Knowledge Center

Blog

Moneyball for Marketing

Rick Abens, Founder & CEO

Investing in shopper marketing is like trying to assemble a winning baseball team. It helps to have a Yankee-sized budget, but money doesn’t ensure success, nor do wisdom and intuition.

The premise of baseball’s Moneyball movement is that teams tend to measure the wrong things when assessing player value and what it takes to win. Moneyball relies not on hunches or hype but on hard statistical data in order to identify gameplay aspects that contribute to wins.

Shopper marketing, like baseball, has tons of variables, but Foresight ROI’s predictive analytics tool weighs each in order to forecast, with an acceptable degree of reliability, whether those elements will team up to produce a win.

Predictive analytics tool

It all starts with measuring the right gameplay elements. Measurements are the raw material you need to make the best shopper marketing decisions, bringing about:

  • Topline growth traceable to shopper marketing
  • An edge over your competition
  • Predictable, repeatable shopper marketing successes
  • Greater value for investors
  • Continuous improvement in market performance

That’s where Foresight ROI comes in, helping CPG giants like Tyson avoid missteps and repeat successes by equipping them with data-based decision guidance and the ability to forecast results.

Consistent, frequent use of Foresight ROI’s predictive analytics tool typically results in a 10% or more increase in marketing ROI each year. That’s like getting an extra million dollars for every 10 million dollars you invest in marketing.

Our predictive analytics software crunches historical and other relevant data through algorithms to determine the likelihood of future outcomes. Our predictive modeling tool goes a step further, examining inputs (data points and sets), the user’s desired outcome (a 10% sales lift, for example), and actual outcomes continually until this plan-measure-learn cycle produces an even better model. The ever-improving model eventually can bring about a desired outcome starting from any given inputs.

Together, robust measurements and predictive analytics answer three key questions for the shopper marketer:

  • How much to spend on marketing and why
  • Where and when to spend for budget optimization
  • How to spend effectively to maximize returns

Measuring shopper marketing ROI

How much to spend on shopper marketing can be determined using a predictive model to optimize marginal returns, and then measuring actual results to see if expectations were met. By measuring the profit and loss impact from marketing over time, you can predict outcomes and then measure the actual results for comparison, thereby “training” the predictive model to point you to the right decisions to increase marginal returns.

Typically, you’ll experience a diminishing return on increases in marketing investments, so you must find the threshold where the marginal return is still acceptable to stakeholders. Strategic importance can be factored in by setting a fixed amount to invest in strategic initiatives, then setting a lower ROI threshold. You can do this across all marketing mix elements to help determine how much to invest in each. Then you must prove to stakeholders that marketing delivered the expected results, and in so doing, you justify your marketing spend and perhaps a budget increase.

You’ll want to optimize the allocation of marketing dollars across your markets, customers, strategic initiatives and seasons. The predictive model measures the actual ROI for each of these, and your judgment also comes into play in ranking the expected return rates for each alternative.

Assess alternative actions

You can run various program alternatives and what-if scenarios through predictive models to forecast outcomes for each: If we do X, then Y is likely to happen. This capability allows you to build a marketing plan that will deliver the best expected results the way Billy Beane of “Moneyball” fame built a winning roster of affordable players using underappreciated baseball stats.   

Foresight ROI can make a Major League hero out of you by equipping you with a cost model, lift model, and P&L model that link your marketing decisions to the expected P&L impact. The cost model predicts how much marketplace exposure you get per dollar for each marketing reach vehicle. 

The lift model predicts the sales impact from the marketing reach for each marketing vehicle in each marketing program, and accounts for differences in lift in different situations, for each product and market.

The P&L model converts the volume sales lift and marketing cost to the marketing’s revenue and profit impact. By rolling up the forecasts for each marketing activity, you will get the estimated impact from the entire marketing investment.

Winning streak

Managers build credibility by forecasting well and then delivering on the forecast results. Repeating the process of forecasting, comparing expected and actual results, and learning from it, in a continual plan-do-learn-change cycle, establishes best practices so you make better decisions for better performance. Providing forecasts and learnings to stakeholders helps ensure buy-in and increases collaboration and accountability.

Foresight ROI’s predictive analytics also measures shopper marketing synergy with trade, quantifying category growth as well as brand ROI and forecasting events that benefit your retail partners. Last but not least, it enables you to eke out an extra point or two of growth, giving you an advantage over your competitors. You also lower investors’ risk, resulting in higher stock values. Those are World Series-caliber wins all the way around.

 

 

  • Connect with us
  • Linkedin
  • Twitter
  • Instagram

© Copyright 2018 Foresight ROI — Turning Insight into Foresight