BUSINESS ANALYTICS

LECTURE NOTES
UNIT 1
INTRODUCTION TO BUSINESS ANALYTICS
Analytics and data science- Analytics life cycle-Types of Analytics-Business Problem
definition- Data collection- Data preparation-Hypothesis
generation-Modeling-Validation and Evaluation-Interpretation-Deployment and
iteration.

Introduction:

Every organization across the world uses performance measures such as market share,
profitability, sales growth, return on investments (ROI), customer satisfaction, and so on for
quantifying, monitoring, and improving its performance.

Organisation should understand the KPI’s (Key performance Indicators) and the
factors that have impact on KPI’s.

1. Analytics:

Analytics is a body of knowledge consisting of statistical, mathematical and

operations research techniques, and Artificial intelligence techniques such as machine
learning and deep learning algorithms, data collection and storage, data management
processes such as data extraction, transformation and loading (ETL).

Many companies use analytics as a competitive strategy. A typical data-driven

decision making process uses following steps:

1. Identify the problem or opportunity for value creation.

2. Identify the sources of data (primary & secondary)
3. Pre-process the data for issues such as missing and incorrect data.
4. Divide the data sets into subsets training and validation.
5. Build analytical models and identify the best model using model performance in
validation data.
6. Implement solution/Decision/Develop product.

1.1 Data Science:

Data Science is nothing short of magic, and a Data Scientist is a magician who
performs tricks with the data in his hat. Now, as magic is composed of different elements,
similarly, Data Science is an interdisciplinary field. We can consider it to be an amalgamation
of different fields such as data manipulation, data visualization, statistical analysis, and
Machine Learning. Each of these sub-domains has equal importance.
Data Manipulation:

With the help of data manipulation techniques, you can find interesting insights from
the raw data with minimal effort. Data manipulation is the process of organizing information
to make it readable and understandable. Engineers perform data manipulation using data
manipulation language (DML) capable of adding, deleting, or altering data. Data comes from
various sources.

While working with disparate data, you need to organize, clean, and transform it to use it in
your decision-making process. This is where data manipulation fits in. Data manipulation
allows you to manage and integrate data helping drive actionable insights.

Data manipulation, also known as data preparation, enables users to turn static data into fuel
for business intelligence and analytics. Many data scientists use data preparation software to
organize data and generate reports, so non-analysts and other stakeholders can derive
valuable information and make informed decisions.

Importance of Data manipulation

Data manipulation makes it easier for organizations to organize and analyse data as
needed. It helps them perform vital business functions such as analyzing trends, buyer
behaviour, and drawing insights from their financial data.

Data manipulation offers several advantages to businesses, including:

● Consistency: Data manipulation maintains consistency across data accumulated from

different sources, giving businesses a unified view that helps them make better, more
informed decisions.
● Usability: Data manipulation allows users to cleanse and organize data and use it
more efficiently.
● Forecasting: Data manipulation enables businesses to understand historical data and
helps them prepare future forecasts, especially in financial data analysis.
● Cleansing: Data manipulation helps clear unwanted data and keep information that
matters. Enterprises can clean up records, isolate, and even reduce unnecessary
variables, and focus on the data they need.

Data visualization:

It is the practice of converting raw information (text, numbers, or symbols) into a

graphic format. The data is visualized with a clear purpose: to show logical correlations
between units, and define inclinations, tendencies, and patterns. Depending on the type of
logical connection and the data itself, visualization can be done in a suitable format. So, it’s
dead simple, any analytical report contains examples of data interpretations like pie charts,
comparison bars, demographic maps, and much more.
 As we’ve mentioned, a data representation tool is just the user interface of the whole
business intelligence system. Before it can be used for creating visuals, the data goes through
a long process. This is basically a description of how Business Analytics works, so we’ll
break it down into the stages shortly:

1. First things first, you should define data sources and data types that will be used. Then
transformation methods and database qualities are determined.
2. Following that, the data is sourced from its initial storages, for example, Google
Analytics, ERP, CRM, or SCM system.
3. Using API channels, the data is moved to a staging area where it is transformed.
Transformation assumes data cleaning, mapping, and standardizing to a unified
format.
4. Further, cleaned data can be moved into a storage: a usual database or data
warehouse. To make it possible for the tools to read data, the original base language
of datasets can also be rewritten.

Business Intelligence Data processing in a nutshell

Common types of data visualizations

Each type of visual corresponds precisely to the idea of what data it can interpret,
and what type of connection (relationship, comparison, composition, or distribution) it shows
better. Let’s look at the most common types of visualizations you encounter in Business
Analytics in general.

Bar chart

A bar chart is one of the basic ways to compare data units to each other. Because of
its simple graphic form, a bar chart is often used in Business Analytics as an interactive page
element.

Bar charts are versatile enough to be modified and show more complex data models. The bars
can be structured in clusters or be stacked, to depict distribution across market segments, or
subcategories of items. The same goes for horizontal bar charts, fitting more for long data
labels to be placed on the bars.

When to use: comparing objects, numeric information. Use horizontal charts to fit long data
labels. Place stacks in bars to break each object into segments for a more detailed
comparison.

Monthly sales bar chart

Pie chart

One more common type of chart we see everywhere, is a pie chart.

This type of chart is used in any marketing or sales department, because it makes it easy to
demonstrate the composition of objects or unit-to-unit comparison.

When to use: composition of an object, comparing parts to the whole object.

 Pie chart showing percentage correlation of ice cream flavour preference

Line Graph

This type of visual utilizes a horizontal axis and a vertical axis to depict the value of a unit
over time.

Line graphs can also be combined with bar charts to represent data from multiple dimensions.

When to use: object value on the timeline, depicting tendencies in behavior over time.

Sales analysis by payment methods

Box plot

At first glance, a box plot looks pretty complicated. But if we look closer at the example, it
becomes evident that it depicts quarters in a horizontal fashion.

Our main elements here are minimum, maximum, and the median placed in between
the first and third quartile. What a box shows is the distribution of objects, and their
 deviation from the [Link] to use: Distribution of the complex object,
deviation from the median value.

Box plot divided into 5 quartiles, while outliers are shown

as object that fall out of distribution area

Scatter plot

This type of visualization is built on X and Y axes. Between them, there are dots placed
around, defining objects. The position of a dot on the graph denotes which qualities it has.

As in the case of line graphs, dots placed between the axes are noticed in a split second. The
only limitation of this type of visualization is the number of axes.

When to use: showing distribution of objects, defining the quality of each object on the

graph.
 A sad scatterplot showing the inability of young people to earn money

Radar or spider chart

This type of chart is basically a line chart drawn in radial fashion. It has a spider web form
that is created by multiple axes and variables.

Its purpose is the same as for a line chart. But because of the number of axes, you can
compare units from various angles and show the inclinations graphically.

When to use: describing data qualities, comparing multiple objects to each other through
different dimensions.

Spider chart structure

Dot map or density map

Superimposing a visualization over the map works for data’s geographical domain. Density
maps are built with the help of dots placed on the map, marking the location of each unit.

A simple representation of a dot map

Funnel charts

These are perfect for showing narrowing correlations between different groups of items. In
most cases, funnels will utilize both geometric form and colour coding to differentiate items.

The example shows conversion results starting from total traffic number and the number of
subscribers

This type of chart is also handy when there are multiple stages in the process. On the
example above, we can see that after the “Contacted Support” stage, the number of
subscribers has been reduced.

When to use: depicting processual stages with the narrowing percentage of value/objects

In choosing the type of visualization, make sure you clearly understand the following points:

1. Specifics of your data set: domain of knowledge or department in your company

2. Audience: people you want to present the information to
3. Connection logic: comparison of objects, distribution, relationship, process
description, etc.
4. Output: simply, the reason for showing this information to somebody

1.1.3 What is statistical analysis?

Statistical analysis is the process of collecting and analyzing samples of data to

uncover patterns and trends and predict what could happen next to make better and more
scientific decisions.
Once the data is collected, statistical analysis can be used for many things in your business.
Some include:

● Summarizing and presenting the data in a graph or chart to present key findings
● Discovering crucial measures within the data, like the mean
● Calculating if the data is slightly clustered or spread out, which also determines
similarities.
 ● Making future predictions based on past behavior
● Testing a hypothesis from an experiment

There are several ways that businesses can use statistical analysis to their advantage. Some of
these ways include identifying who on your sales staff is performing poorly, finding trends in
customer data, narrowing down the top operating product lines, conducting financial audits,
and getting a better understanding of how sales performance can vary in different regions of
the country.

Just like any other thing in business, there is a process involved in business analytics
as well. Business analytics needs to be systematic, organized, and include step-by-step
actions to have the most optimized result at the end with the least amount of discrepancies.

Now, let us dive into the steps involved in business analytics:

● Business Problem Framing: In this step, we basically find out what business
problem we are trying to solve, e.g., when we are looking to find out why the supply
chain isn’t as effective as it should be or why we are losing sales. This discussion
generally happens with stakeholders when they realize inefficiency in any part of the
business.
● Analytics Problem Framing: Once we have the problem statement, what we need to
think of next is how analytics can be done for that business analytics problem. Here,
we look for metrics and specific points that we need to analyze.
● Data: The moment we identify the problem in terms of what needs to be analyzed, the
next thing that we need is data, which needs to be analyzed. In this step, not only do
we obtain data from various data sources but we also clean the data; if the raw data is
corrupted or has false values, we remove those problems and convert the data into
usable form.
● Methodology selection and model building: Once the data gets ready, the tricky part
begins. At this stage, we need to determine what methods have to be used and what
metrics are the crucial ones. If required, the team has to build custom models to find
out the specific methods that are suited to respective operations. Many times, the kind
of data we possess also dictates the methodology that can be used to do business
analytics. Most organizations make multiple models and compare them based on the
decided-upon crucial metrics.
● Deployment: Post the selection of the model and the statistical ways of analyzing
data for the solution, the next thing we need to do is to test the solution in a real-time
scenario. For that, we deploy the models on the data and look for different kinds of
insights. Based on the metrics and data highlights, we need to decide the optimum
strategy to solve our problem and implement a solution effectively. Even in this phase
of business analytics, we will compare the expected output with the real-time output.
Later, based on this, we will decide if there is a need to reiterate and modify the
solution or if we can go on with the implementation of the same.
2. Business Analytics Process

The Business Analytics process involves asking questions, looking at data, and
manipulating it to find the required answers. Now, every organization has different ways to
execute this process as all of these organizations work in different sectors and value different
metrics more than the others based on their specific business model.

Since the approach to business is different for different organizations, their solutions and their
ways to reach the solutions are also different. Nonetheless, all of the actions that they do can
be classified and generalized to understand their approach. The image given below
demonstrates the steps in Business Analytics process of a firm:

2.1 Six Steps in the Business Analytics Lifecycle

Step 1: Identifying the Problem

The first step of the process is identifying the business problem. The problem could be an
actual crisis; it could be something related to recognizing business needs or optimizing
current processes. This is a crucial stage in Business Analytics as it is important to clearly
understand what the expected outcome should be. When the desired outcome is determined, it
is further broken down into smaller goals. Then, business stakeholders decide the relevant
data required to solve the problem. Some important questions must be answered in this stage,
such as: What kind of data is available? Is there sufficient data? And so on.

Step 2: Exploring Data

Once the problem statement is defined, the next step is to gather data (if required) and, more
importantly, cleanse the data—most organizations would have plenty of data, but not all data
points would be accurate or useful. Organizations collect huge amounts of data through
different methods, but at times, junk data or empty data points would be present in the
dataset. These faulty pieces of data can hamper the analysis. Hence, it is very important to
clean the data that has to be analyzed.
To do this, you must do computations for the missing data, remove outliers, and find new
variables as a combination of other variables. You may also need to plot time series graphs as
they generally indicate patterns and outliers. It is very important to remove outliers as they
can have a heavy impact on the accuracy of the model that you create. Moreover, cleaning the
data helps you get a better sense of the dataset.

Step 3: Analysis

Once the data is ready, the next thing to do is analyze it. Now to execute the same, there are
various kinds of statistical methods (such as hypothesis testing, correlation, etc.) involved to
find out the insights that you are looking for. You can use all of the methods for which you
have the data.

The prime way of analyzing is pivoting around the target variable, so you need to take into
account whatever factors that affect the target variable. In addition to that, a lot of
assumptions are also considered to find out what the outcomes can be. Generally, at this step,
the data is sliced, and the comparisons are made. Through these methods, you are looking to
get actionable insights.

Step 4: Prediction and Optimization

Gone are the days when analytics was used to react. In today’s era, Business Analytics is all
about being proactive. In this step, you will use prediction techniques, such as neural
networks or decision trees, to model the data. These prediction techniques will help you find
out hidden insights and relationships between variables, which will further help you uncover
patterns on the most important metrics. By principle, a lot of models are used simultaneously,
and the models with the most accuracy are chosen. In this stage, a lot of conditions are also
checked as parameters, and answers to a lot of ‘what if…?’ questions are provided.

Step 5: Making a Decision and Evaluating the Outcome

From the insights that you receive from your model built on target variables, a viable plan of
action will be established in this step to meet the organization’s goals and expectations. The
said plan of action is then put to work, and the waiting period begins. You will have to wait to
see the actual outcomes of your predictions and find out how successful you were in your
endeavors. Once you get the outcomes, you will have to measure and evaluate them.

Step 6: Optimizing and Updating

Post the implementation of the solution, the outcomes are measured as mentioned above. If
you find some methods through which the plan of action can be optimized, then those can be
implemented. If that is not the case, then you can move on with registering the outcomes of
the entire process. This step is crucial for any analytics in the future because you will have an
ever-improving database. Through this database, you can get closer and closer to maximum
optimization. In this step, it is also important to evaluate the ROI (return on investment). Take
a look at the diagram above of the life cycle of business analytics.

2.3 TYPES OF ANALYTICS :

For different stages of business analytics huge amount of data is processed at various
steps. Depending on the stage of the workflow and the requirement of data analysis, there are
four main kinds of analytics – descriptive, diagnostic, predictive and prescriptive. These four
types together answer everything a company needs to know- from what’s going on in the
company to what solutions to be adopted for optimising the functions.
The four types of analytics are usually implemented in stages and no one type of analytics is
said to be better than the other. They are interrelated and each of these offers a different
insight. With data being important to so many diverse sectors- from manufacturing to energy
grids, most of the companies rely on one or all of these types of analytics. With the right
choice of analytical techniques, big data can deliver richer insights for the companies

Before diving deeper into each of these, let’s define the four types of analytics:

1) Descriptive Analytics: Describing or summarising the existing data using existing

business intelligence tools to better understand what is going on or what has happened.
2) Diagnostic Analytics: Focus on past performance to determine what happened and why.
The result of the analysis is often an analytic dashboard.
3) Predictive Analytics: Emphasizes on predicting the possible outcome using statistical
models and machine learning techniques.
4) Prescriptive Analytics: It is a type of predictive analytics that is used to recommend one
or more course of action on analyzing the data.
Let’s understand these in a bit more depth.
2.3.1. Descriptive Analytics

This can be termed as the simplest form of analytics. The mighty size of big data is beyond
human comprehension and the first stage hence involves crunching the data into
understandable chunks. The purpose of this analytics type is just to summarise the findings
and understand what is going on.

Among some frequently used terms, what people call as advanced analytics or business
intelligence is basically usage of descriptive statistics (arithmetic operations, mean, median,
max, percentage, etc.) on existing data. It is said that 80% of business analytics mainly
involves descriptions based on aggregations of past performance. It is an important step to
make raw data understandable to investors, shareholders and managers. This way it gets easy
to identify and address the areas of strengths and weaknesses such that it can help in
[Link] two main techniques involved are data aggregation and data mining stating
that this method is purely used for understanding the underlying behavior and not to make
any estimations. By mining historical data, companies can analyze the consumer behaviors
and engagements with their businesses that could be helpful in targeted marketing, service
improvement, etc. The tools used in this phase are MS Excel, MATLAB, SPSS, STATA, etc
2.3.2 Diagnostic Analytics

Diagnostic analytics is used to determine why something happened in the past. It is

characterized by techniques such as drill-down, data discovery, data mining and correlations.
Diagnostic analytics takes a deeper look at data to understand the root causes of the events. It
is helpful in determining what factors and events contributed to the outcome. It mostly uses
probabilities, likelihoods, and the distribution of outcomes for the analysis.

In a time series data of sales, diagnostic analytics would help you understand why the sales
have decrease or increase for a specific year or so. However, this type of analytics has a
limited ability to give actionable insights. It just provides an understanding of causal
relationships and sequences while looking backward.
A few techniques that uses diagnostic analytics include attribute importance, principle
components analysis, sensitivity analysis, and conjoint analysis. Training algorithms for
classification and regression also fall in this type of analytics.

2.3.3 Predictive Analytics

As mentioned above, predictive analytics is used to predict future outcomes. However, it is

important to note that it cannot predict if an event will occur in the future; it merely forecasts
what are the probabilities of the occurrence of the event. A predictive model builds on the
preliminary descriptive analytics stage to derive the possibility of the outcomes.

The analytics is found in sentiment analysis where all the opinions posted on social media are
collected and analyzed (existing text data) to predict the person’s sentiment on a particular
subject as being- positive, negative or neutral (future prediction).

Hence, predictive analytics includes building and validation of models that provide accurate
predictions. Predictive analytics relies on machine learning algorithms like random forests,
SVM, etc. and statistics for learning and testing the data. Usually, companies need trained
data scientists and machine learning experts for building these models. The most popular
tools for predictive analytics include Python, R, RapidMiner, etc.

The prediction of future data relies on the existing data as it cannot be obtained otherwise. If
the model is properly tuned, it can be used to support complex forecasts in sales and
marketing. It goes a step ahead of the standard BI in giving accurate predictions.

2.3.4 Prescriptive Analytics

The basis of this analytics is predictive analytics but it goes beyond the three mentioned
above to suggest the future solutions. It can suggest all favorable outcomes according to a
specified course of action and also suggest various course of actions to get to a particular
outcome. Hence, it uses a strong feedback system that constantly learns and updates the
relationship between the action and the outcome.

The computations include optimisation of some functions that are related to the desired
outcome. For example, while calling for a cab online, the application uses GPS to connect
you to the correct driver from among a number of drivers found nearby. Hence, it optimises
the distance for faster arrival time. Recommendation engines also use prescriptive analytics.

The other approach includes simulation where all the key performance areas are combined to
design the correct solutions. It makes sure whether the key performance metrics are included
in the solution. The optimisation model will further work on the impact of the previously
made forecasts. Because of its power to suggest favorable solutions, prescriptive analytics is
the final frontier of advanced analytics or data science, in today’s term.
The four techniques in analytics may make it seem as if they need to be implemented
sequentially. However, in most scenarios, companies can jump directly to prescriptive
analytics. As for most of the companies, they are aware of or are already implementing
descriptive analytics but if one has identified the key area that needs to be optimised and
worked upon, they must employ prescriptive analytics to reach the desired outcome.

According to research, prescriptive analytics is still at the budding stage and not many firms
have completely used its power. However, the advancements in predictive analytics will
surely pave the way for its development.

3. Business Problem Definition:

Problem-solving in business is defined as implementing processes that reduce or remove

obstacles that are preventing you or others from accomplishing operational and strategic
business goals.

In business, a problem is a situation that creates a gap between the desired and actual
outcomes. In addition, a true problem typically does not have an immediately obvious
resolution.

Business problem-solving works best when it is approached through a consistent system in

which individuals:

● Identify and define the problem

● Prioritize the problem based on size, potential impact, and urgency
● Complete a root-cause analysis
● Develop a variety of possible solutions
● Evaluate possible solutions and decide which is most effective
● Plan and implement the solution

3.1 Why Problem Solving Is Important in Business

Understanding the importance of problem-solving skills in the workplace will help you
develop as a leader. Problem-solving skills will help you resolve critical issues and conflicts
that you come across. Problem-solving is a valued skill in the workplace because it allows
you to:

● Apply a standard problem-solving system to all challenges

● Find the root causes of problems
● Quickly deal with short-term business interruptions
● Form plans to deal with long-term problems and improve the organization
● See challenges as opportunities
● Keep your cool during challenges
3.2 How to Solve Business Problems Effectively

There are many different problem-solving skills, but most can be broken into general steps.
Here is a four-step method for business problem solving:

1) Identify the Details of the Problem: Gather enough information to accurately define the
problem. This can include data on procedures being used, employee actions, relevant
workplace rules, and so on. Write down the specific outcome that is needed, but don’t assume
what the solution should be.

2) Creatively Brainstorm Solutions: Alone or with a team, state every solution you can
think of. You’ll often need to write them down. To get more solutions, brainstorm with the
employees who have the greatest knowledge of the issue.

3) Evaluate Solutions and Make a Decision: Compare and contrast alternative solutions
based on the feasibility of each one, including the resources needed to implement it and the
return on investment of each one. Finally, make a firm decision on one solution that clearly
addresses the root cause of the problem.

4) Take Action: Write up a detailed plan for implementing the solution, get the necessary
approvals, and put it into action.

4 . WHAT IS DATA COLLECTION?

Data collection is the methodological process of gathering information about a specific

subject. It’s crucial to ensure your data is complete during the collection phase and that it’s
collected legally and ethically. If not, your analysis won’t be accurate and could have
far-reaching consequences.

In general, there are three types of consumer data:

● First-party data, which is collected directly from users by your organization

● Second-party data, which is data shared by another organization about its customers (or its
first-party data)
● Third-party data, which is data that’s been aggregated and rented or sold by organizations
that don’t have a connection to your company or users

Although there are use cases for second- and third-party data, first-party data (data you’ve
collected yourself) is more valuable because you receive information about how your
audience behaves, thinks, and feels—all from a trusted source.
Data can be qualitative (meaning contextual in nature) or quantitative (meaning numeric in
nature). Many data collection methods apply to either type, but some are better suited to one
over the other.

In the data life cycle, data collection is the second step. After data is generated, it must be
collected to be of use to your team. After that, it can be processed, stored, managed, analyzed,
and visualized to aid in your organization’s decision-making.

Before collecting data, there are several factors you need to define:

● The question you aim to answer

● The data subject(s) you need to collect data from
● The collection timeframe
● The data collection method(s) best suited to your needs

The data collection method you select should be based on the question you want to answer,
the type of data you need, your timeframe, and your company’s budget. Explore the options
in the next section to see which data collection method is the best fit.
4.1 SEVEN DATA COLLECTION METHODS USED IN BUSINESS ANALYTICS

1. Surveys

Surveys are physical or digital questionnaires that gather both qualitative and quantitative
data from subjects. One situation in which you might conduct a survey is gathering attendee
feedback after an event. This can provide a sense of what attendees enjoyed, what they wish
was different, and areas you can improve or save money on during your next event for a
similar audience.

Because they can be sent out physically or digitally, surveys present the opportunity for
distribution at scale. They can also be inexpensive; running a survey can cost nothing if you
use a free tool. If you wish to target a specific group of people, partnering with a market
research firm to get the survey in the hands of that demographic may be worth the money.

Something to watch out for when crafting and running surveys is the effect of bias, including:

● Collection bias: It can be easy to accidentally write survey questions with a biased lean.
Watch out for this when creating questions to ensure your subjects answer honestly and
aren’t swayed by your wording.
● Subject bias: Because your subjects know their responses will be read by you, their
answers may be biased toward what seems socially acceptable. For this reason, consider
pairing survey data with behavioral data from other collection methods to get the full
picture.

2. Transactional Tracking

Each time your customers make a purchase, tracking that data can allow you to make
decisions about targeted marketing efforts and understand your customer base better.

Often, e-commerce and point-of-sale platforms allow you to store data as soon as it’s
generated, making this a seamless data collection method that can pay off in the form of
customer insights.

3. Interviews and Focus Groups

Interviews and focus groups consist of talking to subjects face-to-face about a specific topic
or issue. Interviews tend to be one-on-one, and focus groups are typically made up of several
people. You can use both to gather qualitative and quantitative data.

Through interviews and focus groups, you can gather feedback from people in your target
audience about new product features. Seeing them interact with your product in real-time and
recording their reactions and responses to questions can provide valuable data about which
product features to pursue.

As is the case with surveys, these collection methods allow you to ask subjects anything you
want about their opinions, motivations, and feelings regarding your product or brand. It also
introduces the potential for bias. Aim to craft questions that don’t lead them in one particular
direction.

One downside of interviewing and conducting focus groups is they can be time-consuming
and expensive. If you plan to conduct them yourself, it can be a lengthy process. To avoid
this, you can hire a market research facilitator to organize and conduct interviews on your
behalf.

4. Observation

Observing people interacting with your website or product can be useful for data collection
because of the candour it offers. If your user experience is confusing or difficult, you can
witness it in real-time.

Yet, setting up observation sessions can be difficult. You can use a third-party tool to record
users’ journeys through your site or observe a user’s interaction with a beta version of your
site or product.

While less accessible than other data collection methods, observations enable you to see first
hand how users interact with your product or site. You can leverage the qualitative and
quantitative data gleaned from this to make improvements and double down on points of
success.

5. Online Tracking

To gather behavioural data, you can implement pixels and cookies. These are both tools that
track users’ online behaviour across websites and provide insight into what content they’re
interested in and typically engage with.

You can also track users’ behavior on your company’s website, including which parts are of
the highest interest, whether users are confused when using it, and how long they spend on
product pages. This can enable you to improve the website’s design and help users navigate
to their destination.
Inserting a pixel is often free and relatively easy to set up. Implementing cookies may come
with a fee but could be worth it for the quality of data you’ll receive. Once pixels and cookies
are set, they gather data on their own and don’t need much maintenance, if any.

It’s important to note: Tracking online behavior can have legal and ethical privacy
implications. Before tracking users’ online behavior, ensure you’re in compliance with local
and industry data privacy standards.

6. Forms

Online forms are beneficial for gathering qualitative data about users, specifically
demographic data or contact information. They’re relatively inexpensive and simple to set up,
and you can use them to gate content or registrations, such as webinars and email newsletters.

You can then use this data to contact people who may be interested in your product, build out
demographic profiles of existing customers, and in remarketing efforts, such as email
workflows and content recommendations

7. Social Media Monitoring

Monitoring your company’s social media channels for follower engagement is an accessible
way to track data about your audience’s interests and motivations. Many social media
platforms have analytics built in, but there are also third-party social platforms that give more
detailed, organized insights pulled from multiple channels.

You can use data collected from social media to determine which issues are most important to
your followers. For instance, you may notice that the number of engagements dramatically
increases when your company posts about its sustainability efforts.

5. What Is Data Preparation?

Data preparation, also sometimes called “pre-processing,” is the act of cleaning and
consolidating raw data prior to using it for business analysis. It might not be the most
celebrated of tasks, but careful data preparation is a key component of successful data
analysis.

Doing the work to properly validate, clean, and augment raw data is essential to draw
accurate, meaningful insights from it. The validity and power of any business analysis
produced is only as good as the data preparation done in the early stages.

5.1 Why Is Data Preparation Important?

The decisions that business leaders make are only as good as the data that supports them.
Careful and comprehensive data preparation ensures analysts trust, understand, and ask better
questions of their data, making their analyses more accurate and meaningful. From more
meaningful data analysis comes better insights and, of course, better outcomes.

To drive the deepest level of analysis and insight, successful teams and organizations must
implement a data preparation strategy that prioritizes:

● Accessibility: Anyone — regardless of skillset — should be able to access data

securely from a single source of truth
● Transparency: Anyone should be able to see, audit, and refine any step in the
end-to-end data preparation process that took place
● Repeatability: Data preparation is notorious for being time-consuming and repetitive,
which is why successful data preparation strategies invest in solutions built for
repeatability.

With the right solution in hand, analysts and teams can streamline the data preparation
process, and instead, spend more time getting to valuable business insights and outcomes,
faster.

5.2 What Steps Are Involved in Data Preparation Processes?

The data preparation process can vary depending on industry or need, but typically consists
of the following steps:

● Acquiring data: Determining what data is needed, gathering it, and establishing
consistent access to build powerful, trusted analysis
● Exploring data: Determining the data’s quality, examining its distribution, and
analyzing the relationship between each variable to better understand how to compose
an analysis
● Cleansing data: Improving data quality and overall productivity to craft error-proof
insights
 ● Transforming data: Formatting, orienting, aggregating, and enriching the datasets
used in an analysis to produce more meaningful insights

While data preparation processes build upon each other in a serialized fashion, it’s not always
linear. The order of these steps might shift depending on the data and questions being asked.
It’s common to revisit a previous step as new insights are uncovered or new data sources are
integrated into the process.

The entire data preparation process can be notoriously time-intensive, iterative, and
repetitive. That’s why it’s important to ensure the individual steps taken can be easily
understood, repeated, revisited, and revised so analysts can spend less time prepping and
more time analyzing.

Below is a deeper look at each part of the process.

5.2.1 Acquire Data

The first step in any data preparation process is acquiring the data that an analyst will use for
their analysis. It’s likely that analysts rely on others (like IT) to obtain data for their analysis,
likely from an enterprise software system or data management system. IT will usually deliver
this data in an accessible format like an Excel document or CSV.

Modern analytic software can remove the dependency on a data-wrangling middleman to tap
right into trusted sources like SQL, Oracle, SPSS, AWS, Snowflake, Salesforce, and
Marketo. This means analysts can acquire the critical data for their regularly-scheduled
reports as well as novel analytic projects on their own.

5.2.2 Explore Data

Examining and profiling data helps analysts understand how their analysis will begin to take
shape. Analysts can utilize visual analytics and summary statistics like range, mean, and
standard deviation to get an initial picture of their data. If data is too large to work with
easily, segmenting it can help.

During this phase, analysts should also evaluate the quality of their dataset. Is the data
complete? Are the patterns what was expected? If not, why? Analysts should discuss what
they’re seeing with the owners of the data, dig into any surprises or anomalies, and consider
if it’s even possible to improve the quality. While it can feel disappointing to disqualify a
dataset based on poor quality, it is a wise move in the long run. Poor quality is only amplified
as one moves through the data analytics processes
5.2.3 Cleanse Data

During the exploration phase, analysts may notice that their data is poorly structured and in
need of tidying up to improve its quality. This is where data cleansing comes into play.
Cleansing data includes:

● Correcting entry errors

● Removing duplicates or outliers
● Eliminating missing data
● Masking sensitive or confidential information like names or addresses

5.2.4 Transform Data

Data comes in many shapes, sizes, and structures. Some is analysis-ready, while other
datasets may look like a foreign language.

Transforming data to ensure that it’s in a format or structure that can answer the questions
being asked of it is an essential step to creating meaningful outcomes. This will vary based on
the software or language that an analysts uses for their data analysis.

A couple of common examples of data transformations are:

● Pivoting or changing the orientation of data

● Converting date formats
● Aggregating sales and performance data across time

[Link] GENERATION OR TESTING:

Hypothesis testing is the act of testing a hypothesis or a supposition in relation to a statistical

parameter. Analysts implement hypothesis testing in order to test if a hypothesis is plausible
or [Link] data science and statistics, hypothesis testing is an important step as it involves the
verification of an assumption that could help develop a statistical parameter. For instance, a
researcher establishes a hypothesis assuming that the average of all odd numbers is an even
number.

In order to find the plausibility of this hypothesis, the researcher will have to test the
hypothesis using hypothesis testing methods. Unlike a hypothesis that is ‘supposed’ to stand
true on the basis of little or no evidence, hypothesis testing is required to have plausible
evidence in order to establish that a statistical hypothesis is true.

6.1 Types of Hypotheses

In data sampling, different types of hypothesis are involved in finding whether the
tested samples test positive for a hypothesis or not. In this segment, we shall discover the
different types of hypotheses and understand the role they play in hypothesis testing.
6.1.1 Alternative Hypothesis
 Alternative Hypothesis (H1) or the research hypothesis states that there is a
relationship between two variables (where one variable affects the other). The alternative
hypothesis is the main driving force for hypothesis testing.

It implies that the two variables are related to each other and the relationship that exists
between them is not due to chance or coincidence.
When the process of hypothesis testing is carried out, the alternative hypothesis is the main
subject of the testing process. The analyst intends to test the alternative hypothesis and
verifies its plausibility.

6.1.2 Null Hypothesis

The Null Hypothesis (H0) aims to nullify the alternative hypothesis by implying that there
exists no relation between two variables in statistics. It states that the effect of one variable on
the other is solely due to chance and no empirical cause lies behind it.
The null hypothesis is established alongside the alternative hypothesis and is recognized as
important as the latter. In hypothesis testing, the null hypothesis has a major role to play as it
influences the testing against the alternative hypothesis.
6.1.3 Non-Directional Hypothesis
The Non-directional hypothesis states that the relation between two variables has no
direction. Simply put, it asserts that there exists a relation between two variables, but does not
recognize the direction of effect, whether variable A affects variable B or vice versa.
6.1.4 Directional Hypothesis
The Directional hypothesis, on the other hand, asserts the direction of effect of the
relationship that exists between two variables.
Herein, the hypothesis clearly states that variable A affects variable B, or vice versa.
6.1.5 Statistical Hypothesis
A statistical hypothesis is a hypothesis that can be verified to be plausible on the basis of
statistics. By using data sampling and statistical knowledge, one can determine the
plausibility of a statistical hypothesis and find out if it stands true or not.

6.2 Performing Hypothesis Testing

Now that we have understood the types of hypotheses and the role they play in hypothesis
testing, let us now move on to understand the process in a better manner.

In hypothesis testing, a researcher is first required to establish two hypotheses - alternative

hypothesis and null hypothesis in order to begin with the procedure.

To establish these two hypotheses, one is required to study data samples, find a plausible
pattern among the samples, and pen down a statistical hypothesis that they wish to test.

A random population of samples can be drawn, to begin with hypothesis testing. Among the
two hypotheses, alternative and null, only one can be verified to be true. Perhaps the presence
of both hypotheses is required to make the process successful.
At the end of the hypothesis testing procedure, either of the hypotheses will be rejected and
the other one will be supported. Even though one of the two hypotheses turns out to be true,
no hypothesis can ever be verified 100%.

6.2.1 Seven steps of hypothesis testing

Let us perform hypothesis testing through the following 7 steps of the procedure:

Step 1 : Specify the null hypothesis and the alternative hypothesis

Step 2 : What level of significance?

Step 3 : Which test and test statistic to be performed?

Step 4 : State the decision rule

Step 5 : Use the sample data to calculate the test statistic

Step 6 : Use the test statistic result to make a decision

Step 7 : Interpret the decision in the context of the original question

To guide us through the steps, let us use the following example.

Assume a food laboratory analyzed a certified reference freeze-dried food material with a
stated sodium (Na) content of 250 mg/kg. It carried out 7 repeated analyses and obtained a
mean value of 274 mg/kg of sodium with a sample standard deviation of 21 mg/kg. Now we
want to know if the mean value of 274 mg/kg is significantly larger than the stated amount of
250 mg/kg. If so, we will conclude that the reported results of this batch of analysis were of
bias and had consistently given higher values than expected.

Step 1 : Specify the null hypothesis and the alternative hypothesis

The null hypothesis Ho is the statement that we are interested in testing. In this case, the null
condition is that the mean value is 250 mg/kg of sodium.

The alternative hypothesis H1 is the statement that we accept if our sample outcome leads
us to reject the null hypothesis. In our case, the alternative hypothesis is that the mean value
is not equal to 250 mg/kg of sodium. In other words, it can be significantly larger or smaller
than the value of 250 mg/kg.

So, our formal statement of the hypotheses for this example is as follows:

Ho : 𝑥̅ = 250 mg/kg (i.e., the certified value)

H1 : 𝑥̅ ≠ 250 mg/kg (i.e., indicating that the laboratory has a bias result.

Step 2 : What level of significance

The level of significance is the probability of rejecting the null hypothesis by chance alone.
This could happen from sub-sampling error, methodology, analyst’s technical competence,
instrument drift, etc. So, we have to decide on the level of significance to reject the null
hypothesis if the sample result was unlikely given the null hypothesis was true.

Traditionally, we define the unlikely (given by symbol ) as 0.05 (5%) or less. However,
there is nothing to stop you from using  = 0.1 (10%) or  = 0.01 (1%) with your own
justification or reasoning.

In fact, the significance level sometimes is referred to as the probability of a Type I error. A
Type I error occurs when you falsely reject the null hypothesis on the basis of the
above-mentioned errors. A Type II error occurs when you fail to reject the null hypothesis
when it is false.

Step 3 : Which test and test statistic?

The test statistic is the value calculated from the sample to determine whether to reject the
null hypothesis. In this case, we use Student’s t-test statistic in the following manner:

𝜇=𝑥̅±(𝛼=0.05,𝑣=𝑛−1)𝑠√𝑛

or 𝑡(𝛼=0.05,𝑣=𝑛−1)=|𝑥̅−𝜇|√𝑛𝑠

By calculation, we get a t-value of 3.024 at the significance level of  = 0.05 and v = (7-1)
or 6 degrees of freedom for n = 7 replicates.

Step 4 : State the decision rule

The decision rule is always of the following form:

Reject Ho if …..

We reject the null hypothesis if the test statistic is larger than a critical value corresponding to
the significance level in step 2.

There is now a question in H1 on either one-tailed (> or <) or two-tailed (≠ not equal) tests to
be addressed. If we are talking about either “greater than” or “smaller than”, we take the
significance level at  = 0.05 whilst for the unequal (that means the result can be either
larger or smaller than the certified value), the significance level at  = 0.025 on either side
of the normal curve is to be studied.
As our H1 is for the mean value to be larger or smaller than the certified value, we use the
2-tailed t-test for  = 0.05 with 6 degrees of freedom. In this case, the t-critical value at  =
0.05 and 6 degrees of freedom is 2.447 from the Student’s t-table or from using the Excel
function “=[Link].2T(0.05,6)” or “=TINV(0.05,6) in older Excel version.

That means the decision rule would be stated as below:

Reject Ho if t > 2.447

Step 5 : Use the sample data to calculate the test statistic

Upon calculation on the sample data, we have got a t-value of 3.024 at the significance level
of  = 0.05 and v = (7-1) or 6 degrees of freedom for n = 7 replicates.

Step 6 : Use the test statistic to make a decision

When we compare the result of step 5 to the decision rule in step 4, it is obvious that 3.024 is
greater than the t-critical value of 2.447, and so we reject the null hypothesis. In other words,
the mean value of 274 mg/kg is significantly different from the certified value of 250 mg/kg.
Is it really so? We must go to step 7.

Step 7 : Interpret the decision in the context of the original question

Since hypothesis testing involves some kind of probability under the disguise of significance
level, we must interpret the final decision with caution. To say that a result is “statistically
significant” sounds remarkable, but all it really means is that it is more than by chance alone.

To do justice, it would be useful to look at the actual data to see if there are one or more high
outliers pulling up the mean value. Perhaps increasing the number of replicates might show
up any undesirable data. Furthermore, we might have to take a closer look at the test
procedure and the technical competence of the analyst to see if there were any lapses in the
analytical process. A repeated series of experiment should be able to confirm these findings.

[Link]

A model is an abstraction or representation of a real system, idea, or object. Models capture

the most important features of a problem and present them in a form that is easy to interpret.
A model can be as simple as a written or verbal description of some phenomenon, a visual
representation such as a graph or a flowchart, or a mathematical or spreadsheet
representation.

7.1 Decision Models

A decision model is a logical or mathematical representation of a problem or business
situation that can be used to understand, analyze, or facilitate making a decision. Most
decision models have three types of input:

1. Data, which are assumed to be constant for purposes of the model. Some examples would
be costs, machine capacities, and intercity distances.

2. Uncontrollable variables, which are quantities that can change but cannot be directly
controlled by the decision maker. Some examples would be customer demand, inflation rates,
and investment returns. Often, these variables are uncertain.

3. Decision variables, which are controllable and can be selected at the discretion of the
decision maker. Some examples would be production quantities, staffing levels, and
investment allocations. Decision models characterize the relationships among the data,
uncontrollable variables, and decision variables, and the outputs of interest to the decision
maker.

Decision models can be represented in various ways, most typically with mathematical
functions and spreadsheets. Spreadsheets are ideal vehicles for implementing decision models
because of their versatility in managing data, evaluating different scenarios, and presenting
results in a meaningful fashion. Using these relationships, we may develop a mathematical
representation by defining symbols for each of these quantities:

TC = total cost

V = unit variable cost

F = fixed cost

Q = quantity produced

This results in the model TC = F + VQ

7.1.2 Model Assumptions:

All models are based on assumptions that reflect the modeler’s view of the “real world.”
Some assumptions are made to simplify the model and make it more tractable; that is, able to
be easily analyzed or solved. Other assumptions might be made to better characterize
historical data or past observations. The task of the modeler is to select or build an
appropriate model that best represents the behavior of the real situation. For example,
economic theory tells us that demand for a product is negatively related to its price. Thus, as
prices increase, demand falls, and vice versa (a phenomenon that you may recognize as price
elasticity—the ratio of the percentage change in demand to the percentage change in price).
Different mathematical models can describe this phenomenon.
7.2 Prescriptive Decision Models

A prescriptive decision model helps decision makers to identify the best solution to a decision
problem. Optimization is the process of finding a set of values for decision variables that
minimize or maximize some quantity of interest—profit, revenue, cost, time, and so
on—called the objective function. Any set of decision variables that optimizes the objective
function is called an optimal solution. In a highly competitive world where one percentage
point can mean a difference of hundreds of thousands of dollars or more, knowing the best
solution can mean the difference between success and failure.

Prescriptive decision models can be either deterministic or stochastic. A deterministic

model is one in which all model input information is either known or assumed to be known
with certainty. A stochastic model is one in which some of the model input information is
uncertain. For instance, suppose that customer demand is an important element of some
model. We can make the assumption that the demand is known with certainty; say, 5,000
units per month. In this case we would be dealing with a deterministic model. On the other
hand, suppose we have evidence to indicate that demand is uncertain, with an average value
of 5,000 units per month, but which typically varies between 3,200 and 6,800 units. If we
make this assumption, we would be dealing with a stochastic model.

7.3 Uncertainty and Risks:

As we all know, the future is always uncertain. Thus, many predictive models incorporate
uncertainty and help decision makers analyze the risks associated with their decisions.
Uncertainty is imperfect knowledge of what will happen; risk is associated with the
consequences and likelihood of what might happen.

For example, the change in the stock price of Apple on the next day of trading is uncertain.
However, if you own Apple stock, then you face the risk of losing money if the stock price
falls. If you don’t own any stock, the price is still uncertain although you would not have any
risk. Risk is evaluated by the magnitude of the consequences and the likelihood that they
would occur. For example, a 10% drop in the stock price would incur a higher risk if you own
$1 million than if you only owned $1,000. Similarly, if the chances of a 10% drop were 1 in
5, the risk would be higher than if the chances were only 1 in 100. The importance of risk in
business has long been recognized.

[Link] Validation

Model validation is defined within regulatory guidance as “the set of processes and activities
intended to verify that models are performing as expected, in line with their design
objectives, and business uses.” It also identifies “potential limitations and assumptions, and
assesses their possible impact.”

Generally, validation activities are performed by individuals independent of model

development or use. Models, therefore, should not be validated by their owners as they can be
highly technical, and some institutions may find it difficult to assemble a model risk team that
has sufficient functional and technical expertise to carry out independent validation. When
faced with this obstacle, institutions often outsource the validation task to third parties.

In statistics, model validation is the task of confirming that the outputs of a statistical model
are acceptable with respect to the real data-generating process. In other words, model
validation is the task of confirming that the outputs of a statistical model have enough fidelity
to the outputs of the data-generating process that the objectives of the investigation can be
achieved.

8.1 The Four Elements

Model validation consists of four crucial elements which should be considered:

1. Conceptual Design

The foundation of any model validation is its conceptual design, which needs documented
coverage assessment that supports the model’s ability to meet business and regulatory needs
and the unique risks facing a bank.

The design and capabilities of a model can have a profound effect on the overall effectiveness
of a bank’s ability to identify and respond to risks. For example, a poorly designed risk
assessment model may result in a bank establishing relationships with clients that present a
risk that is greater than its risk appetite, thus exposing the bank to regulatory scrutiny and
reputation damage.

A validation should independently challenge the underlying conceptual design and ensure
that documentation is appropriate to support the model’s logic and the model’s ability to
achieve desired regulatory and business outcomes for which it is designed.

2. System Validation

All technology and automated systems implemented to support models have limitations. An
effective validation includes: firstly, evaluating the processes used to integrate the model’s
conceptual design and functionality into the organisation’s business setting; and, secondly,
examining the processes implemented to execute the model’s overall design. Where gaps or
limitations are observed, controls should be evaluated to enable the model to function
effectively.

3. Data Validation and Quality Assessment

Data errors or irregularities impair results and might lead to an organisation’s failure to
identify and respond to risks. Best practise indicates that institutions should apply a
risk-based data validation, which enables the reviewer to consider risks unique to the
organisation and the model.

To establish a robust framework for data validation, guidance indicates that the accuracy of
source data be assessed. This is a vital step because data can be derived from a variety of
sources, some of which might lack controls on data integrity, so the data might be incomplete
or inaccurate.

4. Process Validation

To verify that a model is operating effectively, it is important to prove that the established
processes for the model’s ongoing administration, including governance policies and
procedures, support the model’s sustainability. A review of the processes also determines
whether the models are producing output that is accurate, managed effectively, and subject to
the appropriate controls.

If done effectively, model validation will enable your bank to have every confidence in its
various models’ accuracy, as well as aligning them with the bank’s business and regulatory
expectations. By failing to validate models, banks increase the risk of regulatory criticism,
fines, and penalties.

The complex and resource-intensive nature of validation makes it necessary to dedicate

sufficient resources to it. An independent validation team well versed in data management,
technology, and relevant financial products or services — for example, credit, capital
management, insurance, or financial crime compliance — is vital for success. Where
shortfalls in the validation process are identified, timely remedial actions should be taken to
close the gaps.
Data Validation in Excel

The following example is an introduction to data validation in Excel. The data validation
button under the data tab provides the user with different types of data validation checks
based on the data type in the cell. It also allows the user to define custom validation checks
using Excel formulas. The data validation can be found in the Data Tools section of the Data
tab in the ribbon of Excel:

Fig 1: Data validation tool in Excel

Data Entry Task

The example below illustrates a case of data entry, where the province must be entered for
every store location. Since stores are only located in certain provinces, any incorrect entry
should be caught.

It is accomplished in Excel using a two-fold data validation. First, the relevant provinces are
incorporated into a drop-down menu that allows the user to select from a list of valid
provinces.

Fig. 2: First level of data validation

Second, if the user inputs a wrong province by mistake, such as “NY” instead of “NS,” the
system warns the user of the incorrect input.
 Fig. 3: Second level of data validation

Further, if the user ignores the warning, an analysis can be conducted using the data
validation feature in Excel that identifies incorrect inputs.

Fig. 4: Final level of data validation

8.2 Model Evaluation

Model Evaluation is an integral part of the model development process. It helps to find the
best model that represents our data and how well the chosen model will work in the future.
Evaluating model performance with the data used for training is not acceptable in data
science because it can easily generate overoptimistic and overfitted models. There are two
methods of evaluating models in data science, Hold-Out and Cross-Validation. To avoid
overfitting, both methods use a test set (not seen by the model) to evaluate model
performance.

● Hold-Out: In this method, the mostly large dataset is randomly divided to three subsets:

1. Training set is a subset of the dataset used to build predictive models.

2. Validation set is a subset of the dataset used to assess the performance of model built in
the training phase. It provides a test platform for fine tuning model’s parameters and
selecting the best-performing model. Not all modelling algorithms need a validation set.

3. Test set or unseen examples is a subset of the dataset to assess the likely future
performance of a model. If a model fit to the training set much better than it fits the test
set, overfitting is probably the cause.

● Cross-Validation: When only a limited amount of data is available, to achieve an

unbiased estimate of the model performance we use k-fold cross-validation. In k-fold
cross-validation, we divide the data into k subsets of equal size. We build models ktimes,
each time leaving out one of the subsets from training and use it as the test set.
If k equals the sample size, this is called “leave-one-out”.

Model evaluation can be divided to two sections:

● Classification Evaluation

● Regression Evaluation

[Link]:

Data interpretation is the process of reviewing data and drawing meaningful conclusions
using a variety of analytical approaches. Data interpretation aids researchers in categorizing,
manipulating, and summarising data in order to make sound business decisions. The end goal
for a data interpretation project is to develop a good marketing strategy or to expand its client
user base.

There are certain steps followed to conduct data interpretation:

● Putting together the data you’ll need( neglecting irrelevant data)

● Developing the initial research or identifying the most important inputs;
● Sorting and filtering of data.
● Forming conclusions on the data.
● Developing recommendations or practical solutions.

9.1 Types of data interpretation

The purpose of data interpretation is to assist individuals in understanding numerical data that
has been gathered, evaluated, and presented.

9.1.1 Qualitative data Interpretation

To evaluate qualitative data, also known as categorical data, the qualitative data interpretation
approach is utilized. Words, instead of numbers or patterns, are used to describe data in this
technique. Unlike quantitative data, which can be studied immediately after collecting and
sorting it, qualitative data must first be converted into numbers before being analyzed. This is
due to the fact that analyzing texts in their original condition is frequently time-consuming
and results in a high number of mistakes. The analyst’s coding should also be defined so that
it may be reused and evaluated by others.

Observations: a description of the behavioral patterns seen in a group of people. The length
of time spent on an activity, the sort of activity, and the form of communication used might
all be examples of these patterns.

Groups of people: To develop a collaborative discussion about a study issue, group people
and ask them pertinent questions.

Research: Similar to how patterns of behavior may be noticed, different forms of

documentation resources can be classified and split into categories based on the type of
information they include.

Interviews are one of the most effective ways to get narrative data. Themes, topics, and
categories can be used to group inquiry replies. The interview method enables extremely
targeted data segmentation.

The following methods are commonly used to produce qualitative data:

● Transcripts of interviews
● Questionnaires with open-ended answers
● Transcripts from call centers
● Documents and texts
● Audio and video recordings are available.
● Notes from the field

Now the second step is to interpret the data that is produced. This is done by the following
methods:
Content Analysis

This is a popular method for analyzing qualitative data. Other approaches to analysis may fall
under the general category of content analysis. An aspect of the content analysis is thematic
analysis. By classifying material into words, concepts, and themes, content analysis is used to
uncover patterns that arise from the text.

Narrative Analysis

The focus of narrative analysis is on people’s experiences and the language they use to make
sense of them. It’s especially effective for acquiring a thorough insight into customers’
viewpoints on a certain topic. We might be able to describe the results of a targeted case
study using narrative analysis.

Discourse Analysis

Discourse analysis is a technique for gaining a comprehensive knowledge of the political,

cultural, and power dynamics that exist in a given scenario. The emphasis here is on how
people express themselves in various social settings. Brand strategists frequently utilize
discourse analysis to figure out why a group of individuals reacts the way they do to a brand
or product.

It’s critical to be very clear on the type and scope of the study topic in order to get the most
out of the analytical process. This will assist you in determining which research collection
routes are most likely to assist you in answering your query.

Your approach to qualitative data analysis will differ depending on whether you are a
corporation attempting to understand consumer sentiment or an academic surveying a school.

9.1.2 Quantitative data Interpretation

Quantitative data, often known as numerical data, is analyzed using the quantitative data
interpretation approach. Because this data type contains numbers, it is examined using
numbers rather than words. Quantitative analysis is a collection of procedures for analyzing
numerical data. It frequently requires the application of statistical modeling techniques such
as standard deviation, mean, and median. Let’s try and understand these;

Median: The median is the middle value in a list of numbers that have been sorted ascending
or descending, and it might be more descriptive of the data set than the average.

Mean: The basic mathematical average of two or more values is called a mean. The
arithmetic mean approach, which utilizes the sum of the values in the series, and the
geometric mean method, which is the average number of products, are two ways to determine
the mean for a given collection of numbers.

Standard deviation: The positive square root of the variance is the standard deviation. One
of the most fundamental approaches to statistical analysis is the standard deviation. A low
standard deviation indicates that the values are near to the mean, whereas a large standard
deviation indicates that the values are significantly different from the mean.

There are three common uses for quantitative analysis.

● For starters, it’s used to compare and contrast groupings. For instance, consider the
popularity of certain car brands with different colors.
● It’s also used to evaluate relationships between variables.
● Third, it’s used to put scientifically sound theories to the test. Consider a
hypothesis concerning the effect of a certain vaccination.

Regression analysis

A collection of statistical procedures for estimating connections between a dependent

variable and one or maybe more independent variables is known as regression analysis. It
may be used to determine the strength of a relationship across variables and to predict how
they will interact in the future.

Cohort Analysis

Cohort analysis is a technique for determining how engaged users are over time. It’s useful to
determine whether user engagement is improving over time or just looking to improve due to
growth. Cohort analysis is useful because it helps to distinguish between growth and
engagement measures. Cohort analysis is watching how individuals’ behavior develops over
time in groups of people.

Predictive Analysis

By examining historical and present data, the predictive analytic approach seeks to forecast
future trends. Predictive analytics approaches, which are powered by machine learning and
deep learning, allow firms to notice patterns or possible challenges ahead of time and prepare
educated initiatives. Predictive analytics is being used by businesses to address issues and
identify new possibilities.

Prescriptive Analysis

The prescriptive analysis approach employs tools like as graph analysis,

Prescriptive analytics is a sort of data analytics in which technology is used to assist
organisations in making better decisions by analyzing raw data. Prescriptive analytics, in
particular, takes into account information about potential situations or scenarios, available
resources, previous performance, and present performance to recommend a course of action
or strategy. It may be used to make judgments throughout a wide range of time frames, from
the immediate to the long term.

Conjoint Analysis

Conjoint analysis is the best market research method for determining how much customers
appreciate a product’s or service’s qualities. This widely utilized method mixes real-life
scenarios and statistical tools with market decision models

Cluster analysis

Any organization that wants to identify distinct groupings of consumers, sales transactions, or
other sorts of behaviors and items may use cluster analysis as a valuable data-mining
technique.

The goal of cluster analysis is to uncover groupings of subjects that are similar, where
“similarity” between each pair of subjects refers to a global assessment of the entire
collection of features. Cluster analysis, similar to factor analysis, deals with data matrices in
which the variables haven’t been partitioned into criteria and predictor subsets previously.

10. Deployment and Iteration:

 The iterative process is the practice of building, refining, and improving a project, product, or
initiative. Teams that use the iterative development process create, test, and revise until
they’re satisfied with the end result. You can think of an iterative process as a trial-and-error
methodology that brings your project closer to its end goal.

Iterative processes are a fundamental part of lean methodologies and Agile project
management—but these processes can be implemented by any team, not just Agile ones.
During the iterative process, you will continually improve your design, product, or project
until you and your team are satisfied with the final project deliverable.

10.1 The benefits and challenges of the iterative process

The iterative model isn’t right for every team—or every project. Here are the main pros and
cons of the iterative process for your team.

Pros:

● Increased efficiency. Because the iterative process embraces trial and error, it can often help
you achieve your desired result faster than a non-iterative process.
● Increased collaboration. Instead of working from predetermined plans and specs (which also
takes a lot of time to create), your team is actively working together.
● Increased adaptability. As you learn new things during the implementation and testing phases,
you can tweak your iteration to best hit your goals—even if that means doing something you
didn’t expect to be doing at the start of the iterative process.
● More cost effective. If you need to change the scope of the project, you’ll only have invested
the minimum time and effort into the process.
● Ability to work in parallel. Unlike other, non-iterative methodologies like the waterfall
method, iterations aren’t necessarily dependent on the work that comes before them. Team
members can work on several elements of the project in parallel, which can shorten your
overall timeline.
● Reduced project-level risk. In the iterative process, risks are identified and addressed during
each iteration. Instead of solving for large risks at the beginning and end of the project,
you’re consistently working to resolve low-level risks.
● More reliable user feedback. When you have an iteration that users can interact with or see,
they’re able to give you incremental feedback about what works or doesn’t work for them.

Cons:

● Increased risk of scope creep. Because of the trial-and-error nature of the iterative process,
your project could develop in ways you didn’t expect and exceed your original project scope.
● Inflexible planning and requirements. The first step of the iterative process is to define your
project requirements. Changing these requirements during the iterative process can break the
flow of your work, and cause you to create iterations that don’t serve your project’s purpose.
● Vague timelines. Because team members will create, test, and revise iterations until they get
to a satisfying solution, the iterative timeline isn’t clearly defined. Additionally, testing for
different increments can vary in length, which also impacts the overall iterative process
timeline.
UNIT II BUSINESS INTELLIGENCE

Data Warehouses and Data Mart – Knowledge Management – Types of Decisions –

Decision Making Process – Decision Support systems – Business Intelligence-

OLAP- Analytic Functions

[Link] Warehouses and Data Mart:

A Data Warehouse (DW) is an organised collection of integrated, subject-

oriented databases designed to aid decision support functions. DW is organized at the
right level of granularity to provide clean enterprise-wide data in a standardized format
for reports, queries and analysis. DW is physically and functionally separate from an
operational and transactional database. Creating a DW for analysis and queries
represents investment in time and effort. It has to be constantly kept up-to-date for it to
be useful.

A Data Warehousing (DW) is process for collecting and managing data from varied
sources to provide meaningful business insights. A Data warehouse is typically used to
connect and analyze business data from heterogeneous sources. The data warehouse is
the core of the BI system which is built for data analysis and reporting. It is a blend of
technologies and components which aids the strategic use of data. It is electronic storage
of a large amount of information by a business which is designed for query and analysis
instead of transaction processing. It is a process of transforming data into information
and making it available to users in a timely manner to make a difference.

Data warehouse system is also known by the following name:

 Decision Support System (DSS)

 Executive Information System
 Management Information System
 Business Intelligence Solution
 Analytic Application
 Data Warehouse
1.1 How Data warehouse works?

A Data Warehouse works as a central repository where information arrives from one or
more data sources. Data flows into a data warehouse from the transactional system and
other relational databases.

Data may be:

1. Structured
2. Semi-structured
3. Unstructured data

The data is processed, transformed, and ingested so that users can access the processed
data in the Data Warehouse through Business Intelligence tools, SQL clients, and
spreadsheets. A data warehouse merges information coming from different sources into
one comprehensive database.

By merging all of this information in one place, an organization can analyze its customers
more holistically. This helps to ensure that it has considered all the information available.
Data warehousing makes data mining possible. Data mining is looking for patterns in the
data that may lead to higher sales and profits.

1.2 Types of Data Warehouse

Three main types of Data Warehouses are:

1. Enterprise Data Warehouse:

Enterprise Data Warehouse is a centralized warehouse. It provides decision support

service across the enterprise. It offers a unified approach for organizing and representing
data. It also provide the ability to classify data according to the subject and give access
according to those divisions.

2. Operational Data Store:

Operational Data Store, which is also called ODS, are nothing but data store required 1.2
when neither Data warehouse nor OLTP systems support organizations reporting needs.
In ODS, Data warehouse is refreshed in real time. Hence, it is widely preferred for routine
activities like storing records of the Employees.

3. Data Mart:

A data mart is a subset of the data warehouse. It specially designed for a particular line of
business, such as sales, finance, sales or finance. In an independent data mart, data can
collect directly from sources.

1.3 Components of Data warehouse

Four components of Data Warehouses are:

Load manager: Load manager is also called the front component. It performs with all the
operations associated with the extraction and load of data into the warehouse. These
operations include transformations to prepare the data for entering into the Data
warehouse.

Warehouse Manager: Warehouse manager performs operations associated with the

management of the data in the warehouse. It performs operations like analysis of data to
ensure consistency, creation of indexes and views, generation of denormalization and
aggregations, transformation and merging of source data and archiving and baking-up
data.

Query Manager: Query manager is also known as backend component. It performs all
the operation operations related to the management of user queries. The operations of
this Data warehouse components are direct queries to the appropriate tables for
scheduling the execution of queries.

End-user access tools:

This is categorized into five different groups like 1. Data Reporting 2. Query Tools 3.
Application development tools 4. EIS tools, 5. OLAP tools and data mining tools.

1.4 Who needs Data warehouse?

Data warehouse is needed for all types of users like:

  Decision makers who rely on mass amount of data
 Users who use customized, complex processes to obtain information from
multiple data sources.
 It is also used by the people who want simple technology to access the data
 It also essential for those people who want a systematic approach for making
decisions.
 If the user wants fast performance on a huge amount of data which is a necessity
for reports, grids or charts, then Data warehouse proves useful.
 Data warehouse is a first step If you want to discover 'hidden patterns' of data-
flows and groupings.

1.5 What Is a Data Warehouse Used For?

Here, are most common sectors where Data warehouse is used:

Airline:

In the Airline system, it is used for operation purpose like crew assignment, analyses of
route profitability, frequent flyer program promotions, etc.

Banking:

It is widely used in the banking sector to manage the resources available on desk
effectively. Few banks also used for the market research, performance analysis of the
product and operations.

Healthcare:

Healthcare sector also used Data warehouse to strategize and predict outcomes, generate
patient's treatment reports, share data with tie-in insurance companies, medical aid
services, etc.

Public sector:

In the public sector, data warehouse is used for intelligence gathering. It helps
government agencies to maintain and analyze tax records, health policy records, for every
individual.

Investment and Insurance sector:

In this sector, the warehouses are primarily used to analyze data patterns, customer
trends, and to track market movements.
Retail chain:

In retail chains, Data warehouse is widely used for distribution and marketing. It also
helps to track items, customer buying pattern, promotions and also used for determining
pricing policy.

Telecommunication:

A data warehouse is used in this sector for product promotions, sales decisions and to
make distribution decisions.

Hospitality Industry:

This Industry utilizes warehouse services to design as well as estimate their advertising
and promotion campaigns where they want to target clients based on their feedback and
travel patterns.

Steps to Implement Data Warehouse

The best way to address the business risk associated with a Data warehouse
implementation is to employ a three-prong strategy as below

1. Enterprise strategy: Here we identify technical including current architecture

and tools. We also identify facts, dimensions, and attributes. Data mapping and
transformation is also passed.
2. Phased delivery: Datawarehouse implementation should be phased based on
subject areas. Related business entities like booking and billing should be first
implemented and then integrated with each other.
3. Iterative Prototyping: Rather than a big bang approach to implementation, the
Datawarehouse should be developed and tested iteratively.

Here, are key steps in Datawarehouse implementation along with its deliverables.

Step Tasks Deliverables

1 Need to define project scope Scope Definition

2 Need to determine business needs Logical Data Model

3 Define Operational Datastore requirements Operational Data Store Model

 4 Acquire or develop Extraction tools Extract tools and Software

5 Define Data Warehouse Data requirements Transition Data Model

6 Document missing data To Do Project List

7 Maps Operational Data Store to Data Warehouse D/W Data Integration Map

8 Develop Data Warehouse Database design D/W Database Design

9 Extract Data from Operational Data Store Integrated D/W Data Extracts

10 Load Data Warehouse Initial Data Load

11 Maintain Data Warehouse On-going Data Access and Subsequent Loa

1,6 Best practices to implement a Data Warehouse

 Decide a plan to test the consistency, accuracy, and integrity of the data.
 The data warehouse must be well integrated, well defined and time stamped.
 While designing Datawarehouse make sure you use right tool, stick to life cycle,
take care about data conflicts and ready to learn you're your mistakes.
 Never replace operational systems and reports
 Don't spend too much time on extracting, cleaning and loading data.
 Ensure to involve all stakeholders including business personnel in Datawarehouse
implementation process. Establish that Data warehousing is a joint/ team project.
You don't want to create Data warehouse that is not useful to the end users.
 Prepare a training plan for the end users.

1.7 Advantages of Data Warehouse:

 Data warehouse allows business users to quickly access critical data from some
sources all in one place.
 Data warehouse provides consistent information on various cross-functional
activities. It is also supporting ad-hoc reporting and query.
 Data Warehouse helps to integrate many sources of data to reduce stress on the
production system.
  Data warehouse helps to reduce total turnaround time for analysis and reporting.
 Restructuring and Integration make it easier for the user to use for reporting and
analysis.
 Data warehouse allows users to access critical data from the number of sources in
a single place. Therefore, it saves user's time of retrieving data from multiple
sources.
 Data warehouse stores a large amount of historical data. This helps users to
analyze different time periods and trends to make future predictions.

1.8 Disadvantages of Data Warehouse:

 Not an ideal option for unstructured data.

 Creation and Implementation of Data Warehouse is surely time confusing affair.
 Data Warehouse can be outdated relatively quickly
 Difficult to make changes in data types and ranges, data source schema, indexes,
and queries.
 The data warehouse may seem easy, but actually, it is too complex for the average
users.
 Despite best efforts at project management, data warehousing project scope will
always increase.
 Sometime warehouse users will develop different business rules.
 Organisations need to spend lots of their resources for training and
Implementation purpose.

1.9 The Future of Data Warehousing

 Change in Regulatory constrains may limit the ability to combine source of

disparate data. These disparate sources may include unstructured data which is
difficult to store.
 As the size of the databases grows, the estimates of what constitutes a very large
database continue to grow. It is complex to build and run data warehouse systems
which are always increasing in size. The hardware and software resources are
available today do not allow to keep a large amount of data online.
 Multimedia data cannot be easily manipulated as text data, whereas textual
information can be retrieved by the relational software available today. This could
be a research subject.
 retrieved by the relational software available today. This could be a research
subject.

Data Warehouse Tools

There are many Data Warehousing tools are available in the market. Here, are some most
prominent one:
1. MarkLogic:

MarkLogic is useful data warehousing solution that makes data integration easier and
faster using an array of enterprise features. This tool helps to perform very complex
search operations. It can query different types of data like documents, relationships, and
metadata.

2. Oracle:

Oracle is the industry-leading database. It offers a wide range of choice of data warehouse
solutions for both on-premises and in the cloud. It helps to optimize customer
experiences by increasing operational efficiency.

3. Amazon RedShift:

Amazon Redshift is Data warehouse tool. It is a simple and cost-effective tool to analyze
all types of data using standard SQL and existing BI tools. It also allows running complex
queries against petabytes of structured data, using the technique of query optimization.

1.9.1 Differences between Data Warehouse and Data Mart

1.
Parameter Data Warehouse Data Mart
A Data Warehouse is a large repository of A data mart is an only subtype of a Data
Definition data collected from different organizations Warehouse. It is designed to meet the need of a
or departments within a corporation. certain user group.

Usage It helps to take a strategic decision. It helps to take tactical decisions for the business.

The main objective of Data Warehouse is to

provide an integrated environment and A data mart mostly used in a business division
Objective
coherent picture of the business at a point in at the department level.
time.
The designing process of Data Warehouse is
Designing The designing process of Data Mart is easy.
quite difficult.

May or may not use in a dimensional model. It is built focused on a dimensional model using a
However, it can feed dimensional models. start schema.

Data warehousing includes large area of the

Data marts are easy to use, design and implement
Data Handling corporation which is why it takes a long time
as it can only handle small amounts of data.
to process it.
Data warehousing is broadly focused all the
Data Mart is subject-oriented, and it is used at a
Focus departments. It is possible that it can even
department level.
represent the entire company.
The data stored inside the Data Warehouse
Data Marts are built for particular user groups.
Data type are always detailed when compared with
Therefore, data short and limited.
data mart.
The main objective of Data Warehouse is to
provide an integrated environment and Mostly hold only one subject area- for example,
Subject-area
coherent picture of the business at a point in Sales figure.
time.
Dimensional modeling and star schema design
Designed to store enterprise-wide decision
Data storing employed for optimizing the performance of
data, not just marketing data.
access layer.

Time variance and non-volatile design are Mostly includes consolidation data structures to
Data type
strictly enforced. meet subject area’s query and reporting needs.

Transaction data regardless of grain fed directly

Data value Read-Only from the end-users standpoint.
from the Data Warehouse.
Data mart contains data, of a specific department
Data warehousing is more helpful as it can of a company. There are maybe separate data
Scope
bring information from any department. marts for sales, finance, marketing, etc. Has
limited usage
 In Data Warehouse Data comes from many
Source In Data Mart data comes from very few sources.
sources.
The size of the Data Warehouse may range
Size The Size of Data Mart is less than 100 GB.
from 100 GB to 1 TB+.
The implementation process of Data
Implementation The implementation process of Data Mart is
Warehouse can be extended from months to
time restricted to few months.
years.

2. Knowledge Management (KM): Concept, Features and Process

Concept of KM:

KM may be defined as follows:

Knowledge management is a process of acquiring, generating, accumulating and using

knowledge for the benefit of the organisation to enable it to gain a competitive edge for
survival, growth and prosperity in a globalized competitive economy.

According to some management experts, notably Peter F. Drucker, KM is a bad term; in

as much as knowledge cannot be managed.

Rather, KM requires conditions for the emergence of a learning organisation; which is

necessary for generation, sharing and use of knowledge residing in the minds of people.

2.1 Features of Knowledge Management

Some salient features of KM are described below:

(i) KM is a systematic process; consisting of standardized procedures to collect, store,

distribute and use knowledge. The essence of KM is to get right knowledge to right people,
at the right time.

(ii) Knowledge is of two types – explicit and implicit. Explicit knowledge is visible
information available in literature, reports, patents, technical specifications,
communication with customers, suppliers, competitors etc. It can be embedded in rules,
systems, policies and procedures etc. of the organisation.

Tacit or implicit knowledge is personal knowledge residing in the minds of people as a

result of their personal beliefs, values, perspectives and experience. There is a need for a
learning organisation for enhancement, sharing and utilisation of tacit knowledge.

(iii) KM is a continuous process; as the world economy is dynamic and full of challenges.
It requires constant creation of new skills and capabilities and improvement of existing
ones.
(iv) KM requires whole-hearted support of top management, to provide cultural and
technical foundation for the origination and implementation of KM practices.

(v) The objective of KM is improvement in organisational performance; to enable the

organisation acquire, sharpen and utilize its competitive edge for survival and growth in
the global economy of today.

2.2 Knowledge Management and Information Technology:

KM is not an outgrowth of IT. Rather, KM requires human skills, creativity and innovative
capabilities of people; which are the base of KM. In fact I there are tools of IT like
Intranets, Lotus Notes, MS-Exchange etc.; which provide an infrastructure for the free
play of human creativity and innovative powers for the formulation of corporation
strategy, in a competitive globalized environment.

The above ideas are illustrated with the help of the following diagram:

Knowledge Management IT and Corporate Strategy

An Overview of the Process of KM:

KM broadly consists of the following major steps:

(i) Identification of Knowledge Needs:

The first step in KM is an identification of what type of knowledge is required for the
successful designing and implementation of corporate strategy.

(ii) Determination of Knowledge Assets:

The management must identify what are the knowledge assets of the organisation; which
basically are competitors, suppliers, governmental agencies, products and processes,
technology etc. Management must plan to get maximum returns out of knowledge assets.

(iii) Generation of Knowledge:

Generation of knowledge requires two sources:

(a) Acquisition of knowledge through knowledge assets e.g. knowledge about new
products (from competitors), new technologies, social, economical, political changes. It
also requires transformation of raw information into knowledge, useful to solve business
problems.

(b) Generation of knowledge, by creating conditions for the emergence of a learning

organisation. This is the most important internal source of knowledge generation which
makes tacit knowledge of individuals available for organisational purposes.

(iv) Knowledge Storage:

It includes preserving existing and acquired knowledge in knowledge repositories. (A

knowledge repository is an on line computer based storehouse of organised information
about a particular domain of knowledge).

(v) Knowledge Distribution:

It is a process which allows members of the organisation to have an access to the

collective knowledge of the organisation.

(vi) Knowledge Utilization:

It requires embedding knowledge in products, processes, procedures etc. of the

organisation. Best utilisation of knowledge takes place when managers utilize knowledge
in organisational decision making. A learning organisation creates conditions for sharing
and utilizing knowledge in organisational contexts.

(vii) Feedback on Knowledge Management

Feedback on KM implies evaluating the significance of knowledge assets. It also includes

impact of KM on organisational performance; and devising techniques for betterment of
KM in future.

An overview of the process of KM- at a glance

2.3 Significance of Knowledge Management

Significance of KM could be highlighted with reference the following advantages which

KM provides to the organisation:

(i) Building and Sharpening Competitive Edge:

KM enables a corporation to build and sharpen its competitive edge, for survival and
growth in the competitive globalized economy. In fact, KM aided by IT tools enables a
corporation to design and implement most appropriate corporate strategies.
(ii) Betterment of Human Relations:

KM is basically built on the knowledge generated, shared and utilized through a learning
organisation. There is no doubt that learning organisation provides the foundation on
which the building of KM could be built. A learning organisation through facilitating
interaction among people of the organisation, leads to betterment of human relations;
which is a very big permanent asset an organisation can boast of to possess.

(iii) Improvement in Organisational Efficiency:

KM provides knowledge which can be embedded in organisational processes. It makes

knowledge available for decision-making purposes. Thus it helps to improve
organisational efficiency, resulting in reduced costs and increased profits, for the
organisation.
(iv) Enhancement of Human Capital Capabilities

KM-its concept and practices – motivate people to enhance their intellectual capabilities,
resulting in new skills, improvement of existing skills etc. Thus not only does KM enhance
the intellectual elements of people; but also indirectly prevents depreciation of human
capital.

(v) Enhancement of Enterprise Goodwill:

Initiation and practices of KM help an enterprise enhance its goodwill in the global
market; enabling it to acquire more success and prosperity.

[Link] of Decisions in Business Intelligence

The characteristics of decisions faced by managers at different levels are quite different.
Decisions can be classified as structured, semi structured, and unstructured.
Unstructured decisions are those in which the decision maker must provide judgment,
evaluation, and insights into the problem definition. Each of these decisions is novel,
important, and nonroutine, and there is no well-understood or agreed-on procedure for
making them.

Structured decisions, by contrast, are repetitive and routine, and decision makers
can follow a definite procedure for handling them to be efficient. Many decisions have
elements of both and are considered semi structured decisions, in which only part of the
problem has a clear-cut answer provided by an accepted procedure. In general,
structured decisions are made more prevalently at lower organizational levels, whereas
unstructured decision making is more common at higher levels of the firm.

Senior executives tend to be exposed to many unstructured decision situations that

are open ended and evaluative and that require insight based on many sources of
information and personal experience. For example, a CEO in today’s music industry might
ask, “Whom should we choose as a distribution partner for our online music catalog—
Apple, Microsoft, or Sony?” Answering this question would require access to news,
government reports, and industry views as well as high-level summaries of firm
performance. However, the answer would also require senior managers to use their own
best judgment and poll other managers for their opinions.

Middle management and operational management tend to face more structured

decision scenarios, but their decisions may include unstructured components. A typical
middlelevel management decision might be “Why is the order fulfillment report
showing a decline over the last six months at a distribution center in Minneapolis?” This
middle manager could obtain a report from the firm’s enterprise system or distribution
management system on order activity and operational efficiency at the Minneapolis
distribution center. This is the structured part of the decision. But before arriving at an
answer, this middle manager will have to interview employees and gather more
unstructured information from external sources about local economic conditions or
sales trends.
Rank-and-file employees tend to make more structured decisions. For example, a
sales account representative often has to make decisions about extending credit to
customers by consulting the firm’s customer database that contains credit information.
In this case the decision is highly structured, it is a routine decision made thousands of
times each day in most firms, and the answer has been preprogrammed into a corporate
risk management or credit reporting system.

The types of decisions faced by project teams cannot be classified neatly by

organizational level. Teams are small groups of middle and operational managers and
perhaps employees assigned specific tasks that may last a few months to a few years.
Their tasks may involve unstructured or semistructured decisions such as designing
new products, devising new ways to enter the marketplace, or reorganizing sales
territories and compensation systems.

SYSTEMS FOR DECISION SUPPORT

There are four kinds of systems used to support the different levels . We introduced
some of these systems in Management information systems (MIS) provide routine
reports and summaries of transaction- level data to middle and operational-level
managers to provide answers to structured and semistructured decision problems.

[Link]-support systems (DSS) are targeted systems that combine analytical models
with operational data and supportive interactive queries and analysis for middle
managers who face semistructured decision situations.

[Link] support systems (ESS) are specialized systems that provide senior
management making primarily unstructured decisions with a broad array of both
external information (news, stock analyses, industry trends) and high-level summaries
of firm performance. The purpose of ESS to help the C- level managers to focus on the
information that really affect the overall profitability and success of the firm. The leading
methodology for understanding the really important information needed by the firm’s
executive is called the Balanced Score Card Method, a frame work for operationalizing
the firm’s strategic plan by focusing on measurable outcomes on four dimensions of firm
[Link],business process ,customer, learning and growth. Performance on
each dimension is measured using KPI’s.

[Link] decision-support systems (GDSS) are specialized systems that provide a group
electronic environment in which managers and teams can collectively make decisions
and design solutions for unstructured and semistructured [Link] guided
meetings takes place in a conference rooms with special software and hardware tools to
facilitate group decision [Link] makes possible to increase the meeting size and
increase in [Link] individuals contribute simultaneously at the same time
rather than one at a time.
[Link] IN THE DECISION-MAKING PROCESS

Making decisions consists of several different activities. Simon (1960) describes four
different stages in decision making: intelligence, design, choice, and implementation
 The decision-making process can be described in four steps that follow one another in a
logical order. In reality, decision makers frequently circle back to reconsider the previous
stages and through a process of iteration eventually arrive at a solution that is workable.

Intelligence consists of discovering, identifying, and understanding the problems

occurring in the organization—why is there a problem, where, and what effects is it
having on the firm. Traditional MIS that deliver a wide variety of detailed information can
help identify problems, especially if the systems report exceptions.

Design involves identifying and exploring various solutions to the problem.

Decisionsupport systems (DSS) are ideal in this stage for exploring alternatives because
they possess analytical tools for modeling data, enabling users to explore various options
quickly.

Choice consists of choosing among solution alternatives. Here, DSS with access
extensive firm data can help managers choose the optimal solution. Also group
decisionsupport systems can be used to bring groups of managers together in an
electronic online environment to discuss different solutions and make a choice.

Implementation involves making the chosen alternative work and continuing

to monitor how well the solution is working. Here, traditional MIS come back into play
by providing managers with routine reports on the progress of a specific solution.
Support systems can range from full-blown MIS to much smaller systems, as well as
project-planning software operating on personal computers.

In the real world, the stages of decision making described here do not necessarily
follow a linear path. You can be in the process of implementing a decision, only to
discover that your solution is not working. In such cases, you will be forced to repeat the
design, choice, or perhaps even the intelligence stage.

For instance, in the face of declining sales, a sales management team may strongly
support a new sales incentive system to spur the sales force on to greater effort. If
paying the sales force a higher commission for making more sales does not produce
sales increases, managers would need to investigate whether the problem stems from
poor product design, inadequate customer support, or a host of other causes, none of
which would be “solved” by a new incentive system.

3.2 Trends in Decision Support and Business Intelligence

Systems supporting management decision making originated in the early 1960s as early
MIS that created fixed, inflexible paper-based reports and distributed them to managers
on a routine schedule. In the 1970s, the first DSS emerged as standalone applications
with limited data and a few analytic models. ESS emerged during the 1980s to give
senior managers an overview of corporate operations. Early ESS were expensive, based
on custom technology, and suffered from limited data and flexibility.

The rise of client/server computing, the Internet, and Web technologies has made
a major impact on systems that support decision making. Many decision-support
applications are now delivered over corporate intranets. We see six major trends:

 Detailed enterprise-wide data. Enterprise systems create an explosion in

firmwide, current, and relatively accurate information, supplying end users at
their desktops with powerful analytic tools for analyzing and visualizing data.
 Broadening decision rights and responsibilities. As information becomes
more widespread throughout the corporation, it is possible to reduce levels
of hierarchy and grant more decision-making authority to lower-level
employees.
 Intranets and portals. Intranet technologies create global, company-wide
networks that ease the flow of information across divisions and regions and
delivery of near real-time data to management and employee desktops.
 Personalization and customization of information. Web portal
technologies provide great flexibility in determining what data each
employee and manager sees on his or her desktop. Personalization of decision
 information can speed up decision making by enabling users to filter out
irrelevant information.
 Extranets and collaborative commerce. Internet and Web technologies
permit suppliers and logistics partners to access firm enterprise data and
decision-support tools and work collaboratively with the firm.
 Team support tools. Web-based collaboration and meeting tools enable
project teams, task forces, and small groups to meet online using corporate
intranets or extranets. These new collaboration tools borrow from earlier
GDSS and are used for both brainstorming and decision sessions.

[Link] Intelligence

Business intelligence combines business analytics, data mining, data visualization, data
tools and infrastructure, and best practices to help organizations make more data-driven
decisions. In practice, you know you’ve got modern business intelligence when you have
a comprehensive view of your organization’s data and use that data to drive change,
eliminate inefficiencies, and quickly adapt to market or supply changes. Modern BI
solutions prioritize flexible self-service analysis, governed data on trusted platforms,
empowered business users, and speed to insight

Business Intelligence is a set of processes, architectures, and technologies that convert

raw data into meaningful information that drives profitable business actions. It is a suite
of software and services to transform data into actionable intelligence and knowledge.

BI has a direct impact on organization’s strategic, tactical and operational business

decisions. BI supports fact-based decision making using historical data rather than
assumptions and gut feeling.

BI tools perform data analysis and create reports, summaries, dashboards, maps, graphs,
and charts to provide users with detailed intelligence about the nature of the business.

4.1 Why is BI important?

 Measurement: creating KPI (Key Performance Indicators) based on historic data

 Identify and set benchmarks for varied processes.
 With BI systems organizations can identify market trends and spot business
problems that need to be addressed.
 BI helps on data visualization that enhances the data quality and thereby the
quality of decision making.
 BI systems can be used not just by enterprises but SME (Small and Medium
Enterprises)
4.2 How Business Intelligence systems are implemented?
step 1) Raw Data from corporate databases is extracted. The data could be spread across
multiple systems heterogeneous systems.

step 2) The data is cleaned and transformed into the data warehouse. The table can be
linked, and data cubes are formed.

Step 3) Using BI system the user can ask quires, request ad-hoc reports or conduct any
other analysis.

4.3 Examples of Business Intelligence System used in Practice

Example 1:

. In an Online Transaction Processing (OLTP) system information that could be fed into
product database could be

 add a product line

 change a product price

Correspondingly, in a Business Intelligence system query that would beexecuted for the
product subject area could be did the addition of new product line or change in product
price increase revenues

In an advertising database of OLTP system query that could be executed

 Changed in advertisement options

 Increase radio budget

Correspondigly, in BI system query that could be executed would be how many new
clients added due to change in radio budget

In OLTP system dealing with customer demographic data bases data that could be fed
would be

 increase customer credit limit

 change in customer salary level

Correspondingly in the OLAP system query that could be executed would be can customer
profile changes support support higher product price
Example 2:

A hotel owner uses BI analytical applications to gather statistical information regarding

average occupancy and room rate. It helps to find aggregate revenue generated per room.

It also collects statistics on market share and data from customer surveys from each hotel
to decides its competitive position in various markets.

By analyzing these trends year by year, month by month and day by day helps
management to offer discounts on room rentals.

Example 3:

A bank gives branch managers access to BI applications. It helps branch manager to

determine who are the most profitable customers and which customers they should work
on.

The use of BI tools frees information technology staff from the task of generating
analytical reports for the departments. It also gives department personnel access to a
richer data source.

4.4 Four types of BI users

Following given are the four key players who are used Business Intelligence System:

1. The Professional Data Analyst:

The data analyst is a statistician who always needs to drill deep down into data. BI system
helps them to get fresh insights to develop unique business strategies.

2. The IT users:

The IT user also plays a dominant role in maintaining the BI infrastructure.

3. The head of the company:

CEO or CXO can increase the profit of their business by improving operational efficiency
in their business.

4. The Business Users”

Business intelligence users can be found from across the organization. There are mainly
two types of business users

1. Casual business intelligence user

2. The power user.
The difference between both of them is that a power user has the capability of working
with complex data sets, while the casual user need will make him use dashboards to
evaluate predefined sets of data.

4.5 Advantages of Business Intelligence

Here are some of the advantages of using Business Intelligence System:

1. Boost productivity

With a BI program, It is possible for businesses to create reports with a single click thus
saves lots of time and resources. It also allows employees to be more productive on their
tasks.

2. To improve visibility

BI also helps to improve the visibility of these processes and make it possible to identify
any areas which need attention.

3. Fix Accountability

BI system assigns accountability in the organization as there must be someone who

should own accountability and ownership for the organization’s performance against its
set goals.

4. It gives a bird’s eye view:

BI system also helps organizations as decision makers get an overall bird’s eye view
through typical BI features like dashboards and scorecards.

5. It streamlines business processes:

BI takes out all complexity associated with business processes. It also automates analytics
by offering predictive analysis, computer modeling, benchmarking and other
methodologies.

6. It allows for easy analytics.

BI software has democratized its usage, allowing even nontechnical or non-analysts users
to collect and process data quickly. This also allows putting the power of analytics from
the hand’s many people.
4.6 BI System Disadvantages
1. Cost:

Business intelligence can prove costly for small as well as for medium-sized enterprises.
The use of such type of system may be expensive for routine business transactions.

2. Complexity:

Another drawback of BI is its complexity in implementation of datawarehouse. It can be

so complex that it can make business techniques rigid to deal with.

3. Limited use

Like all improved technologies, BI was first established keeping in consideration the
buying competence of rich firms. Therefore, BI system is yet not affordable for many small
and medium size companies.

4. Time Consuming Implementation

It takes almost one and half year for data warehousing system to be completely
implemented. Therefore, it is a time-consuming process.

[Link] is OLAP?

A core component of data warehousing implementations, OLAP enables fast, flexible

multidimensional data analysis for business intelligence (BI) and decision support
applications.

OLAP (for online analytical processing) is software for performing multidimensional

analysis at high speeds on large volumes of data from a data warehouse, data mart, or
some other unified, centralized data store.

Most business data have multiple dimensions—multiple categories into which the data
are broken down for presentation, tracking, or analysis. For example, sales figures might
have several dimensions related to location (region, country, state/province, store), time
(year, month, week, day), product (clothing, men/women/children, brand, type), and
more.

But in a data warehouse, data sets are stored in tables, each of which can organize data
into just two of these dimensions at a time. OLAP extracts data from multiple relational
data sets and reorganizes it into a multidimensional format that enables very fast
processing and very insightful analysis.
5.1What is an OLAP cube?

The core of most OLAP systems, the OLAP cube is an array-based multidimensional
database that makes it possible to process and analyze multiple data dimensions much
more quickly and efficiently than a traditional relational database.

A relational database table is structured like a spreadsheet, storing individual records in

a two-dimensional, row-by-column format. Each data “fact” in the database sits at the
intersection of two dimensions–a row and a column—such as region and total sales.

SQL and relational database reporting tools can certainly query, report on, and analyze
multidimensional data stored in tables, but performance slows down as the data volumes
increase. And it requires a lot of work to reorganize the results to focus on different
dimensions.

This is where the OLAP cube comes in. The OLAP cube extends the single table with
additional layers, each adding additional dimensions—usually the next level in the
“concept hierarchy” of the dimension. For example, the top layer of the cube might
organize sales by region; additional layers could be country, state/province, city and even
specific store.

In theory, a cube can contain an infinite number of layers. (An OLAP cube representing
more than three dimensions is sometimes called a hypercube.) And smaller cubes can
exist within layers—for example, each store layer could contain cubes arranging sales by
salesperson and product. In practice, data analysts will create OLAP cubes containing just
the layers they need, for optimal analysis and performance.
OLAP cubes enable four basic types of multidimensional data analysis:

Drill-down

The drill-down operation converts less-detailed data into more-detailed data through
one of two methods—moving down in the concept hierarchy or adding a new dimension
to the cube. For example, if you view sales data for an organization’s calendar or fiscal
quarter, you can drill-down to see sales for each month, moving down in the concept
hierarchy of the “time” dimension.

Roll up

Roll up is the opposite of the drill-down function—it aggregates data on an OLAP cube by
moving up in the concept hierarchy or by reducing the number of dimensions. For
example, you could move up in the concept hierarchy of the “location” dimension by
viewing each country's data, rather than each city.

Slice and dice

The slice operation creates a sub-cube by selecting a single dimension from the main
OLAP cube. For example, you can perform a slice by highlighting all data for the
organization's first fiscal or calendar quarter (time dimension).
The dice operation isolates a sub-cube by selecting several dimensions within the main
OLAP cube. For example, you could perform a dice operation by highlighting all data by
an organization’s calendar or fiscal quarters (time dimension) and within the U.S. and
Canada (location dimension).

Pivot

The pivot function rotates the current cube view to display a new representation of the
data—enabling dynamic multidimensional views of data. The OLAP pivot function is
comparable to the pivot table feature in spreadsheet software, such as Microsoft Excel,
but while pivot tables in Excel can be challenging, OLAP pivots are relatively easier to use
(less expertise is required) and have a faster response time and query performance.

MOLAP vs. ROLAP vs. HOLAP

OLAP that works directly with a multidimensional OLAP cube is known

as multidimensional OLAP, or MOLAP. Again, for most uses, MOLAP is the fastest and most
practical type of multidimensional data analysis.

However, there are two other types of OLAP which may be preferable in certain cases:

ROLAP

ROLAP, or relational OLAP, is multidimensional data analysis that operates directly on

data on relational tables, without first reorganizing the data into a cube.

As noted previously, SQL is a perfectly capable tool for multidimensional queries,

reporting, and analysis. But the SQL queries required are complex, performance can drag,
and the resulting view of the data is static—it can't be pivoted to represent a different
view of the data. ROLAP is best when the ability to work directly with large amounts of
data is more important than performance and flexibility.

HOLAP

HOLAP, or hybrid OLAP, attempts to create the optimal division of labor between
relational and multidimensional databases within a single OLAP architecture. The
relational tables contain larger quantities of data, and OLAP cubes are used for
aggregations and speculative processing. HOLAP requires an OLAP server that supports
both MOLAP and ROLAP.

A HOLAP tool can "drill through" the data cube to the relational tables, which paves the
way for quick data processing and flexible access. This hybrid system can offer better
scalability but can't escape the inevitable slow-down when accessing relational data
sources. Also, its complex architecture typically requires more frequent updates and
maintenance, as it must store and process all the data from relational databases and
multidimensional databases. For this reason, HOLAP can end up being more expensive.

OLAP vs. OLTP

Online transaction processing, or OLTP, refers to data-processing methods and software

focused on transaction-oriented data and applications.

The main difference between OLAP and OLTP is in the name: OLAP is analytical in nature,
and OLTP is transactional.

OLAP tools are designed for multidimensional analysis of data in a data warehouse, which
contains both transactional and historical data. In fact, an OLAP server is typically the
middle, analytical tier of a data warehousing solution. Common uses of OLAP include data
mining and other business intelligence applications, complex analytical calculations, and
predictive scenarios, as well as business reporting functions like financial analysis,
budgeting, and forecast planning.

OLTP is designed to support transaction-oriented applications by processing recent

transactions as quickly and accurately as possible. Common uses of OLTP include ATMs,
e-commerce software, credit card payment processing, online bookings, reservation
systems, and record-keeping tools.
 UNIT III BUSINESS FORECASTING
Introduction to Business Forecasting and Predictive Analytics - Logic and Data
Driven Models - Data Mining and Predictive Analysis Modeling - Machine Learning
for Predictive Analytics.
1. Introduction to Business Forecasting
Business analysts may choose from a wide range of forecasting techniques to
support decision making. Selecting the appropriate method depends on the
characteristics of the forecasting problem, such as the time horizon of the variable being
forecast, as well as available information on which the forecast will be based.

Three major categories of forecasting approaches are qualitative and judgmental

techniques, statistical time-series models, and explanatory/causal methods. In this
chapter, we introduce forecasting techniques in each of these categories and use
basic Excel tools, XLMiner, and linear regression to implement them in a spreadsheet
environment.

1.1 Qualitative and Judgmental Forecasting

Qualitative and judgmental techniques rely on experience and intuition; they are
necessary when historical data are not available or when the decision maker needs to
forecast far into the future. For example, a forecast of when the next generation of a
microprocessor will be available and what capabilities it might have will depend greatly
on the opinions and expertise of individuals who understand the technology. Another use
of judgmental methods is to incorporate nonquantitative information, such as the impact
of government regulations or competitor behavior, in a quantitative forecast. Judgmental
techniques range from such simple methods as a manager’s opinion or a group-based jury
of executive opinion to more structured approaches such as historical analogy and the
Delphi method.

1.1.1The Delphi Method

A popular judgmental forecasting approach, called the Delphi method, uses a panel of
experts, whose identities are typically kept confidential from one another, to respond to
a sequence of questionnaires. After each round of responses, individual opinions, edited
to ensure anonymity, are shared, allowing each to see what the other experts think.
Seeing other experts’ opinions helps to reinforce those in agreement and to influence
those who did not agree to possibly consider other factors. In the next round, the experts
revise their estimates, and the process is repeated, usually for no more than two or three
rounds. The Delphi method promotes unbiased exchanges of ideas and discussion and
usually results in some convergence of opinion. It is one of the better approaches to
forecasting long range trends and impacts.
Indicators and Indexes
Indicators and indexes generally play an important role in developing judgmental
forecasts.
Indicators are measures that are believed to influence the behaviour of a variable we
wish to forecast. By monitoring changes in indicators, we expect to gain insight about the
future behaviour of the variable to help forecast the future.
Example 1 Leading Economic Indicators

The Department of Commerce initiated an Index of Leading Indicators to help predict

future economic performance.
Components of the index include the following:
• average weekly hours, manufacturing
• average weekly initial claims, unemployment
insurance
• new orders, consumer goods, and materials
• vendor performance—slower deliveries
• new orders, nondefense capital goods
• building permits, private housing
• stock prices, 500 common stocks (Standard & Poor)
• money supply
• interest rate spread
• index of consumer expectations (University of
Michigan)
Business Conditions Digest included more than 100 time series in seven economic areas.
This publication was discontinued in March 1990, but information related to the Index of
Leading Indicators was continued in Survey of Current Business. In December 1995, the
U.S. Department of Commerce sold this data source to The Conference Board, which now
markets the information under the title Business Cycle Indicators; information can be
obtained at its Web site ([Link]). The site includes excellent current
information about the calculation of the index as well as its current components.

1.2 Statistical Forecasting Models

Statistical time-series models find greater applicability for short-range forecasting
problems.
Time Series
A time series is a stream of historical data, such as weekly sales. We characterize the
values of a time series over T periods as At , t = 1, 2, c, T. Time-series models assume
that whatever forces have influenced sales in the recent past will continue into the near
future; thus, forecasts are developed by extrapolating these data into the future. Time
series generally have one or more of the following components: random behavior, trends,
seasonal effects, or cyclical effects.
Stationary Time Series
Time series that do not have trend, seasonal, or cyclical effects but are relatively constant
and exhibit only random behavior are called stationary time series.
Many forecasts are based on analysis of historical time-series data and are predicated
on the assumption that the future is an extrapolation of the past
Statistical time-series models find greater applicability for short-range forecasting
problems.
A trend is a gradual upward or downward movement of a time series over time.

Time series may also exhibit short-term seasonal effects (over a year, month, week,
or even a day) as well as longer-term cyclical effects, or nonlinear trends. A seasonal
effect is one that repeats at fixed intervals of time, typically a year, month, week, or day.
At a neighborhood grocery store, for instance, short-term seasonal patterns may occur
over a week, with the heaviest volume of customers on weekends; seasonal patterns may
also be evident during the course of a day, with higher volumes in the mornings and late
afternoons. Figure shows seasonal changes in natural gas usage for a homeowner over
the course of a year (Excel file Gas & Electric). Cyclical effects describe ups and downs
over a much longer time frame, such as several years. shows a chart of the data in the
Excel file Federal Funds Rates.

Total Energy Consumption Time Series

 Seasonal Effects in Natural Gas Usage

Cyclical Effects in Federal Fund Rates

1.3 Moving Average Models

simple moving average method is a smoothing method based on the idea of
averaging random fluctuations in the time series to identify the underlying direction in
which the time series is changing.
Error Metrics and Forecast Accuracy
The quality of a forecast depends on how accurate it is in predicting future values of a
time series. In the simple moving average model, different values for k will produce
different
forecasts.
To analyze the effectiveness of different forecasting models, we can define error
metrics, which compare quantitatively the forecast with the actual observations. Three
metrics that are commonly used are the mean absolute deviation, mean square error, and
mean absolute percentage error.

[Link] Absolute Deviation ( MAD):

The mean absolute deviation (MAD) is the absolute difference between the
actual value and the forecast, averaged over a range of forecasted
values:

where At is the actual value of the time series at time t, Ft is the forecast value for time t,
and n is the number of forecast values (not the number of data points since we do not
have a forecast value associated with the first k data points). MAD provides a robust
measure of error and is less affected by extreme observations.
2. Mean square error (MSE):
Mean square error (MSE) is probably the most commonly used error metric.
It penalizes larger errors because squaring larger numbers has a greater impact than
squaring smaller numbers. The formula for MSE is

n represents the number of forecast values used in computing the average.

3. Root mean square error (RMSE):
Sometimes the square root of MSE, called the root mean square error
(RMSE), is used. Note that unlike MSE, RMSE is expressed in the same units as the data
(similar to the difference between a standard deviation and a variance), allowing for more
practical comparisons.

4. Mean absolute percentage error (MAPE):

MAPE is the average of absolute errors divided by actual observation
values.
The values of MAD and MSE depend on the measurement scale of the time-series
data. For example, forecasting profit in the range of millions of dollars would result
in very large MAD and MSE values, even for very accurate forecasting models. On
the other hand, market share is measured in proportions; therefore, even bad forecasting
models will have small values of MAD and MSE. Thus, these measures have no meaning
except in comparison with other models used to forecast the same data. Generally, MAD
is less affected by extreme observations and is preferable to MSE if such extreme
observations
are considered rare events with no special meaning. MAPE is different in that the
measurement scale is eliminated by dividing the absolute error by the time-series data
value. This allows a better relative comparison. Although these comments provide some
guidelines, there is no universal agreement on which measure is best.

1.4 Exponential Smoothing Models

Simple Exponential smoothing Model

A versatile, yet highly effective, approach for short-range forecasting is simple
exponential smoothing. The basic simple exponential smoothing model is

where F t+1 is the forecast for time period t + 1, Ft is the forecast for period t, At is the
observed value in period t, and a is a constant between 0 and 1 called the smoothing
constant.
To begin, set F1 and F2 equal to the actual observation in period 1, A1.
Using the two forms of the forecast equation just given, we can interpret the simple
exponential smoothing model in two ways. In the first model, the forecast for the next
period, Ft+1, is a weighted average of the forecast made for period t, Ft, and the actual
observation in period t, At. The second form of the model, obtained by simply rearranging
terms, states that the forecast for the next period, Ft+1, equals the forecast for the last
period, Ft, plus a fraction a of the forecast error made in period t, At - Ft. Thus, to make a
forecast once we have selected the smoothing constant, we need to know only the
previous forecast and the actual value. By repeated substitution for Ft in the equation, it
is easy to demonstrate that Ft+1 is a decreasingly weighted average of all past time-series
data. Thus,the forecast actually reflects all the data, provided that a is strictly between 0
and 1.
Double Exponential Smoothing
In double exponential smoothing, the estimates of at and bt are obtained from
the following
equations:
In essence, we are smoothing both parameters of the linear trend model. From the first
equation, the estimate of the level in period t is a weighted average of the observed value
at time t and the predicted value at time t, at+1 + bt+1 ,based on simple exponential
smoothing. For large values of a, more weight is placed on the observed value. Lower
values of a put more weight on the smoothed predicted value. Similarly, from the second
equation, the estimate of the trend in period t is a weighted average of the differences in
the estimated levels in periods t and t - 1 and the estimate of the level in period t - 1.
Forecasting Time Series with Seasonality:
When time series exhibit seasonality, different techniques provide better forecasts,
 Regression-Based Seasonal Forecasting Models
One approach is to use linear regression. Multiple linear regression models
with categorical variables can be used for time series with seasonality.
 Holt-Winters Forecasting for Seasonal Time Series
Holt-Winters models are similar to exponential smoothing models in that
smoothing constants are used to smooth out variations in the level and seasonal patterns
over time. For time series with seasonality but no trend, XLMiner supports a Holt-Winters
method but does not have the ability to optimize the parameters
 Holt-Winters Models for Forecasting Time Series with seasonality and
Trend
Many time series exhibit both trend and seasonality. Such might be the case for
growing sales of a seasonal product. These models combine elements of both the trend
and seasonal models. Two types of Holt-Winters smoothing models are often used.
The Holt-Winters additive model is based on the equation

and the Holt-Winters multiplicative model is

The additive model applies to time series with relatively stable seasonality, whereas the
multiplicative model applies to time series whose amplitude increases or decreases over
time. Therefore, a chart of the time series should be viewed first to identify the
appropriate type of model to use. Three parameters,∝,β,γ, are used to smooth the level,
trend,and seasonal factors in the time series. XLMiner supports both models.

Selecting Appropriate Time-Series-Based Forecasting Models

The table summarizes the choice of forecasting approaches that can be
implemented by XLMiner based on characteristics of the time series.
Regression Forecasting with Causal Variables
In many forecasting applications, other independent variables besides time,
such as economic indexes or demographic factors, may influence the time series. For
example, a manufacturer of hospital equipment might include such variables as hospital
capital spending and changes in the proportion of people over the age of 65 in building
models to forecast future sales. Explanatory/causal models, often called econometric
models, seek to identify factors that explain statistically the patterns observed in the
variable being forecast, usually with regression analysis.

The Practice of Forecasting

Surveys of forecasting practices have shown that both judgmental and
quantitative methods are used for forecasting sales of product lines or product families
as well as for broad company and industry forecasts. Simple time-series models are used
for short- and medium-range forecasts, whereas regression analysis is the most popular
method for long range forecasting. However, many companies rely on judgmental
methods far more than quantitative methods, and almost half judgmentally adjust
quantitative forecasts.

In practice, managers use a variety of judgmental and quantitative forecasting

techniques.
Statistical methods alone cannot account for such factors as sales promotions, unusual
environmental disturbances, new product introductions, large one-time orders, and
so on. Many managers begin with a statistical forecast and adjust it to account for
intangible factors. Others may develop independent judgmental and statistical forecasts
and then combine them, either objectively by averaging or in a subjective manner.
It is important to compare quantitatively generated forecasts to judgmental
forecasts to see if the forecasting method is adding value in terms of an improved forecast.
It is impossible to provide universal guidance as to which approaches are best, because
they depend on a variety of factors, including the presence or absence of trends and
seasonality, the number of data points available, length of the forecast time horizon, and
the experience and knowledge of the forecaster. Often, quantitative approaches will miss
significant changes in the data, such as reversal of trends, whereas qualitative forecasts
may catch them, particularly when using indicators.

[Link] and Data Driven Models

Predictive modeling means the developing models that can be used to forecast or
predict future events. Models can be developed either through logic or data.
Logic driven models remain based on experience, knowledge and logical relationships
of variables and constants connected to the desired business performance outcome
situation.
Data-driven Models refers to the models in which data is collected from many sources
to qualitatively establish model relationships. Logic driven models is often used as a first
step to establish relationships through data-driven models. Data driven models include
sampling and estimation, regression analysis, correlation analysis, forecasting models
and stimulation.

3. Mining and Predictive Analysis Modelling:

Data mining is a rapidly growing field of business analytics that is focused on better
understanding characteristics and patterns among variables in large databases using a
variety of statistical and analytical tools. Many of the tools that we have studied in
previous chapters, such as data visualization, data summarization, PivotTables,
correlation and regression analysis, and other techniques, are used extensively in data
mining. However, as the amount of data has grown exponentially, many other statistical
and analytical methods have been developed to identify relationships among variables in
large data sets and understand hidden patterns that they may contain

Some common approaches in data mining include the following

 Data Exploration and Reduction.
This often involves identifying groups in which the elements of the groups
are in some way similar. This approach is often used to understand
differences among customers and segment them into homogenous groups.
For example, Macy’s department stores identified four lifestyles of its
customers: “Katherine,” a traditional, classic dresser who doesn’t take a lot
of risks and likes quality; “Julie,” neotraditional and slightly more edgy but
still classic; “Erin,” a contemporary customer who loves newness and shops
by brand; and “Alex,” the fashion customer who wants only the latest and
greatest (they have male versions also).4 Such segmentation is useful in
design and marketing activities to better target product offerings. These
techniques have also been used to identify characteristics of successful
employees and improve recruiting and hiring practices.
 Classification. Classification is the process of analyzing data to predict how
to classify a new data element. An example of classification is spam filtering
in an e-mail client. By examining textual characteristics of a message (subject
header, key words, and so on), the message is classified as junk or not.
Classification methods can help predict whether a credit-card transaction
may be fraudulent, whether a loan applicant is high risk, or whether a
consumer will respond to an advertisement.
 Association. Association is the process of analyzing databases to identify
natural associations among variables and create rules for target marketing
or buying recommendations.
For example, Netflix uses association to understand what types of movies
a customer likes and provides recommendations based on the data.
[Link] also makes recommendations based on past purchases.
Supermarket loyalty cards collect data on customers’ purchasing habits
and print coupons at the point of purchase based on what was currently
bought.
 Cause-and-effect modeling. Cause-and-effect modeling is the process of
developing analytic models to describe the relationship between metrics
that drive business performance—for instance, profitability, customer
satisfaction, or employee satisfaction. Understanding the drivers of
performance can lead to better decisions to improve performance. For
example, the controls group of Johnson Controls, Inc., examined the
relationship between satisfaction and contract-renewal rates. They found
that 91% of contract renewals came from customers who were either
satisfied or very satisfied, and customers who were not satisfied had a
much higher defection rate. Their model predicted that a one-percentage-
point increase in the overall satisfaction score was worth $13 million in
service contract renewals annually. As a result, they identified decisions
 that would improve customer [Link] and correlation
analysis are key tools for cause-and-effect modelling.

3.1 Predictive Modeling

Predictive modeling is a commonly used statistical technique to predict future
behavior. Predictive modeling solutions are a form of data-mining technology that works
by analyzing historical and current data and generating a model to help predict future
outcomes.
In predictive modeling, data is collected, a statistical model is formulated, predictions
are made, and the model is validated (or revised) as additional data becomes available.
For example, risk models can be created to combine member information in complex
ways with demographic and lifestyle information from external sources to improve
underwriting accuracy. Predictive models analyze past performance to assess how likely
a customer is to exhibit a specific behavior in the future. This category also encompasses
models that seek out subtle data patterns to answer questions about customer
performance, such as fraud detection models. Predictive models often perform
calculations during live transactions—for example, to evaluate the risk or opportunity of
a given customer or transaction to guide a decision. If health insurers could accurately
predict secular trends (for example, utilization), premiums would be set appropriately,
profit targets would be met with more consistency, and health insurers would be more
competitive in the marketplace.
Predictive modeling is a method of predicting future outcomes by using data modeling.
It’s one of the premier ways a business can see its path forward and make plans
accordingly. While not fool proof, this method tends to have high accuracy rates, which is
why it is so commonly used. Predictive modelling uses statistics to predict outcomes.
Most often the event one wants to predict is in the future, but predictive modelling can
be applied to any type of unknown event, regardless of when it occurred. For example,
predictive models are often used to detect crimes and identify suspects, after the crime
has taken place.
In many cases the model is chosen on the basis of detection theory to try to guess the
probability of an outcome given a set amount of input data, for example given an email
determining how likely that it is spam. Models can use one or more classifiers in trying to
determine the probability of a set of data belonging to another set.
For example, a model might be used to determine whether an email is spam or "ham"
(non-spam). Depending on definitional boundaries, predictive modelling is synonymous
with, or largely overlapping with, the field of machine learning, as it is more commonly
referred to in academic or research and development contexts. When deployed
commercially, predictive modelling is often referred to as predictive analytics. Predictive
modelling is often contrasted with causal modelling/analysis. In the former, one may be
entirely satisfied to make use of indicators of, or proxies for, the outcome of interest. In
the latter, one seeks to determine true cause-and-effect relationships. This distinction has
given rise to a burgeoning literature in the fields of research methods and statistics and
to the common statement that "correlation does not imply causation".

3.2 What Is Predictive Modeling?

In short, predictive modeling is a statistical technique using machine learning and
data mining to predict and forecast likely future outcomes with the aid of historical and
existing data. It works by analyzing current and historical data and projecting what it
learns on a model generated to forecast likely outcomes.
 Predictive modeling can be used to predict just about anything, from TV ratings and a
customer’s next purchase to credit risks and corporate earnings. A predictive model is
not fixed; it is validated or revised regularly to incorporate changes in the underlying
data. In other words, it’s not a one-and-done prediction. Predictive models make
assumptions based on what has happened in the past and what is happening now.
If incoming, new data shows changes in what is happening now, the impact on the likely
future outcome must be recalculated, too. For example, a software company could model
historical sales data against marketing expenditures across multiple regions to create a
model for future revenue based on the impact of the marketing spend. Most predictive
models work fast and often complete their calculations in real time. That’s why banks and
retailers can, for example, calculate the risk of an online mortgage or credit card
application and accept or decline the request almost instantly based on that prediction.
Some predictive models are more complex, such as those used in computational
biology and quantum computing; the resulting outputs take longer to compute than a
credit card application but are done much more quickly than was possible in the past
thanks to advances in technological capabilities, including computing power.

3.3 Top 5 Types of Predictive Models

Fortunately, predictive models don’t have to be created from scratch for every
application. Predictive analytics tools use a variety of vetted models and algorithms that
can be applied to a wide spread of use cases.
Predictive modeling techniques have been perfected over time. As we add more data,
more muscular computing, AI and machine learning and see overall advancements in
analytics, we’re able to do more with these models.
The top five predictive analytics models are:
1. Classification model:
Considered the simplest model, it categorizes data for simple and direct query
response. An example use case would be to answer the question “Is this a
fraudulent transaction?”
2. Clustering model:
This model nests data together by common attributes. It works by grouping things
or people with shared characteristics or behaviors and plans strategies for each
group at a larger scale. An example is in determining credit risk for a loan applicant
based on what other people in the same or a similar situation did in the past.
3. Forecast model:
This is a very popular model, and it works on anything with a numerical value
based on learning from historical data. For example, in answering how much
lettuce a restaurant should order next week or how many calls a customer support
agent should be able to handle per day or week, the system looks back to historical
data.
4. Outliers model:
This model works by analyzing abnormal or outlying data points. For example, a
bank might use an outlier model to identify fraud by asking whether a transaction
is outside of the customer’s normal buying habits or whether an expense in a given
category is normal or not. For example, a $1,000 credit card charge for a washer
and dryer in the cardholder’s preferred big box store would not be alarming, but
$1,000 spent on designer clothing in a location where the customer has never
charged other items might be indicative of a breached account.
5. Time series model:
 This model evaluates a sequence of data points based on time. For example, the
number of stroke patients admitted to the hospital in the last four months is used
to predict how many patients the hospital might expect to admit next week, next
month or the rest of the year. A single metric measured and compared over time
is thus more meaningful than a simple average.

3.4 Predictive Algorithms:

Some of the more common predictive algorithms are:

1. Random Forest: This algorithm is derived from a combination of decision trees,
none of which are related, and can use both classification and regression to classify
vast amounts of data.
2. Generalized Linear Model (GLM) for Two Values: This algorithm narrows
down the list of variables to find “best fit.” It can work out tipping points and
change data capture and other influences, such as categorical predictors, to
determine the “best fit” outcome, thereby overcoming drawbacks in other models,
such as a regular linear regression.
3. Gradient Boosted Model: This algorithm also uses several combined decision
trees, but unlike Random Forest, the trees are related. It builds out one tree at a
time, thus enabling the next tree to correct flaws in the previous tree. It’s often
used in rankings, such as on search engine outputs.
4. K-Means: A popular and fast algorithm, K-Means groups data points by
similarities and so is often used for the clustering model. It can quickly render
things like personalized retail offers to individuals within a huge group, such as a
million or more customers with a similar liking of lined red wool coats.
5. Prophet: This algorithm is used in time-series or forecast models for capacity
planning, such as for inventory needs, sales quotas and resource allocations. It is
highly flexible and can easily accommodate heuristics and an array of useful
assumptions.

Predictive modeling is often performed using curve and surface fitting, time series
regression, or machine learning approaches. Regardless of the approach used, the
process of creating a predictive model is the same across methods.

3.5 Steps for Predictive Modeling:

The steps are:
1. Clean the data by removing outliers and treating missing data.
2. Identify a parametric or nonparametric predictive modeling approach to use.
3. Preprocess the data into a form suitable for the chosen modeling algorithm.
4. Specify a subset of the data to be used for training the model.
5. Train, or estimate, model parameters from the training data set.
6. Conduct model performance or goodness-of-fit tests to check model adequacy.
7. Validate predictive modeling accuracy on data not used for calibrating the
model.
8. Use the model for prediction if satisfied with its performance .
[Link] Learning for Predictive Analytics

Machine learning is defined as an automated process that extracts patterns from

data. To build the models used in predictive data analytics applications, we use
supervised machine learning. Supervised machine learning techniques automatically
learn a model of the relationship between a set of descriptive features and a target feature
based on a set of historical examples, or instances. We can then use this model to make
predictions for new instances. These two separate steps are shown in figure,

The two steps in supervised machine learning. Table1.1 lists a set of historical instances,
or dataset, of mortgages that a bank has granted in the past. This dataset includes
descriptive features that describe the mortgage, and a target feature that indicates
whether the mortgage applicant ultimately defaulted on the loan or paid it back in full.
The descriptive features tell us three pieces of information about the mortgage: the
OCCUPATION (which can be professional or industrial) and AGE of the applicant and the
ratio between the applicant’s salary and the amount borrowed (LOANSALARY RATIO).
The target feature, OUTCOME, is set to either default or repay. In machine learning terms,
each row in the dataset is referred to as a training instance, and the overall dataset is
referred to as a training data sets.
Table 1.1

An example of a very simple prediction model for this domain would be

if LOAN-SALARY RATIO > 3 then
OUTCOME = default
else
OUTCOME = repay
 We can say that this model is consistent with the dataset as there are no instances in the
dataset for which the model does not make a correct prediction. When new mortgage
applications are made, we can use this model to predict whether the applicant will repay
the mortgage or default on it and make lending decisions based on this prediction.
Machine learning algorithms automate the process of learning a model that captures
the relationship between the descriptive features and the target feature in a dataset. For
simple datasets like the one in Table , we may be able to manually create a prediction
model, and in an example of this scale, machine learning has little to offer us.
Consider, however, the dataset in Table, which shows a more complete representation of
the same problem. This dataset lists more instances, and there are extra descriptive
features describing the AMOUNT that a mortgage holder borrows, the mortgage holder’s
SALARY, the type of PROPERTY that the mortgage relates to (which can be farm,house,
or apartment) and the TYPE of mortgage (which can be ftp for first-time buyers or stb for
second-time buyers).
The simple prediction model using only the loan-salary ratio feature is no longer
consistent with the dataset. It turns out, however, that there is at least one prediction
model that is consistent with the dataset; it is just a little harder to find than the previous
one:
if LOAN-SALARY RATIO < 1.5 then
OUTCOME = repay
else if LOAN-SALARY RATIO > 4 then
OUTCOME = default
else if AGE < 40 and OCCUPATION =industrial then
OUTCOME = default
else
OUTCOME = repay
To manually learn this model by examining the data is almost impossible. For a machine
learning algorithm, however, this is simple. When we want to build prediction models
from large datasets with multiple features, machine learning is the solution.

4.1 How does Machine Learning Work?

Machine learning algorithms work by searching through a set of possible prediction
models for the model that best captures the relationship between the descriptive features
and target feature in a dataset. An obvious criteria for driving this search is to look for
models that are consistent with the data.
There are, however, at least two reasons why just searching for consistent models is not
sufficient in order to learn useful prediction models.
First, when we are dealing with large datasets, it is likely that there will be noise in the
data, and prediction models that are consistent with noisy data will make incorrect
predictions.
Second, in the vast majority of machine learning projects, the training set represents only
a small sample of the possible set of instances in the domain. As a result, machine learning
is an ill-posed problem. An ill-posed problem is a problem for which a unique solution
cannot be determined using only the information that is available.
Table 1.2
Table 1.3

We can illustrate how machine learning is an ill-posed problem using an example in

which the analytics team at a supermarket chain wants to be able to classify customer
households into the demographic groups single, couple, or family, based solely on their
shopping habits.
The dataset in Table 1.3 contains descriptive features describing the shopping habits
of 5 customers. The descriptive features measure whether a customer buys baby food,
BBY, alcohol, ALC, or organic vegetable products, ORG. Each feature can take one of the
two values: yes or no. Alongside these descriptive features is a target feature, GRP, that
describes the demographic group for each customer (single, couple, or family). The
dataset in Table 1.3 is referred to as a labeled dataset because it includes values for the
target feature.
Imagine we attempt to learn a prediction model for this retail scenario by searching for
a model that is consistent with the dataset. The first thing we need to do is figure out
many different possible models actually exist for the scenario. This defines the set of
prediction models the machine learning algorithm will search. From the perspective of
searching for a consistent model, the most important property of a prediction model is
that it defines a mapping from every possible combination of descriptive feature values
to a prediction for the target feature. For the retail scenario, there are only three binary
descriptive features, so there are 23 = 8 possible combinations of descriptive feature
values. However, for each of these 8 possible descriptive feature value combinations,
there are 3 possible target feature values, so this means that there are 38= 6,561 possible
prediction models that could be used. Table illustrates the relationship between
descriptive feature value combinations and prediction models for the retail scenario. The
descriptive feature combinations are listed on the left hand side of the table and the set
of potential models for this domain are shown as 1 to 6,561 on the right hand side of the
table. Using the training dataset from Table1.3 , a machine learning algorithm will reduce
the full set of 6,561 possible prediction models for this scenario down to just those that
are consistent with the training instances. Table 1.4(b) illustrates this; the blanked out
columns in the table indicate the models that are not consistent with the training data.
Table 1.4
Potential prediction models (a) before and (b) after training data becomes available.

Table1.4(b) also illustrates the fact that the training dataset does not contain an instance
for every possible descriptive feature value combination and that there are still a large
number of potential prediction models that remain consistent with the training dataset
after the inconsistent models have been excluded. Specifically, there are three remaining
descriptive feature value combinations for which the correct target feature value is not
known, and therefore there are 33 = 27 potential models that remain consistent with the
training data. Three of these- M2,M4,M5- shown in Table1.4(b). Because a single consistent
model cannot be found based on the sample training dataset alone, we say that machine
learning is fundamentally an ill-posed problem.
We might be tempted to think that having multiple models that are consistent with the
data is a good thing. The problem is, however, that although these models agree on what
predictions should be made for the instances in the training dataset, they disagree with
regard to what predictions should be returned for instances that are not in the training
dataset. For example, if a new customer starts shopping at the supermarket and buys
baby food, alcohol, and organic vegetables, our set of consistent models will contradict
each other with respect to what prediction should be returned for this customer, for
example, M2 will return GRP = single, M4 will return GRP = family, and M5 will return GRP
= couple.
The criterion of consistency with the training data doesn’t provide any guidance with
regard to which of the consistent models to prefer when dealing with queries that are
outside the training dataset. As a result, we cannot use the set of consistent models to
make predictions for these queries. In fact, searching for predictive models that are
consistent with the dataset is equivalent to just memorizing the dataset. As a result, no
learning is taking place because the set of consistent models tells us nothing about the
underlying relationship between the descriptive and target features beyond what a
simple look-up of the training dataset would provide.

If a predictive model is to be useful, it must be able to make predictions for queries that
are not present in the data. A prediction model that makes the correct predictions for
these queries captures the underlying relationship between the descriptive and target
features and is said to generalize well. Indeed, the goal of machine learning is to find the
predictive model that generalizes best. In order to find this single best model, a machine
learning algorithm must use some criteria for choosing among the candidate models it
considers during its search.
Given that consistency with the dataset is not an adequate criterion to select the best
prediction model, what criteria should we use? There are a lot of potential answers to this
question, and that is why there are a lot of different machine learning algorithms. Each
machine learning algorithm uses different model selection criteria to drive its search for
the best predictive model. So, when we choose to use one machine learning algorithm
instead of another, we are, in effect, choosing to use one model selection criterion instead
of another.
All the different model selection criteria consist of a set of assumptions about the
characteristics of the model that we would like the algorithm to induce. The set of
assumptions that defines the model selection criteria of a machine learning algorithm is
known as the inductive bias 6 of the machine learning algorithm.
There are two types of inductive bias that a machine learning algorithm can use, a
restriction bias and a preference bias. A restriction bias constrains the set of models that
the algorithm will consider during the learning process. A preference bias guides the
learning algorithm to prefer certain models over others.
For example, we introduce a machine learning algorithm called multivariable linear
regression with gradient descent, which implements the restriction bias of only
considering prediction models that produce predictions based on a linear combination of
the descriptive feature values and applies a preference bias over the order of the linear
models it considers in terms of a gradient descent approach through a weight space. As a
second example, we introduce the Iterative Dichotomizer 3 (ID3) machine learning
algorithm, which uses a restriction bias of only considering tree prediction models where
each branch encodes a sequence of checks on individual descriptive features but also
utilizes a preference bias by considering shallower (less complex) trees over larger trees.
It is important to recognize that using an inductive bias is a necessary prerequisite for
learning to occur; without inductive bias, a machine learning algorithm cannot learn
anything beyond what is in the data.
In summary, machine learning works by searching through a set of potential models to
find the prediction model that best generalizes beyond the dataset. Machine learning
algorithms use two sources of information to guide this search, the training dataset and
the inductive bias assumed by the algorithm.
 UNIT IV
HR & SUPPLY CHAIN ANALYTICS
Human Resources – Planning and Recruitment – Training and Development - Supply
chain network - Planning Demand, Inventory and Supply – Logistics – Analytics
applications in HR & Supply Chain

1. Introduction to Human Resource:

Every business is made up of people : its human resources. An organisation is nothing
without human resources. Human resource management (HRM) is about managing these
people effectively. It is aimed at achieving business objectives through the best use of an
organisation's human resources. Effective management of human resources is vital in all
types and sizes of organisations.
In fact, how effectively the human resources managed will have a major impact on how
successful the business becomes. It is universally agreed that the quality of the human
resources is the major factor in maintaining the competitiveness and profitability of the
today’s business.
1.1 What is HRM?
 Human Resource Management (HRM) involves all management decisions and
practices that directly affect or influence the human resources, who work for the
organisations.
 HRM is the set of organisational activities directed at attracting, developing,
rewarding and maintaining an effective work force.
 HRM Vs Personnel Management:
In general, the terms ‘ human resource management (HRM) and personnel
management are used interchangeably.
 Proponents of HRM argue that it is different from personnel
[Link] to them, HRM incorporates practices developrd by
practitioners of people management.
That is ,
Human Resource managers= Specialists in Personnel Management + Generalists
in line and senior management.
 Others hold that both HRM and PM are little different and overlap in their
techniques and range of interest.
Defining HRM:
(i) Effective HRM benefits the individual, society, and the company.
(ii) Companies use HRM activities to manage their Human Resources.
(iii) The efficiency with which any organisation can be operated will largely
depend upon how effectively its human resources are managed and
utilized.
 Figure 1.1 Essence of HRM

1.2 OBJECTIVES OF HRM:

Objectives are benchmarks against which actions are evaluated a broad
objective of HRM is to optimise the usefulness (ie., productivity) of all workers in
an [Link], there are four types of objectives that are common to
Human Resource Management. They are:
[Link] Objectives
2. Organisational Objectives
3. Personal Objectives
4. Labour Union Objectives

1. Societal Objectives:
Since an organisation is part of the society the main objective of HRM is to
be responsive to the needs and challenges of society.
HRM’s societal objectives include:
i) To provide more employment oppurtunities.
ii) To provide maximum productivity.
iii) To provide material and mental satisfaction to workforce.
iv) To control the wastage of effort.
 v) To help help to maintain ethical policies and socially responsible
behaviour.
vi) To encourage healthy human relations and social welfare.
vii) To manage change to the mutual advantage of individuals, groups ,the
enterprise and the public
2. Organisational Objectives :
These objectives of HRM are based on the fact that human resource
management exists to contribute to organisational effectiveness.
HRM’s organisational objectives include:
i) To help the organisation to reach its goals.
ii) To efficiently employ the skills and abilities of the workforce.
iii) To provide well-trained and well-motivated employees to the
organisation.
iv) To develop and maintain a quality of work life that makes employment
in the organisation desirable.
v) To communicate HRM policies to all employees.
3. Personal (or employees) Objectives :
The another important objective of HRM is to assist employees in
achieving their personal goals.
HRM’s Personal objective include:
i) To provide adequate remuneration to the employees.
ii) To provide job security
iii) To provide Facilities for proper Training and Development.
iv) To increase the employees’s job satisfaction and self-actualisation.
v) To provide congenial working environment.
4. Labour Union Objectives :
The HRM is also concerned with labour unions and related issues.
HRM’s labour union related objectives include:
i) To recognise the labour unions.
ii) To establish the personnel policies in consultation with unions.
iii) To create congenial atmosphere with unions so as to maintain the spirit
of self-discipline and co-operation with the management.

1.3 HUMAN RESOURCE MANAGEMENT MODEL

The figure 1.2 is a HRM model that illustrates how HRM activities come to bear on an
organisation’s environment, employees,jobs, job outcomes and organisational
[Link] shown in the figure all of these forces are in turn affected by the
organisation’s external environment.
 Fig 1.2 ; Human Resource Management Model
The model shown in the figure is also called as a diagnostic approach to HRM.
Here the term diagnostic approach means that, in making human resource
decisions, the HR manager must consider the employees, the jobs, the
organisation (i.e., the internal environment), the external environment and the
desired results.

Basic components of HRM:

From the figure 1.2 it may be noted that there are four basic components of
HRM, each of which has general dimensions. The components are:
1. HRM activities/functions,
2. HRM outcomes,
3. Organisational (i.e, internal) environmental influences and
4. External environmental influences.

1. HRM Activities/Functions:
a)Organisational Planning and Development:
  Determination of needs of the organisation based on long and short
term objectives, technology selected, product feature and external
environment.
 Design of organisational structure.
 Establishing a healthy organisational climate of mutual co-
operation, trust and confidence.
b) Strategic Human Resource Planning
 Assessing current human resources.
 Assessing future human resources needs
 Developing a program to meet the future needs.
c) Job Analysis
 It is an assessment that defines jobs and the behaviour necessary
to perform them.
 Preparation of Job descriptions and job specifications.
d) Staffing
 It concerns the recruitment and selection of human resources
for an organisation.
 It includes: Man power planning, Recruitment, Selection and
Placement,Induction,Promotion and Transfer and Seperation
e) Training and Development
It includes:
1. Orientation of new employees
2. Training of employees to perform their jobs.
3. Retraining of employees as their job requirements change .
4. Encouraging the development and growth of employees.
f) Performance Appraisal:
 It assesses how well employees are doing their jobs.
 Appraisals are useful:
i) In making compensation decisions
 ii) In specifying areas in which additional development of
employees is needed.
Iii)In making Placement decisions.

g) Compensation Benefits:
 Compensation rewards people through pay, incentives
and benefits for performing work within the
organisation.
 Organisations must develop and refine their basic wage
and salary to ensure that pay-for-performance policies
are followed.
 h) Health and Safety:
 Organisations should be more responsive to the concerns about the
physical and mental health and safety of employees.
 Organisation should provide safer and healthy workshop conditions
for employees.
i)Employee Relations:
 The formal relationship between employees and their employers
must be managed for the benefit of both.
 To facilitate good employee relations, it is important to develop
and communicate HR policies and rules.
j) Union Relations:
 Union-related activities are important because they affect
employees, managers, and the performance of many HR
activities.
 At the formal organisation level, the union is the agent
representing a group of employees in an organisation.
 The other activities of union include collective bargaining and
grievance management.

k) HR Information and Assessment Systems:

 Information, communication and research systems are vital to the
coordination of HR activities.
 Creating and maintaining HR Database and Systems are critical
aspects of the strategic role of HR Management.
 Measuring HR effectiveness is done by evaluating how well HR
activities are being performed in an organisation.
[Link] Outcomes:
The right hand side of the figure 1.2 indicates several outcomes that HR activities
attempt to influence.
 HRM outcomes include:
i) Job Outcomes: Performance,Productivity, quality, satisfaction and
retention.
ii) Organisational Outcomes: Survival, Competitiveness, Growth, ,Profitabilty.
[Link] (i.e internal) Environmental Influences
The figure shows that forces inside the organisation affect the HRM activities.
Some of the key Internal environmental factors that influence the HRM activities
include:
i) Top management’s goals and values
ii) Corporate Culture
iii) Strategy
iv) Technology
v) Structure
vi) Size
[Link] Environmental Influences
 Organisations are surrounded by an external environment filled with many
variable factors, as shown on the top of the [Link] forces outside the
organisation greatly influence and restrict the organisation’s HRM activities.
 The major external environmental factors that influence the HRM activities are:
1. Economic Conditions
2. Government Requirements
3. Labour market conditions and union expectations.
4. Technological Influences.
5. Socio-cultural factors
6. Demographic and competitiveness conditions.
1. Economic Conditions:
 Changing economic conditions directly influence the operation of
any organisation and indirectly influence human resource actions.
 A manager’s decision to hire additional people, to lay off current
employees and even how much to pay each job are all examples of
HR decisions that are influenced by economic conditions.
 Under Favorable economic conditions expansion of existing
programs and creation of new programs are very likely.
 Whereas with less favourable or deteriorating conditions,
contraction or cancellation of programs maybe necessary.

2. Government (legal/political) Requirements:

 Government through the enforcement of laws has a direct and
immediate impact on the human resource function.
 Thus the laws and regulations of the central, state, and the local
governments which are directed at HR issues influence and restrict
objectives, strategies and HR actions.
3. Labour Market Conditions and Union Expectations:
 Changing conditions in the labour market,shortages of certain
skilled workers and surpluses of others, changing market and
expectations of people in the labour force influence the
organisation’s HR activities.
 If the organisation is organised by the trade union, its expectations
will restrict and influence how the organisation operates and what
objectives it seeks.
4. Technological Influences:
 Technology influences HRM in two general [Link] way is for
technology to change entire industries. Automation is the other
way technology affects HRM.
  Another factor is increasing computerisation of major
organisational functions.
 Thus the technological factor affects both positively and negatively
the human resource activities.
5. Socio- Cultural Factors:
 The changing cultural values of society has direct impact on the
human resource functions.
 The increased Participation in women in the labour forces is an
example of a cultural change that influence HR activities.
 Changing attitudes towards work and leisure have confronted
human resource departments with requests for longer vacations,
more holidays and varied workweeks. Supervisors increasingly
turn to HR managers for help with employee motivation.
[Link] and Competitive conditions:
 The factors of geographic and competitive conditions influence
the activities of human management.
[Link] Condition:
 One geographic factor affecting affecting the supply of Human
Resources is the net migration into a particular region.
 The shift of population growth to the cities is an HR planning
concern.
 Many workers are reluctant to accept geographic relocation as a
precondition of promotion in the organisation. This trend has
forced the organisations to change their development policies
and practices.
[Link]:
 Competitors are another external force in staffing.
 Failure to consider the competitive labour market and to offer pay
scales and benefits competitive to organisations in the same general
industry and geographic locations may adversely affect the
organisation’s outcome.
 Underpaying or undercompeting may result in much lower quality
workforce.

1.4 HUMAN RESOURCE POLICIES

What is meant by a policy?
A policy is a man-made rule of pre-determined course of action that is
established to guide the performance of work towards the organisation objectives.
Policy is a type of standing plan that serves to guide subordinates in the execution of their
tasks.
What are Human Resource Policies?
The Human resource policies provides guidelines for a wide variety of employment
relationships in the organisation. These guidelines identify the identify the organisation’s
intentions in the recruitment,selection,development,compensation etc., people in the
working organisation. HR policies serve as a road map for HR managers and line
managers.

1.5 Essentials Characteristics of a sound human resource policy

[Link] statement of HR policy should be defined, positive, clear and easily understood by
everyone in the organisation so that what it proposes to achieve is evident.
2. It should be periodically revised, evaluated, assessed and revised.
[Link] must be supplementary to the overall policy of an organisation.
4. It should be formulated with due regard for the interest of all concerned parties-the
employers, the employees, and the public community.
[Link] must provide a two way communication system between the management and the
employees.
6. It should be consistent with the public policy.
[Link] should be progressive and enlightened, and must be consistent with professional
practice and philosophy.
8. It should be uniform throughout the organisation.
9. It should have a sound base in appropriate theory and should be translated into
practices, terms and peculiarities of every department of an enterprise.
10. It must make a measurable impact , which can be evaluated and qualified for the
guidance of all concerned.

1.6 New Trends in Human Resource Management:

Since HRM is the prime mover of the management of the people at work, therefore it
has to encounter these challenges effectively in order to enable organisations to achieve
their objectives.
Some of the important new trends that are emerging at the global level as well as in India
are,
[Link] of Economy
[Link] Restructuring
[Link] Organisational Designs
[Link] on Total Quality Management
[Link] on Kaizen
[Link] Job profile
[Link] diversity in the work force
8. Increasing role of Women Employees
[Link] Knowledge Management
10. Increasing view on organisation as vehicles for achieving social goals.
2.0 WHAT IS HUMAN RESOURCE PLANNING?
Human Resource Planning is a process by which an organisation ensures that it has
the right number and kinds of people , in the right places, and at the right times, who are
capable of effectively and efficiently performing the assigned tasks.
2.1 HUMAN RESOURCE PLANNING PROCESS
HRP consists of forecasting future human resource needs, forecasting the availability of
those human resources, and matching supply with the demand . Figure 1.3 Illustrates the
model of human resource planning process.
Steps in Human Resource Planning:
As shown in the figure 1.3 the five major steps involved in Human Resource planning are
[Link] Information
[Link] demand for Human Resources
3. Forecast supply of Human Resources
4. Identify Human Resource gap
[Link] Plans

[Link] Information:
The first step in any form of HR planning is to collect information. A plan or a forecast
cannot be any better than the data on which it is based.
Figure 1.3 Human Resource Planning Process Model

 HR planning requires two types of information

A. Data from external environment
B. Data from inside the organisation
[Link] from external environment:
 These data include information on current conditions and predicted changes in
the general economy, the economy of the specific industry, the relevant
technology, and the competitons.
 Any of these factors may affect the organisations, business plans and thus the need
for the human resources.
 Also, HR plnners must be aware of labour market conditions such as
unemployment rates, skill availabilities and the age, and sex distributions of the
labour force.
  Finally HR planners need to be aware of central and state government regulations:
Those that directly affect the staffing practices.
[Link] from inside the organisation:
 Internal information includes short and long term organisational plans.
 The organisations plans to build, close, modify, or automates its facilities will
have HR implications.
 Information is also needed on the current state of Human Resources in the
organisations, such as how many individuals are employed in each job and
location and how many are expected to leave or retire during the forecast
period.
[Link] Demand for Human Resources:
 Once the HR planners have collected the information from both internal and
external sources , they next forecast the future demand for the employees.
 The forecasting answers the question : how many and what type of employees
will be needed to carry out the organisation’s plans in the future.?
 The forecasts are grounded in information about the past and present and in
assumptions about the future.
[Link] supply for Human Resources:
 Once the Human resource department makes the projections about the
future resource demands, the next major concern is to forecast the supply
of labour.
 There are two sources of supply: i) Internal supply ii) External supply
 The internal supply of labour consists of all the individual
currently employed by an organisation. It consists of present
employees who can be promoted , transferred, or demoted to
meet the anticipated needs.
 The external supply of labour consists of people in the labour
market who donot work for the organisation. These include
employees of other organisation and those who are
unemployed.
[Link] Human Resource and Gap(Matching supply and Demand):
 Once HR planner has estimated the organisation’s future demand and supply of
Human Resources, the next step in HR planning is plan specific programs tto
ensure that supply will match demand in the future.
 In this step , the gap between the human resource needed and their availability is
identified.
 This human resource gap maybe in two forms: either surplus human resources or
shortage of human resources.
[Link] Plans:
  Various action plans /decisions have to be devised to bridge the identified
human resource gap.
 The two possible problems are either surplus human resource or shortage of
human resources.
 If there is a shortage of human resources, the problem maybe resolved by
discouraging retirements, hiring new people, transferring people from
overstaffed areas, and installing labour saving equipments and processes.
 If there is a surplus of human resources, the problem, maybe resolved by
utilizing attrition (i.e., not replacing people who leave), offering earlier
retirements, Transfering people to understaffed areas and terminating people.


2.3 Three ranges of Human Resource Forecasting:

The Human resource forecasting maybe categorized into three , based on the time frame
as:
1. Short range of forecasting (0 to 2 years)
2. Intermediate Range forecasting ( 2 to 5 years)
3. Long Range forecasting ( beyond 5 years)

2.4 Forecasting Human Resource Supplies

Types of forecasting techniques :
As with forecasting demand, two basic techniques help forecast internal labour supply.
Thy are: 1. Judgemental forecasts [Link] Techniques
1. Judgemental forecasts
Organisation use two judgemental techniques to make supply forecasts
i) Replacement analysis ii) Succession analysis
i).Replacement Analysis:
 Replacement Analysis uses replacement charts. Replacement charts are
a visual representation of who will replace whom in the event of a job opening. In
other words, replacement charts are developed to show the names of the current
occupants of positions in the organisations and the names of likely replacements.
 Replacement charts make potential vacancies readily apparent and
indicate what types of positions most urgently need to be filled.
Present performance levels of current employees can be used to estimate
potential vacancies.
 On the replacement chart, the incumbents are listed directly under the
job [Link] individuals likely to fill the potential vacancies are listed
listed directly under the incumbents.
 Such a listing can provide the organisations with a good estimate of what
jobs are likely to become vacant and indicate if anyone will be ready to
fill the vacancy.
ii)Succession Analysis:
Succession analysis is similar to replacement, except that succession
planning tends to be a longer term and more developmental and tends to offer
greater flexibility.

2. Statistical Techniques:

 With the advent of personal computers, organisations are using

more sophisticated statistical model to forecast the supply of
human resources.
 Two commonly used statistical techniques for forecasting human
resource supplies are i) Markov Analysis ii) Goal Programming
i) Markov Analysis
 Markov Analysis is a fairly simple method of predicting the
internal supply of labour at some future time.
 The heart of Markov Analysis is the transition probability
[Link] transition matrix shows the probability of an
employee staying in his present job, moving from one position to
another or leaving the organisation, for forecast time period.
 When this transition matrix is multiplied by the number of people
beginning the year in each job, the results show how many people
are expected to be in each job by the end of the year.
  Markov analysis can help to identify the lower retention
probability, but it does not suggest any particular solution to the
potential problem.
3. Goal Programmimg:
 Goal programming is a further extension of Markov Analysis.
 The objective of goal programming is to optimise goals- in this case, a
desired staffing pattern—given a set of constraints concerning such thimgs
as the upper limits on flows, the percentages of new recruits and the total
salary budget.

2.5 Statistical Techniques used to forecast staffing demand needs

3.0 Recruitment
Defnition:
Recruitment maybe defined as the process of discovering potential candidates for
actual and anticipated organisational vacancies.
Recruitment can be described as those activities in HRM which are undertaken inorder
to attract sufficient job candidates who have the necessary potential, competencies and
traits to fill job needs and to assist the organisation in achieving its objectives.

3.1 Recruitment Sources :

A. Internal Sources:

1. Present Employees:

Promotions and transfers from among the present employees can be a good source of

recruitment. Promotion implies upgrading of an employee to a higher position carrying

higher status, pay and responsibilities. Promotion from among the present employees is

advanta-geous because the employees promoted are well acquainted with the

organisational culture, they get motivated, and it is cheaper also.

Promotion from among present employees also reduces the require-ment for job

training. However, the disadvantage lies in limiting the choice to a few people and

denying hiring of outsiders who may be better qualified and skilled. Furthermore,

promotion from among present employees also results in inbreeding which creates
frustration among those not promoted. Transfer refers to shifting an employee from one

job to another without any change in the position/post, status and responsibilities. The

need for transfer is felt to provide employees a broader and varied base which is

considered necessary for promotions. Job rotation, involves transfer of employees from

one job to another on the lateral basis.

2. Former Employees:

Former employees are another source of applicants for vacancies to be filled up in the

organisation. Retired or retrenched employees may be interested to come back to the

company to work on a part-time basis. Similarly, some former employees who left the

organisation for any reason may again be interested to come back to work. This source

has the advantage of hiring people whose performance is already known to the

organisation.

3. Employee Referrals:

This is yet another internal source of recruitment. The existing employ-ees refer their

family members, friends and relatives to the company as potential candidates for the

vacancies to be filled up in the organisation. This source serves as one of the most

effective methods of recruiting people in the organisation because employees refer to

those potential candidates who meet the company requirements known to them from

their own experience. The referred individuals are expected to be similar in type in terms

of race and sex, for example, to those who are already working in the organisation.

4. Previous Applicants:
This is considered as internal source in the sense that applications from the potential

candidates are already lying with the organisation. Sometimes, the organisations contact

through mail or messenger these applicants to fill up the vacancies particularly for

unskilled or semi- skilled jobs.

B. External Sources:

External sources of recruitment lie outside the organisation. These outnumber internal

sources.

1. Employment Exchanges:
The National Commission on Labour (1969) observed in its report that in the pre-

Independence era, the main source of labour was rural areas surrounding the industries.

Immediately after Independence, National Employment Service was established to bring

employers and job seekers together.

In response to it, the compulsory Notification of Vacancies Act of 1959 (commonly called

Employment Exchange Act) was instituted which became operative in 1960. Under

Section 4 of the Act, it is obligatory for all industrial establishments having 25 workers or

more, to notify the nearest employment exchange of vacancies (with certain exceptions)

in them, before they are filled.

The main functions of these employment exchanges with their branches in most cities are

registration of job seekers and their placement in the notified vacancies. It is obligatory

for the employer to inform the outcome of selection within 15 days to the employment

exchange.

Employment exchanges are particularly useful in recruiting blue-collar, white-collar and

technical workers. A study conducted by Gopalji on 31 organisations throughout the

country also revealed that recruitment through employment exchanges was most

preferred for clerical personnel i.e., white-collar jobs.

[Link] Agencies:

Generally, these agencies select personnel for supervisory and higher levels. The main

function of these agencies is to invite applications and short list the suitable candidates

for the organisation. Of course, the final decision on selection is taken by the
representatives of the organisation. At best, the representatives of the employment

agencies may also sit on the panel for final selection of the candidates

[Link]:

Advertisement is perhaps the most widely used method for generating many

applications. This is because its reach is very high. This method of recruitment can be

used for jobs like clerical, technical and managerial. The higher the position in the

organisation, the more specialized the skills or the shorter the supply of that resource

in the labour market, the more widely dispersed the advertisements is likely to be.
 For example, the search for a top executive might include advertise-ments in a

national daily like ‘The Hindu’.

4. Professional Associations:

Very often, recruitment for certain professional and technical positions is made through

professional associations also called ‘ headhunters’. Institute of Engineers, Indian

Medi-cal Association, All Indian Management Association, etc., provide placement

services for their members. For this, the professional associations prepare either list of

job seekers or publish or sponsor journals or magazines containing advertisements for

their members. The professional associations are particularly useful for attracting highly

skilled and professional personnel. However, in India, this is not a very common practice

and those few that provide such kind of service have not been able to generating a large

number of applications.

5. Campus Recruitment:

This is another source of recruitment. Though campus recruitment is a common

phenomenon particularly in the American organisations, it has made its mark rather

recently Of late, some organisations such as HLL, HCL. L &T, Citi Bank, ANZ Grindlays,

Motorola, Reliance etc., in India have started visiting educational and training

institutes/campuses for recruitment purposes.

Ex-amples of such campuses are the Indian Institutes of Management, Indian Institutes

of Technology and the University Departments of Business Management. For this

purpose, many institutes have regular placement cells/offices to serve as liaison between
the employers and the students. Tezpur Central University has, for example, one Deputy

Director (Training and Placement) for the purposes of campus recruitment and

placement.

The method of campus recruitment offers certain advantages to the employer

organisations. First, the most of the candidates are available at one place; Second, the

interviews are arranged at short notice; third, the teaching faculty is also met; and Fourth,

it gives them opportunity to sell the organisation to a large student body who would be

graduating subsequently. However, the disadvantages of this type of recruitment are that
organisations have to limit their selection to only “entry” positions and they interview the

candidates who have similar education and experience, if at all.

6. Deputation:

Another source of recruitment is deputation, i.e., sending an employee to another

organisation for a short duration of two to three years. This method of recruitment is

practiced, in a pretty manner, in the Government Departments and public sector

organisations. Deputation is useful because it provides ready expertise and the

organisation does not have to incur the initial cost of induction and training.

However, the disadvantage associated with deputation is that the deputa-tion period of

two/three years is not long enough for the deputed employee to prove his/her mettle, on

the one hand, and develop commitment with the organisation to become part of it, on the

other.

7. Word-of-Mouth:

Some organisations in India also practice the ‘word-of-mouth’ method of recruitment. In

this method, the word is passed around the possible vacancies or openings in the

organisation. Another form of word-of-mouth method of recruitment is “employee-

pinching” i.e., the employees working in another organisation are offered an attractive

offer by the rival organisations. This method is economic, both in terms of time and

money.

Some organisations maintain a file of the applications and bio-data sent by job-seekers.

These files serve as very handy as and when there is vacancy in the organisation. The
advantage of this method is no cost involved in recruitment. However, the drawbacks of

this method of recruitment are non-availability of the candidate when needed and the

choice of candidates is restricted to a too small number.

8. Raiding or Poaching:

Raiding or poaching is another method of recruitment whereby the rival firms by offering

better terms and conditions, try to attract qualified employees to join them. This raiding

is a common feature in the Indian organisations.

For example, several executives of HMT left to join Titan Watch Company, so also exodus

of pilots from the Indian Airlines to join private air taxi operators. Whatever may be the

means used to raid rival firms for potential candidates, it is often seen as an unethical

practice and not openly talked about. In fact, raiding has become a challenge for the

human resource manager. Besides these, walk-ins, contractors, radio and television,

acquisitions and mergers, etc., are some other sources of recruitment used by

organisations.

3.2 Various steps involved in Recruitment process

3.3 Realistic Job Previews(RJP):

One technique to improve the recruitment process is known as the Realistic Job Previews.
RJP refers to a description provided by the organisation to applicants and new employees
that gives both the positive and negative aspects of a job.
RJP can improve the recruitment process by giving each candidate all the pertinent and
realistic information about the job and the organisation. In this the positive and negative
sides of the job and firm are included.
In this manner , the candidate can make a more-informed choice and select jobs for which
he or she is better suited. In the long run, the RJP helps to achieve overall job satisfaction
and performance. It also avoids situations where dissatisfaction and poor performance
results from a person finding that the job and its environment were not as advertised.
UNIT V MARKETING AND SALES ANALYTICS
Marketing Strategy, Marketing Mix, Customer Behavior – selling Process – Sales Planning
– Analytics applications in Marketing and Sales
1. Marketing Strategy
• Analytical marketing strategies help to measure the effectiveness of marketing
tools and the development of any brand. An advertising campaign and marketing
initiatives require a huge amount of investment. So how to understand the budget? Which
channels are most effective? How much profit is to be obtained? Marketing analytics
strategies provide the answers to all these questions.
1.1 Significance of Marketing Analytics Strategies
• Marketing analytical strategies are critical in addressing and resolving marketing
issues. The prime motive behind implementing these strategies is to evaluate the effective
marketing programs in terms of return on investments in a business.
• The outcomes of adopting these strategies:
• Comparisons with competitors
• Recommendations for effective allocation of budget and resources
• Data processing analysis
• Collection of data through all the channels of communication and units in the
company
• Creating a structured template for reporting the purpose of effective analysis of
units
• Thus the marketing analysis strategies help in the given aspects:
• Having a holistic view of business
• Improving the management of the company and finance
• Forecasting and planning marketing initiatives
• Increasing the effectiveness of existing marketing programs through the
allocation of resources
• Increase the profitability and return on investments
• Thus you should set a proper marketing analytics framework within the
organization to have the right processes along with the right technology platforms to

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 capture data-driven strategy and deliver consistent information about this.

1.2 Analytics Marketing Strategies

• Marketing analytics is the practice of combining and analyzing databases,
identifying patterns and then coming up with actionable insights that improve the return
on investments of marketing efforts. Modern marketing analytics provides a holistic
picture of the business and lets you plan and optimize the whole process based on
revenue attribution. Besides this you should follow a new marketing strategy to survive
long term with competition from customer-focused services and products. Today almost
all businesses are following self-service, AI-powered analytics to analyze and visualize
the data and design the dashboards. Here are some prime analytics marketing strategies
as described below:
1. Exploring The Top Marketing Analytics Resources
You need to explore top marketing analytics resources, some of these are as
follows:
• Hear From Peers
• Get the Buyers Guide
• Know the Trends
These all are prime tools that can be used by you to explore marketing techniques.
You should get the buyer’s guide, this will enable you to meet the expectations and
requirements of customers. Besides this, you should also follow the latest marketing
trends to navigate today’s fast-paced world.
2. Website Marketing Analysis
As far as digital marketing tools are considered, the website is the best tool for it.
Here you should understand the top pages of the websites to generate a high amount of
conversion and traffic. Besides this, you should also identify the pages that are receiving
high traffic but not conversions. Heatmaps can help you in analyzing the audience
interaction with each element on your page. This will enable you to identify pages that
are getting a high bounce, identify the audience, their demographics, devices they are
using to access your content and the ranking of keywords on your web pages.

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3. Social Media Analytics
The social media platform has become the most accessible and diverse tool from
the perspective of marketing. This marketing strategy can help you to understand the
sentiments of people and how they are responding and engaging with you. This will
enable you to take decisive action and approach the right audience of the target market.
To implement a successful analytics marketing strategy you would have to reach more
people and engage with the followers to understand the improvements they are looking
for.
4. Campaign Analytics
This strategy helps you in tracking your campaign, like how these are performing,
getting the leads or not. So what you can do is understand the lead conversion rates from
multiple channels and sources. After doing this, you have to identify the opportunities by
product category and the source of lead. With this, you need to identify the content and
platform that is majorly resonating with your audience. This will enable you to optimize
the messaging and target of your content strategy.
5. Link Analytics
• Link is the most crucial aspect of searching algorithms. By taking the assistance of
link analytics you can view the link of the site, the domain, and page authority of referring
domains, like the total number of inbound links, top pages by link, anchor text and many
more.
• Thus having transparency is the prime motive of marketing managers. For this,
they have to set a common agreement on different KPIs. in today’s competitive age it is
essential to opt for effective marketing strategies by learning the art of positioning your
brand, as it can help to win over the competitors. In addition to this, another important
element of a reliable marketing analytics framework is to build an effective analytics
dashboard. This dashboard should represent KPIs by unifying data strategies from
different marketing data sources.
[Link] Research–
With keyword research, you can obtain very detailed insights into how your
business is appealing to your potential customers and if there are areas that you can
optimise. View how competitive your target keywords are, the average monthly search
volume for that particular keyword, the estimated CPC’s if you decide to bid on those
keywords, the number of clicks that you are getting for that keyword and the click-
through rates.
Thus the marketing analytics strategies are necessary for any business to obtain
timely, reliable, complete and operative information.
Tools
• It is the practice of studying the data of Marketing efforts of various channels and
campaigns and form models in order to report the metrics like ROI, Channel Performance,
etc. to identify parameters for improvement. Marketers will be able to provide answers

3
to the analytics questions that are most important to their stakeholders by monitoring
and reporting on business performance results, diagnostic metrics, and leading indicator
metrics
• The intelligence derived from marketing analytics allows you to spend each dollar
as effectively as possible.
• However, despite the emergence of several platforms and technologies that can
streamline the marketing analytics workflows, it remains a challenge for companies to
build concrete, actionable data analytics solutions for marketing efforts. According to a
survey of senior marketing executives published in the Harvard Business Review, “more
than 80% of respondents were dissatisfied with their ability to measure marketing ROI.”
• To set up a practical marketing analytics framework within your organisation,
you must have the right processes along with investing in the right technology platforms
to capture data-driven strategy and deliver unified and consistent information on your
measurement metrics.
1.3 Marketing Analytics Strategies Process
• With marketing analytics, you can gather intelligence into several different areas
of your marketing strategy. It will help you understand how your programs are
performing against the cost and which programs are delivering the best ROI. It will help
you to segregate your efforts and identify the area that you need to focus on the most.
• Analytics strategy will help you to realise how your programs are working in
conjunction to nurture your leads. With this, you can build a solid base upon which you
can qualify them and pass the leads on to your sales reps as opportunities.
• With marketing analytics, you can also identify laggards, i.e. the programs that are
not providing adequate return based on efforts invested at them. You can then choose to
redefine your data-driven strategy at them or remove them from your focus altogether.
• Market and competitor analysis will give you crucial insights into your competitor
data-driven strategy and which channels/ programs are working for them. Learning from
your competitors is an old business principle and marketing analytics can give you a
powerful arsenal to use and base your actions on the digital platforms.
• Even better! Advanced analytics can provide insights into trends, make forecasts
and capitalise on opportunities before anyone else.
• This will help grow your bottom line and avoid wastage on marketing spending,
optimising the dollar spend and viewing campaign performance in real-time. It helps you
to measure the impact of your strategies and compare it against the cost. •
Marketing strategies and tactics are normally based on explicit and implicit beliefs
about consumer behavior. Decisions based on explicit assumptions and sound theory and
research are more likely to be successful than the decisions based solely on implicit
intuition.

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• Knowledge of consumer behavior can be an important competitive advantage
while formulating marketing strategies. It can greatly reduce the odds of bad decisions
and market failures. The principles of consumer behavior are useful in many areas of
marketing, some of which are listed below –
 Analyzing Market Opportunity
Consumer behavior helps in identifying the unfulfilled needs and wants of
consumers. This requires scanning the trends and conditions operating in the market
area, customer’s lifestyles, income levels and growing influences.
 Selecting Target Market
The scanning and evaluating of market opportunities helps in identifying different
consumer segments with different and exceptional wants and needs. Identifying these
groups, learning how to make buying decisions enables the marketer to design products
or services as per the requirements.
Example − Consumer studies show that many existing and potential shampoo
users did not want to buy shampoo packs priced at Rs 60 or more. They would rather
prefer a low price packet/sachet containing sufficient quantity for one or two washes.
This resulted in companies introducing shampoo sachets at a minimal price which has
provided unbelievable returns and the trick paid off wonderfully well.
 Marketing-Mix Decisions
Once the unfulfilled needs and wants are identified, the marketer has to determine
the precise mix of four P’s, i.e., Product, Price, Place, and Promotion.
 Product
A marketer needs to design products or services that would satisfy the
unsatisfied needs or wants of consumers. Decisions taken for the product are related to
size, shape, and features. The marketer also has to decide about packaging, important
aspects of service, warranties, conditions, and accessories.
Example − Nestle first introduced Maggi noodles in masala and capsicum
[Link], keeping consumer preferences in other regions in mind, the
company introduced Garlic, Sambar, Atta Maggi, Soupy noodles, and other flavours.
 Price
The second important component of marketing mix is price. Marketers must
decide what price to be charged for a product or service, to stay competitive in a tough
market. These decisions influence the flow of returns to the company.
 Place
The next decision is related to the distribution channel, i.e., where and how to offer
the products and services at the final stage. The following decisions are taken regarding
the distribution mix −

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• Are the products to be sold through all the retail outlets or only through the
selected ones?
• Should the marketer use only the existing outlets that sell the competing brands?
Or, should they indulge in new elite outlets selling only the marketer’s brands?
• Is the location of the retail outlets important from the customers’ point of view?
• Should the company think of direct marketing and selling?
 Promotion
• Promotion deals with building a relationship with the consumers through the
channels of marketing communication. Some of the popular promotion techniques
include advertising, personal selling, sales promotion, publicity, and direct marketing and
selling.
• The marketer has to decide which method would be most suitable to effectively
reach the consumers. Should it be advertising alone or should it be combined with sales
promotion techniques? The company has to know its target consumers, their location,
their taste and preferences, which media do they have access to, lifestyles, etc.
2. Marketing Mix
• Marketing mix modeling is a marketing analytics strategy that can help your brand
maximize on return and get a deeper understanding of how your business actually
functions. Let’s look into the benefits that this strategy can provide for your brand. As the
world of digital marketing has exploded, the rise of big data and incredibly technical and
complex data sets has been both a blessing and a curse to brands big and small.
• While it’s true that detailed data can help businesses understand their consumers
and grow their businesses, it’s often the case that the data is overwhelming.
• With technology platforms and analytics tools being able to collect enormous
amounts of data, brands are often left struggling to get through it all and understand what
it is that they’ve gathered.
• In order to address the issue of how to manage incoming data and then use that
information to make impactful decisions, a clear analytics strategy is necessary for all
brands.
• Picking the right strategy for your business is the key to making sure you are
getting the most out of your planning and marketing activity.
• Marketing mix modeling is one example of a marketing analytics strategy that can
really help your brand manage data and learn the best places to invest your budget and
time on.
• Keep reading this post to learn more.
2.1 What is Marketing Mix Modeling?

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• Marketing mix modeling is a statistical marketing method that attempts to
determine the effectiveness of marketing campaigns and initiatives by taking apart data
and attributing contributions to different marketing tactics and factors to better predict
future success.
• Put another way, marketing mix modeling looks at different pre-determined
factors and the data that has been gathered from marketing campaigns to see which
factors have had the biggest impact on return and which factors have contributed the
most to success.
• Once this data has been collected and organized, the marketing mix modeling
system will use the past and historical data to predict or forecast future marketing and
sales success.
• By looking at the trends that have worked before, the marketing mix modeling will
theoretically be able to forecast with more accuracy than other analytical methods.
2.2 The 5 P’s of Marketing Mix Modeling
As stated above, marketing mix modeling distributes success from data to
different pre-determined factors.
Those factors are often referred to as the 5 P’s of marketing, which are derived
from other marketing research and studies. Let’s look at those 5 P’s now.
 Product : Product refers to the actual products or services that are created and
offered to customers by a brand.
 Price :The price takes into consideration any deals, sales, pricing models, and
methods of payment involved in a sale.
 Place : Place refers to the channels through which products are available to
consumers and how consumers are able to find the offers that the brand has.
Promotion
 Promotion : is the method by which products or services are marketed and
shared among audiences.
 People: People is the final P, and is sometimes left off of marketing mix modeling.
People refers to both the internal staff and the customers that drive sales in a
brand.
2.3 Marketing Mix Modeling vs. Attribution Modeling
• Marketing mix modeling is often compared to another popular model of marketing
analytics, attribution modeling.
• Attribution modeling is the process of setting up different touchpoints that trigger
events on the customer’s journey.
• Each touchpoint is assigned a value to help determine which points in the
customer’s journey are responsible for bringing in revenue. • While attribution
modeling can be helpful to understand data and provide context for ROI, it also has a few
major drawbacks.

7
• The biggest problem is that not every touchpoint in a customer’s journey can
possibly be tracked and analyzed through collected data.
• Another drawback of attribution modeling is that it functions mainly through
clicks and clicks alone — other potential data points are put aside in favor of clicks that
can “prove” a conversion has taken place at a touchpoint.
• Attribution modeling also doesn’t prove the effectiveness of a campaign. After all,
a customer will have to pass through the same touchpoints whether they were convinced
through an advertisement to make a conversion or not.
• That makes it difficult to assign return to specific touchpoints.
2.4 Benefits of the Marketing Mix Modeling
Let’s take a deeper dive into the benefits that it can provide to your brand’s
analytics and reporting models.
 Prove the ROI of Marketing Initiatives

Marketing mix modeling allows marketers to really prove the ROI of their
initiatives. By relating data insights back to the factors in each campaign that provided
success, it can help brands understand the full impact of their efforts.
 Gather Insights
Marketing mix modeling is also great for understanding key insights from business
initiatives. Those insights can be used to drive effective budget allocations within
marketing and sales departments and convince stakeholders of the benefits of the model.
 Create Better Sales Forecasting
Sales forecasting refers to the practice of estimating how much revenue can be
generated in the future based on the impact that your sales and marketing efforts have
had in the past.
By allocating success to key factors, marketing mix modeling allows brands to have more
accurate forecasting.
 Understand Historical Data and Trends
Marketing mix modeling is based on understanding the past data that has been
collected during initiatives and [Link] other analytics models will ignore this
valuable data or only look at parts of it. The marketing mix system ensures historical data
and trends are examined closely for value.
 Account for Negative Impacts
Just as marketing mix modeling allows brands to see the positive impacts that
their efforts have created, it can also be used to see negative impacts on different
marketing [Link] helps brands know which areas of the business need work
and where serious corrections need to take place.

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2.5 What are the Limitations of Marketing Mix Modeling?
Like all marketing analytics methods, there are drawbacks and limitations to this
[Link] amount of data collected means that there isn’t one method of analytics that
can address every data set. Here are some of the major drawbacks of marketing mix
modeling:
• Infrequent reporting, meaning no real-time data analytics.
• Does not analyze the customer’s experience or journey.
• Doesn’t provide the 1:1 analysis of attribution modeling.
• Doesn’t examine relationships between channels.
• Doesn’t look into brand awareness, messaging, or reach.
• Requires a large marketing analysis budget.
• Harder to implement in B2B businesses than B2C brands.
2.6 How to Build the Marketing Mix Modeling
While there are some setbacks, marketing mix modeling can provide major
benefits to your brand. Let’s take a look at how you can go about building this system in
your own organization.
1. Establish Your Goals
• The end goal of any marketing analytics strategy is to parse through and gather
insights from your data sets.
• That means that marketing mix modeling is meant to help organize your data and
your analytics methods.
• Therefore, it makes sense that the first step is to establish the specific goals you
want to attain through your strategy.
• Your goals might center around budgets, marketing campaigns, product pricing,
or your brand in comparison to competitors.
2. Create Internal Alignment
In order to succeed, you need to have clear alignment across your organization.
• As with most data analytics, marketing mix modeling requires you to pull data
from many different systems from different departments.
• That requires compliance across different teams and with the key stakeholders in
your organization, such as:
CMO, Media agencies, Marketing agencies, Marketing executives and
managers,CRM managers,Sales leads
3.0 Consumer Behavior

9
 Consumer behavior is about the approach of how people buy and the use
merchandise and services. Understanding consumer behavior will assist business entities
to be more practical at selling, designing, development of products or services, and every
other different initiative that impacts their customers. In this tutorial, it has been our
endeavor to cover the multidimensional aspects of Consumer Behavior in an easy-to-
understand manner.
• Audience
This tutorial will help management students as well as industry professionals who
work in a product development environment, or in packaging, or for that matter, any part
of a company that has an interface with the customers.
• Prerequisites
To understand this tutorial, it is advisable to have a foundation level knowledge of
basic business and management studies. However, general students and entrepreneurs
who wish to get an understanding about consumer behavior may find it quite useful.
 Consumer Behavior - Consumerism
Consumerism is the organized form of efforts from different individuals, groups,
governments and various related organizations which helps to protect the consumer
from unfair practices and to safeguard their [Link] growth of consumerism has led to
many organizations improving their services to the customer.
 Consumerism
Consumer is regarded as the king in modern marketing. In a market economy, the
concept of consumer is given the highest priority, and every effort is made to
encourage consumer satisfaction. However, there might be instances where
consumers are generally ignored and sometimes they are being exploited as well.
Therefore, consumers come together for protecting their individual interests. It is a
peaceful and democratic movement for self-protection against their exploitation.
Consumer movement is also referred as consumerism.
3.1 Features of Consumerism
Highlighted here are some of the notable features of consumerism −
Protection of Rights − Consumerism helps in building business communities and
institutions to protect their rights from unfair practices.
Prevention of Malpractices − Consumerism prevents unfair practices within the
business community, such as hoarding, adulteration, black marketing, profiteering, etc.
Unity among Consumers − Consumerism aims at creating knowledge and
harmony among consumers and to take group measures on issues like consumer laws,
supply of information about marketing malpractices, misleading and restrictive trade
practices.

10
 Enforcing Consumer Rights − Consumerism aims at applying the four basic
rights of consumers which are Right to Safety, Right to be Informed, Right to Choose, and
Right to Redress.
Advertising and technology are the two driving forces of consumerism −
• The first driving force of consumerism is advertising. Here, it is connected
with the ideas and thoughts through which the product is made and the consumer buys
the product. Through advertising, we get the necessary information about the product we
have to buy.
• Technology is upgrading very fast. It is necessary to check the environment on a
daily basis as the environment is dynamic in nature. Product should be manufactured
using new technology to satisfy the consumers. Old and outdated technology won’t help
product manufacturers to sustain their business in the long run.
3.2 Consumer Behavior – Significance
• Consumer behavior covers a broad variety of consumers based on diversity in age,
sex, culture, taste, preference, educational level, income level, etc. Consumer behavior can
be defined as “the decision process and physical activity engaged in evaluating, acquiring,
using or disposing of goods and services.”
• With all of the diversity to the surplus of goods and services offered to us, and the
freedom of choices, one may speculate how individual marketers actually reach us with
their highly definite marketing messages. Understanding consumer behavior helps in
identifying whom to target, how to target, when to reach them, and what message is to be
given to them to reach the target audience to buy the product.
The following illustration shows the determinants of consumer behavior.
• The study of Consumer Behavior helps in understanding how individuals make
decisions to spend their available resources like time, money, and effort while purchasing
goods and services. It is a subject that explains the basic questions that a normal
consumer faces − what to buy, why to buy, when to buy, where to buy from, how often to
buy, and how they use it.

11
• Consumer behavior is a complex and multidimensional process that reflects the
totality of consumer decisions with respect to acquisition, consumption, and disposal of
goods and services.
3.3 Dimensions of Consumer Behavior
Consumer behavior is multidimensional in nature and it is influenced by the
following subjects −
• Psychology is a discipline that deals with the study of mind and behavior. It helps
in understanding individuals and groups by establishing general principles and
researching specific cases. Psychology plays a vital role in understanding how consumers
behave while making a purchase.
• Sociology is the study of groups. When individuals form groups, their actions are
sometimes relatively different from the actions of those individuals when they are
operating individually.
• Social Psychology is a combination of sociology and psychology. It explains how
an individual operates in a group. Group dynamics play an important role in purchasing
decisions. Opinions of peers, reference groups, their families and opinion leaders
influence individuals in their behavior.

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• Cultural Anthropology is the study of human beings in society. It explores the
development of central beliefs, values and customs that individuals inherit from their
parents, which influence their purchasing patterns.
3.4 How Consumer Behavior affects Marketing Strategy ?
• Business organizations across globe try to influence consumer by encouraging
them to buy products and services. This is done by studying about the needs of the
consumer and creating appropriate strategies so that consumer buys products. There are
several marketing strategies used for influencing consumer behavior which affects the
buying decision.
• The first thing to be kept in mind while building strategies for marketing products
is communicating with consumers emotionally. This can be done by giving promotional
material in order to get attention of consumer. It has been found that consumers are
attracted to products that create emotions in the form of joy and surprise.
• All businesses throughout the world are seeking for solutions to assure long-term
sales and profitability, as well as market sustainability. To do so, companies must pay
close attention to their source of profit – consumers – and, more crucially, their
behaviour.
• Consumer behaviour is the study of consumer demands and how consumers
(customers and organizations) meet these needs, as well as their motivation for using and
purchasing a certain product or service.
• This is an exceptionally helpful study for corporations looking seeking strategies
to stay relevant in the market since it assists them in determining the best marketing plan
for their items.

• After rigorously analyzing consumer behaviour, only a relevant marketing plan

can be established to advertise the service/product to the correct segment of the
audience by finding a market gap or demand; failing to do so exposes the firm to

13
product/service failure. Businesses are expected to research all the criteria listed below
to effectively analyze their customers.
• A successful marketing strategy is critical to a company’s success since it assists
the company in developing a product or service that has the potential to sell and provide
high levels of profit yield A marketing strategy is a company’s plan for selling its
product, which includes considering the four variables listed below.
Consumer behaviour and marketing strategy are inextricably linked:

• Consumer behaviour assists firms in determining whether what they are selling
will be lucrative, as well as in tailoring their marketing plan to the appropriate target
population for their product/service.
• Catering a product/service to the wrong audience may be detrimental to a
business, whereas, Catering the appropriate product/service to the right consumers by
observing their behaviour, on the other hand, might be invaluable to a company.
• Many organizations look for the most cost-effective way to do consumer research.
By using technologies like Google Analytics, Google Survey, CRM, and the social
networking sites listed above, businesses may keep track of their customers’ web activity,
making it easier to determine client preferences. Keepingtrack of consumer behaviour is
critical for ensuring profitability
With the recent change towards the Covid-19 crisis, businesses must monitor customer
behaviour more now than [Link] Covid-19 has bought drastic changes in
consumer [Link] are also less likely to make large purchases during an
economic- financial crisis such as the recession; therefore, businesses must study and
analyze consumer behaviour to ensure sustainability through having the right marketing
strategy catered to the consumer’s financial and emotional preferences. Failure to do so
may result in the suspension of operations or bankruptcy.
In conclusion, consumer behaviour has a significant influence on marketing
strategy and is important to the success of a product; so, the marketing strategy must be
determined through analyzing consumer behaviour to understand what customers want.
Meeting consumer demand is the quickest method to make profits – the ultimate
objective of any and every firm.
4. Selling process
The sales process – also known as a sales cycle – is the method your company follows to
sell your product or service to customers. It involves a series of steps, from initial contact
with a lead to the final sale.
The sales process is similar to developing a relationship with someone new. When you
first meet, you get to know each other, learn what they like, and determine their goals.
Along the way, you decide if you can work together and whether you are a match. If this
is the case, the relationship can proceed and grow.

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4.1 Importance of building a sales process
These are some benefits of building a sales process for your business:
You can optimize the structure of your sales team to support the sales process and
identify the main challenges in the sales cycle.
It will be easier to onboard new sales personnel.
It helps you identify short-term and long-term goals and how each step in the sales
process supports the next one.
It highlights where time and resources are being wasted, so you can remove activities
with low return on investment and focus your efforts on activities with more positive
returns.
It identifies the steps that need to be improved. This allows you to invest in training,
education, and practice to get better in areas of weakness, which will help match your
success in other parts of the sales process.
4.2 The 7-step sales process
Prospecting
Preparation
Approach
Presentation
Handling objections
Closing
Follow-up
If you are one of the 2.5 million employees in the United States working in sales, you know
that even for the most natural salesperson, it can sometimes be difficult to turn potential
leads into closed sales. Across industries, you need different skills and knowledge to
prove to your potential customers that your solution is best for their particular problem.
The seven-step sales process outlined in business textbooks is a good start, especially
since leading sales ops teams attribute to 60% or more of their total pipeline in any
quarter to actively designed and deployed sales plays. The seven- step sales process is
not only a good start to customizing it to your particular business but more importantly,
customizing it to your target customers as you move them through the sales funnel.
As the old adage goes, “Learn the rules like a pro so you can break them like an artist.”
Once you’ve mastered the seven steps of the sales process you might learn in a business
class or sales seminar, then you can break the rules where necessary to create a sales
process that may not necessarily follow procedure but gets results.
The textbook 7-step sales process

15
What are the seven steps of the sales process according to most sales masters? The
following steps provide a good outline for what you should be doing to find potential
customers, close the sale, and retain your clients for repeat business and referrals in the
future.

1. Prospecting
The first step in the sales process is prospecting. In this stage, you find potential
customers and determine whether they have a need for your product or service— and
whether they can afford what you offer. Evaluating whether the customers need your
product or service and can afford it is known as qualifying.
Keep in mind that, in modern sales, it's not enough to find one prospect at a company:
There are an average of 6.8 customer stakeholders involved in a typical purchase, so
you'll want to practice multi-threading, or connecting with multipledecision-makers on
the purchasing side. Account maps are an effective way .
2. Preparation
The next step is preparing for initial contact with a potential customer, researching the
market and collecting all relevant information regarding your product or service. Develop
your sales presentation and tailor it to your potential client’s particular needs.
Preparation is key to setting you up for success. The better you understand your prospect
and their needs, the better you can address their objections and set yourself apart from
the competition.
3. Approach
Next, make first contact with your client. This is called the approach. Sometimes this is a
face-to-face meeting, sometimes it’s over the phone. There are three common approach
methods. Premium approach: Presenting your potential client with a gift at the beginning
of your interaction

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Question approach: Asking a question to get the prospect interested.
Product approach: Giving the prospect a sample or a free trial to review and evaluate
your service
4. Presentation
In the presentation phase, you actively demonstrate how your product or service meets
the needs of your potential customer. The word presentation implies using PowerPoint
and giving a salesy spiel, but it doesn’t always have to be that way—you should actively
listen to your customer’s needs and then act and respond accordingly.
5. Handling objections
Perhaps the most underrated step of the sales process is handling objections. This is
where you listen to your prospect’s concerns and address them. It’s also where many
unsuccessful salespeople drop out of the process—44% of salespeople abandoning
pursuit after one rejection, 22% after two rejections, 14% after three,and 12% after four,
even though 80% of sales require at least five follow-ups to convert. Successfully handling
objections and alleviating concerns separates good salespeople from bad and great from
good.
6. Closing
In the closing stage, you get the decision from the client to move forward. Depending on
your business, you might try one of these three closing techniques.
Alternative choice close: Assuming the sale and offering the prospect a choice, where both
options close the sale—for example, “Will you be paying the whole fee up front or in
installments?” or “Will that be cash or charge?”
Extra inducement close: Offering something extra to get the prospect to close, such as a
free month of service or a discount.
Standing room only close: Creating urgency by expressing that time is of the essence—
for example, “The price will be going up after this month” or “We only have six spots left”
[Link]-up
Once you have closed the sale, your job is not done. The follow-up stage keeps you in
contact with customers you have closed, not only for potential repeat business but for
referrals as well. And since retaining current customers is six to seven times less costly
than acquiring new ones, maintaining relationships is key.
4.3 Prospect for potential customers

The first step is to prospect for customers, which requires some research. This stage has
three components.
[Link] an ideal customer profile (ICP). The goal is to identify and understand your
ideal customers. This helps you determine whom to contact and why you are contacting

17
them as potential customers. The ICP uses real data to create a fictional characterization
of a client who:
Can provide your company with value (e.g., revenue, influence)
Your company can provide value to (e.g., return on investment, better service)
[Link] potential leads. Use the ICP to create a list of potential leads that fit this
profile. Use a variety of sources (e.g., online databases, social media) to develop a list of
ideal client companies. Then create a list of prospects from these companies that your
sales team can contact and qualify.
[Link] initial qualification. First, qualify the company by conducting research to see
if it meets the criteria that matter to you (e.g., company size, geography, industry, growth
phase). Then qualify the prospects with an interview to determine if they are a good fit
as a customer. Determine if the prospect has:
 A need for your product or service.
 The budget to purchase your product or service.
 The authority to make the purchasing decision.
 The timing to make the purchase
4. Make contact with prospects
 After identifying the ideal prospect, reach out to contact them. This step
has two parts:
 Determine the best way to contact the prospect (e.g., telephone, email,
social media).
 Reach out to the prospect. Make sure you are prepared (e.g., with a script,
introduction and questions) before making contact. Introduce yourself
and work on building trust, not making a sale.
5. Qualify prospects.
 Although you have already done your research to qualify the prospect before
making contact, you still need to determine if they would make an ideal
customer. This can only happen in a direct conversation with the prospect
(either over the phone or in person).
 To qualify the prospect, learn more about them. Ask about their goals, budget,
challenges and other issues that will help you to make your decision. Make sure
that the person you are speaking with has the power to make decisions on doing
business with you. When speaking with the prospect, identify opportunities to
provide value.
 Qualifying the prospect involves confirming whether they meet the criteria of a
good customer. If they are not a good fit, tell the prospect why. If they are still
interested, determine why.

6..Nurture prospects.

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 Once you have qualified the prospect, demonstrate the relevance of your solution
to them. This typically involves answering questions about your unique offer, the
benefits you provide, and the problems you solve.
When answering the prospect’s questions and learning about their needs, you
have to nurture them along the process of making a decision. This involves:
Moving the prospect along the stages of awareness

Unaware: The person does not know they have a problem.

Problem aware / pain aware: The person knows they have a problem but
is not aware of a solution.
Solution aware: The person knows there is a solution but does not know about
your product.
Product aware: The person knows about your product but does not know
if it can solve their problem.
Most aware: The person knows a lot about your product but needs to know
about its benefits.

 Educating the prospect about the product, service or industry Personalizing your
communications
 Responding to common challenges

 Building your reputation with the prospect as someone who is helpful,

responsible and reliable in your area of expertise.
Some prospects may be both interested in your offering and qualified, but might
not be ready or able to become a customer at this time. To nurture this type of
prospect, stay in touch going forward and demonstrate your ability to help. This
will help to keep you top of mind when they are ready to buy.
7.. Present your offer.
Use the information you have collected to this point to present the prospect with
your best possible offer. Make the offer personalized, targeted and relevant to
your prospect’s needs. Craft the offer to address their challenges, budget and
goals.
While the content of your offer is very important, how you present the offer can
be the difference between success and failure. Consider your audience and the
situation when deciding how to present your offer. Creativity can be very
effective, but you should also focus on what works best for you given the
experience of previous presentations.
8.. Overcome objections.
You’ve made the best possible offer – now it’s up to the prospect to make the
next move. The most common response is some type of objection to your offer,
such as:
Price (e.g., too expensive for the value provided)
Risk (e.g., too “dangerous” to switch to a new solution)

19
 Content of offer (e.g., offer does not provide enough detail) Contract terms (e.g.,
term is too long)
Ideally, you addressed the common objections during the nurturing phase or
when creating the offer. However, you cannot always address every objection
before the prospect makes it.
To overcome or address objections:
Be patient and measured in your response. Listen to the prospect’s concerns
objectively. Do not rush or pressure the prospect to move forward. Address
objections that are related to each other. For example, if the prospect questions
the value and price, go over everything you’ve included in the offer to show how
the value you provide exceeds the price.
When you have explained your reasoning, ask the prospect if you have properly
addressed their objection.
Read between the lines of generic objections (e.g., “We are not interested”).
Ask more questions to determine the real reasons behind each objection. Listen
carefully to the answers before responding.

9 .Close the deal.

Once you have overcome all objections, you can close the deal to make the sale.

First, work on sealing the deal. The goal is to confirm the prospect’s
engagement and work toward the next steps. The key is to make it easier for the
prospect to say yes to the deal. Prime the prospect by reminding them how they
will achieve a specific goal in purchasing your product or service.
To close the deal:
Ask a direct question or make a direct statement (e.g., “Would you like to sign the
deal now?”).
Ask an indirect question (e.g., “Are you satisfied with what is included in the
offer?”).
Provide an incentive to close the deal (e.g., add a sign-up bonus). Offer a free trial
period (e.g., “Try it for one week”).
Emphasize the urgency or scarcity of the offer (e.g., “This is a limited-time offer”).
Ask what else the prospect requires to make a decision. When the prospect has
committed to the purchase, answer any additional questions they have and give
them details on the next steps. Provide a written agreement and summary of the
conversation so that their supervisor or other stakeholders can review it for
accuracy.
If the prospect still responds with “not yet” or “not now” for reasons beyond your
control (or theirs), then return the prospect to the nurturing stage. Stay in touch
and follow up with prospects who are not ready to purchase.

4.4 How to implement a sales process

Consider the following approach to implement the sales process in your

organization.
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[Link] the customer.

The sales process begins with the buyer. To implement an effective sales process,
you must understand the buyer and then design your sales process to address
their goals, motivations, and needs. This requires identifying and then answering
their “why” question. For instance, why is the buyer looking for a solution? Why
are they looking to you for the solution?
Build a sales process to help your salespeople find the answer to the key
question. Conduct interviews with buyers and salespeople and perform industry
research to find the answers to include in the process.

[Link] milestones.

Once you’ve defined the stages of your sales process, establish the key steps and
milestones within those stages. A milestone could be identifying where the buyer
is in the sales process or engaging with stakeholders within a certain time
period. Score each milestone to determine how many resources to invest into
that part of the sales process. When you set a milestone for each stage, train
salespeople to meet that milestone at the assigned stage. This will prevent them
from skipping steps or taking the wrong approach at the wrong time (such as
talking about the price too soon). Instructing salespeople on when and how to do
handoffs will also help correct problems in the sales process. This simplifies the
process of helping buyers move from one stage to the next.

[Link] skills and resources.

Build skills, resources and activities into the sales process to help your
salespeople move to the next milestone. Resources could include brochures, case
studies and whitepapers for a salesperson to share with customers. Provide your
salespeople with specific training for particular milestones or have them engage
in activities for other milestones.

[Link] and improve.

A sales process is not static; it should be refined and improved over time. Get
feedback from salespeople, measure buyer behavior, and track and analyze sales
data to evaluate the effectiveness of your sales process. Use the results to solidify
the successful activities and resources within the sales process, implement
activities and processes to prevent negative outcomes, and remove activities and
resources that do not advance the sales process. This will keep the sales process
relevant, actionable and efficient.
By constantly iterating and improving your sales process, you will: Reduce the
time it takes to onboard new salespeople.

[Link] the percentage of successful sales.

21
 Minimize costly mistakes.
 Improve sales forecasting.
 Reach sales targets on a more consistent basis.
 Align your technology and systems with the sales process.
It’s important to equip your salespeople with technology (such as CRM software)
that enables them to perform each step of the sales process efficiently. However,
software tools alone won’t make salespeople more effective or encourage them
to follow best practices. You need to combine the technology with supportive
systems, guidance and resources.
 Provide technology that streamlines the sales process, collects and organizes
information on customers, and lists the required activities for salespeople to
follow.
 Create systems and resources to support the sales team’s use of the technology
during the sales process, such as these:
 Checklists to make sure all steps are performed in order
 Content and video to demonstrate the importance of the stages and milestones
Buyer-focused content tied to where they are in the sales process
 Reminders to prevent salespeople from skipping steps
 Training content for each step in the sales process

5. Sales Planning

Sales planning is a set of strategies that are designed to help sales teams reach
their target sales quotas and help the company reach its overall sales goals. Sales
planning helps to forecast the level of sales you want to achieve and outlines a
plan to help you accomplish your goals. A sales plan covers past sales, risks,
market conditions, your target personas, and plans for prospecting and selling.
Sales planning occurs at various stages of the sales cycle. Generally, businesses
set monthly or quarterly sales goals. Sales don’t happen all on their own just
because your sales manager sets goals. By defining the steps in a sales plan, sales
managers can help their teams reach their targets and enjoy the rewards that
come with collective success.
Another important part of the sales planning process is evaluating the company
and understanding its position in the marketplace. Market conditions are ever-
changing, so it’s important to study them and to adjust your sales plan
accordingly.
Sales plans typically account for short- and long-term planning. Goals without
rewards aren’t sufficient to incentivize each salesperson to reach for the sky. The
right tools and sales strategies go a long way toward motivating salespeople to
reach their targets.
As salespeople reach their goals, you’ll want to set new ones. Every time you set
new targets, it’s appropriate to amend your sales plan. Changes to your sales

22
 plan may also mean that you need to change how your company allocates
resources to ensure that your salespeople have the resources they need. If you
haven’t already invested in a cloud-based phone system and VoIP integrations,
you might consider how setting up a sales call center, complete with call center
software, could help streamline your sales activities and help you reach your
goals more easily.

5.1The Role of a Sales Plan for Your Business

In case there’s any doubt about the important role that your sales plan plays in
your business, you may be interested to know that a little more than half of sales
professionals annually miss their sales quotas. Sales experts attribute this
underwhelming percentage to the lack of strategic planning and failure to align
sales goals in accordance with conditions in the marketplace.
Top sales performances only come about after proper planning and preparation.
A well-thought-out plan streamlines sales tasks, which increases the efficiency
and productivity of your sales teams.
For the best results, develop your sales plan well in advance. The best plans
account for multiple levels. A common approach is to start with annual targets
and break them down by the quarter, month, and week. Also, you’ll need to pre-
plan your resources, logistics, and activities for every part of your sales plan.
These activities will give you a road map that leads to sales success.
Short-term planning and monitoring are important activities because they
give you the opportunity to make changes to your sales plan based on weekly or
monthly sales results. If your salespeople are way ahead of – or way behind on –
your projections, short-term planning will ensure that sales goals are reasonable
and attainable.
A good sales plan means that your sales teams can function as efficiently as
possible. Inside sales reps and call center agents can easily use call center
software for sales call planning, freeing up outside salespeople to focus on
making in-person calls and closing sales.

5.2 Sales Planning & Aligning Your Sales Strategy

 When your business is experiencing a downturn in revenue generation, this is

usually a sign of poor sales and marketing alignment. Misalignment between
sales and marketing reduces revenue, negatively impacts customer experience,
and makes it tougher for salespeople to meet their quotas.
 Here some interesting things about marketing and sales alignment:
 Sales and marketing productivity decline when there is a misalignment between
them.

23
 Alignment between sales and marketing improves the customer experience
because it helps to improve customer service and to create a single customer
journey.
 Salespeople don’t always use marketing content when there’s no alignment.

 Marketing software and sales automation software make it possible to develop

data-driven sales and marketing plans.
 Alignment ensures that marketing and sales teams develop profiles of the same
audience segments and target personas.
 Strong alignment means that marketing and sales messaging to customers are
consistent and tell the same story.
 Sales and marketing alignment also has a positive impact on post-sale growth,
retention, and brand loyalty.
 Overall, when sales and marketing teams align with each other, it positions your
company to get the most value from prospects and customers. It’s the best path
to take your company to new heights.

5.3 How to Use Sales Planning Templates

A proven sales plan template should be part of your brand strategy because it
will guide your business growth every step of the way. You could think of it as
telling your sales story. Every story tells the who, what, why, where, when, and
how from beginning to end.
Let’s break the strategic process down into five parts:

[Link] setting
[Link] forecasting
[Link] and customer research
4. Prospecting
5. Sales

 One process seamlessly dovetails with the next. Start with your high-level goals
and then factor in the various market factors. Set realistic goals as a benchmark
for forecasting reasonable goals in the future. You’ll need to base your goals on
several things, including the size of the market, your annual company goals, your
sales teams’ experience, and the resources that you have available.
 A cloud-based phone system offers dashboard analytics that gives you metrics
such as the number of inbound calls and outbound calls and the average call
length. This will allow you to set standards for your call agents. Also, it will help
you to scale your contact center so that it’s not over- or understaffed.
 Marketing and customer research is an important activity that helps you position
your company properly for business growth. The right data will determine your niche
markets so you can start building traction with a receptive audience. Your niche
encompasses your products, content, culture, and branding.

24
 The next step is to identify the most likely sources for finding high-quality leads
so that you can start building a quality prospect list. It’s also a great idea to
leverage current client relationships as you build your prospecting plan.

5.4 Importance of sales planning

 Sales planning is an important aspect of business that identifies current issues,

such as a lack in sales, and seeks to find solutions or develop strategies. Sales
planning takes advantage of new opportunities, such as when a company
develops a new product, to create brand awareness or interest. Sales plans
address various sales opportunities and the plan's objectives may vary
depending on whether the company sells directly to the consumer, or to another
business.
Ideally, a sales plan:

 Define targets
 Creates strategies
 Identifies tactics
 Motivates teams
 Sets budgets to achieve targets
 Reviews goals and suggests improvements

6.0 Analytics applications in Marketing and Sales

 Measure Performance of Marketing Campaigns

The most basic form of marketing analytics is to provide marketers with the
tools to understand what business impact their marketing campaigns have. This
task can range from something as straightforward as providing standard metrics
(click- through rate, ROI, etc..) at the campaign level to an analysis as complex as
developing a Market Mix Model to come up with the optimal marketing strategy
to maximize profit.
 Find Opportunities in Marketing Performance
While marketing performance analytics will let you know on the whole how a
campaign performs, it isn’t until someone digs in to many cuts of data to uncover
whether there are certain types of users that respond better to particular
marketing treatment - perhaps some campaigns work better in certain markets
or on mobile. Marketing analysts mine and model your data to uncover nuggets
that can be acted on by marketers.
 Understand Your Customers

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 Diving deep into customer demographics and behaviors can help you understand
which are more likely to be successful. This information can then be used by
marketers when selecting their target audiences. Through data mining and
statistical modeling, marketing analysts can provide a rich understanding of your
customers and what drives success.
 Understand Your Competition
Market research is often within the domain of marketing analytics and it can help
marketers understand the competition better and adjust their strategy
accordingly.

Sales analytics applications

The full list of applications we have seen are:
 Sales forecasting
 Sales force management Sizing
 Geo-distribution
 Predictive/prescriptive lead scoring Customer contact analytics
 Sales rep compensation improvements
 Sales attribution between marketing and sales
 Sales process improvements
 Performance management
Additionally sales analytics enables numerous applications we listed above.
Some of these applications have dramatic benefits:

 Reduction of sales support activities

Sales reps spend more time on non-sales activities according to most research on
the topic. These include making sales forecasts, prioritizing leads, deciding how
to approach leads which can all be automated with sales analytics applications.
To perform such tasks, sales reps can use behavioural analytics.

 Improved prioritization

There are several levels of improved prioritization thanks to sales analytics:

Predictive/prescriptive lead scoring techniques enable improved prioritization
by sales [Link] rep compensation can be improved with advanced analytics
enabling company to focus on successful sales reps.

 Sales attribution models allow the company to focus its resources

appropriately between sales and marketing.
Improved sales processes and practices
 Insights can lead managers to learn from top performers, improve their coaching
and sales processes .

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