MARKETING PRODUCTIVITY ANALYSIS Half the money I spend

MARKETING PRODUCTIVITY ANALYSIS

“Half the money I spend on advertising is wasted; the trouble is I don't know which half. ” 2

John Wanamaker (1838 -1922): “Half the money I spend on advertising is wasted; the trouble is I don't know which half. ” 3

“Corporate marketing is the last bastion of unaccountable spending in corporate America. ” 4

Eric Schmidt (2006): “Corporate marketing is the last bastion of unaccountable spending in corporate America. ” 5

Marketing Productivity Analysis “The use of productivity measurement in relation to the marketing function is relatively new. The central role of marketing can be expressed as the management of consumer demand the translation of this demand into sales and profits. Marketing productivity analysis is an important tool in evaluating the performance of the marketing department in carrying out this role. It measures the efficiency with which marketing inputs are used to generate target levels of marketing outputs. ” 6

Marketing Productivity Analysis “The use of productivity measurement in relation to the marketing function is relatively new. The central role of marketing can be expressed as the management of consumer demand the translation of this demand into sales and profits. Marketing productivity analysis is an important tool in evaluating the performance of the marketing department in carrying out this role. It measures the efficiency with which marketing inputs are used to generate target levels of marketing outputs. ” Thomas, Michael J. (1984) “The Meaning of Marketing Productivity Analysis” 7

Effective vs. Efficient: The Difference? 8

Effective vs. Efficient: The Difference? Effective (adj. ): Adequate to accomplish a purpose; producing the intended or expected result. Efficient (adj. ): Performing or functioning in the best possible manner with the least waste of time and effort. 9

“Measuring Marketing Productivity” 10 Rust et al. (2004)

“Metrics for Making Marketing Matter” 11 Lehmann (2004)

Framework for Marketing Performance Measurement • • What marketers and competitors do Advertising Price Promotions Distribution What customers think & feel Direct Effect Awareness Consideration Feedback Effect Liking What customers do Brand purchases 12 Adapted from Lehmann and Reibstein (2006)

Advertising Campaign Testing • • What marketers and competitors do Advertising Price Promotions Distribution What customers think & feel Direct Effect Awareness Consideration Feedback Effect Liking What customers do Brand purchases 13 Adapted from Lehmann and Reibstein (2006)

Brand Health Tracking • • What marketers and competitors do Advertising Price Promotions Distribution What customers think & feel Direct Effect Awareness Consideration Feedback Effect Liking What customers do Brand purchases 14 Adapted from Lehmann and Reibstein (2006)

Marketing Mix Modeling • • What marketers and competitors do Advertising Price Promotions Distribution What customers think & feel Direct Effect Awareness Consideration Feedback Effect Liking What customers do Brand purchases 15 Adapted from Lehmann and Reibstein (2006)

M 5: Mindset Metrics and Marketing Mix Modeling • • What marketers and competitors do Advertising Price Promotions Distribution What customers think & feel Direct Effect Awareness Consideration Feedback Effect Liking What customers do Brand purchases 16 Adapted from Lehmann and Reibstein (2006)

Return on Marketing Investment: Rearview Mirror Marketing ROI Marketing Expenditure Incremental Contribution Costs Marketing Support Margins Model Incremental Volume

Return on Marketing Investment: Front Dash Marginal Marketing ROI Marginal Expenditure Marginal Contribution Costs Marketing Support Margins Model Incremental Volume

A BRIEF HISTORY OF MARKETING MIX MODELING

It all began with… What do these three things have in common? (first drink is on me if you can guess!)

The Answer: SIR FRANCIS GALTON eugenicist, tropical anthropologist, explorer, geographer, inventor, meteorologist, proto-geneticist,

1875: Is This Really Marketing Mix? 18 16 14 12 10 8 6 4 2 2 4 6 8 10 12 14 16 18 Galton’s work on inherited characteristics of sweet peas led to the initial conceptualization of linear

The First 100 Years Regression conceptuali zed 1875

The Birth of Data Regression conceptuali zed 1875 1923 A. C. Nielsen Company Founded

The Nielsen Factor Pioneer in Data Collection • Inaugurated a National Radio Index for broadcasters and advertisers in 1942 • Followed by a television ratings service in 1950 • Once TV ratings were available, people starting experimenting 25

Advertising, Goodwill and Demand Vidale/Wolfe observe relationship between sales and advertising Regression conceptuali zed 1875 1923 1957 A. C. Nielsen Dorfma Company n/Steine r Founded Theroe m 1962 Arrow/Nerlo ve Formalize Adstock

First Marketing Mix Model Vidale/Wolfe observe relationship between sales and advertising Regression conceptuali zed 1875 1923 1957 A. C. Nielsen Dorfma Company n/Steine r Founded Theroe m Little/Lodish Media Planning Calculus MDS Founded (1969) 1962 Arrow/Nerlo ve Formalize Adstock 1975 Little BRAND AID Marketin g Mix Model

Advertising has a Carryover Effect Vidale/Wolfe observe relationship between sales and advertising Regression conceptuali zed 1875 1923 1957 A. C. Nielsen Dorfma Company n/Steine r Founded Theroe m Little/Lodish Media Planning Calculus MDS Founded (1969) 1962 Broadbent Popularize s Adtsock 1975 Little Arrow/Nerlo ve Formalize BRAND AID Adstock Marketin g Mix Model 1979

Two Dimensions of Adstock Advertising Lag (Decayed Effect) Advertising Saturation (Diminishing Returns Effect) 29

Ten Years After IRI Found ed 1980 Guadagni/Lit tle Logit Mix Model 1983 Nielsen Launches Home Video Index Duke’s Marketing Workbenc h IRI’s Infoscan Introduc ed 1986 1987 1985 IRI Acquire s MDS MMA Founde d Blattberg/Wisniew ski How Promotions Work 30 1989

Marketing Mix Models – Before the Internet TV x Print Radi o 31 Trad e Sales

The Next 10 Years 10 Marketing Mix Modeling firms founded; numerous consultants and ad agencies start ROMI practices 1999 1990 So what happened next? 32

The World Changed… 33

MMM in a Digital World Sales & Trade Promotions Marketing Search Volume Search Online Display Paid Search Impressions Paid Search Clicks Business Performance Business. Impact Business Impact Sales Direct Indirect 34 Social Media