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

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Presentation on theme: "MARKETING PRODUCTIVITY ANALYSIS. 2 “Half the money I spend on advertising is wasted; the trouble is I don't know which half.”"— Presentation transcript:

1 MARKETING PRODUCTIVITY ANALYSIS

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

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

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

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

6 Marketing Productivity Analysis 6 “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 and 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.”

7 Marketing Productivity Analysis 7 “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 and 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”

8 Effective vs. Efficient: The Difference? 8

9 9 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.

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

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

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

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

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

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

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

17 Return on Marketing Investment: Rearview Mirror Marketing ROI Marketing Expenditure Marketing Support Incremental Contribution Incremental Volume CostsMargins Model

18 Return on Marketing Investment: Front Dash Marginal Marketing ROI Marginal Expenditure Marketing Support Marginal Contribution Incremental Volume CostsMargins Model

19 A BRIEF HISTORY OF MARKETING MIX MODELING

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

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

22 1875: Is This Really Marketing Mix? Galton’s work on inherited characteristics of sweet peas led to the initial conceptualization of linear regression

23 The First 100 Years 1875 Regression conceptuali zed

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

25 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

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

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

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

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

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

31 Marketing Mix Models – Before the Internet 31 TV x PrintRadioTradeSales

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

33 The World Changed… 33

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


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