Thursday, January 23, 2014

Shift to Digital: Part 5 - Operational Savings

Where does the money we want to shift come from?

The previous two posts in this series focused on Driving Growth and Building Leadership, but at some point we need to think about how to free up resources to dedicate to the new mix.   It is great to have a vision of two pie charts that split out the entire marketing budget into completely different approaches.   But we do need to find ways to allocate a reasonably fixed set of resources - moving 50% of a budget is vastly different than growing a budget by 50%.

So, here are a list of questions focused on operational and tactical topics.
  1. Where is marketing needed vs. not needed?
  2. Where is the ROMS (Return on Marketing Spend) strong/weak? 
  3. What business and geo-demographic elements explain the variance in ROMS?
  4. What is the value of each action leading a sale – by channel/source of traffic? 
  5. What is the value of social sharing? (Interesting facts for e-commerce here.)
  6. What is the value of an “Offer View” – by channel/source of traffic?  (single offer centric)
  7. How do we align the digital footprint with terrestrial sales activity?
  8. What value would creative optimization bring to improving conversions?
  9. How can we leverage targeting, bidding and interaction history to reduce ‘wasted impressions’?
  10. What is true cost of execution of a digital budget?
  11. What is the financial contribution of individual touch points?
  12. What are the reach, frequency optimums by channel and segment?
  13. What is the difference in cost models of reaching consumers on-site and off-site?
  14. To what extent does spend on loyalty programs offset ink and airwaves?
  15. What is the most effective means of reaching a consumer/segment?
  16. Where else can we amortize fixed costs of content production with the most bang-for-the-buck?
  17. Which data sets should be integrated in which order to gain efficiency?
  18. What is the dollar value of what we know to our suppliers, vendors and market in general?
  19. Which loyalty or transactional segments work best for targeting?
  20. How many digital impressions does it take to replace a TV ad or a page in a flyer?
I don't know if the answer to that last question is 100,000 or 1,000,000 or even 10,000,000 but it seems to be a worthy goal for an analytic program to focus on.

There are a variety of ways we can approach the shift to digital, but hopefully these 60 questions help provide some guidance on how the analytic program could be developed and managed.

Tuesday, January 21, 2014

Shift to Digital: Part 4 - Brand and Category Leadership

What position do we occupy in the mind?

This is the continuation of thinking about 'the shift to digital'.  The last post on the topic listed twenty questions that need answers when thinking about Driving Growth.  This set of questions focuses on what it might take to establish brand and category leadership.   As such, they focus a lot more on understanding consumers and customers because the mind is the most difficult thing to change.
  1. What segments emerge from existing marketing activities?
  2. What roles do existing product categories/segments play in driving store traffic?
  3. What categories impact share of mind, share of wallet and cart size?
  4. What segments exist based on how people shop?  (touch points, timing, content consumption)
  5. How much and what type of information is needed to impact choice?
  6. What digital metrics correlate with or predict sales?
  7. How do consumers use shopping channels (store, catalog, ecommerce) differently?
  8. What level of penetration is required for a loyalty program to impact store sales?
  9. What type of cadence generates the desired behavior by segment by category by channel?
  10. What consumer segments based on loyalty are a good proxy for the entire franchise?
  11. What level of personalization moves the needle at an acceptable cost?
  12. Does the pattern of consumer interactions mimic merchandising allocations?
  13. What jobs need to be done by the consumer that have the most impact on transactions?
  14. Do some categories do better in printed flyer, and others in the digital channels (flyer, email, mobile, display)
  15. What is the impact of the gap between “Say – Do” on sales?   (eg add to list, but not buy)
  16. How much of the journey do we need to see in order to impact choice?  
  17. What is the lift associated with personalized offers based on transaction history?
  18. What is the value of own-brand vs. manufacturer brand in driving behavior?
  19. What is the contribution of owned, paid and earned media?
  20. Where do out customers go to find information?
For each question there is a set of data than can be cobbled together to help answer it.  A key element is being able to reduce digital interactions to a point, i.e. geo-locate the activity.    And that space will be the subject of another post - How do we know where it happened?

Monday, January 20, 2014

Attribution: A Mixed Model

How do you attribute offline AND online marketing at the same time?

Giving credit where credit is due is hard, particularly in the the world of marketing.  To help me think thru this I mocked up the classic 2 by 2 matrix.

There are two broad approaches to attribution: Top-down and Bottom-up: as well as two different purposes: Tactical and Strategic.   This results in four ways to approach the problem; this doesn't mean there are four techniques - there are a myriad of them in each cell.  The example I'll use is the flyer or circular (disclosure: my day job focuses on this) in the context of reallocating budget from the printed version to the digital world.

Top-down approaches looking at the tactical level grew out of the Marketing Mix Modeling world.   Econometric models try to tease out and control for the effect/variability of marketing activities.   While some testing is often done, this approach won't support the needs of an organization looking at bold strategic moves (like re-purposing 50% of its budget) to something new.

In the digital realm, and in particular the e-commerce, bottom-up and path analysis of a specific consumer is often the basis for attribution.   Whether it is 'last click' or a more advanced form of attribution, it is still limited to a limited domain.

The 'shift to digital' series (posts before and after this one) focus on a big change where both styles of attribution are required.  So, the challenge is figuring out a way to link marketing mix models which can handle flyer distribution, OOH, and TV with their digital equivalents that work with anonymous, PII and segment data. 

It seems to me that the variance of one might be explained by the other....

Shift to Digital: Part 3 - Driving Growth

What questions need answers?

In the continuation of a series of posts on shifting major portions of a marketing budget around, this post looks at the goal of "Driving Growth" and lists out a series of questions that could form projects.

Since growth focuses on results, the questions in this post tend to focus on monetary issues.  I'll save the consumer/customer questions to a post on building brand and category leadership.

The list:
  1. How do sales change with respect to specific marketing activities?
  2. How much of the effect of a tactic is offensive (lift/incremental) and how much is defensive (baseline/erosion)?
  3. What is the sensitivity in sales to different marketing mix allocations?
  4. What is the source of promotional sales? Brand, category, store, net-new?
  5. What level of digital air cover is required to replace offline air cover?
  6. To what extent to national decisions impact local sales?
  7. What is the interaction between tactics?
  8. Where is there headroom to actually grow the business?
  9. What role does competitive presence play in our sales?
  10. How much of a store's growth is controlled by the organization?
  11. How can content be repurposed and distributed to impact sales?
  12. What friction in the current business model prevents sales?
  13. Which current non-digital steps could be (should be??) made digital?
  14. How can decisions in-store be facilitated with mobile content and features?
  15. What is the role of communal content (reviews, social) in making/speeding the choice process?
  16. How should budgets be allocated geographically?
  17. How do we forecast or extrapolate from a test to a broad roll out?
  18. What digital/retail trends will work for us over 3-5 years?
  19. What is the allowable marketing cost of each tactic in each area?
  20. Do the puzzle pieces form more than one marketing plan?
All of the above require thinking about the holistic environment in which a store operates rather than looking at it from a channel perspective.   In the end, this is a problem of allocation where not all the information is at the same level or potentially not even capable of being integrated.  Our job is to reduce the risk of moving 50% of a budget away from one tactic to a collection of others by quantifying as many of the variables as possible.

Thursday, January 16, 2014

Open Data and the Organization

What might open data do to the organization?

The trend of using accessible data from outside the organization continues.  McKinsey recently quantified the economic opportunities of using what is termed 'open data'.  They're big, but you'd expect that from a management consulting firm.   Tim O'Reilly describes open data this way:
There’s a pragmatic open and there’s an ideological open. And the pragmatic open is that [data is] available. It’s available in a timely way, in a nonpreferential way, so that some people don’t get better access than others.
Some implications:
  1. The lack of control, and the potential for change, means those providing business requirements need to more like mentors and docents than hardliners and dictators.  Much more emphasis on thinking about 'why we will be successful' (strategy) rather than 'how we will accomplish it' (tactics.)
  2. The value proposition may shift as organizations find they may have data that they want to contribute to the community.  These may be byproducts of processes that spin off data, e.g. geo-location and timing of distribution activity, that others may find beneficial or acting as a broker for a consortium of data used in benchmarking performance.
  3. The skill set of marketing department will include a collection of hackers responsible for finding novel ways of identifying and satisfying market needs by combining internal core competencies and any/all external supporting data.
In short, open data will force organizations to clearly understand what its purpose is...others, will be using the same data to do similar things.

5 Analytic Steps in the Shift to Digital

How should marketing approach shuffling the budget?

Business objectives haven't changed a whole lot over time - drive growth, build brand/category leadership and create operational savings.    Broadly speaking these goals end up requiring shifting money around based on three steps.
  1. Freeing resources from non-productive programs,
  2. Identifying how marketing impacts key metrics among key segments, and
  3. Re-purposing marketing dollars to more productive programs
Transferring money around at a tactical level, e.g. spot to national TV, display to search, print to tablet, and understanding the impact is fairly common and a tractable analytic problem.  But in a world of stagnant same store sales imagine that 33% or more of the largest budget item is focused on a single offline tactic, e.g television, flyer/circular, or out-of-home, and that money is put on the table as the foundation of 'doing things differently' and moving to digital.

We're not talking about our discretionary spend or bucket for experiments here, we're talking about betting the farm. 

In this case, there are numerous known unknowns, like 'what is the sales impact if we don't do that anymore', but also a very real potential for unknown unknowns - things we simply don't know to ask about yet. This begins to sound like a three-to-five year program, not a single campaign, that has as many cultural and process changes as it does tactical ones.

To help break down such a large problem from an analytic perspective, it is helpful to identify specific programs that shape our understanding and thus our planning.  Here's my initial categorization:
  1. Document "Cost of Sales" attributable to each key tactic
  2. Identify productivity of each tactic by geographic zones, e.g. store trading area.
  3. Develop consumer segmentation model(s) based on how they choose and decide
  4. Build a model for how different types of content work
  5. Define how wholesale changes in the media mix impacts sales
Each of the above categories can then be further broken down into analytic projects, data-related activities as well as in-market pilots.   These will be the focus of the next set of posts that will list out 15-20 specific questions per goal marketers should be asking their data teams whose single biggest contribution to the transformation will be reducing risk by quantifying uncertainty.

(Disclosure - this problem is something we're facing at work and I'm sharing my thinking process of how we're helping clients get from A to B.)

This is the second part of a continuing series about the 'shift to digital'.  It started here.

Wednesday, January 08, 2014

The Shift to Digital

How do we get there from here?

Boston Consulting Group's 50th anniversary includes a survey on what troubles leaders the most.  (Can't find the source document, just the press release - so using the eMarketer blurb.) And for a 'consumer insights' professional it is good to see "Leveraging Customer Data" and "Digital Channels" in the top five, right behind "Open Innovation" and "Large-scale Transformation" and above "Distinctive Business Models."

There is nothing prescriptive about those items.  In the context of strategy development, they are broad constructs that shape or focus thinking - they are goals, not defined objectives or outcomes - those have to be company specific.

The eMarketer article highlights the challenges by industry and there are some differences.
  • Consumer and Retail companies are most interested in growth in their current markets whereas Industrial firms are looking for new markets.
  • Consumer and Retail firms also rank Leveraging Customer Data the highest.
  • Digital Channels shows a wide swing (Technology is highest, Energy and Environment is very low).   C&R is above average.
So, weaving things together one can start to imagine a program-level plan to "Shift to Digital" for consumer/retail firms that is constrained by competitive activity, lack of customer insights, and a marketing budget that includes both on and off line tactics.  

In my mind, such a plan would have three parallel objectives:
  1. Drive Growth: re-purpose marketing dollars to more productive programs.
  2. Build Brand/Category Leadership: Increase penetration, share of wallet and loyalty among key segments for key categories.
  3. Create Operational Savings: free resources from non-productive or sub-optimized activities (and not just marketing.)
Achieving these objectives based on what we know is hard enough, doing it while we are still learning what we don't know will prove to be interesting to say the least. 

So, this post is going to be the start of a series around the questions that need answers as firms make the shift.  It may even provide some ways to answer them along the way.

Stay tuned....and hope it helps.