Measuring and managing return on marketing investment, that’s the promise of the book from Guy R. Powell. A famous quote in marketing is : Half of my advertising is wasted; I just don’t know which half (John Wannamacher). Indeed, how many marketing initiative are rigorously evaluated? No doubt price cuts increase volumes, but how often does it to improve the top line, not even talking about the bottom line. This book is about putting some analytics in marketing and knowing the truth.
The five step of marketing effectiveness
The book start with a presentation of their marketing effectiveness framework which is a very good one indeed. It’s based around 4P (Price, Product, Place, Promotion), 3C (Competition, Consumers, Channel) and 1E (Exogenous factor like holidays, weather, regulation, …) which are all stuff which can impact your KPI whether you have control on it (like the P elements) or not. After that presentation, the book goes through 5 levels of marketive effectiveness.
The first step seems easy, you just have to track your marketing activities and how much was spent for each one. The book propose a test, you should be able to provide in half an hour a spreadsheet of all activities in the last 3 years and all expected activities in the next year. Many companies fail the test.
This is what we can expect from a campaign analysis. Each sale which was driven by the marketing campaign is considered as additional revenue thank to the campaign. This is usually a last touch attribution method (if one week, I use a coupon to buy my weekly pack of beer it will be attributed to the campaign even if I don’t care about the campaign). Then, you have revenue generated by the campaign on one side, the cost on the other and you can easily compute some ROI.
As marketing campaign are more and more using multiple channels, analyzing one is more and more tricky. The mix modeler approach uses the 4P3C1E as input and output the sales volumes. Learning is usually done by regression analysis. Now you are able to know what channel is the most relevant, what is expected if a competitor launch a marketing campaign. You can also optimize expenditure for each channel to achieve greater ROI.
While the mix modeler approach is very campaign focused, the consumer analyser approach focus on the customer by modelizing it as an agent. I think this is very valuable when you already have some customer segments which behave differently. With such systems you can generate any What-If scenario and see what would happen. It’s a bit like the psychohistory science from Asimov which could predict the future of mankind by mathematic modelization. Definitively the holy grail for any business analyst.
This chapter focus on managing a portfolio of brand to maximize shareholder value.
This book is about marketing meeting analytics and will give you a lot of ideas. Thanks to the 14 case studies you can already find out where to start. Sadly, the book stop here. Both mix modeler and consumer analyzer are really valuable approaches but the journey is long to obtain them even if it seems easy in the book. Case studies are not really detailed so it’s hard to know which shortcuts they take. Nevertheless, the underlying idea of the book is very strong. Considering the amount of money spent in marketing and that much of it is wasted or misallocated, putting at least a bit of analytics in the process could only help.
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