marginally subversive

what is marketing analytics? - a first stab...

I have been asked so many times "what is marketing analytics?"  (My mom would typically ask me the same question albeit in a different form: "So what exactly do you do?  What do I tell my friends when they ask me what you do in Singapore?")

Here is my stab at trying to define what exactly (the keyword) I do.

If you have any thoughts, opinions, suggestions, objections - feel free to leave a comment. I will try my best to respond.

What is marketing analytics?

Marketing communications analytics - simply put - is all about knowing "which half of your advertising investments are working" and making this "working half" work even harder.

Marketing analytics is aimed at understanding how each aspect of the marketing mix - from communications (including advertising, digital, and media planning), pricing, distribution, branding and brand heritage, target audiences - works in order to deliver sales, revenues, and profits. 

Using advanced statistical techniques - such as econometric and statistical modeling; marketing investment risk analysis, simulation, and mitigation; behavior- and financial-value-based segmentation of audiences - marketing communications analytics aims to answer questions that marketing directors, CMOs, and even CFOs may have about the effectiveness of their investments in advertising, promotions, pricing tactics, distribution and retailer drives, and customer relations.

It is quickly emerging to be on the top of the Chief Marketing Officer's to-do list as marketing costs are being (rightly) categorized (and recognized) as "financial investments" that therefore require to generate returns.

The demand for analytics is also emerging primarily because marketing discussions are beginning to be linked with strategic corporate and finance objectives of creating short- and long-term wealth for shareholders. 

Simply put, CMOs are now being demanded to quantify their team's contributions to the company's bottom-line.

So what does marketing analytics encompass?  

A rather good question - because I think this is where a lot of divergence happens, specially amongst companies that are seeking to establish their analytics practice internally.  Here are my thoughts:

1. Investment effectiveness analysis -

How much of the current sales/profits of the brand can be attributed to the investments made by the brand in marketing, including advertising and non-advertising efforts?  How much sales/profits are generated per dollar-spent on marketing?  What is the best way to invest across different kinds of marketing activities - TV advertising, press, promotions/discounts, price-cuts?  How do competitive investments affect levels of investments?  How do other external variables - socio-demographic changes, consumer moods, seasonality, temperature and rainfall, financial liquidity - affect the effectiveness of investments?

2. Investment optimization -

Given the historical performance of the brand's investments, what are the best ways to deploy marketing moneys in future campaigns?  What are the optimum levels of investments in each of the different aspects of marketing - TV, press, price-discounting, PR-buzz generation, digital, distribution-drive, retailer-push - to deliver an objective?  How can competitive pressure be managed

3. Investment simulation and scenario planning -

If marketing budgets were cut by 10%, what would the impact be?  If marketing budgets were increased by 10%, what would the impact be - and how should that additional 10% be used to further the brand's goals?  If competitive pressure increases by a commensurate 10% increase, what would the impact be?  If consumers' preferences changed due to changing economic environments, how can a company prepare?

4. Consumer Segmentation and Engagement -

Prior to preparing the budgets, which socio-demographic groups are most likely to be the "valuable" targets of the brand?  What kinds of brand communications best work with these segments?  How do we manage segments that are valuable but vulnerable to poaching by other brands/switching?  How can we attract other brands' high-value/highly-vulnerable target segments to our own brand?

Is marketing analytics new? 

Marketing Communications Analytics is not new.  Some have called it "marketing mix modeling" - since it deals with the 4/5/6 P's or marketing.  Some have called it marketing sciences.  Some call it evidence-based marketing planning.

It is however re-emerging as a practice because the demand amongst CMOs to measure and get their department's contribution to shareholder wealth and value creation measured is real. 

Given the economic crunch, it is quickly becoming an area of urgency.  Because companies are pressured to account for their investments more effectively to their boards and their shareholders, the demand for analytics is even going to increase more in the months to come.

Ad and media agencies believe that this is something that will propel their services to a higher level.  Some companies have succeeded in doing so.  However, one thing is certain:  the traditional way of doing business - from hiring and training talent to actual operations - is not going to be sufficient and will not guarantee success.

Agility is critical - and "financial- and political-will" are necessary to effect changes in how agencies think.

What is the future of marketing analytics? 

Marketing Communications Analytics will pave the way for new remuneration models for communications specialists - from brand consultancies, media companies, creative agencies, and digital agencies to CRM. 

We have seen in the last several years the inclusion of procurement companies in the agency pitch processes.  This is only the first step.

The next step - where marketing analytics will play a significant role - will be when finance executives start getting involved in the marketing business.

Finance executives have a different language - they will talk about NPVs, discounted cash-flows, IRRs, ROIs, risk-management, and value-at-risk.  It will probably take them some time to deeply understand the value of brands and brand strategies - but they will get there.

This is where marketing analytics comes in - because marketing analysts will be able to speak these same language (or at least, approximate the language of finance executives) through their use of hybrid techniques - techniques from statistics, econometrics, and finance.

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What do you think?  Any opinions or thoughts on these?

the problem with “traditional reach” in media planning…

… is that the metric does not capture the new ways that people get information.

Traditional media – such as TV, radio, presses, and outdoor media – have been traded on reach, GRPs, and frequency.  The most basic of dictums in media planning is “reach X% of people at least Y number of times in order to effect a change in their behavior, as cost-efficiently as possible”.

This statement is in essence based on a “trade-off” between the number of people one reaches and the information complexity that a medium can carry and deliver.  It is the foundation of media economics – and why TV ad lengths rarely go beyond 30s or 45s, why presses are limited to full-page/full-color, why radio ads are usually 30s or 60s, and why outdoor ads – which are probably the most wide-reaching and high-frequency media [and cost-efficient too!] – can’t communicate information details.

The ‘trade-off’ between complexity and reach is also the reason why media planners think of audiences in need of as constant “learning” through “effective-frequency”-based planning.

This is no longer true.

The tradeoff is based on several assumptions that have been taken to be reflective of reality in the marketing world:

1. People do not interact
2. Information flows in a linear manner from one person to another
3. The medium can be separated from the message or the information it carries
4. Nobody can “touch” the message – there is no ‘message decay’ or ‘information depreciation’
5. There is a constant “noise-to-signal” ratio from one person to another, from one time to another, from one place to another

What do we do?

It’s time to create a new currency for media planning.  It should be one that takes into account not just the number of people reached, but the information’s complexity and the ‘quality’ of the reception amongst its intended targets.  It must also be one that takes into account the possibility of “non-linear jumps” in the information transmission.

Could epidemiology point us to the new currency?

Potentially.

I am not an expert in epidemiology nor the models that epidemiologists employ in explaining and predicting how diseases, such as measles, the flu, and colds, evolve across time. It appears – from remnants of my university days that the models in epidemiology could potentially help in the creation of a new currency. 

One of the most common ones is the Susceptible-Exposed–Infected-Recovered [SEIR] model, which can also be extended as follows:

The equations are far more complicated than the usual Reach = GRPs x Average Frequency that we are used to.

And one could argue that “wait, that is a process – not a currency”.

And that is the point.

A currency for media planning needs to be based on how information flows – or at least how specific media or channels contribute to the process.

New wine in old wineskins…

Technology in the hands of consumers and of audiences have changed the way media are used and consumed.  It has also changed the ways information is transmitted, digested and internalized, and retransmitted.

We can’t forever be stuck with the old “GRP” and “reach” framework given the new realities that we are now facing in communications planning.

Reach is simple – but given the complexities we now face, it has become simplistic.  And incomplete.

It is time to shift.

The principles of Behavioural Economics can make communications work harder says Janet Hull, consultant head of marketing at the IPA..

via mediatel.co.uk

I am quite surprised that it is only now that marketing practitioners are actually asking the question whether behavioral economics, communications, and marketing are linked.

Hmmm. Isn't that obvious?

OK. Let's say for the sake of argument that a marketing practitioner is not familiar with "behavioral economics" and what it is.

But surely, one has studied in university basic economics - and what is economics? The study of the allocation of finite resources to optimize utility - however "utility" is measured (e.g., returns, production, revenues, production, happiness... ok, perhaps not the last one...)

Isn't it obvious then that economics has a place in marketing and in communications since everyday, we deal with decisions on how to optimize finite budgets to get the best returns on marketing moneys?

Now put in behavioral: That suggests... people. Individuals. Consumers.

Put the two together: study of people and individuals as consumers or audiences who are faced with options and are motivated to maximize their finite resources - money, time, attention, emotions - to generate the best returns.

I thought discrete choice theory, conjoint analysis, and similar techniques - and Bayesian statistics that allow for hierarchical and individual level analytics - are beginning to be a part of the world of marketing and communications.

Red herring or red hot? C'mon.

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What is behavioral economics?

From Wikipedia:

Behavioral economics is that branch of one,which deals with the study and application of analysis with scientific approach on social,emotional factors for understanding the consumers,investors and the market,and the resources.

The field is primarily concerned with the bounds of rationality (selfishness, self-control) of economic agents. Behavioral models typically integrate insights from psychology with neo-classical economic theory. Behavioral Finance has become the theoretical basis for technical analysis.

"Is media planning art or science?"

When I started working in advertising, one of the questions that my boss - Hermie - used to ask the team was "Is media planning an art or a science?"

The question is - in spite of its simplicity - profound because it affected the way we think and the way we approach media planning:

If it were pure science, then anything and everything that the computer, the surveys, the algorithms spewed out - whether they were ratings, optimizers, or indices - were to be followed.  All arguments would be centered on which one was cheaper and more effective - and which was delivered the better measurable value.

Even when it came to targeting, it was all about identifying the profitable target demographics - those who were most likely to buy the product - based on research that was conducted by specialists in the field of data-gathering.

But where does that leave creativity?

That "umph" that makes a media plan for a certain brand its own unique property.  (After all, media plans - and communication plans - are desigend to address a specific brand problem.)

Where does that come in?

On the other hand...

If it were pure art, then what's the point of subscribing to countless research and validating/cross-validating research on viewing and reading habits of audiences?  What was the point of identifying the "zapping" threshold (a big issue back then - otherwise known as "channel surfing") for consumers?  What was the point of quantifying "involvement" and putting it as a criterion for selection of TV programs?

If it were pure art, then what is the point of understanding the response of consumers to advertising - either in the form of recalling the ad the day after it was first aired and a few weeks after or of actually trekking down to the stores and picking one up off the shelves?

If it were art, then everything becomes subjective...

That's when I started thinking that media planning and communications planning were not pure art - neither was planning pure science.

It was a careful balance between art and science.

Science provides the structure and the discipline - the starting point.  Art provides the weaving of a story out of the numbers.

Science provides the "rules" - that once understood can be bent and broken as and when necessary through the principles of art.

Art provides the inspiration and the hypotheses - science provides the currency to measure whether a certain hypothesis holds water or not.

I used to say in trainings that I conduct with teams that a media planner is an amalgam of so many professions and disciplines:  They are psychologists, sociologists, social observers, experimentalists, group therapists, psychoanalysts, storytellers, and design-/experience-creators.  At the same time, they ought to be economists, auditors, accountants, statisticians, researchers, and eyeball- and transaction-counters.

The golden mean.

The yin and the yang.

The balance.

That's where great campaigns - I think - come from.

Thanks to Woooody on Flickr for the photo

the mighty also falls

"How the Mighty Fall" the BusinessWeek

Collins outlines five stages of decline: Hubris Born of Success, Undisciplined Pursuit of More, Denial of Risk and Peril, Grasping for Salvation, Capitulation to Irrelevance or Death. He makes the point that great companies can fall "even if engaged in energetic and ambitious activity"...  (Emphasis mine)

This is from Jim Collins who wrote Good to Great and Built to Last (together with Jerry Porras).

It is quite interesting how it captures - in very simple terms and 'stages' - the history of some companies.

If I look at the financial industry, this could very well be the same trends that occurred.  The same is true of "idols".

This could very well be the same of brands.

From BusinessWeek.Com

simply beautiful

I have heard the buzz about this commercial from the MCYS of Singapore.  But I never had the chance to catch it on TV - until a friend forwarded the link to me.

And beautiful.

I get rarely moved by TV commercials.  This one is amongst the few.

Update:

I am not sure if the recent PR releases on press about "beautifully imperfect" couples (e.g., a tall guy marrying a short lady, a cross-ethnic marriage) were related to this.  But if they were, I think that was too much of a stretch: this ad in and of itself was beautiful.  The message was - for me - very clear.  It didn't need to be made "cheesy" by contests and promos, and the search of the beautifully imperfect couples.  I am sure there are lots - but this ad was in itself the message - and the medium.

In communications planning, we also need to know when to stop 'milking' an idea.  There are some ideas that just simply need to be communicated - and reflected upon on one's own time.  There are some messages that just simply are strong enough to be in themselves ENOUGH.

This is one of them, I believe.

And I believe that any other attempt - "share your beautifully imperfect photos, or stories, or experiences..." - just dilutes the beauty of the message.

It extended the 'reach' of the campaign - surely - but it diluted the message and its beauty.

Measuring ROI with Google – A Simple View

An interesting video from Google on YouTube on calculating ROI, using profit margins.

What thing that’s missing though is “So how do I move into the future?”

Profit margins (and cost of goods sold and revenues) are not static measurements for businesses.  There is seasonality involved – and there is randomness involved.  While measuring ROI from past campaigns is good, measuring and predicting ROIs for future campaigns is far much better and far more useful.

Just because one product does generate more profits now doesn’t necessarily mean it will continue to generate profits in the future.

Similarly: ROI from the past are not necessarily good predictors of ROI in the future.

Google Search as an Indicator of Brand Health?

I stumbled upon this Google video on using search results to understand the health of your brand versus other brands.  I thought it was interesting – but very dangerous. 

[Data and information in the wrong hands can become weapons of mass insight destruction!]

While it does answer some burning marketing questions – such as “how strong is my brand versus other brands”?, it could potentially be valid – since it is based on searches made by consumers, and therefore are ‘consumer-action-based’, and it is possible to monitor these across time – as per the video, it still leaves a lot of questions.

• Why are things going up or down?
  
• In the example, there was a surge in one of the brand’s “supposed brand strength”.  Can you trace that back to something relevant?
  
• The search terms are also revealing in the example video: the top search term is “digital camera batteries”.  Now, how do you explain that?  From my perspective, that actually indicates a potential problem/opportunity – that consumers have 'battery-related’ concerns and/or interests more than “digital camera” per se.
  

 

 

 

 

This is really interesting – but again, data and information [plus graphing, visualization techniques and statistical testing] can become weapons of insight destruction in the wrong hands.

The Future of the Communications

Cisco

 

For CISCO, the future of communications is on Mobile Internet – not just being able to access the internet through a mobile phone as a “by the way”, but as a real, basic part of our lives.

 

 

They call it 4G – and have even created a site for it.

 

Microsoft

For Microsoft, it is somewhat different – but still within the same category of “everywhere-everytime”.  This is an entry from Chris Brogan showing what Microsoft thinks the future of computing will be: it’s everywhere and anywhere – and every time and anytime.

 

<a href="http://video.msn.com/?mkt=en-GB&amp;playlist=videoByUuids:uuids:a517b260-bb6b-48b9-87ac-8e2743a28ec5&amp;showPlaylist=true&amp;from=shared" target="_new" title="Future Vision Montage">Video: Future Vision Montage</a>

 

 

Here’s the challenge to marketers and device-creators:  How can you leverage these to create the future – and be a part of the changing world of consumer-brand-entertainment landscape?

Making IKEA Catalogs Alive – and more engaging

This is something that I picked up from a colleague’s blog. 

I loved the idea of making a relatively boring medium (though IKEA’s is not boring at all, I should say – since I look forward to it!)  Other brands that do catalogs ought to think of the same way – bring the medium alive through another medium.  Or better yet: Bring the message to life and elevate it into the area of experience!