass Model, ASSESSOR model

New product and service design

*Creativity software: idea generation, idea evaluation, GE/Mckinsey portfolio model,

Marketing mix The term "marketing mix" is a foundation model for businesses, historically centered around product, price, place, and promotion (also known as the "4 Ps"). The marketing mix has been defined as the "set of marketing tools that the firm uses to ...

* Pricing: classic approach, cost-oriented pricing, demand-oriented pricing, competition-oriented pricing *

Promotion Promotion may refer to: Marketing * Promotion (marketing), one of the four marketing mix elements, comprising any type of marketing communication used to inform or persuade target audiences of the relative merits of a product, service, brand or i ...

: affordable method, percentage-of-sales method, competitive parity method, objective-and-task method * Sales force decisions: intuitive methods, market-response methods, response functions

References

{{Reflist Marketing analytics Engineering disciplines