1. Modeling Market Outcomes as a Function of the Marketing Mix Copyright 2014 Institute for Marketing Productivity - All rights reserved

2. The Gist Pie = (Price – Production Cost) * Sales – Marketing Cost Where can you spot Randomness? 2

3. Overarching Motivation Many Marketing Measureables are Random What is the origin of this randomness? Knowing, of-course, supports decision improvement 3

4. Roadmap 1. Intro to Excel Data Analysis Add-In 2. Experiment One: Random Numbers 3. Experiment Two: Model Illustration 4. Experiment Three: Random + Model 4

5. Recitation: Random Variables Variables who’s value is subject to variation resulting from chance 5

6. Experiment One: Random Numbers Fair Coin Flip to Buy Generate 12 fair coin flips Media Delivery Shock Generate 12 media shocks to paid media plan Conversion (Sales) Shock Generate 12 shocks to aggregate conversions 6

7. Recitation: Models Verbal: Sales are driven by price. As price goes up sales go down. A change in price brings about double the change in sales. And, there are no sales when price reaches fifty dollars. Mathematical: Use symbols to denote marketing variables and express their relationships as equations or inequalities by following the rules of mathematical logic. Graphical/Conceptual: Use spatial or directed graphs and charts the express model 7

8. Recitation: Theoretical Model Is a set of assumptions that describes a marketing environment 8

9. Experiment Two: Theorize and Illustrate Relationships Construct a simple (one variable) verbal model of paid media’s relationship to conversion Construct a mathematical model of your verbal model Illustrate your model with an Excel line chart 9

10. Here’s my verbal model Conversions increase as advertising pressure increases, and response to advertising diminishes as pressure increases 10

11. Here’s my mathematical model 11

12. Here’s a Plot of My Function 12

13. Recitation: Measurement Models Measure the response of a managerial objective to various independent marketing and marketing-environment variables. 13

14. Experiment Three: Bring Model and Randomness Together Objective = f(Marketing plan, Plan shock) + Objective shock 14

15. Here’s a Plot from My Example 15

16. SUMMARY Motivated Experiments Conducted a random shock sampling experiment Theorized a relationship between paid media and sales conversions Generated Sales data by combining random shock sample with mathematical model of sales response to paid media