Marketing Engineering, Conjoint Analysis, CLV, and Marketing Metrics

Comprehensive vocabulary flashcards covering the core concepts, quantitative formulas, psychological models, and strategic tools of Marketing Engineering, Conjoint Analysis, Customer Lifetime Value, Customer Satisfaction, and Brand Positioning Metrics.

Marketing Engineering

The practice of using data (the 'physics') and mathematical or statistical models (the 'math') to design marketing strategies that are efficient, robust, and deliver measurable return on investment.

Click-Through Rate (CTR)

The percentage of individuals who clicked on an advertisement out of the total impressions it received, computed as $\text{CTR} = \left(\frac{\text{Clicks}}{\text{Impressions}}\right) \times 100$.

Average Order Value (AOV)

A sales metric tracking the average amount of money spent by customers per transaction, calculated as $\text{AOV} = \frac{\text{Total Revenue}}{\text{Number of Orders}}$.

Cost-Per-Click (CPC)

A digital marketing advertising efficiency metric calculated by dividing the total advertising spend by the number of clicks generated ($\text{CPC} = \frac{\text{Ad Spend}}{\text{Clicks}}$).

Cart Abandonment Rate

The percentage of potential purchasers who add items to an online cart but exit without completing a purchase, calculated as $\left(\frac{\text{Cart Adds} - \text{Purchases}}{\text{Cart Adds}}\right) \times 100$.

RFM Analysis

A database segmentation tool that evaluates customer value based on three behavioral dimensions: Recency (how recently they purchased), Frequency (how often they buy), and Monetary value (how much they spend).

Marketing Mix Modeling (MMM)

An analytical modeling technique that quantifies the impact of various marketing activities (such as TV, social media, and digital promotions) to optimize the allocation of marketing budgets for maximum return.

Conjoint Analysis

A decompositional market research method that models consumer preferences by asking respondents to evaluate multi-attribute alternatives, statistically inferring the underlying utility of each attribute level.

Decompositional Preference Model

An approach in preference modeling where consumers evaluate a product bundle as a whole, and statistical methods deconstruct this overall evaluation into discrete utilities for each individual component or attribute.

Part-Worth Utility

An interval-scaled numerical score indicating the subjective value or preference a consumer assigns to a specific level of a product attribute, centered around zero within each attribute.

Attribute Importance Weight

A percentage representing the relative impact of an attribute on consumer choice, calculated as $\text{Importance}_A = \left(\frac{\text{Utility Range}_A}{\sum \text{Utility Ranges of All Attributes}}\right) \times 100$.

Choice-Based Conjoint (CBC)

A conjoint methodology where respondents select their single preferred offering from a set of competing product profiles (or choose 'none'), closely simulating real marketplace purchase behavior.

Orthogonal Array

A statistical experimental design framework used to select an efficient fractional subset of product profiles to test, allowing unconfounded estimation of main attribute utilities without surveying every combination.

Market Simulator

A decision support model that utilizes calculated conjoint utilities to predict market shares, test product configurations, and conduct 'what-if' competitive simulations.

Logit Model (Conjoint Simulation)

A probabilistic simulation model using Euler's number ($e \approx 2.71828$) that converts total product utility into non-negative choice probabilities and simulated market share values.

Customer Lifetime Value (CLV)

The present value of all future net profits expected to be generated from a customer across their entire relationship with a business, viewed as an ongoing stream of cash flows rather than a single transaction.

Customer Acquisition Cost (CAC)

The total sales and marketing expenditure required to win a new customer, calculated as $\text{CAC} = \frac{\text{Total Acquisition Costs}}{\text{Number of New Customers Acquired}}$.

CLV:CAC Ratio

A vital health metric comparing the lifetime profit of a customer to the cost of acquiring them, with a ratio of $3:1$ or higher recognized as the standard benchmark for a sustainable business.

Customer Retention Rate (CRR)

The percentage of customers maintained over a defined period, calculated using the formula $\text{CRR} = \left(\frac{E - N}{S}\right) \times 100$, where $E$ is ending customers, $N$ is newly acquired customers, and $S$ is starting customers.

Customer Equity

The total financial asset value of a company's customer base, represented conceptually as the aggregated lifetime values of all current and potential future customers.

Customer Pyramid

A value-based customer segmentation model categorizing accounts into four distinct tiers based on profitability and loyalty: Platinum (top tier/advocates), Gold, Iron (mass market), and Lead (costly/drain on resources).

Customer Satisfaction

A psychological state resulting from a customer's cognitive comparison between pre-purchase expectations and post-consumption perceived performance ($\text{Perception} \ge \text{Expectation}$).

Expectancy Confirmation Theory

A psychological theory stating that customer satisfaction is determined by whether product performance confirms, positively disconfirms (exceeds), or negatively disconfirms (falls short of) pre-purchase expectations.

Positive Disconfirmation

An outcome within Expectancy Confirmation Theory where actual product or service performance exceeds customer expectations ($\text{Performance} > \text{Expectations}$), producing high satisfaction or delight.

Cognitive Dissonance

The psychological discomfort or post-purchase doubt experienced by a consumer holding conflicting thoughts or beliefs after making a significant purchase decision.

Customer Satisfaction Score (CSAT)

A transactional satisfaction metric calculated as $\text{CSAT (\%)} = \left(\frac{\text{Number of Satisfied Customers [Ratings 4 and 5]}}{\text{Total Number of Respondents}}\right) \times 100$.

Net Promoter Score (NPS)

A customer loyalty and brand advocacy index derived from a 0–10 recommendation scale, calculated as $\text{NPS} = \%\,\text{Promoters (9--10)} - \%\,\text{Detractors (0--6)}$.

Customer Effort Score (CES)

A service-process metric tracking the ease of interaction or issue resolution for a customer, built on the philosophy that minimizing customer friction increases loyalty.

Product Positioning

The strategic act of designing a company's offering and brand identity to occupy a distinct, valued, and competitive position in the mind of the target consumer.

Point of Difference (POD)

A core attribute, feature, or benefit of a brand's offering that convincingly sets it apart from and makes it superior to existing competitive alternatives in the market.

Reason to Believe (RTB)

The credible evidence, proof points, or factual support provided by a brand to substantiate its positioning claims and customer promises.

Unaided Awareness

A top-of-mind brand visibility metric measuring the percentage of target consumers who mention a brand spontaneously without any prompt when asked about a product category.

Aided Awareness

A brand familiarity metric measuring the percentage of survey respondents who recognize a brand when presented with its name alongside other competitors.

Market Share

A behavioral indicator of competitive strength representing the portion of total industry sales captured by an individual brand: $\text{Market Share} = \left(\frac{\text{Company Sales Revenue}}{\text{Total Market Sales Revenue}}\right) \times 100$.

Sales Growth Rate

A primary financial metric measuring the trajectory of sales revenue changes over time, calculated as $\left(\frac{\text{Current Period Sales} - \text{Previous Period Sales}}{\text{Previous Period Sales}}\right) \times 100$.

Return on Marketing Investment (ROMI)

A marketing efficiency metric quantifying profitability from marketing activities, calculated as $\text{ROMI} = \frac{(\text{Incremental Revenue} \times \text{Contribution Margin}) - \text{Marketing Cost}}{\text{Marketing Cost}}$.

Repeat Rate

A behavioral retention metric measuring the percentage of unique buyers who return to complete more than one purchase within a given time period: $\left(\frac{\text{Repeat Customers}}{\text{Total Unique Customers}}\right) \times 100$.