M A S B M A S B Copyright MASB 2009 CLV Roadmap for CPG The Market Research Event October, 2009 Rick Abens, Foresight ROI, formerly at ConAgra Foods, Board Member Marketing Accountability Standards Board 1 Measuring and Improving the Long-term Impact from Marketing for Fast Moving Consumer Goods
Customer Lifetime Value for Consumer Packaged Goods to gain control over the impact from your marketing
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MASBMASB Copyright MASB 2009
CLV Roadmap for CPG
The Market Research Event October, 2009
Rick Abens,Foresight ROI, formerly at ConAgra Foods,Board Member Marketing Accountability Standards Board
1
Measuring and Improving the Long-term Impact from Marketing for Fast Moving Consumer Goods
MASBMASB
Marketing Accountability Standards Board
Non-profit industry organization of CMOs, CFOs, Researchers, Academics
Purpose is to raise the influence of marketing in the board room
Conducts projects for industry advancement and education
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MASBMASB Copyright MASB 2009
Customer Lifetime Value marketing can help with key marketing issues for consumer packaged goods companies
How do we drive long-term growth with marketing?
How do we develop customer acquisition and retention marketing strategies that are impactful?
How do we match the right offers to the most responsive customers?
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MASBMASB Copyright MASB 2009
Short-term ROI marketing mix assessment covers the smallest and least profitable sales volume
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Baseline
AdvertisingPromotion
Trade S-T ROI measures incremental sales
Baseline volume 60% of sales unmeasured
Sources of Sales Volume
CPG Industry Average
MASBMASB Copyright MASB 2009
Sources of Growth
1. Acquire new customers
2. Retain more customers
3. Increase purchase size
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MASBMASB Copyright MASB 2009
Looks like these businesses are growing driven by new customers
0%
30%
60%
90%
New Customers
% of Pre-vious Cus-
tomers
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MASBMASB Copyright MASB 2009
The new customers only replaced the lost ones instead of driving growth
0%
30%
60%
90%
New Customers = Lost CustomersRetained Customers
% of Pre-vious Cus-
tomers
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MASBMASB Copyright MASB 2009
Driving the right B2C customer behavior is key to growth
Impact of a one-week 30% price reduction
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Source: Dominique M. Hanssens and Shijn Yoo (2008)
Short-term Lift
CLV Lift0%
1%
2%
3%
4%
5%
Heinz Ketchup
Customer (consumer) behavior impact
Own customer purchase acceleration
Increased purchase size and category usage
Short-term Lift
CLV Lift0%
2%
4%
6%
Hunt’s Ketchup
MASBMASB Copyright MASB 2009
Customer Lifetime Value for CPG
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MASBMASB Copyright MASB 2009
Getting to CLV with metrics and processes
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CPG Currently
Direct MailCredit CardsCPG Aspiration
Auto ManufacturersKroger with Dunnhumby
Customer
Churn Management
Target Marketing
ROIMass
Marketing
CLVTarget
Marketing
Product Customer
Long-term MMA
Short-term MMA
Pro
ces
ses
Pro
ces
ses
MetricsMetrics
MASBMASB
Choices for marketing long-term impact
Distributed Lag
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Markov Brand Equity
Impulse Response Function
MASBMASB
Vector Auto Regressive approach represents the dynamics of marketing effects
Developed in the 1980’s as an economic application to account for:
Co integration of variable drivers
Interdependencies of independent variables
Dynamic lag effects and variable evolution
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MASBMASB
What is VAR?
Systems of equations
Explains the evolution of a set of variables as a function of their past evolution (Vector)
Branch of regression analysis where independent variables are all previous values in a time series (Autoregression)
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MASBMASB
VAR system reports marketing results in terms of consumer behavior
VAR Inputs Variable synergies and
causalitiese.g. Coupons + Merchandising e.g. Advertising effects on dist.e.g. Lag effect of advertisinge.g. Seasonality–marketing synergiesAll other synergies and causalities