Finding the Waste in Marketing Spending A high - payback exercise
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Finding the Waste in
Marketing Spending
A high-payback exercise
Half the money I spend on advertising is wasted; the trouble is, I don't know which half.
John Wanamaker
• Various professional estimates of what percent of marketing spend is wasted range from 30 to as high as 60 percent. Some estimates and pronouncements have been downright depressing and shocking.
• It is said that the effectiveness of marketing has reached an all-time low, according to a [2014] survey of 3,000 global marketers conducted by The Fournaise Marketing Group. The marketers surveyed reported that 35% of their marketing spend had no discernible effect on consumers. The report suggested the main cause of the waste can be largely attributed to lack of measurement.
• This report will show that “marketing-mix” or ROI modeling is an econometric tool for measuring marketing effectiveness and returns. In using this tool, companies and brands can determine which marketing initiatives and campaigns are working and which are not. By uncovering the low-productive activities, considerable savings are possible. More importantly, however, by reallocating dollars from the less to the more productive activities, each company will significantly recharge its business growth.
Our Destination is to move towards profit-driven marketing
Cumulative Event Contribution
“Events” that Comprise the Marketing Plan
The Simple Premise of Profit Driven Marketing
“Events” that Comprise the Marketing Plan
Distribution of Marketing Events by ROI
41% of Events 59% of Events
59% of marketing events have a negative ROI
Pro
fita
bili
ty
Median-14%
Reinvestment of bottom 25% events
can increase profitability by 25%
Ret
urn
s o
n D
olla
rs S
pen
t (%
)
Source: Booz & Company & Assn. of Nat’l. Advertisers
Modelling Architecture
We undertake an econometric media mix modelling to understand which marketing channels have driven sales and ROI for this Auto company. The illustration below shows the various data components that we considered in this modelling of sales units*.
Digital Display (Premium & Network)
The Auto Services TV
Paid Search
SEO: Unique Site Visitors
Radio, Press, Cinema, ITV Spons’
Competitor TV**
Monthly Temp & Precipitation*
CPI: Used Car Price Index*
Gross Domestic Product
Seasonality ***
TCP Car Sales (Oct
2010 – Sept 2013
* not all variables we re included in the modelling** The Car Shop, CarCraft, Available Car, Fords of Winsford & Stoneacre TV Ratings*** Determined through TCP car sales data from Oct 2010 and Sept 2013
4
alidate
easure
ssess
ptimize
“Validate” Model PerformanceR2=97.6%, Holdout R2=89.9%
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Oct
-20
10
Dec
-20
10
Feb
-20
11
Ap
r-2
01
1
Jun
-20
11
Au
g-2
01
1
Oct
-20
11
Dec
-20
11
Feb
-20
12
Ap
r-2
01
2
Jun
-20
12
Au
g-2
01
2
Oct
-20
12
Dec
-20
12
Feb
-20
13
Ap
r-2
01
3
Jun
-20
13
Au
g-2
01
3
Model
Actual
The model shows a high level of predictive accuracy
6
“Measure” Annual Marketing Contributions
86.2%
0.0%
2.9%
0.7%
1.9%
0.9%
1.2%
1.2%
3.0%
0.2%
1.8%
13.8%
Baseline
Display Premium
Display Network
Paid Search
Branded TCP TV GRPs
SEO
Sponsorship (ITV Weather )
Cinema Ad
Radio
Press
GDP Effect
1.4 million in marketing spend generated almost 13.4 million pounds in revenue sales. Total media accounts for about 12% of total sales. Radio, Digital Display and TV were the largest drivers of car sales.
7
“Assess” Drivers of Growth
-5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0%
CompTV_Fords of Winsford
CompTV_Stoneacre
Baseline
SEO
Paid Search Impressions
Display Premium Impressions
Press Spend
CompTV_Available Car
CompTV_Carcraft
Branded TCP TV GRPs
Competitor Brand TV GRPs…
Cinema Ad Spend
Sponsorship (ITV Weather Spend)
GDP Effect
Radio Spend
Display Network Impressions
-4.2%
-3.8%
-1.7%
-0.4%
-0.2%
-0.2%
-0.1%
-0.1%
0.1%
0.9%
1.0%
1.2%
1.2%
1.3%
2.5%
2.5%
Annual Variance Contributiion
Digital Display & Radio were the key growth drivers. Media contributed +8.3% but competitive ad spending had a -8.0% impact.
8
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.8 1.0 1.4 1.5 1.62.8 3.5
4.1
8.3
15.1 15.1
42.7
-
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
ROI per $ by Executed Ad/Campaign
76% of ads wasted <=0.5 ROI
“Assess” how Profit Driven Marketing identifies the low productive events and ads which do little to drive the
business
Based on experience, at least 25% of ads will be identified as below 0.5 ROI and thus will be real savings opportunities. In this case, a much higher percentage of ad were substandard.
Then “optimize “ marketing spend by reallocating spend from poor performing activities to high performing ones
10
Marketing spend optimization generates an estimated +10.2% sales lift at constant budget levels.
CONTRIBUTION CURRENT SPEND OPTIMAL SPEND
Mobile 266,920 280,000 420,000
TV 2,435,766 594,042 2,122,771
FSI's 232,001 2,900,000 743,038
OOH 39,866 1,230,888 988,766
Print 87,655 3,783 7,188
Radio 264,541 5,244 9,964
FSI's 967,000 3,611,152 4,333,382
0%
20%
40%
60%
80%
100%
Mobile
TV
FSI's
OOH
Radio
FSI's
8,925,109 8,925,109
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