MARKETING MIX MODELING FROM THE BOTTOM UP: SYNCING PROMOTIONAL SPEND OPTIMIZATION WITH PRECISION MARKETING
Executive Summary: Traditionally, marketing mix modeling for corporate strategy and customer experience analytics for execution are carried out independently of each other, with no direct link. This disconnect makes tying executive level strategy to marketing and sales execution difficult and greatly reduces overall effectiveness. By using an integrated analytic approach that informs both strategy and execution, organizations ensure the highest probabilities of success.
Who does your marketing mix modeling and who generates the target list for your CRM campaign? Odds are they are performed by separate teams, resulting in two distinctly different underlying analytic approaches and results. But doesn’t customer responsiveness inform your promotion assessment and optimization? And if you are forecasting a level of sales based on your marketing mix analytics, don’t you want to be as sure as possible it will be achieved? There needs to be a common thread tying strategy to execution and that thread is an integrated analytic approach.
BOTTOM-UP APPROACH TO MARKETING MIX MODELING
Corporate marketing and sales strategy is typically a top-down affair. Analysts look at national level data, ascertain the attribution for a small set of high level promotion groups, optimize the budget and impact for each, and then publish the goals for the various execution teams. This traditional way of doing things misses the mark and does not embrace the opportunities afforded by using a bottom-up approach. Marketing mix modeling should start with customer responsiveness at the lowest promotion level possible. Instead of starting with CRM - HCP, start with CRM - HCP BRANDED ADULT at the customer micro-segment level, such as PCP | D7-10 | INCREASING.
RESPONSE CURVE GENERATION FOR CAMPAIGN AND CUSTOMER MICRO-SEGMENTS
By including the lowest level promotion and customer segment views in your marketing mix analysis, you can generate response curves for executive strategy and promotion execution purposes. Here is an example for promotion/campaign CRM - HCP BRANDED ADULT:
With response curves for each low level promotion, we can generate the Impact and ROIs at various spend levels. Executives can see what is working and what is not and be able to forecast what changes in spend will ultimately mean. By generating their corresponding MROI curves, an algorithm can be applied to optimize spend across promotions for a host of desired outcomes.
Response and MROI curves can also be created at the customer micro-segment level, allowing promotion owners to see which customers are most likely to respond to a given promotion and optimize their execution across these segments. Here are examples from the customer PCP | D7-10 | INCREASING for the promotion CRM - HCP BRANDED ADULT:
By distilling the customer curves into scores for responsiveness and opportunity, customer preference maps can be generated with detail on where the high opportunities exist—all leading to more effective promotion execution and improved customer experiences. Here are examples of what the scores, preferences, and map would look like for CRM - HCP BRANDED ADULT; PCP | D7-10 | INCREASING:
SYNCING STRATEGY WITH EXECUTION
The strategy and execution level views depicted above come from an integrated set of analytics performed at the lowest promotion and customer segment levels available. The response curves for the promotions tie directly to the response curves for the customers and vice versa.
Why does this matter? It matters because now strategy and execution are synced. And synced data means more precision and more flexibility to respond to changing conditions. When management forecasts a level of contribution from their promotions based on spend increases/decreases, they have the highest level of confidence that those forecasts can be met. While a bottom-up approach takes a more integrated and aligned effort, the result will be much more accurate and will lead to improved customer engagement across promotions.
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