Marketing Analytics2

CONFIDENTIAL - PAGE 1Copyright © 2005 Marketing Management Analytics

ANA Member Rep Summit:

Moving from measurement to management:Making marketing effective and accountable.

John Nardone – EVP/CCOEd See – EVP/COO


Agenda

� Marketing accountability quiz

� Moving from measurement to management• Measurement, Diagnosis and Response• Analytics Framework

� Is your organization ready?• Marketing Analytic Maturity Model

� Key enablers break out: • People, Process, Technology, Data, Metrics• Best Practices

� Case Study: What it looks like in action


A recent MMA/Forrester/ANA study of 135 senior marketers confirms they can neither measure nor manage their marketing efforts effectively

� Only 1 in 3 marketers said that they built marketing budgets based on knowledge of the spending required to meet corporate goals.

� Only 13% of senior marketers felt confident in their ability to forecast the sales impact of their marketing programs.

� And faced with a 10% budget cut, only 2 in 5 marketers felt they could predict the impact of sales�


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� Marketing as a function often does not enjoy the trust of the organization:• Senior execs do not have high confidence that investment in marketing efforts will

achieve corporate goals.• Even marketers have low confidence in their ability to predict the success of their

efforts.

� Marketing needs to move beyond backwards-looking measurement to decision-focused management.

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Industry leaders have begun to establish formal marketing effectiveness programs to help them advance from measurement to management.


Continuous Marketing Management: a systems-based approach of measurement, diagnosis and response

� Marketing measurement is a necessary step, but alone is insufficient to improve marketing effectiveness

� Diagnosis of marketing performance requires a combination of analytics, tools, experience and judgment.

� Appropriate response in the “window of actionability” can only be achieved through pre-defined response protocols: Scenario plans.

Response

Measurement

Diagnosis

Analytics Framework

An analytics framework is the central lynchpin that supports the entire process


The analytics framework organizes metrics and supporting analyses to anticipate business decisions and provide the insight to support them.

Beyond reporting, “standing analytics” support key business decisions so that analysis is not “ad hoc discovery”

The analytics framework supports both measurement and diagnosis

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Is your company ready for continuous marketing management?


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Level 1Agency Hostage

Level 2Brand

Builders

Level 3Efficiency

Experts

Level 4Customer Converts

Level 5Profitability Pros

• Quickly assess the current capabilities and weaknesses of an organization

• Determine the appropriate target level for an organization

• Leverage best practices and resources to move to a higher maturity level

BenefitsIncreased marketing ROIIncreased accountabilityIncreased effectiveness


The maturity model assesses a series of key performance areas

Analytics Scope: what is the focus of the analytics? Are there true analytics or just reporting? What efforts are focused on advertising, the brand, the customer, sales and profits?

Business Objectives and Impact: At what level do the marketing analytics and business objectives align? Are the causal relationships between measures and outcomes understood?

Major Marketing Analytic Activities: How are the analytics being used? Are they used to justify decisions after the fact, or are they used to drive decisions? Do the analytics support forecasting? Supply/demand chain integration?

Process and repeatability: Are marketing decision processes clearly defined, repeatable, and are they repeated consistently?

Organizational Participation- what skills and groups contribute to the process?

Studies and Research- What data and information is bought, tracked and used?

Services and Tools Used –How is data managed? What tools are used? Which services are bought and which are in-house?

Key Performance Areas• The model examines

analytic performance in areas including scope, metrics, organization, and tools

• Organizations are placed on a maturity level based upon their performance in each of these areas

• An organization must be meeting all performance areas for a level in order to be categorized at that maturity. Each level assumes the performance areas for the lower levels.




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Level 2Brand

Builders

Level 2Brand

Builders

Level 3 Efficiency Experts


Level 4 Customer Converts


Level 5Profitability

Pros


Pros

At Level One, the organization typically displays the following:

• Great Advertising = Great Marketing!Execution of activities that focus on creating good ads that are judged by ad awareness, copy testing and ad tracking studies.

• That is great copy, isn’t it? Up the forecasts by 20%.Analytic focus is on copy testing and ad tracking studies.

• The agency knows best.Most of the marketing function resides within the advertising agency.

Behavioral Observations

•Measurement is confused with analytics- relationship of what is measured to business objective is assumed, not proven.

•Historical knowledge is managed by oral tradition rather than documented norms.

•Use of measurement is limited to a few members of the organization.

•Measurements are used to justify decisions that are already made.




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Level 2Brand

Builders

Level 2Brand

Builders






Pros


Pros

At Level Two, the organization typically displays the following:

Brand is king. I’m building a brand. As much branding as I can afford!

Analytic focus is on brand health and does not provide insights on ROI or causal drivers

We know who our customers are… women 25-54!

Marketing activities are focused on customer segments, not targeted customers. Intuition drives investment decisions against large segmentation.

We have a team

Skills are in place to manage the agency.

•Brand health is measured, but often inconsistently and with unclear association with causal factors.

•Brand efforts are viewed as “goodness” measures and rarely directly measured against incremental or baselines sales.

•Linkage between equity movement and sales not causally related.

•Agency performance comp often related to brand measures.





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Level 3EfficiencyExperts

Level 3EfficiencyExperts

Level 2 Brand

Builders

Level 2 Brand

Builders




Pros


Pros

At Level Three, the organization typically displays the following:

• Our advertising drives sales… we can prove it! Analytic capabilities can now prove the ROI for marketing vehicles and identify causal drivers through mix models and syndicated research

• We are efficient!Dollars are well spent and spend is efficient. Growth may be elusive.

• We know where we are, how we got there and where we are goingThe performance of the portfolio, brands, and tactics are tracked throughout the year

•Analytics are focused on measuring past performance, with insights informing future plans. Performance is tracked during execution.

•Analytics are clearly incorporated in the planning processes, but often not operationalized throughout the year.

•Analytic skills on staff, most frequently in research organization.

•Research org viewed as support function rather than decision driver.





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Level 2 Brand

Builders

Level 2 Brand

Builders




Pros


Pros

At Level Four, the organization typically displays the following:

• We know our brand, we know our results, we know our customer! Rich customer understanding with strongly targeted and measured marketing.

• We fly our brands by facts and forecasts!Analytics are used for predictive applications and causal forecasting

• We know who buys, why they buy, how they buy, and how valuable they are.Customer data is viewed as strategic asset.

• We have a CMO who is really at the table.Marketing holds a key role in the “c”-suite.

•Organization has visibility to key customer touchpoints across the enterprise.

•Marketing goals directly aligned to business objectives.

•Marketing leadership participates in all key business strategy decisions and directions

•Analytics identify customer value for targeting.

•Some analytics and data integration are on- demand.





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Level 5 Profitability

Pros

Level 5 Profitability

Pros

Level 2 Brand

Builders

Level 2 Brand

Builders





At Level Five, the organization typically displays the following:

• Continuous marketing improvement is our organization’s mantra. Analytics drive the marketing decisions and empower marketing creativity. Profitability and growth drive metrics.

• Innovation is valued….and measured! Marketing innovations are identified, validated, and quantified by analytics. The marketing process drives integration of innovation across the company.

• 3-sigma marketing is cool!The organization uses “6-sigma” like concepts to move marketing effectiveness above the average, driving profit and growth.

• Marketing is a team effort. Marketing *is* the center of the universe.Marketing operations integrate with IT, Finance, Operations, etc to ensure fiscal goals are met.

Behavioral Observation

•Marketing process is defined, structured, and valued as a corporate asset.

• Use of analytics is institutionalized, consistent, and demanded.

•Data for decision making is available on a continuous and ongoing basis.

•Analytics are current, and as near real-time as possible.

•Marketing decisions include stakeholders from key organizations.


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People

Process

Tools/Tech

Data

Metrics/measurement


Best Practice: People, Process, Best Practice: People, Process, Technology, Data and MetricsTechnology, Data and Metrics

John John NardoneNardoneEVP, Chief Client OfficerEVP, Chief Client Officer

Ed SeeEd SeeEVP, Chief Operating OfficerEVP, Chief Operating Officer


People:Ensure organization is ready to be accountable.

� Each level of sophistication has distinct characteristics and requirements.

� Marketers cannot leapfrog levels as they advance their organizational capabilities. Marketing

Analytics Maturity Model

� Lasting marketing accountability can only be achieved when foundational conditions are in place.

� Readiness follows a maturity model- progressive stages with increasing levels of skills, processes, tools, and data.


People:Ensure sufficient skills are on hand to design the marketing effectiveness program.

� Creating a successful marketing effectiveness initiative requires at least 7 key competencies:

• Project Management• Business Metrics design• Organization and Process Design• Data/database design• Marketing Analytics• Systems Integration• Change Management

Do it all Internally:Do it all Internally:Beware of skill gaps and lack of dedicated Beware of skill gaps and lack of dedicated resourcesresources

Be the GC. Coordinate multiple Vendors:Requires well documented requirements and design, strong PM skills, and dedicated mgmt resources

Hire a big consulting firmHire a big consulting firmBe sure there is a true specialty in ME. Be sure to get the “A” team.

Hire a marketing effectiveness specialistSpecialized skills. Deep Experience. “A” team attention.


People:Ensure sufficient resources. Dedicated staff are critical.

�Staff for success at all levels. A marketing effectiveness effort will not be successful without dedicated and capable resources.


Process:Structure the roll out to ensure adoption and “stickiness”.

� “Big bang” approach rarely works.

�Phase metrics for sustained change. Stage project with goals and metrics for:

• Readiness• Deployment• Adoption• Optimization

�Strong Governance ensures that the effort does not progress to each next level without satisfying the requirements of the levels before.


Process: Ensure marketing effectiveness programs address all business stakeholders .

�Marketing effectiveness requires a cross functional team and approach.

�Successful cross functional programs require senior level governance and a single chair.

�Decision making process and escalation paths must be clear and fast enough to support business needs.

�An executive champion is a must. RACI Decision ModelRACI Decision Model••ResponsibleResponsible••AccountableAccountable••ConsultedConsulted••InformedInformed

CrossFunctional

ProgramTeam


Tools/Technology:Tools are best deployed to support a well defined process.

�Marketing tools and technologies alone cannot provide meaningful business improvement.

�Marketing accountability often requires significant change in how a company does business. Tools should be designed to support the new processes.

�Tools not rules: In organizations with high turnover, embed the process and critical know-how in the tools.

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Data:Address data requirements early in your process.

�Design an information architecture with an eye toward analytics.

• Clear definition of all data (Data dictionary)

• Product hierarchy• Geographic hierarchy• Data alignment conventions

� Inventory data assets and identify critical data gaps as early as possible.

� Instrument programs to create data where it does not otherwise exist.


Data:Implement governance to ensure data is treated as a precious corporate asset.

� Develop a data governance approach that is manageable by the organization and will age well.

• “System of record” for each data source

• CRUD privileges defined: Create, Read, Update, and Delete

• Process for addressing changing data needs over time

� Data architecture and governance should exist independently from the technical systems that house the data.

• Systems will come and go. The data is the asset.


Metrics/Measurement: ROMI measurement is only one key metric. Use a balanced scorecard.

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�The goal of any marketing effectiveness program should be continuous performance improvement based on a balanced set of metrics.

�Exclusive focus on ROI measurement often leads to perverse behaviors.


Metrics/Measurement:Structure standing analytics. Avoid ad hoc reporting.

�Organizations must instrument their processes rather than just report their data.

• shift from culture of reporting to an expectation of standing analytics.

• Parsimony counts.

�Look for information to inform decisions, not provide “the answer”

�Avoid artificial precision: leads to wasted effort and diminishing returns

�Be careful that a drive for precision does not encourage people to “game the system”.


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Case Study: A large franchise in multi-year decline adopts a continuous marketing management system

� Core brand franchise is in decline.

� To slow volume declines, support has shifted from brand based advertising to trade support and special packs.

� Client suspects that trade and special packs are eroding the brand, and that advertising is under-supported…but can’t make a case.

� Franchise includes a portfolio of products that dominate their category.

• The products share brand parentage. There are cross product advertising halos, as well as competitive effects.

� Client is unsure how to allocate spending across products to maximize overall franchise profit.

� Forecasting has been a pain point, as the impact of marketing and trade tactics on sales have been unpredictable.

Analytics framework built around the key business questions to be addressed.

Monthly course correction process established.

Models used to drive new forecasting process.

Built integrated marketing database, monthly updates.

Econometric models built to measure marketing and trade effectiveness.

Initiatives


Thorough measurement of performance and payback of marketing tactics expose opportunities for improvement

• Marketing mix models for key brands help to understand causal drivers of performance

• ROI scorecards for marketing tactics present opportunities for resource reallocation

• Trade lift better understood by including forward buying effect

TV EffectivenessIncr. Volume (000) / 100 HH GRPs

2002 2003 2004YTD

15,936

9,658

15,052

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% Sales driven by Marketing

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Monthly “due-to” analysis, “variance reports” and “source or error reports” decompose forecasted performance against actual, to understand what is working or not working.

TotalTVRadioPrintCouponTradeDistributionCompetitionPriceCategoryOverridesUnexplained Variance

Volume Due-To Analysis - Brand A1/1/2004 – 12/31/2004 vs. 1/1/2005 – 12/31/2005

5.6%2.0%2.4%1.3%-0.5%-0.1%0.8%0.3%0.0%-0.4%3.2%-1.1%

% Volume Difference

VolumeDifference

300,000107,143128,57169,643-26,786-5,35742,85716,0710-21,42120,000-25,000

Investment Difference

$105,000$100,000$20,000$35,000- $20,000- $30,000

Relative Volume Change

Dashboard reports assemble all KPI’sand important information in one manageable space

Up to date forecast


Response/actions are implemented quickly enough to impact market performance

Media spend is optimized to ideal support levels, and allocated across the portfolio for maximum payback

What-if scenarios anticipate issues and drive monthly action plans

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12/29/03 1/26/04 2/23/04 3/22/04 4/19/04 5/17/04 6/14/04 7/12/04 8/9/04 9/6/04 10/4/04 11/1/04 11/29/04

Prod 1 Prod 2 Prod 5 Prod 6 Prod 7 Prod 8 Prod 9 Prod 10 Prod 11 Prod 12 Prod 13

2004 Optimized Plan (excl. Prod 3 & Prod 4)Total Spending: $93.8 MM

Key Issues for July•Ad wear out/delay of new advertising•Shipper at Costco not meeting expectationsAction Plan•Understand doctor sampling program as key driver•Ensure flawless execution of marketing plan

•1 pager on key metrics and milestonesfor bonus packs and new copy•Track delivery vs. estimate of GRP's•Track trade support versus year ago•Examine media plan vs 2003 to understand•Drivers of TV ROI


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• Drivers of business performance are better understood overall. Brand teams are having the right discussions.

• Forecasting has improved, driving increased operational efficiency.

• Identified weak tv creative as a cause of underperformance, and launched new, more effective copy.

• Reduced reliance on unprofitable special packs.

• Total brand spending INCREASED behind new copy, and business growth followed.

• Media allocation across brands and time was optimized, increasing media effectiveness by 15%.

• Trade saturation and forward buying quantified, leading to new trade support strategy.


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For more information, visit www.mma.com


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1. Rewards / Measurements / Career path alignment

2. Process review and design

3. Communities of practice

4. Training

5. Communications

Sample program initiatives are likely to include:

� Analytic framework developed� Econometric models developed� Tools to support diagnosis and

scenario planning implemented.� New response protocols designed and

documented. � Data Governance established.� Training for both new processes and

new systems� Staff education to “trust the numbers”,

while avoiding black box syndrome.


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Readiness

Roll-out

Adoption

Compliance

Baseline

Institutionalizing transformational change is a gradual process with different measures for success at each point…