The Smart Cube | Marketing Mix Modeling: An Old Remedy for New IllsMelissa Luongo
Authors:
Ankit Abraham Sinha, Senior Analyst
Sidharth Sreekumar, Assistant Manager
What is Marketing Mix Modeling (MMM)?
MMM is the use of statistical analysis to estimate and predict the impact and effectiveness of media channels, price changes, promotions, and external factors on the sales volumes of a company. This helps demystify the relationship between a company’s marketing spend and its bottom line.
Measuring the Effectiveness of Marketing Spend Using MMM
Increasing Marketing Spend
As global ad spending increases, it is imperative for companies to ensure that they get the best bang for their buck. In this scenario, the need to measure the impact of various marketing media on sales and deploy marketing funds efficiently is even greater.
The Need to Measure the Impact of Marketing
According to an April 2014 study by VisionEdge Marketing and ITSMA, 85% of marketers polled were of the opinion that the pressure to measure the value and contribution of marketing is increasing. In addition, a May 2014 study by Ifbyphone states that 60% of marketing executives report marketing metrics to their business leadership teams at least on a monthly basis. This highlights the increasing emphasis being laid by business leaders on the need for regular and more accurate measurement of marketing metrics that highlight the impact of marketing spend on business performance.
Many things can impact channel sales, but there are five core factors that truly matter in driving profitable growth via a network of channel partners.
Top 20 Reasons Why Agent-based Modeling is Disrupting Marketing MixThinkVine
Misallocated ad dollars may be costing brands more than 25 percent in lost sales. Based on an analysis of ThinkVine customers with average annual sales of more than $1 billion, we found that companies were spending too much or too little on specific media 85 percent of the time. By optimizing their marketing budgets, the companies added anywhere from 7 to 81 percent in additional revenue attributed to marketing activities – an average of 28 percent.
Don’t lose out on the additional sales your marketing could be driving. Brands have been relying too heavily on outdated, backward-looking marketing mix methods that leave money on the table.
Companies are now turning to agent-based modeling to make better strategic decisions that will deliver the results they need, and here is why.
The Smart Cube | Marketing Mix Modeling: An Old Remedy for New IllsMelissa Luongo
Authors:
Ankit Abraham Sinha, Senior Analyst
Sidharth Sreekumar, Assistant Manager
What is Marketing Mix Modeling (MMM)?
MMM is the use of statistical analysis to estimate and predict the impact and effectiveness of media channels, price changes, promotions, and external factors on the sales volumes of a company. This helps demystify the relationship between a company’s marketing spend and its bottom line.
Measuring the Effectiveness of Marketing Spend Using MMM
Increasing Marketing Spend
As global ad spending increases, it is imperative for companies to ensure that they get the best bang for their buck. In this scenario, the need to measure the impact of various marketing media on sales and deploy marketing funds efficiently is even greater.
The Need to Measure the Impact of Marketing
According to an April 2014 study by VisionEdge Marketing and ITSMA, 85% of marketers polled were of the opinion that the pressure to measure the value and contribution of marketing is increasing. In addition, a May 2014 study by Ifbyphone states that 60% of marketing executives report marketing metrics to their business leadership teams at least on a monthly basis. This highlights the increasing emphasis being laid by business leaders on the need for regular and more accurate measurement of marketing metrics that highlight the impact of marketing spend on business performance.
Many things can impact channel sales, but there are five core factors that truly matter in driving profitable growth via a network of channel partners.
Top 20 Reasons Why Agent-based Modeling is Disrupting Marketing MixThinkVine
Misallocated ad dollars may be costing brands more than 25 percent in lost sales. Based on an analysis of ThinkVine customers with average annual sales of more than $1 billion, we found that companies were spending too much or too little on specific media 85 percent of the time. By optimizing their marketing budgets, the companies added anywhere from 7 to 81 percent in additional revenue attributed to marketing activities – an average of 28 percent.
Don’t lose out on the additional sales your marketing could be driving. Brands have been relying too heavily on outdated, backward-looking marketing mix methods that leave money on the table.
Companies are now turning to agent-based modeling to make better strategic decisions that will deliver the results they need, and here is why.
ROI - Taking Measure of Your Marketing EffortsSpryIdeas
It’s the question that strikes fear into the heart of the most seasoned marketing manager: “What was the return on investment (ROI) for this program (e.g., email blast, trade show, social media campaign, etc.)? It’s a legitimate question because company executives and the people to whom they answer are naturally concerned with the “bottom line” and want to make sure that marketing expenditures are netting results. However, it can also be a challenging and complicated query. Determining the exact contribution any given marketing program has on revenue growth or profits is akin to defining happiness—it depends on to whom you are talking and what their priorities are! (http://bit.ly/2ghsK8H)
Setting the right metrics for channel marketing management platform is critical for driving partner adoption and generating meaningful return on investment.
Executive Summary
This How-To Guide will explain the components of a Marketing Resource Management (MRM) system, provide an action plan for deployment, and conclude with a plan for implementation.
Marketing Resource Management (MRM) systems control the administrative processes that support customer-facing marketing programs. This distinguishes MRM from marketing execution systems that store customer databases and deliver marketing messages through email, Web ads, and other channels. MRM may be sold independently or as a component of comprehensive marketing management systems which also provides execution.
MRM functions fall into two primary clusters. The first involves functions related to company-level marketing management, including program planning, scheduling, budgeting, and cost reporting. The other cluster relates to program management, including task lists, purchasing media and materials, and content creation, approvals, storage, and distribution. Some MRM systems specialize in a few of these functions. Others specialize in additional functions such as customizing content for local offices or dealers or in marketing reporting and analysis. Systems may also be tailored to specific industries or companies of a certain size.
Companies buy MRM systems when their marketing programs become too complicated to run in a less systematic fashion. This, along with the systems’ high cost, originally meant that MRM was used almost exclusively by large marketing organizations with hundreds of marketers in multiple offices. More recently, the growth of digital marketing has meant that even small marketing organizations need to manage many different programs and content versions across multiple channels, and to introduce new versions more quickly. This expanded complexity has rarely been accompanied by a corresponding expansion of staff, adding to the pressure for more efficient operations. At the same time, costs have decreased as MRM capabilities were added to integrated marketing suites and as stand-alone MRM products became available as vendor-hosted services (Software as a Service, or SaaS). The result has been increased use of MRM systems among companies of all sizes.
Read this 7-page guide to learn about:
The components of a Marketing Resource Management (MRM) system
An action plan to deploy an MRM system
How to implement an MRM system
Demand Metric's How-To Guides are designed to provide practical, on-the-job training and education and provide context for using our premium tools & templates. If there is a topic that you would like to see covered, please contact us at info@demandmetric.com (link sends e-mail) to make a content request.
Marketing and driving Brand ROI is a must for any company. How can companies accomplish growth in both areas? Marketing metrics! Companies must select what measurement metric is best and understand their marketing if they hope to grow. What are the 5 dimensions of the future of metrics? See our list here: http://ow.ly/DswOy #BrandROI
Harnessing the Power of Predictive Models for Marketing Campaign Optimization...Daniel McKean
In the fast-paced world of digital marketing, making data-driven decisions is not just an advantage; it's a necessity. Among the plethora of tools and techniques at the disposal of marketers and data analysts, predictive models stand out for their ability to transform complex marketing challenges into opportunities for strategic optimization.
ROI - Taking Measure of Your Marketing EffortsSpryIdeas
It’s the question that strikes fear into the heart of the most seasoned marketing manager: “What was the return on investment (ROI) for this program (e.g., email blast, trade show, social media campaign, etc.)? It’s a legitimate question because company executives and the people to whom they answer are naturally concerned with the “bottom line” and want to make sure that marketing expenditures are netting results. However, it can also be a challenging and complicated query. Determining the exact contribution any given marketing program has on revenue growth or profits is akin to defining happiness—it depends on to whom you are talking and what their priorities are! (http://bit.ly/2ghsK8H)
Setting the right metrics for channel marketing management platform is critical for driving partner adoption and generating meaningful return on investment.
Executive Summary
This How-To Guide will explain the components of a Marketing Resource Management (MRM) system, provide an action plan for deployment, and conclude with a plan for implementation.
Marketing Resource Management (MRM) systems control the administrative processes that support customer-facing marketing programs. This distinguishes MRM from marketing execution systems that store customer databases and deliver marketing messages through email, Web ads, and other channels. MRM may be sold independently or as a component of comprehensive marketing management systems which also provides execution.
MRM functions fall into two primary clusters. The first involves functions related to company-level marketing management, including program planning, scheduling, budgeting, and cost reporting. The other cluster relates to program management, including task lists, purchasing media and materials, and content creation, approvals, storage, and distribution. Some MRM systems specialize in a few of these functions. Others specialize in additional functions such as customizing content for local offices or dealers or in marketing reporting and analysis. Systems may also be tailored to specific industries or companies of a certain size.
Companies buy MRM systems when their marketing programs become too complicated to run in a less systematic fashion. This, along with the systems’ high cost, originally meant that MRM was used almost exclusively by large marketing organizations with hundreds of marketers in multiple offices. More recently, the growth of digital marketing has meant that even small marketing organizations need to manage many different programs and content versions across multiple channels, and to introduce new versions more quickly. This expanded complexity has rarely been accompanied by a corresponding expansion of staff, adding to the pressure for more efficient operations. At the same time, costs have decreased as MRM capabilities were added to integrated marketing suites and as stand-alone MRM products became available as vendor-hosted services (Software as a Service, or SaaS). The result has been increased use of MRM systems among companies of all sizes.
Read this 7-page guide to learn about:
The components of a Marketing Resource Management (MRM) system
An action plan to deploy an MRM system
How to implement an MRM system
Demand Metric's How-To Guides are designed to provide practical, on-the-job training and education and provide context for using our premium tools & templates. If there is a topic that you would like to see covered, please contact us at info@demandmetric.com (link sends e-mail) to make a content request.
Marketing and driving Brand ROI is a must for any company. How can companies accomplish growth in both areas? Marketing metrics! Companies must select what measurement metric is best and understand their marketing if they hope to grow. What are the 5 dimensions of the future of metrics? See our list here: http://ow.ly/DswOy #BrandROI
Harnessing the Power of Predictive Models for Marketing Campaign Optimization...Daniel McKean
In the fast-paced world of digital marketing, making data-driven decisions is not just an advantage; it's a necessity. Among the plethora of tools and techniques at the disposal of marketers and data analysts, predictive models stand out for their ability to transform complex marketing challenges into opportunities for strategic optimization.
Driving marketing performance in financial services is subject to unique considerations. Diverse set of distribution channels, complex customer segments, a need to balance branding and promotion, and multiple outcome measures impacting customer value are factors to consider.
Explore the world of Integrated Marketing Campaigns with IM4U, a leading expert in the field. Learn the importance of measuring marketing effectiveness, discover key metrics, and delve into case studies showcasing impactful results. Uncover the power of data-driven marketing, understand the role of analytics tools, and optimize your campaigns for maximum ROI. IM4U is your partner in elevating digital marketing strategies, offering proven expertise and innovative solutions for sustained business growth.
Shows approach which expands the breadth of what marketing-mix models cMichael Wolfe
Much criticism has been levied towards marketing-mix modeling recently. This article shows innovations and proposes solutions for reinventing this powerful marketing measurement tool
Running Head Marketing PlanSWOT Analysis .docxcowinhelen
Running Head: Marketing Plan/SWOT Analysis 1
Marketing Plan/SWOT Analysis 14
Marketing plan/ SWOT analysis
Heather Taylor
Kaplan
MT499: Bachelors Capstone in Management-peregrine
Prof: Angie Sokol
July 31, 2016
Part 1
A well-developed strategy will aid in the realization of the business goals and build a strong reputation for your products. This marketing strategy helps in the focusing of the company products and services to the market segment most appropriate for them. The development process usually involves the creation of two ideas that are powerful to create awareness of the business and its products thereof (Hooley and Saunders 2004)
Marketing strategy is a component of a marketing plan that aims at directing the program toward the achievement of the organisational goals and objectives. Marketing plan is therefore a comprehensive document that lays bare all the regulatory advertising and marketing efforts and activities that are geared towards achieving these goals within a given duration of time. Marketing strategy has a pivotal role in increasing the sales volume of every organisation and realizing sustainable competitive edge. (Viardot, 2004) It encompasses all primary, short-term and long-term activities in the marketing field and it entails analysis of the initial strategic position of business together with the creation, evaluation and selection of market-geared strategies and hence lend to the goals of the firm as well as its marketing objective.
The process of marketing strategy development begins with the evaluation of the environmental factors, which entails the strategic constraints. It is therefore necessary to have a clear understanding of the external environment, including, technological, economic, cultural, political and legal elements of the environment. Secondly, goals are chosen and objectives set. A marketing strategy is, therefore, the explanation of all the specific actions to be taken to achieve the set goals. Marketing strategies are interactive and dynamic; partially planned and partially unplanned (Luke, 2004) this is to give room for the business to react to unforeseen challenges within the marketing environment as they try to keep focussed on a particular direction. A longer time span is preferred, usually five years. Simulation models such as customer lifetime value models aid marketers to conduct “what if” analysis to try and predict what might happen in future if certain conditions are met, and rate the extent to which such actions can affect the organisation’s revenue per customer and the churn rate. Strategies offer specification on how to adjust the marketing mix; firms can use tools such as marketing mix model to aid the resource allocation decision for various media and distribution of funds across a portfolio of brands.
An effective marketing heavily leans a well-informe ...
Where we are with marketing ROI measurement Michael Wolfe
This article discusses current state of affairs for marketing ROI measurement. There is dissatisfaction with the status quo and this article outlines a completely new approach.
Measuring the Lonng-Term Effects of AdvertisingMichael Wolfe
To those who do Marketibng-Mix modeling, one understands that these tools tend to have a singlular and exclusively short-term focus on marketing measurment. This white paper makes a case to including long-term measures in these models, expecially loking at the long-teerm efffects of advertising. This article makes a good business case for doing this and provides sine reak case studies to support his case.
“Well-defined and understandable processes need to be developed and enforced at a corporate level. It is important that these processes enhance quality, communication, and velocity, not detract from them.”
www.ana.net ANA Magazine Spotlight Issue 6
http://www.ana-thoughtleadership.net/
Marketing Sostenible: una nueva forma de entender las marcas, donde los profesionales de Marketing dejaremos de ser “pescadores” para convertirnos en...
(...)
"Avui 23 d'abril és un dia molt especial a Barcelona. Un dia en que celebrem una festa de la ciutat treballant i en la que intercanviem roses i llibres, bellesa i cultura.
A WINC volem regalar-te un relat que intenta expressar que, entre tots, podem fer créixer una bonica rosa a la nostra societat. T'adjuntem l'e-book MarketingSostenible_WINC.pdf.
Si t'agrada comparteix-lo a la teva empresa i amb els teus amics."
Àlex Cabré - WINC
(...)
"MEFE TV. El valor de la planificación". Javier Andrés (Director de Marketing. Atres Advertising) y Javier Herreros (Director Tres 14 Research). Aedemo TV.
"L’ús professional de les xarxes socials" Ignasi Pardo. Consultor de comunicació. Soci fundador de Comms Planning (www.commsplanning.es). Revista completa a : http://issuu.com/ccjcc1/docs/web_auditor65
Pixels, Performance and Profits. Accenture.comms planning
Pixels, Performance and Profits. Why CFOs in the broadcasting
industry need to build a new model
of performance management for a
multi-platform, digital world.
The consumer decision journey. McKinsey. Consumers are moving outside the purchasing funnel, changing the way they research and buy your products. If your marketing hasn’t changed in response, it should. https://www.mckinseyquarterly.com/The_consumer_decision_journey_2373
Premium MEAN Stack Development Solutions for Modern BusinessesSynapseIndia
Stay ahead of the curve with our premium MEAN Stack Development Solutions. Our expert developers utilize MongoDB, Express.js, AngularJS, and Node.js to create modern and responsive web applications. Trust us for cutting-edge solutions that drive your business growth and success.
Know more: https://www.synapseindia.com/technology/mean-stack-development-company.html
Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
What is Enterprise Excellence?
Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
"𝑩𝑬𝑮𝑼𝑵 𝑾𝑰𝑻𝑯 𝑻𝑱 𝑰𝑺 𝑯𝑨𝑳𝑭 𝑫𝑶𝑵𝑬"
𝐓𝐉 𝐂𝐨𝐦𝐬 (𝐓𝐉 𝐂𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
𝐓𝐉 𝐂𝐨𝐦𝐬 provides unlimited package services including such as Event organizing, Event planning, Event production, Manpower, PR marketing, Design 2D/3D, VIP protocols, Interpreter agency, etc.
Sports events - Golf competitions/billiards competitions/company sports events: dynamic and challenging
⭐ 𝐅𝐞𝐚𝐭𝐮𝐫𝐞𝐝 𝐩𝐫𝐨𝐣𝐞𝐜𝐭𝐬:
➢ 2024 BAEKHYUN [Lonsdaleite] IN HO CHI MINH
➢ SUPER JUNIOR-L.S.S. THE SHOW : Th3ee Guys in HO CHI MINH
➢FreenBecky 1st Fan Meeting in Vietnam
➢CHILDREN ART EXHIBITION 2024: BEYOND BARRIERS
➢ WOW K-Music Festival 2023
➢ Winner [CROSS] Tour in HCM
➢ Super Show 9 in HCM with Super Junior
➢ HCMC - Gyeongsangbuk-do Culture and Tourism Festival
➢ Korean Vietnam Partnership - Fair with LG
➢ Korean President visits Samsung Electronics R&D Center
➢ Vietnam Food Expo with Lotte Wellfood
"𝐄𝐯𝐞𝐫𝐲 𝐞𝐯𝐞𝐧𝐭 𝐢𝐬 𝐚 𝐬𝐭𝐨𝐫𝐲, 𝐚 𝐬𝐩𝐞𝐜𝐢𝐚𝐥 𝐣𝐨𝐮𝐫𝐧𝐞𝐲. 𝐖𝐞 𝐚𝐥𝐰𝐚𝐲𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞 𝐭𝐡𝐚𝐭 𝐬𝐡𝐨𝐫𝐭𝐥𝐲 𝐲𝐨𝐮 𝐰𝐢𝐥𝐥 𝐛𝐞 𝐚 𝐩𝐚𝐫𝐭 𝐨𝐟 𝐨𝐮𝐫 𝐬𝐭𝐨𝐫𝐢𝐞𝐬."
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Putting the SPARK into Virtual Training.pptxCynthia Clay
This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
Recruiting in the Digital Age: A Social Media MasterclassLuanWise
In this masterclass, presented at the Global HR Summit on 5th June 2024, Luan Wise explored the essential features of social media platforms that support talent acquisition, including LinkedIn, Facebook, Instagram, X (formerly Twitter) and TikTok.
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...BBPMedia1
Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
Company Valuation webinar series - Tuesday, 4 June 2024FelixPerez547899
This session provided an update as to the latest valuation data in the UK and then delved into a discussion on the upcoming election and the impacts on valuation. We finished, as always with a Q&A
Company Valuation webinar series - Tuesday, 4 June 2024
Modeling the real return on marketing investments
1. Modeling the Real Return on Marketing Investments<br />July 1, 2011<br />BY: PETER-CAIN<br />A key decision facing the brand manager is how best to allocate an often limited marketing budget across a wide set of marketing activities. This is a challenging task in a competitive market place involving complex marketing strategies, where competitor activity can often upset careful planning. The conventional approach to answering this question is the single equation marketing mix mode3l, which formulates a demand equation as a function of selected marketing drivers. Response parameters are then estimated using classical regression techniques and used to calculate ROI and inform optimal allocation of the marketing budget.<br />Such models, however, focus solely on incremental volume, often recommending a marketing budget allocation skewed towards promotional activity: short-run sales respond well to promotion, yet are less responsive to media activity – particularly for established brands. This, however, ignores the long-run view: that is, the potential brand-building properties of successful media campaigns on the one hand and the brand-eroding properties of heavy price discounts on the other. Acknowledging and quantifying these features is crucial to a complete ROI evaluation and a more strategic budget allocation.<br />To address this issue, the marketing mix model needs to be re-structured to quantify both short-run and long-run variation in the data. The former is used to calculate short-term ROI on marketing investments in the usual way. The latter measures the evolution of brand preferences over time. This generates an evolving baseline which, when combined with marketing investments and consumer tracking information, allows a quantification of long-run ROI.<br />Conventional Marketing Mix Modeling<br />Market mix modeling employs econometric techniques to quantify the contribution of a set of driver variables to the variation in a sales response variable. The model building process involves three key steps: selecting key marketing driver variables, defining the manner in which sales are linked to the driving variables and the nature of sales adjustment to the change in driving variables. This final step is known as dynamic specification, where lagged value of sales can be added and/or lags applied directly to the variables themselves. For example, advertising TVR data traditional appear in adstocked form to capture the carry-over effects that we would intuitively expect from successful media campaigns: namely, where the effects are felt beyond the period of execution due to product purchase cycles and/or media retention in the mind of the consumer.<br />Such models focus solely on the short- to medium-term returns on marketing investments. Traditional approaches to modeling the long-run impact of marketing activity build primarily on the basic dynamics mentioned above. For example, the long-run effects of television advertising are often estimated using adstocked TVR data with very high retention rates – indicative of heavy persistence of past levels of advertising weight. Alternatively, long-run effects are derived simply by multiplying the short-term effects by there, based on results in Lodish et al (1995). Promotion modeling can also be extended to incorporate the negative effects of post-promotional dips – reflecting pantry loading, where stocking up in response to promotional deals today cannibalizes product sales tomorrow.<br />All such extensions, however, miss an extremely important component of the long-run view. That is, the extent to which marketing activity can help – or hinder – the development of underlying brand strength. It is well known that advertising investments tend to generate little incremental return, yet serve to provide a long-run brand-building function. On the other hand, excessive reliance on promotions can denigrate brand image, eroding equity in the brand. How can we test for and quantify these effects? One approach is to exploit the fundamentals of time series regression analysis.<br />Advanced Marketing Mix Approaches<br />All marketing mix models involve the analysis of time-ordered sales observations. It is well known that any time series can be decomposed into trend, seasonal and cyclical components. Consequently, mix models are essentially time series models with marketing elements woven around this basic structure. The trend component represents long-run evolution of the sales series and is crucial to a well-specified marketing mix model. In the conventional approach, the trend is represented by the regression intercept plus a linear deterministic growth factor. The result is a model with a linear trending base. If no observable positive or negative growth is present, then the base is forced to follow a fixed horizontal line. Trends in sales data rarely behave in such simple deterministic ways. Many markets, ranging from Fast Moving Consumer Good (FMCG) to automotive, exhibit trends that evolve and vary over time. This is ignored in the conventional mix model. However, when it comes to understanding the long-run brand-building impact of marketing on sales, this is a serious oversight. Quantifying brand-building effects requires an understanding of how the long-run component of the time series behaves: that is, how base sales behave. This is not possible if base sales are pre-determined to follow a constant mean level or a deterministic growth path, as any true long-run variation in the data is suppressed. To overcome this, we need to specify the trend component as part of the model itself. This allows us to simultaneously extract both short and long-run variation in the data, giving a more precise picture of the evolution of long-run consumer demand and short-run incremental drivers. 1 The result is a marketing mix model with a truly evolving baseline. <br />An example for an FMCG face cleansing product is illustrated in Figure 1.<br />Modeling the Long-Run Effects of Marketing<br />Evolutionary or dynamic baseline mix models open the way to long-run analysis. This is simply because it is then possible to evaluate whether marketing activity plays a role in driving base sales evolution. If so, it can then be said to exert a long-run or trend-setting impact, in addition to any short-run incremental contribution. For example, it is well known that incremental returns to TV advertising tend to be small. However, successful TV campaigns also serve to build trial, stimulate repeat purchase and maintain healthy consumer brand perceptions.<br />In this way, advertising can drive and sustain the level of brand base sales. Conversely, excessive price promotional activity tends to influence base sales evolution negatively – via denigrating brand perceptions. Only by quantifying such indirect effects can we evaluate the true ROI to marketing investments and arrive at an optimal strategic balance between them.<br />To estimate these effects requires linking marketing investments to brand perceptions through to long-run base demand from marketing mix analysis. In this way, a sequential path is identified measuring the indirect impact of marketing activities on long-run consumer demand. <br />The flow is illustrated in Figure 2 and some example data are illustrated in Figure3, which plots the evolving baseline o Figure 1 alongside TVR investments and brand perception data relating to product fragrance and perceived product value.<br />Calculating the Full Long-Run Impact and Total ROI<br />Estimated indirect impacts of marketing investments are part of the long-run sales trend and as such generate a stream of effects extending into the foreseeable future: positive for TV advertising and negative for heavy promotional weight. These must be quantified if we wish to measure the full extent of any indirect effects. To quantify the current value of future indirect revenue streams, we use a net present value approach. This essentially decays the value of each subsequent period’s indirect effect as loyal consumers eventually leave the category and/or switch to competing brands. A discount rate is used to reflect increasing uncertainty around future revenue.<br />The indirect ‘base-shifting’ impact over the model sample, together with the decayed present value of future revenue streams quantifies the total long-run impact of advertising and promotional investments. These are then added to the weekly revenues calculated from the short-run modeling process. Benchmarking final net revenues against initial outlays allows calculation of the total ROI to marketing investments.<br />Managerial Implications<br />The long-run modeling process delivers two key commercial benefits. Firstly, it allows improved strategic budget allocation. Results from conventional models tend to favor intensive promotional activity over media investments. This often leads to a denigration of brand equity in favor of short-run revenue gain. Factoring in long-run revenues allows us to redress this balance in favor of strategic brand-building marketing activity. Secondly, it improves media strategy. Understanding which key brand characteristics drive brand demand can help to inform the media creative process for successful long-run brand building.<br />Conclusions<br />We’ve offered an alternative approach to market mix modeling which explicitly models both the short-and long-run features of the data. Not only does this provide more accurate short-run marketing results but, when combined with evolution in intermediate brand perception measures, allows an evaluation of the long-run impact of marketing activities. This framework demonstrates two key issues.<br />Firstly, if we wish to measure long-run marketing revenues it is imperative that econometric models deal with the evolving trend or baseline inherent in most economic time series: conventional marketing mix models are not flexible enough to address this issue.<br />Secondly, it demonstrates that intermediate brand perception data can be causally linked to brand sales and used to improve long-run business performace. This directl addresses the reservations over the use of primary research data raised by Binet et al (2007).<br />Reference<br />Binet, L. and Field, P. (2007) ‘Marketing in the Era of Accountability’, IPA Datamine, World Advertising Research Centre.<br />Cain, P.M. (2005), ‘Modelling and forecasting brand share: a dynamic demand system approach’, International Journal of Research in Marketing, 22, 203-20<br />Lodish, Leonard M., Magid Abraham, Stuart Kalmenson, Jeanne Livelsberger, Beth Lubetkin, Bruce Richardson, Mary Ellen Stevens. (1995). ‘How TV advertising works: A meta-analysis of 389 real world split cable TV advertising experiments’. Journal of Marketing Research, 32 (May) 125-139.<br />Dr. Peter Cain is SVP, Head of Science and Innovation EMEA and Global Accounts at MarketShare. With over 12 years experience in the marketing industry, he brings best-practice econometric and analytical solutions across a range of verticals.<br />