Digital Academy Aegis Media & Microsoft Advertising 28 th June 2011

Econometrics Sasha Grujicic & Lynne Clarke

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

The Approach

Factors affecting a single purchase

Applying maths to marketing DriversPerformance Marketing activity Sales Competitor activity Brand perception Pricing Weather Customer acquisition Market share

Calculating revenue return on investment 8 Cost of marketing activity = RROI x Customers acquired Monetary value for each customer

Reaching the point of diminishing returns 0 As spend increases so does ROI Spend can still be delivering sales but at lower ROI than the optimal point Spend is no longer delivering sales Spend has reached optimal levels for ROI Example: Optimal ROI range Example: Optimal ROI range

Throw enough mud at the wall, some of it will stick

Adserving Data (MV) Rich Media Data (MV) Site Served Data (MV) Site Side Analytics (Proximity) French Data Video pre- roll Search (BING) ComScore Social (Radian 6) Nielsen FD+ data Econometric Modelling: What’s changing?

Econometric Modelling: Implications Opportunity to move to Agent Based Modeling and Targeting Greater level of granularity of data and attribution Purchase path mapping / correlations Real time transactional considerations More frequently updated modeling possibilities

Econometric Modelling: Implications

It is OUR job to help our clients understand the difference between the IMMEDIATE and the IMPORTANT

Econometric Modelling: Implications to planning How much to spend on marketing? What is the optimal mix of marketing activities? What is the overall impact of an increase or reduction of the marketing budget? What is a change in business performance due-to? How to improve the timing and execution of marketing? How does the impact of marketing vary across customer segments and store types?

How much to spend on marketing? Contribution of first $1 spent on advertising Contribution of the next $1 spent on advertising Econometric Modelling: Implications to planning

What is the optimal mix of marketing activities? Econometric Modelling: Implications to planning

What is the overall impact of an increase or reduction of the marketing budget? Contributions % of Sales Driven by Marketing Volume +5.2% Last Year This Year Econometric Modelling: Implications to planning

What is a change in business performance due-to? Marketing Impacts Non-Marketing Impacts Total change due to base Total change due to base Total change due to marketing Total change due to marketing Econometric Modelling: Implications to planning

How to improve the timing and execution of marketing? Econometric Modelling: Implications to planning

How does the impact of marketing vary across customer segments and store types? Econometric Modelling: Implications to planning

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