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Best Practice POV

DEFINITION: WHAT IS A MARKETING MODEL   In looking for an operational definition of what a Marketing Model is, certain key words emerge. These are representation, real world, events, objects, processes and relationships. Importantly, a model is not merely an area of application, a statistical technique nor a generic description. CRM, regression analysis and data mining are not Marketing Models per se. They are an area of application, a statistical technique and a generic description.   Marketing Models are created for a purpose, make assumptions about what they are representing and typically consist of variables that describe the relationships that are of interest. (Lilien, Rangaswamy) Often analogies are made to maps and charts that are also vehicles to portray relationships. Furthermore, in defining a Marketing Model there tends to be a distinction made between the construction and building of the model vs. the application of the model.   “In the most general sense, a “model” is anything used to represent something else – a map used to represent a section of countryside is a model, and so is a chart used to represent concurrent changes in fuel oil sales and temperature.” (Buzzell) Stated another way, a Marketing Model is a stylized representation of reality that is easier to deal with and explore for a specific purpose than reality itself. (Lilien, Rangaswamy) Modeling is simply a means of examining, depicting, specifying and operationalizing relationships. (Smith)   The following chart exhibits the fundamental correspondence between a model and the real world. Marketing Models are seen as representations of real world objects, events, and processes. There are two points of correspondence shown in the diagram: the representation of real objects and events by a model (model-building) and the application of results derived from a model. (Buzzell)      Chart 1   Correspondence Between A Model And The “Real World”   “Real World”                                                                                 “Model”   Objects and Events                           Representation                   Model-Representation                                                 Model-Building   Relationships and Processes                                                          Operations on Models     Real World Results                                                                        Model Result                                                             (Buzzell ) A good way is to look at models is in terms of their intended purpose. They may be measurement models whose purpose is to measure variables, relationships or demand as a function of a number of dependent variables. Another purpose is decision support where models are designed to help managers make decisions.    “A model that is used by a manager should be simple, robust, easy to control, adaptive, as complete as possible, and easy to communicate with. By simple is meant easy to understand; by robust, hard to get absurd answers from; by easy to control, that the user knows what input data would be required to produce desired output answers; adaptive means that the model can be adjusted as new information is acquired; completeness implies that important phenomena will be included even if they require judgmental estimates of their effect; and, finally, easy to communicate with means that the manager can quickly and easily change inputs and obtain and understand the outputs. (Little) These decision models can be descriptive, predictive or normative. Finally, there are theoretical models whose purpose is to explain marketing phenomena. (Lilien, Rangaswamy) , (Lilien, Kotler, Moorthy)  A related way to look at models is by the function they are intended to perform; describe a process, predict future events, serve as a control providing a basis of choice among alternative courses of action. (Buzzell)   Another way to look at different types of models is to examine them in terms of their degree of abstraction in terms of representing reality. Iconic models directly resemble reality. Analogue models substitute one property for another. Symbolic models represent by symbols of a logical or mathematical character. (Buzzell)

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Best Practice POV submitted by
James Donius
James Donius
Managing Director
at Marketplace Measurement Worldwide
Scarborough, New York
United States
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