MOTOMARKETING…flexing DSS muscles to beat the competition

Design of Experiments Case StudyWCBF ConferenceChicago9.22.2004

CHIP LEONCorporate Director,Motorola Corporate Initiatives Group

2

2002 Business NPI SAY / DO PERFORMANCE-actual margin $ vs. business case margin $ commitment

=> 300%200%0%<= -100%Business G

Business F

Business E

Business D

Business C

Business B

NPI Sample=121

Business A

Margin Shortfall

-$B

Products <90%

%

Say/Do Target 90-120%

Net Margin Delta

-$B

Products 90-120%

%

Margin Overage

$M

Products>120%

%

Lift the ‘DO’!

3

WHAT IS OUR TYPICAL RESPONSE?

Discounts /rebates

Learn & Earn

Spiffs / incentives

advertising

Pricemoves

Rep Visits

Product /Featurespecific

PromotionsEvents

Low ‘DO’!Low ‘DO’! Affinities

PR

..and I’ll even

throw in the

kitchen sink!Which ones do we do?!

Which generate the highest return?!

4

Define:What is important?

Measure:How are we doing?

Analyze:What is wrong?

Improve:What needs to be done?

Control:How do we guarantee

performance?

• Maximize margin / lift through effective sales & marketing tactics

• Established key effectiveness measure: ROI• Standardized effectiveness reporting process• Set targets: 125-250% ROI

• Running series of Design of Experiments (DOE’s) to determine what really causes lift

• Do more of what works, kill what doesn’t

• Build a Digital Scenario Optimization Tool

WHAT TO DO TO LIFT THE ‘DO’

5

WHAT ARE DESIGN OF EXPERIMENTS?Not just correlation, but CAUSE

=

y = f (x1, x2, x3, x12, x23, x123,)

How does each tactic affect the output?

What are the effects of interactions?

Which aresignificant?

Vol / Margin lift Discounts /

rebates

Learn & Earn

Spiffs / incentives

advertising Pricemoves

Rep VisitsProduct /Featurespecific Promotions

Events

6

Location 1

WHAT ARE DESIGN OF EXPERIMENTS?Not just correlation, but Cause

advertising

Discounts /rebates

Location 2

advertising

Discounts /rebates

Location 3

advertising

Discounts /rebates

Location 4

advertising

Discounts /rebates

7

Location Interactive POS

Seeding(giving sales associate a

phone)

Sell & Earn

(Incentive variation)

1 – Joliet Yes Yes No

2 – North Ave No No Yes

3 – St. Charles No Yes No

4 – Harwood Yes Yes Yes

5 - Algonquin Yes No No

6 – N. Riverside No No No

7 - Schaumburg Yes No Yes

8 - Tinley No Yes Yes

Real Marketing DOE example: Customer A, NA

Which Tactics cause, and by what contribution, the greatest effect?

Point of Sale

Off On

Sale

s Li

ft

Sell & Earn

Off On

Sale

s Li

ft

Seeding

Off On

Sale

s Li

ftSlope of lin

e =

Contributio

n to Effe

ct

Great

er C

ontri

butio

n

Little Contribution

9

How do the interactions of differenttactics cause effects on sales?

Off On

Sale

s Li

ft

Addition of Point of Sale

Is the additional cost of point of sale worth the incremental lift

& margin return?

= more lift, however

less cause of the lift

Sell to

Earn

10

1.00.50.0-0.5-1.0

1.0

0.5

0.0

-0.5

-1.0

Choose level of Point of Sale

Cho

ose

leve

l of S

ell &

Ear

n

Precursor to Scenario Planning tool

Optimize

d Combination fo

r Greatest R

eturn!Sales = 19.8 + 6.00 POS - 1.50 Seed + 4.00 S to E

11

When making a price move at retail, we definitely must advertise the price drop• Price drop alone significant; product advertising moderately so• Interaction of price drop and advertising generates significant cause (more

than each on their own)• can we offer $20 perceived value other than actual $20 drop?

Point of Sale and Sell to Earn independently are significant• Yet less significant when combined, and less efficient (ROI)• Diminishing return when throwing more tactics to create lift?

Seeding is not a significant cause to sales lift (Yet!)• And what causation does exist, is sometimes negative• Must retest: contradictory to dealer councils, yet reflective of focus groups

and field failures• Re-test with exciting new phones; do not seed with old phones

EARLY LEARNINGS FROM FIRST PILOT

12

Test ran in 16 Customer P stores in the U.K.

Purpose is to test the causation to sales lift at retail between:

1. New experimental interactive POS V600

2. Product seeding3. Bespoke backing card

Exit interviews and mystery shoppers are used to gauge brand metrics at the store level during the test.

The test will be replicated twice to get more precision on the effects.

Real Marketing DOE example:

Customer P, EMEA

13

SEEDING Live

product provided by Motorola with dummy SIM to store controller

LIVE DEMO UNIT FSU and Live product provided

by Motorola with dummy SIM

BESPOKE BACKING CARD Motorola themed product card,

designed to stand out from the remainder of the range

14

Main Effect Analysis Indicates Seeding Best At Causing Sales Uplift …

• Main effects only analysis indicates that seeding is causing highest V600 delta sales uplift;

• Interactive POS is scoring 2nd best effect;

• Backing card has a negative impact on sales performance.

3.5

8.25 7.375

4.375

1.75

10

OFF ON OFF ON

OFF ON

15

• Largest effect (main and interaction) remains with seeding (C) bar extending the farthest. It means that, out of the 3 tactics and interaction of these tactics, seeding is the tactic causing the higher delta sales lift.

• In addition, the effect for the seeding with interactive POS (AC) is somewhat noticeable. Same for interactive POS with backing card (AB) and for interactive POS (A).

• Backing card (B) alone, the 3 tactics together (A,B,C) or backing card with seeding BC) are not generating sales lift.

Term

Standardized Effect

BC

ABC

B

A

AB

AC

C

1,81,61,41,21,00,80,60,40,20,0

1,415Factor NameA POSB Backing CardC Seeding

Pareto Chart of the Standardized Effects(response is V600 Delta Sales, Alpha = ,20)

All Effect Analysis Confirm Seeding Significance And Some Key Interaction Effects, Particularly Seeding With Interaction POS…

16

Seeding With Interactive POS Drive A Delta Of 12-14 V600 Units By Store …

• You can see that the largest effect is seeding (C) because it extends the farthest. It means that, out the 3 tactics used in the DOE, seeding is the tactic causing the higher sales lift.

• In addition, the effect for the seeding with interactive POS (AC) is somewhat noticeable. Same for interactive POS with backing card (AB) and for interactive POS (A).

17

• With no controlled conditions implemented, delta sales of V600 versus previous month are 5 units per store.

• while implementing controlled the 3 conditions, delta sales of V600 versus previous month are 17.5 units, a three-fold increase over doing nothing!

Implementing The 3 Controlled Conditions Versus Doing Nothing Drives A 3.5 Time V600 Delta Sales Increase …

* 3.5

18

Digital Scenario Optimization Tool• Runs utilizing transfer functions from DOE’s, monte carlos, and

econometrics• multiple scenario outputs: levels of levers, volume lift, margin return• With accuracy

“The way we work”• Optimization: of campaigns, planning / budgeting, RETURN • Marketing & Finance: internal effectiveness• customer tool

HOW WE WILL DRIVE DECISIONS & OPTIMIZE FUTURE CAMPAIGNS…

19Source: Maximizing Marketing ROI; 2001 American Productivity & Quality Center; in conjunction with The Advertising Research Foundation

“ROI – BASED MARKETING PAYS OFF”Best Practice of Marketing Mix Modeling (DOE’s) &

Scenario Optimization tools utilized by…

20

Ultimate method that can be applied to any function to understand and optimize ROI…• Manufacturing

-What process changes optimize yield? Time vs. temperature vs. pressure vs…

• Finance- What strategies / factors influence positive market capitalization? Cash vs. EPS vs. Market share vs…

• HR- What attracts and retains leaders and high performers? Incentive plans vs. stock options vs. health benefits vs…

• Product design & feature selection- Which feature combinations create highest consumer demand? Samsung model

•Any time you want to know TRUE causation

LET DOE’s WORK FOR YOU -

21

THANK YOU!

e: chipleon@motorola.com