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Show Them You're Super

Rick Abens, Founder & CEO

As a shopper marketing manager, you know the importance of results as well as measuring them. That’s how your successes are recognized and your efforts continually improve. Increasingly, shopper marketing managers are turning to predictive analytics to help them make sharper decisions and confidently forecast the outcomes. Using this method is like tapping into a superpower (cape and tights optional).

Predictive analytics addresses three key areas for marketers:

  • How much should I spend on marketing?
  • Where and when do I spend for budget optimization?
  • How do I spend effectively to maximize returns?

 

More Power to You

Think about superheroes and their special powers. As a marketer, a marginal return optimization analysis works like that for you because it helps determine how much to spend on marketing. Marginal return is the ROI on the next dollar spent. Marketing investments typically have a diminishing return, so managers need to figure out the threshold point where the marginal return is still acceptable. Factoring strategic importance into the decision by setting a fixed amount to invest in prioritized initiatives and then setting a lower threshold is equally powerful. When you apply it to all your marketing mix elements, helping to identify how much to invest in each, you can pretty much save the day.

Of course, there may be a few non-believers out there. That’s why you need to prove to stakeholders that the cost is warranted. Demonstrate that you’ve achieved the results you were expecting, and they’ll appreciate your abilities.

Using a predictive model, you can determine how much to spend on marketing by optimizing marginal returns. Then, you measure your actual results against the predictive model’s forecast. If you’re not right on target, expect a bit of fine-tuning (they didn’t come up with that superhero costume overnight). Both you and the model will improve over time through the accumulation of data.

Once you know that your marketing activities have delivered expected results, you can optimize spending allocation across your markets, customers, strategic initiatives and seasons. You can wield this mighty hammer…uh…tool, along with any additional information, to rank the expected return rates for various courses of action.

 

Analytics:  Your Trusty Sidekick  

Even the strongest comic book characters rely on some extra help. In your case, that’s what predictive modeling does. Though the science is complicated, the application of it is not. Foresight ROI puts the tools at your fingertips. Cloud software and a user dashboard equipped with the keyboard equivalent of adjustable knobs allow you to predict outcomes based on limitless variables.

The purpose is to make you even better at what you do best:  The planning, creation and the execution of marketing activities. Predictive analytics helps you to build best practice knowledge of what works, so you can continue to make super smart decisions.

Whatever you take on, tap into your experience as well as three proven strategies:

  • Ensure customers’ needs and motivations guide creative strategies and executions
  • Focus on growing the category with new users, new occasions, and/or larger baskets
  • Integrate all your marketing activities across the path to purchase

A predictive model forecasts outcomes based on the decision alternatives you select. This allows you to build a marketing plan that will deliver the best expected results. A comprehensive predictive model consists of a cost model, a lift model and a profit-and-loss model to 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 cost modeling process involves measuring historical reach cost rates, then using other available information along with judgment to forecast any changes in these cost rates. It’s best to document the assumptions in this forecast for assessment when the actual results come in.

A lift model predicts the sales impact from the marketing reach for each marketing vehicle in each marketing program, accounting for differences in lift in various situations for each product and market.

The P&L model is simply revenue and profit rates to convert the volume sales lift and marketing cost to the revenue and profit impact from the marketing.

Roll the forecasts for each marketing activity and you’ll get the estimated impact from the entire investment.

 

Back to Headquarters

Benefits of this modeled measurement process include:

  • Improved marketing decisions and outcomes
  • Better internal stakeholder alignment due to common understanding behind decision rationales
  • Credibility at retail and an edge over the competition due to accurate forecasts
  • Higher stock value, as better forecasting lowers investor risk
  • Continuous improvements as repeating the process of forecasting, comparing actual vs forecast results, and learning from the experience builds marketing best practice knowledge

Use your x-ray vision on that last bullet. By repeating the plan-do-learn-adjust cycle consistently and frequently, you build a common knowledge base across the enterprise. Foresight ROI’s customers have benefited from a 10% (or more) increase in marketing return on investment, each year. In other words, they’re getting an additional million dollars for every $10 million they invest in marketing!

Predictive modeling belongs in your utility belt. Contact us to get started.

 

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