Leeds

Marshalls Mill

Marshall Street

Leeds, LS11 9YJ

T 0113 394 0000

Edinburgh

6 Dock Place

Edinburgh, EH6 6LU

T 0131 555 1500

Manchester

Commercial Street

Manchester, M15 4PZ

T 0161 839 6600

Birmingham

Innovation Centre

1 Devon Way

Birmingham, B31 2TS

T 0121 222 5522

Dublin

7 Ely Place

2 Dublin

T 01 232 1800

Measure, forecast and improve the

effectiveness of your marketing mix

Why evaluate marketing?

1. Measuring the increases in sales that marketing activities have caused can

justify advertising’s position as an investment, rather than simply as a cost

2. Understanding which parts of the marketing mix are working hardest, allows

for building a more efficient and effective marketing plan in future

Econometrics measures and then improves the

effectiveness of advertising

Econometrics is the ‘gold standard’ method of evaluating marketing investments.

It is a technique that uses mathematical models to measure past marketing

activity, so that we can improve the effectiveness of marketing plans in the future.

Marketing measurement is difficult. Many different factors affect the sales of a

product and cutting through the different effects of price changes, promotions,

seasonal differences, competitor activity and more to find the number of sales

driven by a marketing campaign, takes much more than a simple year-on-year or

week-on-week view of sales.

Econometric models allow us to account for the many different factors that affect

sales, evaluate them and then remove them so that advertising’s effects can be

accurately measured.

When we talk about econometrics, we usually mean sales modelling, but it

doesn’t have to be. Whatever a campaign was designed to achieve – from

increased brand awareness to more searches for a website – the toolbox that

econometrics provides can help to measure its effectiveness.

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s (£

'000

s)

Press Radio

TV Store Openings

Seasonality Actual

Model

An econometric model breaks down sales, measuring the different

activities that have caused them to change (1.1)

Leeds

Marshalls Mill

Marshall Street

Leeds, LS11 9YJ

T 0113 394 0000

Edinburgh

6 Dock Place

Edinburgh, EH6 6LU

T 0131 555 1500

Manchester

Commercial Street

Manchester, M15 4PZ

T 0161 839 6600

Birmingham

Innovation Centre

1 Devon Way

Birmingham, B31 2TS

T 0121 222 5522

Dublin

7 Ely Place

2 Dublin

T 01 232 1800

Measure, forecast and improve the

effectiveness of your marketing mix

Econometric models sit alongside other measurement

Some advertising channels are easier to measure than others. Direct mail for

example can generate a simple response rate using coupon returns and we can

use different telephone numbers to track the impact of press or TV ads for

products that are sold via call centres. We call this type of measurement ‘direct

response’ because we can see an individual customer responding to a specific ad.

For other marketing channels, e.g. Posters, or TV spots that aim to build

awareness of a brand, measurement is much more difficult.

Web metrics have brought direct effectiveness measurement to a much wider

group of brands. Cost per click and cost per acquisition on the web are standard

effectiveness metrics, but like other direct response measures, they are not the

whole story and have the potential to be misleading.

1. Direct response measurement is unavailable for key marketing channels (e.g.

brand TV or posters.) If DR is the only measurement that we have, there’s a

real risk of favouring activities that we can measure, rather than those activities

that are the most effective.

2. Direct response measurement suffers from “Last click wins”.

“Last click wins” is a phrase that comes from web advertising, but it applies equally

well to any direct response measure. It means that the piece of marketing that

finally triggers a purchase is credited with a sale, ignoring everything else - from

TV campaigns to PR - that the customer saw before that single ad.

In general, direct response measurement will under-value both brand advertising

and advertising channels that prompt consumers to respond in a way which can’t

be tracked. E.g. in-store.

Econometrics helps by fixing the ‘last click wins’ problem and by making all

marketing channels measurable, not just those which carry a direct

response mechanism.

Leeds

Marshalls Mill

Marshall Street

Leeds, LS11 9YJ

T 0113 394 0000

Edinburgh

6 Dock Place

Edinburgh, EH6 6LU

T 0131 555 1500

Manchester

Commercial Street

Manchester, M15 4PZ

T 0161 839 6600

Birmingham

Innovation Centre

1 Devon Way

Birmingham, B31 2TS

T 0121 222 5522

Dublin

7 Ely Place

2 Dublin

T 01 232 1800

Measure, forecast and improve the

effectiveness of your marketing mix

For example, Google search advertising is undoubtedly more effective for well-

known brands. These brands have more people searching for them by name and

also higher click-through rates. Econometric models let us measure the true value

of a brand focussed TV campaign, showing the sales uplift that it has driven and

also how it has made search spend work harder. We are able to prove that

customers would not be searching for the brand, were it not for the TV.

In chart 1.2, econometrics has allowed us to measure three marketing channels

where measurement was previously unavailable, find that the true cost per

acquisition of web advertising is higher than previously thought and show that

press is more effective than was measured by phone call tracking alone.

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3.50

4.00

TV Outdoor Brand press Directresponse press

Web display Web search

Co

st In

dex

Directly measured cost per sale

True cost per sale (from econometrics)

No

me

as

ure

No

me

as

ure

No

measu

re

Econometric adjustments to cost per sale (1.2)

Leeds

Marshalls Mill

Marshall Street

Leeds, LS11 9YJ

T 0113 394 0000

Edinburgh

6 Dock Place

Edinburgh, EH6 6LU

T 0131 555 1500

Manchester

Commercial Street

Manchester, M15 4PZ

T 0161 839 6600

Birmingham

Innovation Centre

1 Devon Way

Birmingham, B31 2TS

T 0121 222 5522

Dublin

7 Ely Place

2 Dublin

T 01 232 1800

Measure, forecast and improve the

effectiveness of your marketing mix

Three measures combine to give a full picture of marketing

return on investment

Econometric models measure effectiveness at a high level, showing the most

effective marketing channels and providing an overall ROI for advertising. Direct

response measures let us optimise within a marketing channel and pick the most

effective press titles, for example.

What’s the output?

1. Measurement of past advertising campaigns, split into the different

media channels that were used.

- Proof that historic advertising added to sales and (hopefully!) was profitable.

- Return on investment calculations showing the individual profitability of each

marketing channel.

2. Forecasting and improvement of future campaigns

- The really useful bit and why it’s worth investing in econometrics.

- We can use a model to forecast the effectiveness of different media

schedules and then choose the one with the highest returns.

Leeds

Marshalls Mill

Marshall Street

Leeds, LS11 9YJ

T 0113 394 0000

Edinburgh

6 Dock Place

Edinburgh, EH6 6LU

T 0131 555 1500

Manchester

Commercial Street

Manchester, M15 4PZ

T 0161 839 6600

Birmingham

Innovation Centre

1 Devon Way

Birmingham, B31 2TS

T 0121 222 5522

Dublin

7 Ely Place

2 Dublin

T 01 232 1800

Measure, forecast and improve the

effectiveness of your marketing mix

Optimising the media plan with forecasting tools

Marketing analysis can generate a very large number of results. As well as a

return on investment measure for each part of past campaigns, we also measure

a response curve (diminishing returns curve), which allows us to forecast what

the ROI of a campaign would be, at alternate budget levels.

Optimisation tools, programmed with these results, handle forecasting the

effectiveness of a campaign and allow us to concentrate on outcomes and ask

‘what if’ questions about different marketing schedules.

Contact Details

Neil Charles

E neil.charles@mediacom.com

T +44 (0)113 394 0078

M +44 (0)7508 269965

Owen Buttolph

E owen.buttolph@mediacom.com

T +44 (0)131 555 7822

Marketing Budget Optimiser

Spend Step (Accuracy) £10,000

Budget Scenarios

Scenario 1 £500,000

Scenario 2 £750,000

Scenario 3 £1,000,000

Scenario 4 £1,250,000

Scenario 5 £1,500,000

Scenario 6 £1,750,000

Scenario 7 £2,000,000

Scenario 8 £2,250,000

Scenario 9 £2,500,000

Scenario 10 £2,750,000

Run Optimisation

Response curves forecast sales and profitability at different marketing budgets