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Transformational Marketing Mix Optimization Using a Virtual Marketplace


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Marketing planning 3.0, a 5-part educational webcast series, kicks off with the talk from Copernicus' Jeff Maloy on the Holy Grail of marketing mix optimization--a virtual marketplace that makes it possible to evaluate the ROI of current marketing and media plans. Many marketers also are using this tool to simulate innovative marketing strategies and plans they have never tried before and forecast the likely results.

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Transformational Marketing Mix Optimization Using a Virtual Marketplace

  1. 1. TRANSFORMATIONAL MARKETING MIXOPTIMIZATION USING A VIRTUALMARKETPLACEJeffrey Maloy, Senior Vice President and Chief Marketing OfficerTuesday, June 18, 2013
  2. 2. 2WELCOME!2 weeks, 5 webcasts, improved marketing effectiveness
  3. 3. 1. Transformational Marketing Mix Optimization Using a Virtual MarketplaceDate: Tuesday, June 18Time: 1 pm EDTPresenter: Jeffrey Maloy, SVP and CMO2. Using a Virtual Marketplace to Evaluate Your Marketing StrategyDate: Wednesday, June 19Time: 1 PM EDTPresenter: Eric Paquette, Senior Vice President3. Optimizing Your Media Plan for the Bought-Owned-Earned WorldDate: Tuesday, June 25Time: 1 pm EDTPresenter: Rolf Olsen, Vice President, Director, Marketing Analytics4. Leveraging Marketing Investments with Marketing Mix ModelingDate: Wednesday, June 26Time: 1 pm EDTPresenter: Irina Pessin, Managing Partner, Data2Decisions US5. Marketing Analytics: 5 Things Every CMO Should KnowDate: Thursday, June 27Time: 1 pm EDTPresenter: Peter Krieg, President and CEO3SERIES SCHEDULE
  4. 4. For a PDF of this presentation and our advertorial on using bigdata for marketing planning…Email ami.bowen@copernicusmarketing.com4
  5. 5. 5WHO AM ?Jeffrey MaloySeniorVice PresidentCopernicusMarketing Consulting& ResearchLeadingourCPG practiceFormerDirectorof Marketing,with multiple brand managementand consumerinsightsassignments.Developingrelationships with clients such as Kraft,P&G, Nestlé,and Hershey’s.Helping myclients develop,execute and evaluate transformationalmarketingstrategies
  7. 7. 7FROM THIS…27 4 11 18 25 1 8 15 22 29 5 12 19 26 3 10 17 24 31 7 14 21 28 5 12 19 26 2 9 16 23 30 6 13 20 27 5 12 19 26 2 9 16 23 30 7 14 21 28 4 11 18$654,000$654,000$654,000$654,000$11,315,000$11,315,000$11,315,000$11,315,000$13,657,000$13,657,000$13,657,000$2,962,000$2,962,000$2,962,000$2,962,000$1,200,000$550,000$550,000$33,760,000$33,760,000$765,000$765,000$2,970,000$2,970,000$9,085,000$2,325,000$2,325,000$1,025,000$1,025,000$525,000$525,000$225,000$225,000$64,920,000$64,920,000$175,000 $175,000 $175,000$75,000 $75,000 $75,000$1,050,000 $775,000 $500,000$450,000 $375,000 $200,000$9,085,000$255,000$350,000 $385,000 $385,000 $385,000 $255,000 $255,000$350,000 $350,000$33,760,000$255,000 $255,000 $255,000$550,000$5,627,000 $13,624,333 $9,985,667 $4,523,000135 180 90180 135 9035/83 43/107 27/5239/113 35/89 27/60$483,000 $624,000 $305,000$670,000 $528,000 $352,000285 243 243 243 132 265285 380 19065/156 62/132 62/131 60/126 45/70 60/14263/155 70/210 54/106$2,115,000 $1,275,000 $1,265,000 $1,335,000 $492,000 $974,000$2,053,000 $2,802,000 $1,346,000200 168 166 163 82 163200 266 13359/104 56/87 56/86 53/81 36/40 50/8257/102 64/135 46/68$1,810,000 $1,020,000 $1,010,000 $1,080,000 $397,000 $785,000$1,738,000 $2,350,000 $1,125,00077 50 34M ay Jun28/37 21/23 14/16$312,000 $212,000 $130,000CostJul Aug Sep Oct Nov Dec Jan Feb M ar Apr66 HH GRPs/Week GM + DR TV 50/50 :30/:1595 HH GRPs/week GM + DR TV 100% :30s 81 HH GRPs/week GM 35% :30s/65% :15s + DR TV 100% :30s$1,200,00045 HH GRPs/week DRTV Only 100% :30s~45% reach/month~55%+ reach/month~50% reach/month + Dog Wet & Treats New Creative Launch (P4CB)66 HH GRPs/wk GM + DR TV 100% :15~45% reach/month
  8. 8. … TO THIS8SearchAggregated ContentIn-StoreE-CommerceContent SyndicationPre -LaunchPublic RelationsOutreach toInfluencersSponsorshipsPrint Live Read RadioLifestyle PaidMediaPaid Video(TV, Digital)AwarenessDriving Paid MediaRadioWOMLive EventsPaid SocialMobile App Facebook AppPartnershipsYOURBRANDHERE
  9. 9. 55% of CMO projectsutilize marketing analyticsbefore a decision is made(Source: The CMO Survey, February 2013)But…72% of CEOs saymarketers are alwaysasking for more moneybut can rarely explain howmuch incrementalbusiness it will generate(Source: Forbes, 2011)9BUT NO “GET OUT OF JAIL FREE” CARD?WHO?HOW MUCH?WHAT?WHERE?WHEN?
  10. 10.  “Always On” Planning Sense and Respond Highly Targeted Paid, Owned And Earned Media Behavioral/ Programatic Buys Synchronized Swimming How and WhyDid It HappenFROM: Marketing Plan Calendar Top-DownAllocation Mass Marketing Traditional Paid Media Demographic Buys Swim Lanes What HappenedTO:10A NEW APPROACH TO MARKETING AND PLANNING ISNEEDED
  11. 11. “Traditional” MarketingEvaluation Methods Regression-based(linear, top-down) approaches Historical perspective Aggregate-level resultsMost relevant in cases when: Less dynamic pace of change Less competitiveenvironment Heavier spending on traditional(paid) media Less segmented market More conservative planningapproach (top-down allocation)11NEW TOOLS ARE NEEDED TO COMPLEMENT“TRADITIONAL” TECHNIQUES
  12. 12. Enter: ComplexityScience A study of complex systems. Simulates how individual parts(or “agents”) interact with eachother, and the likely outcomefor the system as a whole. Models dynamic, socialinteractions.What is an Agent: For our purposes, agentsgenerally represent consumersor groups, and agentrelationships represent socialinteractions. A discrete entity with its owngoals and behaviors. Mechanisms by which agentsinteract can be described bybehavioral “rules.” May have the capacity to “learn”(change the rules).12A COMPLEX MARKET REQUIRES COMPLEXITYSCIENCE
  13. 13. Simulation models, such asagent-based modeling is notnew.Until recently, it primarily hasbeen used for simulating:– Migration of species– Spread of viruses anddiseases– Supply chainNow being used in fields inwhich simulation modeling hasnever been applied before(markets)13TRULY “VIRAL” MARKETING
  14. 14. In the 2000s, some smart man asked this question:“In this social age, why can’tABMs describe the spread ofmarketing messages?”Fortunately therewas no good answer.14WHY NOT MARKETING
  15. 15. A simulation approach to marketing mix optimization is especiallyrelevant when: Dynamic marketplace Forwarding-looking perspective Experimental marketing plans – paid, owned, and earned media Highly segmented market Want to understand impact on salesand brand equity Test and Learn mentality Marketing neversleeps Need to knowthe How and Whybehind the What15WHY SIMULATION MODELING?Bought Owned Earned
  16. 16. Marketing Plans Target Segments…….…. Message Strategy…….... Media Strategy (Paid,Owned and Earned)….… Pricing Strategy……….… Product Strategy…….…..16CONNECTS NUANCES OF MARKETING PLANNING ANDEVALUATION
  17. 17.  Complex marketplace Diverse population Fragmented media “Always on” devices “Big Data”Need for computing power17WHY NOW?
  18. 18. 18TURNING 3V’S INTO 3W’SHow to turn “big data” into “smart data”? Answer: 3W’s:WhenWhereWhyVolumeVelocityVariety3 V’sEconomicDataEnviron-mentalDataMediaCostsPOSDataPrice/PromotionDataCompetitiveDataGPS/RFIDDataSurveyData
  19. 19. 1. Build your “simulated society”2. Assign “rules of engagement”3. Calibrate and validate4. Explore new frontiers19SO HOW DO WE BUILD THIS AMAZING MODEL?
  20. 20. First we build a “virtual” panel of agents:Each agent is like a mini-database, waiting to be populated with data andbehavioral rules.Panel must be representativeof relevant population on: Gender Age Income Ethnicity Corpo-graphics Geographic region Category incidence211. BUILD SIMULATED SOCIETY
  21. 21. Establish decision rules for each agent and/or segment of agents:How do they react when acted upon by:• Other agents• Marketing and Media• External factorsRules are based upon:• Marketing sciences• Secondary data (media consumption)• Custom research (e.g., segment purchase behaviors)• Top-down analysis (Marketing Mix Models)• Advanced analytics• Understanding of their “journey” and key decision points222. PROGRAM THE AGENTS
  23. 23. Once rules are established, we run and refine the model untilresults reflect “reality”:243. CALIBRATE AND VALIDATE Examine model’s results, relative toexpectations Calibrate agent rules− Are results logical,intuitive, reasonable?− Possibly validate the modelon a “hold out” sample Proceed with caution− As with any good model,results needed to becombined with judgment
  24. 24. Now, we’re ready to dream. Test those risky plans in a risk-freesimulation.254. EXPLORE NEW FRONTIERSWhat if… Spend more/less? Shift to more digital tactics? Target new/different segments? Reposition brand? Competitive aggression?
  25. 25. Powered by CCM (agent-based simulation andother advanced analytics), we analyzed multiplestrategic alternatives:– Targeting strategies– Messaging strategies– Product focus– Media mix and allocation26CASE STUDYAfter multiple scenarios, we identified one that delivered…ChallengeAnalysisIncrease sales by +4-5% with a flat marketing budget.
  26. 26. + >$200 MM+ >4% incremental revenue lift27CASE STUDYActionResultsFrom: To:GM W 25-44 USH W 18-49TV Digital, Mobile and SocialHolidayMessagePromotional MessageAssortmentFocusBed & Bath Focus
  27. 27. 1. Simulation models (such as ABMS) can bean effective tool in the analytic toolbox2. Complex, dynamic models for complex,dynamic markets3. Simulate new, “stretch” scenarios4. Understand the “how” and “why” behindthe “what”28CONCLUSIONS
  28. 28. Questions?For a PDF of this presentation and our advertorial on using bigdata for marketing planning…Email ami.bowen@copernicusmarketing.com29
  30. 30. Jeffrey Maloy, SeniorVice President(203) 831-2375Jeff.Maloy