Case Study: What’s the Best Marketing Mix?

Increasing Marketing Productivity and Profits

May 2006

 

Resources to Help You

 

 

Marketing Mix Webinar -- Getting the Most Out of Your Marketing Budget Thursday, May 18th at 12 Noon PT

More Info on MarQuant Tools

 


Marketing Mix Webinar -- Getting the Most Out of Your Marketing Budget Thursday, May 18th at 12 Noon PT

If you or your colleagues would like to know how econometrics and optimizations are used by companies to determine which half of their advertising is working, please sign up for this webinar.

You'll learn how to determine which product or segment or geographic area should get the bulk of your marketing budget.

Contact us if you'd like to sign up for our 50-minute webinar on how to use econometrics and optimizations to get the most from your marketing budget on Thursday, May 18th at 12 noon PT.

Barbara Lewis

MarQuant Analytics clients include Fortune 100 clients in the following industries

  • Retail
  • Automotive
  • Financial Services
  • Entertainment
  • Biotech
  • Advertising
  • Computer Hardware
  • Computer Software

Most companies have a multitude of marketing activities and attendant marketing expenses. In the days when there were only several marketing activities such as TV, radio, print and direct mail, marketers could easily gauge response rates through testing. However, with multi-million dollar marketing budgets and extensive marketing activities that can number 50 and up, marketing response for each activity becomes nearly impossible to test. Testing is especially difficult when more than one marketing activity is directed to a potential customer. Then, how can you determine which activity worked best?

Econometrics is the answer to that question. Econometrics, which is the application of mathematics and statistics to the study of economic and financial data, is sweeping through industries. Finally, we can figure out which 50 percent of advertising is working! After completing the econometrics, a marketing and financial model is developed that can then be optimized to yield total budget recommendations and specific allocations among the various marketing activities for optimal results. The following case study describes how one Fortune 100 company was able to determine response rates for various marketing activities and then optimize their budget, accordingly.

Business Goal Discussion: The first step in the determining the best marketing mix was to discuss the company’s business goals, which could include profits, customer life-time value, market share, customers, etc. Companies have different business goals and sometimes multiple goals. In this case, our client’s goal was increasing customer lifetime value. Next we interviewed executives to get their opinions on the factors that drive customers to be retained longer while spending more money, thus increasing customer lifetime value.

Data Capture: Once we determined the drivers, we discussed the variables that are measured to track their performance. Although a company may track 50 variables, only 15 may influence business goals. The variables can be internal, which include marketing spend, or external, which can include the unemployment rate, for example. Then we gathered the data and developed a database of all the variables across time. Three years of weekly data should yield a robust model.

Econometric Analysis: Our team of PhDs performed regression analysis on the database to determine which variables had impact on converting prospects to customers and customers to retained customers. The impact is defined as a coefficient of elasticity or impact value. Certain variables have significant impact whereas others may have little or no impact.

Budget Optimization: The coefficients from the econometric analysis were loaded into MarQuant Analytics’ proprietary software to determine the optimal budget based on long-term customer value, acquisition and retention value. Since that amount was more than the company wanted to spend, the budget amount was set and the optimizations rerun.

Recommendations: The recommendations increased marketing spend in certain areas and decreased others. For the same amount of budget as the previous year, the company was able to increase its customer lifetime value by 15 percent.

As marketing activities expand and the results of which are increasingly hard to gauge, executives can use econometrics and optimization to determine the best marketing mix to accomplish their goals.

If you would like a demo of a case study, please contact Barbara Lewis at (310) 471-8979 or barbaralewis@marquantanalytics.com. Or you can register for our 50-minute webinar on how econometrics and optimization can help you accomplish your top-line and/or bottom-line goals.

Barbara Lewis President of MarQuant Analytics

 

·  More Info on MarQuant Tools

If you would like more information about about MarQuant's analytical tools including descriptions and screen shots, click here.

If your marketing requires a more practical and scientific look or marketing mix budgeting, you and your clients can obtain customized analytical tools developed by MarQuant Analytics.