Measuring and Growing the

ROI of

Marketing

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Agenda for today

1. The critical questions to address2. Why are we here and what is the problem?3. Brief introduction to marketing effectiveness measurement.4. How to optimize marketing spend and maximize growth5. Questions and discussion

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Some questions prompting need for effectiveness measurement

What are the most effective marketing channels – TV, Radio, Outdoor, FSI’s, Print or Digital?

What elements of my marketing investment are working and not working? Where is the waste?

What has been the ROI of online/digital media versus traditional mass media?

How important are holidays and specific recurring sales peaks on the calendar?

What is the impact on sales if we increase the number of stores in the market?

What is the impact on sales if we increased prices by x%?

What is the best way to allocate my marketing budget?

What are the primary growth drivers for sales?

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The long & winding roadof marketing

Why are we here?

• Marketing budgets tend to be one of the largest line-item expenses on the balance sheet

• Traditionally, there has tended to be no accountability for this expense. What do we get from this investment? Is there payback?

• According to a recent study by IBM with about 1700 global marketing leaders, 63% of them believe that marketing ROI will be the most important and critical measure of business and marketing success in the next 3-5 years.

• The problem, however, is that only 16% of these marketers presently use marketing ROI as a guide to their marketing investment decisions

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The ideal situation

Spend W on Activity X

Sales increase by Y and Profit Increases by Z%

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Execute in Market

The problem: Too many channels, fragmentation and confusion

Sales

Competition

Weather

Service Quality

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…simply eye-balling historic media and sales data does not provide answers

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…econometrics can helpA statistical technique used to identify and quantify the incremental contribution made by marketing

investments on sales*

Sales

Macro-Economic

Factors

Distribution

Price

Seasonality (Temp & Periodic effects)

Promos/Direct

Marketting

Customer Sat.

Paid Digital Media (PPC,

Display)

Mass Media: TV, Radio, Print, OOH

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Un

its

Sold

Variance

Modelled Sales

Actual SalesForecast

R2 = 97.6% - This indicates a very high level of accuracy to the actual sales data.Holdout R2 = 89.9% - This indicates fit for the forecast (holdout) test.MAPE = 4.2% The average % variance between actual sales and fitted/predicted.

Step 1: Develop a highly predictive sales modelDevelop a predictive model by mapping historic media activity against sales. We deliberately holdout 10-15% of the dataset to test for predictive accuracy. The premise and validity of our models depends on validating predictive capabilities

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Key Deliverables from Econometrics Projects

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Step 2: Overall media contribution to sales

Shows how much of total sales is incremental due to marketing. Decomposition of sales provides a snap shot of the overall importance of media and marketing in driving total sales. In this case, 33% of total sales revenues are “due to” marketing expenditures.

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Step 3: Marketing Variance: 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

Shows how each marketing or media driver contributed to total year-ofer-year growth.Digital Display & Radio were the key growth drivers. Media contributed +8.3% but competitive ad spending had a -8.0% impact.

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Shows the net returns or revenue per unit of spend or investment.

The first step in improving marketing productivity is to determine precise financial returns to marketing spending by campaign/activity.

Step 4: Returns by channel (ROI per $1 spent)

Least efficient channels

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Step 5: Total Marketing Response

168,000

168,500

169,000

169,500

170,000

170,500

171,000

171,500

172,000

172,500

173,000

£- £1,000,000 £2,000,000 £3,000,000

An

nu

al U

nit

Sal

es

Annual Marketing Spend

Unit Sales Marginal Profit

Current Spend

Shows how sales respond to different levels of spending. The dilemma is that incremental spend sometimes will not generate much growth because of saturation and diminishing returns. Marketing response tends to vary depending on the spending levels

and competitive activities.

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Step 6: Marketing Contributions by Month

(500)

-

500

1,000

1,500

2,000

Oct-2010 Jan-2011 Apr-2011 Jul-2011 Oct-2011 Jan-2012 Apr-2012 Jul-2012 Oct-2012 Jan-2013 Apr-2013 Jul-2013

Baseline The Car Shop_TV Carcraft_TV Available Car_TV

Fords of Winsford_TV Stoneacre_TV Digital Display Premium Digital Display Network

Digital Paid Search SEO Brand TV Sponsoship

Cinema Radio Press GDP Effect

Gains from recent campaigns negated by competitive media

Base Momentum (Seasonality and cumulative Brand Equity)

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Demonstrates how marketing impacts sales at different points in time.

Step 7: Marketing Spend OptimizationMarketing spend optimization generates an estimated +10.2% sales lift at constant budget levels (average of

past 2 years). This result restores some traditional mass media, but with a relative increase for digital. The

plan finances an increase of all other media via a reduction in spend on sampling.

CONTRIBUTION CURRENT SPEND OPTIMAL SPEND

Mobile 266,920 280,000 420,000

Web SEO 2,435,766 594,042 712,851

Sampling 232,001 2,900,000 743,038

OOH 39,866 1,230,888 2,338,686

Print 196,383 3,783 7,188

Radio 264,541 5,244 9,964

TV 690,000 3,611,152 4,333,382

0%

20%

40%

60%

80%

100%

Mobile

Web SEO

Sampling

OOH

Print

Radio

TV

8,925,109 8,925,109

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** Earned social media excludedfrom this chart, but part of overalloptimization result

Play out marketing What-if scenarios

An interactive dashboard allows you to simulate different marketing mix/spend

scenarios and assess the resultant impact on sales and profitability.

1. Set marketing budgets.

2. Set your spend levels across media channels

3. Assess the resultant impact on sales & profit

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Providing Answers to Business Questions

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BOTTOM-LINE ANALYTICS: OUR EXPERIENCE

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BLA leadership bios

Michael Wolfe is CEO of Bottom-Line Analytics LLC in the USA. Michael has 30 years of direct

experience in marketing science and analytics both on the client and consulting side. On the former, Michael has worked for Coca-Cola, Kraft Foods, Kellogg’s and Fisher-Price. He has also consulted with such blue-chip firms as AT&T, McDonald’s, Coca-Cola, Hyatt Corp., L’Oreal, FedEx and Starbucks. Michael has broad experience in marketing analytics covering marketing ROI modelling, social media analytics, pricing research and brand strategy.

Masood Akhtar is the Bottom-Line Analytics partner in the UK and heads the company

efforts across EMEA. Masood is former Director of Analytics for McCann-Erickson and also hasworked for Mintel International Group, JWT, Costa Coffee, Coca Cola, Hyatt Corp. He is anaccomplished econometrician with extensive experience in marketing ROI analytics, marketingresearch, market segmentation, social media analytics and marketing KPI dashboards.

David Weinberger is CMO of Bottom-Line Analytics. David’s career has taken him to such

blue-chip firms as Coca-Cola, Kraft Foods, Georgia Pacific and the Home Depot. David’s consulting experience has focused on such verticals as retailing, financial services, apparel, consumer products and insurance. David’s has considerable expertise in the areas of customer analytics, life-time value, shopper marketing, social media, brand strategy, segmentation and marketing ROI analytics.

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