Last week we started a case study from the online retail industry to learn more about marketing analytics (Read Part 1). Before we continue with the same case, let me share a few factors that enhance the quality of analysis for marketing or customer analytics. The obvious factors, of course, are the analysts’ inclination & expertise toward business problem solving, and love for data, maths, and numbers. Moreover, to understand customers better, analysts also need to have the keenness to understand human behavior. The primary branches of science that enhance our understanding of why humans behave the way they do are psychology, sociology, and neuroscience.
Psychology is the study of an individual’s behavior; sociology, on the other hand, studies the social behavior of humans. Neuroscience has been the game changer in the last few decades for our understanding of human brain and behavior. The advanced imaging techniques like functional magnetic resonance imaging (fMRI) are elucidating the inaccessible areas of the brain and its functions. These are still early days but we are living in exciting times where we are learning so many cool things about human behavior. Let me explore a bit more about human behavior by analyzing the most deviant behavior of all, by analyzing…
Neuroscience of Murder
Murder is a horrible crime, but the most heinous murderers are serial killers or psychopaths. These outliers (thankfully!) in our society are characterized as offenders for the killing of two or more victims in separate events. The worst serial killers like Ted Bundy are responsible killing more than 30 victims, all unknown to them, for no specific reason. Psychopaths often display behavior such as lack of empathy, poor self-control, excessive risk taking, superficial charm, and grandiosity. Let us peek inside the brain to understand the epicenter of these characteristics i.e. lack of empathy, poor self-control. We will come back a little later to other behaviors of psychopaths like excessive risk taking, superficial charm, and grandiosity. In this process, we will learn more about human behavior.
Remember the last scene of the movie Titanic, when Leonardo DiCaprio’s character (Jack Dawson) was about to die in the chilling water of the Atlantic ocean. In this scene, he was urging his girlfriend Rose (Kate Winslet) to go on living a happy and long life. This made some people bawl in the movie-theater, and the remaining audience felt deeply touched by this unfortunate event on the screen. This tendency of human beings to associate and feel other people’s pain and joy is called empathy. Marketers are of course aware of this fact and use this effectively in advertising to make you establish a deeper emotional connect with their product.
Psychopaths or serial killers do not feel empathy. This is the reason it becomes easy for them to torture people to death. The lack of empathy in psychopaths is because of a neurological disorder in their brains. Mirror neurons, part of an intricate and detailed circuitry of brain neural networks, connect the emotion centers of the brain with sensory organs like eyes etc. Mirror neuron circuitry in psychopaths is found to be impaired hence the emotional centers of their brain don’t get ignited enough for them to feel another person’s pain.
A crucial part of the human brain responsible for our emotions is the frontal lobe (OK I know I am using quite a few jargon here, but this part of the brain is really cool. I will tell you more about the frontal lobe in some later article.). The frontal lobe is also responsible for self-awareness and self-control. For psychopaths the frontal lobe shows much less activity than a normal brain, hence they display the lack of self-control. Marketers and advertisers often test everyone’s self-control through their appealing messages and visual techniques. We have all bought useless products at various points of our lives while succumbing to lack of self-control. It is interesting how neuroscience is linking our behavior to activities in our brain.
Coming back to serial killers, in analytics and modeling terms, the key determining variables / factors for their aberrant activities are linked to both nature (genetics, brain activities etc.) and nurture (upbringing, parenting, the behavior of society etc.). “Genetics loads the gun and the environment pulls the trigger.” This statement by Francis Collins, director NIH, sums up the role of genetics and society for creating killers.
Human behavior is so complicated as it is an amalgamation of so many factors / variables. It is essential for good marketing analysts to be a keen observer of human behavior. The job of marketing analyst is not just to crunch numbers but to gain a deeper understanding of customer behavior. A good marketing analyst reveals not just how customers behave but also why customers behave the way they do. Keeping this in mind, let’s move back to the marketing analytic case study we started last week:
Marketing Analytics Case Study Example
After the CMO left your office (read the earlier part), you asked your analysts to pull out a few numbers from the company’s data warehouse for the cost of campaigns and profit. Using the data you figured out that the variable cost of running a campaign for each solicitation is around $2.3. Additionally, every customer that uses a marketing catalog is generating around $56 in profit. You did a quick back of the envelope calculation to estimate the profit from the campaigns
You could gauge the problem in the above quick and dirty campaign P&L. This bottom line leaves no margin for the CMO to cover the operating cost of campaigns and running his team. He needs to do better on both customer response / conversion rates for the campaigns and revenue generated by customers through the campaigns. This helps you define the immediate objectives i.e
Objective 1: Improve the conversion rate of the campaigns i.e. number of customer buying products from the marketing product catalog
Objective 2: Improve the revenue generated through the converted customers
The above objectives will involve the creation of a couple of models. The first model will estimate probabilities for customers to respond to the campaign catalog by purchasing products from it. The second model will estimate the dollar value each customer will generate if they respond to the campaign. As you could probably notice the first problem is a classification problem. The second problem will involve estimating a continuous variable i.e. dollar value. After the above two objectives are satisfied the net profit should be much better than $5200 generated by last year’s campaigns effort. In the next articles, we will explore more about the process to accomplish the above objectives.
We have seen that psychopaths or sociopaths have the following behavioral patterns i.e. lack of empathy, poor self-control, excessive risk taking, superficial charm, and grandiosity. However, I must also point out that not everyone with the above tendency will become a serial killer. There are several examples of people with similar brain structure as psychopaths working in socially benevolent manners. Of course, a good nurture (parenting, support of society etc.) have shaped these humans to behave for the good of the society. There are also examples of people with similar tendencies becoming bankers and politicians, not necessarily working for a good cause. Quite a few investment bankers during the financial crisis of 2007 were also displaying psychopathic behavior of lack of empathy, poor self-control, excessive risk taking, superficial charm, and grandiosity. Phew! human behavior is so complicated. We still have a way to go before we have some decent understanding of human nature. We have made a good start with our scientific investigation but I must say we are nowhere close. We know a lot more about the universe and other physical phenomena than about our own nature and behavior. See you soon with the next article.