Measuring and Predicting Marketing Performance


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The ability to measure and then predict your marketing effectiveness opens up a new set of
opportunities that will not only optimise your business performance but help to cultivate innovation within your marketing activity.

Point of View By Azlan Raj, Marketing Strategy & Analysis, SapientNitro

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Measuring and Predicting Marketing Performance

  1. 1. POINT OF viewMeasuring and PredictingMarketing PerformanceBy: Azlan Raj, Marketing Strategy & Analysis, SapientNitroIn the current economic climate, which includes a saturated and competitive online market, theability to convert customers within a new age of consumer behaviour is becoming increasinglydifficult (and expensive).There are three ways in which you can increase your profit margin: reduce costs, increase revenue,or both. To increase your online revenue, you can optimise on-site or you can throw money at yourmarketing efforts. However, instead of increasing your marketing spend in a time where businessesare tightening their budgets, you can also look at optimising your existing budget. Understanding howconsumers engage with your brand touchpoints is the first step to maximising your marketing efforts.The ability to measure and then predict your marketing effectiveness opens up a new set ofopportunities that will not only optimise your business performance but help to cultivate innovationwithin your marketing activity.INTRODUCTION TO MEASURING AND PREDICTING MARKETING PERFORMANCEMarketing has evolved over the last 50 years from billboard advertising right through to present daydigital engagement. Whilst walking on the streets of London, I have seen digital billboards, digitalsignage, and even digital bins. If you walk into a store, you may see hybrid tills and computers withstore assistants using iPads instead of running upstairs to check stock. We now live in an entirely newdigital age.Source: Mat Siltala, Dream Systems Media © Sapient Corporation, 2012
  2. 2. POINT OF view This evolution has happened as part of a constantly changing society that has quickly adapted to the new technologies it has been presented with. It shows the adaptability of today’s simplicity-driven consumer. Children as young as 12 months are now able to use these technologies, and it’s forcing us to quickly evolve. Marketing has progressed accordingly, adapting to this new age of technology in order to meet consumer needs. However, analytics is often overlooked through this growth, and whilst more advanced techniques in measuring performance (through digital and even traditional channels) have come to fruition, the ability to effectively measure a multi-channel environment is still in its infancy in most businesses despite being high on the corporate agenda. Over 50% of C-Suite executives see data and analytics as a top 10 corporate priority, with almost 10% placing it right at the top of their agenda. This shows just how much higher a priority analytics should be in profile and efficiency than it currently is. DIGITAL BUSINESS PRIORITIES ON CORPORATE AGENDA (% OF C-SUITE EXECUTIVES) MAY 2012 BIG DATA AND ANALYTICS 91 62 61 4 20 13DIGITAL MARKETING AND SOCIAL TOOLS 91 62 61 4 20 13 FLEXIBLE DELIVERY PLATFORMS 61 22 31 5 23 17 Top corporate priority Not a top corporate or BU priority Top priority for 1-2 business units Top 10 corporate priority Top 3 corporate priority Not on the agenda Source: McKinsey & Company, In addition, there is much talk about “Big Data” and the ability to measure every item of data, from every system, in every channel. However, few companies take the opportunity to effectively measure the data that is available now. The ability to track marketing (in most cases) can be completed without the entire headache of getting legacy systems to talk to each other, yet very few businesses are doing this in a way that will drive business change. The large majority of businesses don’t effectively attribute their channels to measure return on investment (ROI). A recent study from IBM has shown that 78% of CEOs believe that marketers aren’t empowering their teams to focus more on ROI and are losing sight of their main objectives. This is something that can be addressed by correctly investing and shifting the culture of a business from the top down in order to become a performance-driven (data-driven) organisation. Businesses need to consider their more tactical options as well as their wider strategic initiatives. It’s a fine balance, but some of the tactical work can feed into the wider data needs of the business. © Sapient Corporation, 2012
  3. 3. POINT OF viewHOW DO YOU EFFECTIVELY MEASURE AND PREDICT MARKETING PERFORMANCE?There is a lot of focus on two buzz phrases at the moment: “channel attribution” and “media mixmodelling.” Search for either of these phrases in Google, and you’ll receive a list of blog posts aboutwhat they are and how effective they can be. These articles aren’t wrong. There are some very lucrativebusiness benefits to using both. However, there is a level of understanding and maturity that goesalongside using either approach. In order to start using them to efficiently calculate ROI, you must firstunderstand the differences and how they can be applied within your business.Channel AttributionChannel attribution allows businesses to look at the historic performance of marketing activity at ajourney level. Single-touch journeys account for approximately 50% of conversions online. This meansthat the remaining 50% contain more than one touchpoint. Allocating performance solely to onechannel can be a misrepresentation of the true effectiveness of your marketing activity.Key Benefits of Channel Attribution• Allows you to acquire cost savings by allocating more accurate spend across a multi-channel journey (e.g., payments to affiliates)• Allows you to understand where marketing channels have underperformed at channel level, campaign level, product level, and media levelMedia Mix ModellingMedia mix modelling helps to predict the effectiveness of marketing. Using the historic data fromchannel attribution, media mix modelling leverages on the power of predictive analysis to forecastwhich channels will perform better based on certain criteria.Key Benefits of Media Mix Modelling• Allows you to use channel attribution data to predict future performance. It can predict the likelihood that a channel such as natural search will be more or less likely to convert when preceded by display or social• Allows you to look at permutations and combinations to calculate which channels work most effectively together• Allows you to stay ahead of your competitors by optimising your spend based on journeys that work for your customers• Allows you to reduce future spend whilst potentially increasing conversion (and ultimately ROI)WHY USE PREDICTIVE ANALYTICS?Media mix modelling combines the data obtained from channel “Predictive modeling is the areaattribution with the insight of predictive analysis to help define how of data analytics concernedmarketing budgets can be spent in the future. with forecasting probabilities and trends”Predictive modelling should only be addressed once you reach acertain level of confidence with your attribution modelling. However, Predictive Modeling Resources, 2012there are many questions that your channel attribution model shouldleave you with, which predictive analysis could help answer: © Sapient Corporation, 2012
  4. 4. POINT OF view • Why is this channel underperforming, and will it work better in any other scenario? • Why does it (or doesn’t it) perform better? • Is there a tactical system that can be used to maximise marketing efforts? • How likely is my campaign to succeed based on this past experience, and what impact will it have? Predictive analytics will allow you to understand the likelihood that a channel will further perform within a particular scenario, and the deeper impact that may not be initially noticed by merely looking at the attribution alone. But why do you need predictive analysis if you already use advanced attribution modelling? Predictive analytics delivers information outside of channel attribution. As mentioned previously, media mix modelling aims to deliver future insights rather than reflect on the historic data. The difference here is that media mix modelling (predictive analytics) uses the channel attribution data as a springboard to deliver further insight. This is why it is imperative to have a robust attribution model in place prior to introducing predictive modelling. Once in place, predictive analytics will allow you to address some of the key questions above. For example, if Channel A is performing well and we increase or re-allocate budget: a) Will it improve its performance in the short term? b) Will it perform better under different journeys? (e.g., before or after Channel B) c) What is the likelihood that it will improve performance longer term? d) What effect could this change have on other channels? (e.g., Channel B) In order to be at a level to deliver the answers to the above questions, you need to evolve your marketing analytics so that you can confidently understand your marketing performance. THE MARKETING ANALYTICS MATURITY MODEL Assessing your maturity within marketing analytics is the first step in understanding how to develop your marketing efforts beyond basic tracking. SapientNitro’s Marketing Analytics Maturity Model outlines the five key stages in developing your marketing analytics maturity in order to ensure that you maximise your spend.Source: SapientNitro,2012 © Sapient Corporation, 2012
  5. 5. POINT OF view1. ReportersReporters look at historical data and produce flat content reports to which they can monitor whatis happening at the most basic level. Reporting is about reviewing through hindsight. The reportingculture is focused on “sense checking” that the data matches the expectations of a particularcampaign.2. MeasurersMeasurers will take into account success criteria and ensure that valuable key performance indicators(KPIs) are in place, whilst aiming to maintain data integrity. Measurers will also aim to evolve analyticaldata into something that can drive actionable business change. Measurers start to look at multiple datasources and more dynamic reporting.3. OptimisersOptimisers look at the present and make changes accordingly. Optimising companies tend to be moremature with regards to their infrastructure and culture. As a result, they will be more strategicallyevolved with their approach to marketing analytics despite the reactive nature of optimising. Optimiserswill also start to look at individual channel performances in silos to help deliver agile improvement.4. AnalysersAnalysers ask the question “why?” in order to deliver deeper insights that can influence the strategicdirection of the business. Analysts in more analytically mature companies are valued because of aculture that lives and breathes data–driven change. Analysing companies aren’t solely reactive but theywill take a holistic view of optimisation and targeting, whilst also beginning to deliver a multi-channelapproach to analysis.5. FuturistsBased on the art movement, this culture of analytics maturity oozes innovation by using historic datato forecast and predict the performance of marketing. By effectively strategising and operationallyimplementing changes in the business, the futurist culture will be innovative by aiming to deliver theultimate performance in a multi-channel environment in order to ensure that a wider picture is alwaysaccounted for.WHAT ATTRIBUTION MODELS ARE THERE?A number of different attribution models exist; all of which are named depending on the author. Eachmodel has its pros and cons, but the appropriate application of these are dependent on your business.Exploring a range of models can help you to understand where marketing channels are delivering (orunder-delivering) and give you a clearer picture of the end customer.Last Touch AllocationLast Touch Allocation is the most common method of attribution and is used in the majority ofbusinesses today. Last Touch measures the final channel in a customer journey and allocates allpurchases and conversions against this final channel. Therefore, all success metrics are given to thechannel that “closes” the sale.   © Sapient Corporation, 2012
  6. 6. POINT OF viewFirst Touch AllocationFirst Touch Allocation measures the first channel in a customer journey and allocates all purchasesand conversions against this channel. Therefore, all success metrics are given to the channel thatinitially engages the consumer.In this example, all revenue would be attributed to the display channel:  Last Touch Weighted AllocationLast Touch Weighted Allocation measures all the channels in a customer journey and allocatesall purchases and conversions against touchpoints depending on the position within that journey.Therefore, the closer the channel is to the Last Touch, the higher the allocation. Higher positionalweighting means that all success metrics are hierarchically distributed to each channel accordingly.In this example, all revenue would be attributed to channels depending on their position:  First Touch Weighted AllocationFirst Touch Weighted Allocation measures all the channels in a customer journey and allocatesall purchases and conversions against touchpoints depending on the position within that journey.Therefore, the closer the channel is to the First Touch, the higher the allocation. Higher positionalweighting means that all success metrics are hierarchically distributed to each channel accordingly.In this example, all revenue would be attributed to channels depending on their position  Linear AllocationLinear Allocation measures all the channels in a customer journey and allocates all purchases andconversions equally against each touchpoint. Therefore, all success metrics are equally distributed toeach channel.In this example, all revenue would be attributed to each channel equally: © Sapient Corporation, 2012
  7. 7. POINT OF view  Last Touch Split AllocationLast Touch Split Allocation measures all the channels in a customer journey and allocates allpurchases and conversions based on location. Therefore, 50% is attributed to the Last Touch and theremaining 50% is equally distributed to the remaining channels.In this example, all revenue would be attributed as below:  First Touch Split AllocationFirst Touch Split Allocation measures all the channels in a customer journey and allocates allpurchases and conversions based on location. Therefore, 50% is attributed to the First Touch and theremaining 50% is equally distributed to the remaining channels.In this example, all revenue would be attributed as below:Bespoke AllocationDifferent suppliers approach the Bespoke Allocation model in different ways, so ensure that you areconsidering some of the common mistakes when choosing the right company to build your attributionmodel. The trick to a Bespoke model is making sure that the turnaround is efficient enough toinfluence change. Your model should adapt around your sales cycles to enable a quick delivery onactionable insights.A Bespoke model will attribute to a channel based on a number of different factors but can berepresented in the example below:   © Sapient Corporation, 2012
  8. 8. POINT OF viewConsiderationsEach of the above models has pros and cons, so the right model will depend on your businessrequirements. Working with a trusted partner will help you define this but, to get you started, here are acouple of items that you should consider when looking at attribution models:• Does this model fairly distribute credit to the appropriate channels in a journey?Am I looking at closing the conversion or starting it? This may vary per department within the businessand is something that you should consider based on the channel usage.• Will this model give me the speed and flexibility that I need to be effective?This is dependent on your sales and change cycles, but you need something that will work within yourtimeframes. If your marketing plan needs to be updated weekly but you can only turn around a bespokemodel within two weeks, then your data is obsolete. Adapt according to your needs.• Will this model allow me to predict future outcomes?If you’re using a one-touch attribution methodology, then the benefit of understanding how channelswork together becomes insignificant. However, understanding permutations and combinations ofchannels will develop your ability to spend your budget wisely.• Will this help me reduce my costs or optimise spend and performance?This is probably the most important question you will need to ask. Understanding whether the ROI ofimplementing a model will outweigh the time and cost spent in creating the model is key in the successof initiating an attribution or predicting an analytics approach.COMMON MISTAKES IN CHANNEL ATTRIBUTIONThere are a set of common mistakes companies make when implementing channel attribution, whichcan hinder the timeliness and effectiveness of the value that can be delivered. The following is a list ofissues we’ve experienced with clients:Data SourcesThis isn’t in regards to getting legacy systems to speak to each other, but more around the fact thatmultiple data sources are required to calculate attribution—and they often use different systemsthat collect data in different ways and use different metrics. Many models aren’t accounting for thisdifference, which can lead to data integrity issues.For example, if you are using clicks against visits, are you taking into account that a visit can containmultiple clicks? How are those clicks being calculated? Or, if you are measuring offline activity againstpurchases, are you taking into account that offline can drive other channels, not just vanity URLs? Whatimpact does that have on the journey?Tag management solutions pull this data together, but you need to check how your solutionamalgamates this data. To get the true impact of attribution, amalgamation alone isn’t enough.Understanding your data sources and how to accurately collect your data is often overlooked, but is akey differentiator for a higher level of accuracy. © Sapient Corporation, 2012
  9. 9. POINT OF viewTag Management SolutionsAlthough tag management solutions pull data together, they won’t necessarily push out the modelsrequired to give you the answers you need. Channel attribution requires an investment to be effectivebut make sure you fully understand this amount of investment before making your decision; find outexactly what you’re paying for prior to signing on the dotted line.Again, finding the right provider will help you make the right decision on tag management solutions todeliver the right tool for your needs.Data TrustIs all of your marketing activity tracked? Are you taking data trust into account? If not, how can you trustthe performance of your attribution model? For example, if you don’t correctly tag your paid search(PPC), it will appear as a natural search in most analytics tools. Your ability to accurately tag yourmarketing activity will directly impact your results.Creating the right governance processes and levels of trust within your business is often overlooked,but can be a key influencer when looking at channel attribution.Future Marketing SpendNext steps are often misunderstood within channel attribution. Many people think that attribution is assimple as saying, “Optimise your marketing spend by moving your budget accordingly.” In most cases,it’s not as easy as turning marketing on and off. For example, if you find that third party websites aredelivering a high conversion rate, you can’t simply increase the number of websites that link to you.This involves research, communication with these third parties, and—potentially—an additional budget.After this, you will need to measure what impact these new sites have on conversion in comparisonto any budget that has been reallocated. In addition, there is the added complication that elasticity israrely taken into account for the longer-term impact.Here’s the scenario: You look at your attribution model(s) and realise that you need to increase yourpaid search budget. Once this happens, you realise that your conversion drops and it’s not as effectiveas you initially predicted. Few companies take into account that the increase in traffic may increaseirrelevant traffic or, more importantly, can reduce ROI due to the fact that the marketing may hit thepoint of saturation and that each channel could potentially peak, reducing productivity. Any predictivemodels have to take into account the elasticity of any marketing predictors.Also, what is the halo effect on other channels? Is there an impact that actually decreases theproductivity on a wider level? Even though there is a certain level of confidence when making changes,this is a test and should be monitored accordingly.Total Attribution PerformanceAttribution should be like good analysis and optimisation—ongoing and recurring. Iterativeimprovements to attribution help to continually optimise your marketing activity.Don’t attempt to calculate total attribution all at once. The upfront investment, in time, will not payshort-term dividends. Graduate your modelling to evolve with your business. By the time you calculateattribution with a bespoke model right down to the product or activity level, your sales cycle will belikely to render your data invalid. The product can become out of date, the campaign may finish, or theimpact to change could reduce over time (reduction in competitive advantage).Think quick wins versus longer-term goals when looking at marketing optimisation. © Sapient Corporation, 2012
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  11. 11. POINT OF view WHAT ATTRIBUTION TOOLS ARE AVAILABLE? Although not the primary purpose of this paper, it’s difficult not to mention the tools that can deliver attribution data. There are a number of tools that have their associated strengths and weaknesses. Forrester has released their findings and point of view on some of the available attribution tools: Risky Strong Bets Contenders Performers Leaders Strong Visual IQ Adobe ClearSaleing GroupM Current ering Converto Market presence Full vendor participation Weak Weak Strategy Strong Source: Forrester Wave: Cross-Channel Attribution Vendors, Forrester Research, Inc. Things that you should also consider when researching tools are tag management solutions and data collation processes. Always ask yourself, “What is the easiest and most effective way to collect data within my organisation? Can the tools I already have get me started?” CONCLUSION There are a few key takeaways that you should always think about when looking at attribution. • Where am I now? • Where do I want to go? • How do I get there? • What do I need to get there? You won’t necessarily need a fully bespoke solution. It is dependent on your specific business requirements, however, what you need is something that you can react to and is clearly actionable. Continuously evolve your measurement as there isn’t one right answer, and it changes per business. Remember, you are looking at full customer experiences and you should be analysing their journeys, not isolated channels or behaviours. Don’t think bigger with attribution and modelling—think smarter. About the Author Azlan is an award-winning digital consultant who specialises in digital mar- keting communications and performance. Working in a range of industries, Azlan has worked with a number of blue chip organisations to help optimise   their marketing efforts through effective campaign planning, strategy, and most importantly, accurate measurement.   © Sapient Corporation, 2012