Aggregating Unlike Inputs By Converting Inputs into Dollars of Marketing Expense to Simplify The Analysis of Marketing Performance Ted Mitchell

The issue is How to combine similar marketing inputs that have different metrics Printed Ads, Radio Ads, and Sales Force Calls are all communication efforts They can all have the same goal BUT They have different measurements of application Printed Ads: square inches per insertion Radio Ads: Time on air Calls by Sales Person: Time with Client

Combining Marketing Inputs That have the same primary goal or desired output. Finding a Common metric so that unlike variables can be added together Attention Episodes Square footage of display space Dollars spent

Typology of Demand Producing Marketing Machines Two-Factor Model Calibrated from a Single Performance Two-Factor Meta-Model Calibrated from a minimum of two performances Input from Positive Elements of Marketing Mix, π Promotion, Place, Product Type #1 Quantity Sold, Q = r x π Conversion rate, r = Q/π Quantity Sold, Q = (Q/π) x π Type #3 slope-origin version ∆Quantity Sold, ∆Q = m x ∆π Conversion rate, m = ∆Q/∆π Slope-Intercept version Q = a + b(π) Input from Negative elements of the Marketing mix Price Tag, P Type #2 Quantity Sold, Q = r x P Conversion rate, r = Q/P Quantity Sold, Q = (Q/P) x P Type #4 slope-origin version ∆Quantity Sold, ∆Q = m x ∆P Conversion rate, m = ∆Q/∆P Slope-Intercept version Q = a - b(P)

To build the Typology we needed 1) Simplify The types of Input into Positive and Negative elements of the 4P marketing mix 2) Meta-Machine for Forecasting Demand, Q, from Positive Inputs of Marketing Mix 3) Meta-machine for Forecasting Demand, Q, from Negative Input of Selling Price Tag

Two Basic Types of Input, I 1) Positive Elements of the marketing mix, π, that increase value to customer: Promotion, Place, Product quality 2) Revenue generating element of the price tag, P, to the customer, that reduces value to the customer

Aggregating Inputs into Dollars Inputs as numbers of hours, servers, coffee quality, radio spots Cups per hour, per server, per radio spot, shelf facing Combining various promotion efforts, into dollars of budget expenditure Cups per $ of promotion, product expense, channel expense

The more strategic the analysis The more things in each of the 4P’s have to be aggregated

To simplify the Marketing machines Marketing Managers are often forced to combine unlike elements of the marketing mix into a single variable There are color ads in magazines, b&w ads in newspapers, promotional inserts To gather different types of print ads into a single metric we may use number of square inches, number of insertions, rating points, etc. To gather differ types of promotional effort such as print ads, radio spots, TV spots, Internet click-throughs we may use number of attention episodes, amounts of money expended, gross rating points, etc.

Total Promotional Effort May use total dollar expenditures on all forms of communication effort, advertising, sales force, public relations, special events, contests, etc. that have a common purpose New product launch New Penetration/market share campaign Building Loyalty program

Total Place Expenditures On Number of channels, number of channel levels, number of store outlets, number of sales people, amount of retail show space, number of store hours, etc. May be used to as the total place effort

Total Product Effort Individual brands are brought together into families, into product lines, product categories, legal implications Individual Product attributes are lumped into measures of reliability, dependability, power, speed, comfort, style etc. Amounts of money, manpower, spent of any individual product aspect can be combined into a single measure of product input

The Aggregation Of positive elements of the marketing mix by converting every element of the mix into dollars of marketing effort is very common The Aggregation of negative elements into customer cost, beyond the price tag to the customer, is less common For example, Credit costs, insurance costs, cost of luggage, transfer costs, warranty costs, life-time maintenance costs are usually considered invisible and not aggregated into total customer cost.

The Aggregation Of marketing Inputs for simplification purposes often results in the analysis of dollars of marketing effort and dollar price tags as marketing inputs to generate dollars of marketing revenue as an output. Dollars of Output, $O = (conversion rate, $O/$I) x (Dollars of Input, $I)

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