Budget cut methods · Cost of SEO in thousands 280 260 240 220 200 180 160 140 20 22 24 26 28 30 32...
Transcript of Budget cut methods · Cost of SEO in thousands 280 260 240 220 200 180 160 140 20 22 24 26 28 30 32...
Budget cut methodsFaster, cheaper & better
The scalable way of doing Marketing Mix Modeling
Christopher Engman, CRO/CMO Proof Analytics
Email me for the slide deck [email protected]
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Agenda
• 14 Classical decision making mistakes
• Budget cut methodso Shaving
o Panic
o Surgical
• Surgical cut options
• MMM and Automated MMM deep dive
• What data is needed?
• Surgical cut method steps
• Q&A
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Jump the gunSelecting the first option rather than exploring alternatives
EGOFailing to request or consider input from people in the know
Silver bulletDo what’s easy rather than what’s best
Opportunity costThe loss of other alternatives when one alternative is chosen
Sunk costMoney that has already been spent and which cannot be recovered.
Analysis paralysisWhen over analysis or overthinking prevents individuals from making a decision.
Selective perceptionWhen a person only perceives what he/she desires and ignores other perceptions or viewpoints.
Frame blindnessNot identifying the options. One track decision making.
The Prudence trapWhen faced with high stakes, we adjust our estimates or forecasts with prudence, “just to be on the safe side...”
Sample of oneDrawing conclusions on one data point
The anchoring trapConsidering a decision, the mind gives disproportionate weight to the first information it receives.
Loss aversion2.5 times stronger
Thinking fast and slowOutside vs inside your expertise
Multiple dimensions vs association & memory4 variables, no timelag
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3 ways to handle budget cutsThe events around the globe are changing fast, and we needto adjust to the recession.
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The budget is cut by “shaving” off a fixed percentage evenly across all your various marketing activities.
1 The Shaving Method
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Only looking at the short term conversions, cutting off efforts that give mid- or long term effects.
2 Panic Mode
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Using Automated MMM and making decisions based on facts. With this approach, you optimize the budget spend: cutting less profitable efforts, and increasing where it’s most valued.
3 Surgical cuts
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Surgical cut types
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Know how to balance the spend between marketing, communications and sales
To bridge the language between marketing and the rest of the C-suite.
Know how should I split my marketing spend between TV, radio, social media, email, SEM, affiliates, events, sponsorships etc.?
To make changes in the marketing budget or gotomarket budget we need to…
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In-Tools Measurement
Facebook, LinkedIn, Google Analytics, Marketing Automation, Optimizely, InZynk, Eventbrite etc.
• Many tools and data sources
• 4 variables vs 15-50 variables
• Not delayed effects
• A language that the rest of the C-suite doesn’t understand
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Visualization tools
Qlik, MS Power BI, Tableau
Visualizing data from various sources
+ Few variables and no delays
+ Presents information in compelling and easy-to-consume ways
− 15-50 variables -> The brain can’t see patterns between +15 variables and can’t see the delayed effects
− Does not compute a relationship between variables
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Cookie deletionUntrackablesites for MTA
Delayed effects(time lag)
Branding & PROffline activities
Multiple devices
Multi-touch attribution is problematic
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The Golden standard: Most Fortune 1000 companies use Marketing Mix Modeling
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Marketing Mix Modeling
Big advantage is that it calculates the value and delayed effect AND calculates offline channels, branding and PR
+ Multiplier (1 USD in 17 USD out)
+ Delayed effect (Time lag between cause and effect)
+ Volatility/standard deviation
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Marketing Mix Modeling
− Expensive and slow (weeks to months to get the results)
− Difficult to find talent (about 2/3 of all MMM profiles on LinkedIn are PhDs or higher)
− Example case: 7 out of 170 countries, 1-2 times per year instead of 170 countries and every month
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PROOF: Automated Marketing Mix Modeling
AUTOMATED Multi variate regression modeling
• Multiplier (1 USD in 17 USD out)
• Delayed effect (Time lag between cause and effect)
• Standard error / volatility
• Spillover effect, if one BU or offering is promoted, how does it drive an adjacent area
• Adstock, a way to account for that some effects are persistent and (partly) carry over to future periods. A mathematically calculated brand value.
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PROOF: Automated Marketing Mix Modeling
AUTOMATED Multi variate regression modeling
• Speed: Minutes instead of weeks or months -> GPS live traffic information vs paper map
• Cost: Thanks to automation, the cost of creating and running the models is often a small part of what it costs when using data scientists and a non-automated solutions
• Scale: AMMM can scale across global entities, across the entire marketing portfolio
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Acme Inc. India: marketing financial performance FebruaryFebruary Marketing ROI: 7 times the money, 5 months average time to impact, low volatility.
WINNERS
• Paid LinkedIn ads – 7 kUSD spend, 8 times the money, 4 months average time to impact, medium volatility
• Paid Blogs – 3 kUSD spend, 11 times the money, 2 months average time to impact, high volatility
o Look into the variety of podcasts since some of them might have a lower relevance, but high average multiplier
• Video productions – 15 kUSD spend, 12 times the money, 8 months average time to impacto high volatility on both the multiplier and the time to impact. Consider splitting video content into smaller
categories to improve the analysis further.
• Podcasts – 1.5 kUSD spend, 10 times the money, 4 months average time to impact, high volatility (same as for paid blogs)
• PR – 45 kUSD spend, 13 times the money, 3 weeks of average time to impact, medium volatility
o The short time to impact is common. Increases the trust close to the purchase decision.
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Acme Inc. India: marketing financial performance FebruaryNEUTRAL
• Paid search / SEM – 12 kUSD spend, 5.5 times the money, 2 weeks average time to impact, low volatility
• Paid Instagram ads – 30 kUSD spend, 6 times the money, 4 weeks average time to impact, high volatility (see comments on Facebook above)
• Email marketing – 4 kUSD spend, 3 times the money, 2 weeks average time to impact, high volatility (need to look into why)
• Own website – 20 kUSD spend, 8 times the money, 10 months average time to impact, low volatility
• Webinars – 3.5 kUSD spend, 4 times the money, 5 weeks average time to impact, high volatility (events, webinars etc all depend a lot on the topics and who is running them, high volatility is expected)
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Acme Inc. India: marketing financial performance FebruaryLOSERS
• Paid Facebook ads – 10 kUSD spend, 3 times the money, 3 weeks average time to impact, high volatility
o Likely high volatility due to too big knowledge differences within the social media team.
• Promoted tweets – 5 kUSD spend, 3 times the money, 9 months average time to impact, low volatility
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Example cases based on the three budget cut methods- Shaving, same % across all- Panic, cut all except short term- Surgical, use regression modeling / MMM / A-MMM to know what to increase and decrease short-, mid-, and long term focus plus online, offline
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A fintech company B2BOne of the leading fintech companies operating in a highly competitive market. New leads are mainly acquired online and through direct mails with an SDR conversion team and KAM.
Revenue: 24 M Euro
Profit: 1 M Euro
Marketing spend: 2,4 M Euro
Sales spend: 10 M Euro
Marketing mix
• Direct mail
• Affiliate
• SEM
• Facebook ads
SHAVING METHOD
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• Retargeting
• PR
• Events
• IP-display/ABM
• Guest bloggers
• Video production
• Case studies
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A fintech company B2BShaving method
Company is cutting costs with 20%, across all marketing tactics, 5% on sales.
Immediate yearly saving: 980 k Euro
Delayed effects:
• Incoming leads drops with 10% 1st month
• Incoming leads drops 25% following months
• Engagement drops with 30% over 6 months
• SDR conversion rate drops 10%
• Brand awareness growth stops
SHAVING METHOD
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First quarterSales drop 12%
Second quarterSales drop another 14%
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A fintech company B2B
SURGICAL CUT
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Surgical cut
Company is cutting costs with 7%, across all marketing tactics, 30% on sales.
Immediate yearly saving: 70 k Euro + 3 M Euro = 3.07 M Euro
Big cuts: sales staff + events
Small cuts: guest bloggers
Delayed effects:
• Incoming leads drops with 10% 1st month
• Incoming leads drops 3% following months
• Engagement drops with 4% over 6 months
First quarterSales drop 12%
Second quarterSales increase 3%
Profit!
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Sports retailer, B2CWell-established company with both e-commerce & physical stores. E-commerce is growing but majority of sales is still in physical stores.
Revenue: 700 M Euro
Profit: 36 M Euro
Marketing spend: 76 M Euro
Store staff spend: 250 M Euro
Marketing mix
• Influencer marketing
• SEM
• Facebook ads
• Instagram ads
PANIC MODE (SHORT TERM)
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• PR
• Events
• Blogs
• Website
• Article production
• Video production
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Sports retailer, B2CWell-established company with both e-commerce & physical stores. E-commerce is growing but majority of sales is still in physical stores.
Marketing mix
• Influencer marketing
• SEM
• Facebook ads
• Instagram ads
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• PR
• Events
• Blogs
• Website
• Article production
• Video production
PANIC MODE (SHORT TERM)
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Sports retailer, B2CPanic mode
Cutting all tactics that don’t effect short term sales.Immediate saving: 50 M Euro
• Store sales revenue drops with 5% short term
• Store sales revenue drops with 15% long term
• Footfall drops with 12%
• Conversion rate drops with 8%
• Online sales drops with 5%
• Brand awareness drops with 8%
• CLV drops with 15% (customer life value)
PANIC MODE
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First quarterSales drop 5%
Second quarterSales drop another 25%
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Why surgical cuts with A-MMM
• Short-, mid-, and long term considerations (test implications of changes)
• ”True” ROI (not just short term ROI)
• Offline marketing, people, online marketing, out-of-reach-online
• From data to changes 1 week (can be shorter thanks to automation)
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What data is needed to do surgical cuts in the marketing
budget using A-MMM?
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Example of data
Example input file B2B / Industrial 2-3 years of history, CPG 1-2 years
NB These can vary a lot between different B2B and B2C companies
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Surgical 6 method steps
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Decide what we optimize and what constraints we have (first quarter, second quarter, min 7x)
Upload into ProofSpend data per marketing category & volumetric KPIs (2-3 years history)
Two min. analysis Ready to make surgical cuts based on the A-MMM
Contextual analysis with the CMO, head of analytics etc.
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4 5 6
6 steps, surgical cuts method
Who are we?
World leader in Automated Marketing Mix Modeling
Clients like Samsung, Nivea, Daniel Wellington, Intel, Oracle, Johnson Controls, United Technology
Offices and clients in the USA, Sweden and India, 35 staff
Experienced team members incl.• CEO and founder – Mark Stouse, ex CMO
Honeywell• Analytics led by Prof. Dr. Magnus Söderberg• Software CTO and co-founder Tom Bishop• Global marketing and sales team led by
Christopher Engman
Thank you! Get more insights on proofanalytics.ai
www.linkedin.com/in/christopherengman/
+46 73 510 19 74
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INSIGHTS
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1. Too many sales people, too little marketing
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2. Too many channels
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3. Too much lead gen vs closingdeals vs client growth
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4. Too little PR
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5. PR has the biggest effectnear the purchase decision
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7. SEM and the bath tub problem
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8. Too many events
Thank you! Get more insights on proofanalytics.ai
www.linkedin.com/in/christopherengman/
+46 73 510 19 74