Market Mix Models, where one focuses on a single KPI like sales volume, are an extremely powerful technique and especially useful at disentangling the key elements of all the marketing levers that are available – price, promotion, advertising and so on.  Add in some enhanced granularity – modelling CPG by SKU and retail account, for example – and the technique becomes even more powerful.

But even the best models report back that an impact on your single KPI could not be found for some parts of the marketing mix.

This is not because these initiatives don’t have any impact.  It is more to do with the naïve measurement approach that is adopted by some marketing mix professionals.

Now, I’ve long been a believer that any marketing activity should ultimately be assessed on its ability to drive sales and profitability.  Else, what’s the point in it?  But the way it does this and the time period over which it works does not have to be as simple as “engage customer base with social media in week 1 and see sales go up in week 2”.

We’ve had the path to purchase  more than a century.  Let’s be smarter about using it.

In the modern era of digital media, instant response and online purchases, we are the first to admit that the path to purchase is changing.  But it is still key in building our understanding of how brands interact with the ecosystem which they inhabit.  Marketers use path to purchase to plan their campaigns. Modelers, who are  responsible for assessing the effectiveness of campaigns, should start using it too.

And when we talk about the path to purchase , we’re not talking about simple linear stages  that a customer goes through; becoming aware, interested, then desiring your brand and finally taking action and purchasing.  We doubt this was ever really the case.  It is hard to see how it’s the case now.  Stages are blurred and marketing can affect none, one or even all of the stages.  What’s more important is that some marketing channels won’t have a direct effect on sales at all, but will help to build the effectiveness of other levers.

Our solution is Integrated Marketing Response. There is no preconceived shape to the path to purchase  – it is an atheoretical approach that allows the data to tell her own story.  And instead of focusing on a single KPI like sales, it examines as many KPIs as required to derive a holistic understanding of the marketing ecosystem.

The strength of this approach is that you  no longer need to make excuses as far as measurement is concerned – blaming the inability to measure something on esoteric technical or data concerns.  There may not have been a direct effect on the end goal from some marketing stimuli, but then it probably wasn’t designed with this in mind.  Does anyone seriously believe that a company that succeeds in boosting its re-tweets by 10% will see a corresponding increase in sales at the till?  Well, perhaps –  if it is communicating a huge  discount. But we don’t need to rehash arguments about what short termism  will do to your brand health and profitability.

imr-diagram

Instead it is quite likely that these tweets will feed into some intermediate stage that may in turn feed into sales.  Let’s look at a simple example:

Diagram 1 shows a stylized example of an IMR ecosystem.  Caveat that while Gain Theory’s experience suggests that there are similarities across brands, each IMR is bespoke to a particular client and brand.  We can see from the schematic that some marketing initiatives have a direct effect on the end KPI (increased sales) while others are purely enablers, working with other stimuli to make them more effective.

To summarize, if you run an MMM analysis, the marketing ROIs will be based completely on the direct effect.  If you run an IMR the marketing ROIs will be based on both the direct and indirect effects.  This holistic view of marketing performance will lead to greater understanding of the impact of all touchpoints, as well as enhanced efficiencies within budget setting and allocation.

This approach is not theoretical: it is a proven success across retail, CPG, pharma and tech brands.

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