MMO business intelligence

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MMO business intelligence

  1. 1. business intelligence in practice
  2. 2. piece of information MMO isn’t another nor another (expensive ;) tool to play with... 2
  3. 3. way which gives you MMO is the the whole world of your business with understanding of its natural laws, evaluation of observed effects and direct implications to your every day business decisions in Marketing and its components’ Mix aiming towards sensible Optimization and efficiency 3
  4. 4. Milestones of Marketing Mix Optimization 1953 by Neil Borden in his American Marketing The term “marketing mix” was firstly used in Association presidential address*. 1960 by E. Jerome McCarthy. Marketing mix components, famous 4Ps, were introduced in late 1980’s and early 1990’s Marketing mix optimization projects started in the in the FMCG/retail industry. relatively later due to its First efforts in other industries – finance, telco, etc. – emerged significantly more complicated nature. source: Wikipedia * 4
  5. 5. Understanding what drives sales / market share MMO is a process that results in ATL BTL tangible outputs for marketing Sales support: incentives management, optimization and Sales support: personnel planning. Incremental Price promo, subsidies sales Pricing (w.r.t. competition) MMO is a data-driven business Sales Product innovation, extension research aiming towards discovering, Product performance, functionality interpreting, and the development of sales mechanism. Competition, its commercial activities External factors, e.g. GDP, income Simply, MMO explains and measures Baseline Seasonality market response to sales drivers. sales Distribution, sales coverage Brand equity, customer retention 5
  6. 6. Contribution of marketing elements to overall performance Sales 14% Promo 10% Place MMO assesses the impact of each 20% Price Sales of the marketing mix components Product on incremental sales 16% external factors, 25% Baseline represents expected sales including competition when no short-term marketing activity brand equity, customer retention, is present distribution 15% Σ=100% 6
  7. 7. ROI analysis Return on investment (ROI) is an example of direct application 260,4 of MMO market understanding. 16,3 Investment Incremental sales ROI We compare costs (investment) to incremental sales generated 9,3 133,8 by each mix component to 7,9 assess ROI 5,1 64,4 47,8 0,2 33,1 9,3 8,2 6,9 4,6 0,7 50% discount i-net ad spend sales incentives price discount outdoor spend 7
  8. 8. Marketing Mix Optimization mil. CZK 100 Econometric model behind the real example of budget allocation * MMO research enables “what-if” 80 interactive analysis playing with budget allocation. 60 Imagine, that your current 40 budget could be either slightly reallocated into or 20 even increased by 12 mil. and 0 reallocated into . 50% discount TV ad spend DM spend Sales Radio ad spend Incremental incentives sales Incremental profit from the reallocation is about 35 mil. or 92 mil., which means incremental net profit of 35 mil. or 92-12=80 mil.* 8
  9. 9. Typical project workflow Business and Data Audit Each client is unique and MMO is a business research, so detailed understanding of client’s needs is critical. Since MMO is a data-driven modeling, data audit of all relevant sources is necessary. If data sources are not available or sufficiently structured, we design new data pipelines. Econometrical Modeling Since MMO is not a boxed commodity ready to be shipped, each project has to be assembled and tuned accurately. However, there exists general attitude, process, which we employ together with our experience (for instance, we usually suggest to starting with a single product; once we all are convinced that the model makes sense from both statistical and business point of view, we go on to build models for all remaining products). Marketing Mix Optimization In addition to detailed results, figures, and simulators,... we want to deliver more – understanding and knowledge which puts the client forward. We work together with the client on implementation of the MMO process into its business. MMO is a powerful frame of reference for past evaluation and future inference. 9
  10. 10. A few things to be aware of... 1. MMO is based on sales data and marketing activities. Although the data are essential, we experience that alleged lack of data is not a barrier – in that case, let us collect the data first. 2. MMO is a long-term project requiring commitment and open cooperation 0,6 FTE for internal project manager with varying levels of utilization for entire project duration • 1-2 weeks for data owners, sector heads • 3. Mind & Process changes – successful realization of the added value brought by MMO requires often a refreshed mind-set and a re-design of the internal business process. The client has to be ready for such a change. 4. Budget – MMO projects usually require larger budgets, with a significant variance given by the scope of the project. 5. Scope – we recommend to start off on a smaller scale with a pilot project which will test both the client and the vendor as to their ability to realize the project and utilize the results (e.g. select few important products, etc.). In later stages the project scope can be broadened. 10
  11. 11. References The Core Group is a business research and consultancy department of TNS AISA. TNS has extensive experience with MMO projects in various fields – from FMCG to telco and finance. The Core Group has been developing MMO methodology in the Czech market for past 3 years. This extensive knowledge base ensures reliable, in-time delivery and continuous support and access to up-to-date methods. The Core Group: • Large MMO project in 2007-2008 for a prominent retail bank • 2 product lines modeled • Modeling of acquisition and profit TNS Norway • Several MMO projects in telecommunication sector (sales and churn modeled) TNS US Vast experience with MMO projects in various fields – FMCG, finance • 11
  12. 12. Business intelligence in practice skills, technologies, applications and Business intelligence refers to practices used to help a business acquire a better understanding of its commercial context. provide historical, current, and Business intelligence applications predictive views of business operations aiming to support better business decision-making. [Wikipedia] MMO is about. That's what 12
  13. 13. Case study – finance sector Czech Republic The Core Group has executed an extensive MMO project in a prominent Czech retail bank in 2007-2008 The project included: Modeling of 2 product lines • Modeling of acquisitions and profits • Optimization of marketing budget to yield higher ROI • Delivery of Optimization tool • Outcomes: Reliability of models around 90% • Identified opportunity for cost saving in excess of 30m CZK • Identified opportunity for profitability growth in excess of 140m CZK • Initiation of changes in media mix, campaign timing optimization, changes in distribution channels • 13
  14. 14. Marketing Mix Optimization tool Marketing Mix Optimizer is an application which provides interface for MMO econometrical model. The application offers, except of historical overviews and summary statistics, interactive environment for simulations and scenario evaluation. Moreover, built-in mathematical functions suggest optimal budget allocation. 14
  15. 15. Various business assignments Business assignments for MMO could be basically divided into two groups: 1. Interactive simulations where you can manually adjust marketing mix and immediately see estimated 1 result on sales. 2. Marketing mix optimization via automated allocation given either 2 total budget or target to achieve. 15
  16. 16. Example of Marketing Mix Optimization tool 16
  17. 17. Example of Marketing Mix Optimization tool – cont. Relevant business factors included in the MMO model. 17
  18. 18. Example of Marketing Mix Optimization tool – cont. Values of input factors which could be interactively changed by the user. 18
  19. 19. Example of Marketing Mix Optimization tool – cont. Estimated profit change decomposed into factors. 19
  20. 20. Example of budget reallocation Given current total marketing budget, just reallocate 2 mil. CZK from TV to Internet. This means 5% decrease of TV spends and 37% increase of Internet spends. Expected incremental net profit equals 4.9 mil. CZK. 20
  21. 21. Contacts Ondřej Štěpánek Pavel Vaněček Consultant Project Manager Telephone: ++420-272 177 222 Telephone: ++420-272 177 184 Mobile: ++420-606 778 021 Mobile: ++420-602 617 801 Email: ondrej.stepanek@thecoregroup.cz Email: pavel.vanecek@thecoregroup.cz www.thecoregroup.cz www.thecoregroup.cz

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