MARKETING PRODUCTIVITY ANALYSIS
“Half the money I spend on advertising is
wasted; the trouble is I don't know which half.”
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John Wanamaker (1838-1922):
“Half the money I spend on advertising is
wasted; the trouble is I don't know which half.”
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“Corporate marketing is the last bastion of
unaccountable spending in corporate America.”
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Eric Schmidt (2006):
“Corporate marketing is the last bastion of
unaccountable spending in corporate America.”
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Marketing Productivity Analysis
“The use of productivity measurement in relation to the marketing
marketing function is relatively new. The central role of marketing can be
marketing can be expressed as the management of consumer demand and
consumer demand and the translation of this demand into sales and
sales and profits. Marketing productivity analysis is an important tool in
important tool in evaluating the performance of the marketing department
marketing department in carrying out this role. It measures the efficiency
the efficiency with which marketing inputs are used to generate target
generate target levels of marketing outputs.”
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Marketing Productivity Analysis
“The use of productivity measurement in relation to the marketing function is
marketing function is relatively new. The central role of marketing can be
marketing can be expressed as the management of consumer demand and the
demand and the translation of this demand into sales and profits. Marketing
profits. Marketing productivity analysis is an important tool in evaluating the
evaluating the performance of the marketing department in carrying out this
carrying out this role. It measures the efficiency with which marketing inputs
marketing inputs are used to generate target levels of marketing outputs.”
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Effective vs. Efficient: The Difference?
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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.
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“Measuring Marketing Productivity”
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Rust et al. (2004)
“Metrics for Making Marketing Matter”
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Lehmann (2004)
Framework for Marketing Performance Measurement
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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
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Adapted from Lehmann and Reibstein (2006)
Advertising Campaign Testing
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•
•
•
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
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Adapted from Lehmann and Reibstein (2006)
Brand Health Tracking
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•
•
•
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
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Adapted from Lehmann and Reibstein (2006)
Marketing Mix Modeling
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•
•
•
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
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Adapted from Lehmann and Reibstein (2006)
M5: Mindset Metrics and Marketing Mix Modeling
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•
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•
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
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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
anthropologist, eugenicist, tropical explorer, geographer, inventor,
meteorologist, proto-geneticist, psychometrician and statistician
1875: Is This Really Marketing Mix?
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2
4
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8
10
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Galton’s work on inherited characteristics of sweet peas led to
the initial conceptualization of linear regression
The First 100 Years
Regression
conceptualized
1875
The Birth of Data
Regression
conceptualized
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
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Advertising, Goodwill and Demand
Vidale/Wolfe observe
relationship between sales
and advertising
Regression
conceptualized
1875
1923
1957
Dorfman/Stei
A.C. Nielsen
Company Founded ner Theroem
1962
Arrow/Nerlove
Formalize Adstock
First Marketing Mix Model
Vidale/Wolfe observe
relationship between sales
and advertising
Regression
conceptualized
1875
1923
1957
Dorfman/Stei
A.C. Nielsen
Company Founded ner Theroem
Little/Lodish Media
Planning Calculus
MDS Founded (1969)
1962
Arrow/Nerlove
Formalize Adstock
1975
Little
BRANDAID
Marketing
Mix Model
Advertising has a Carryover Effect
Vidale/Wolfe observe
relationship between sales
and advertising
Regression
conceptualized
1875
1923
1957
Dorfman/Stei
A.C. Nielsen
Company Founded ner Theroem
Little/Lodish Media
Planning Calculus
MDS Founded (1969)
1962
1975
Arrow/Nerlove
Formalize Adstock
Little
BRANDAID
Marketing
Mix Model
Broadbent
Popularizes
Adtsock
1979
Two Dimensions of Adstock
Advertising Lag (Decayed Effect)
Advertising Saturation (Diminishing Returns Effect)
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Ten Years After
IRI
Founded
1980
Guadagni/Little Logit
Mix Model
1983
Nielsen Launches
Home Video Index
Duke’s Marketing
Workbench
IRI’s Infoscan
Introduced
MMA
Founded
1986
1987
1989
1985
IRI Acquires
MDS
Blattberg/Wisniewski How
Promotions Work
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Marketing Mix Models – Before the Internet
TV
x
Print
Radio
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Trade
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?
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The World Changed…
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MMM in a Digital World
Sales & Trade
Promotions
Marketing
SearchVolume
Volume
Search
Online Display
Paid Search
Impressions
Paid Search
Clicks
Business Performance
Business
BusinessImpact
Impact
Business
Impact
Sales
Direct
Indirect
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Social Media