Marketing mix modelling helps managers calculate ROI – Dr. Muneer Muhamed

Many of the marketing heads whom I spoke to recently had no clue about the return on investment (ROI) of overall marketing. It’s astonishing that they only know of the return on a couple of initiatives within the function. That is pointless.

Whether the marketing department is driven by various media or different types of methods or segments, any head of marketing should know the return from all marketing efforts including email campaigns, social media advertising and so on.

Only a total view of all marketing touchpoints will provide any meaningful answer to the CEO. Unless you have the combined ROI results, you’ll never be able to take the right marketing mix decision.

One of our clients claimed a 350 percent return on one of his marketing campaigns. But when quizzed about how much return the other marketing activities in the business brought in, he had no clue. It seemed as if he got all the credit for a high return because his programme was the last touchpoint in a marketing plan that the customer had experienced before making a purchase.

How do companies perceive leads? It’s the progression of a prospect from a long list to final buy. In other words, from a client’s point, it is the progression from one’s unidentified needs to a defined business challenge, solution identification, consideration and selection.

However, there is a flaw in this process. First, in a B2B purchase, there are always several persons involved. Second, many other factors affect buyers’ journeys. And finally, influencers and decision makers will often be in various buying stages at different times and may not always be moving in a linear fashion.

Here’s the fallacy of high return by the end marketing programme when the customer is a click away from buying the product or service. Many of the other marketing initiatives would have contributed to taking that customer through the stages of purchase to the point at which the final marketing programme clinched the deal.

So is assigning all value to the end initiative any good? Maybe marketers don’t have the tools and resources to tackle this problem.

The solution is a process called ‘marketing mix modelling.’ This will help determine the value of each customer touchpoint leading to a sale, compared to only the last one.

It can be done without using an external consultant or expensive business intelligence software. The process begins with the understanding that this is an important thing to do – that this analysis is simply an extension of trying to understand what works and how much one shou­ld spend on each element of the marketing mix. Remember that this wouldn’t make some folks too happy about the results!

Imagine how your organisation assigns credit for marketing return. The following process may be a trial for the mathematically challenged – but marketers do not belong to that set. It does provide better insights into the appropriate value of marketing contributions by campaigns or elements of the marketing process.

The method requires contact data for every marketing touchpoint. If you don’t have registration when you get website visits, social interactions or ad impressions, you can’t count any of them for this valuation exercise.

These following steps are involved in finding out the marketing element contribution...

STEP ONE Begin by examining only those B2B prospects who were touched by marketing activities and turned into customers. You should check records for at least six months more than your typical sales cycle. If you are in textile machinery manufacture for instance, you should consider a time frame of over 18 months. The longer the time frame, the better...

STEP TWO Examine all the contacts and every marketing touchpoint of those customers, and check out the entire progression of events.

STEP THREE Calculate the sales revenue and/or pipeline value of those customers. Both revenue and pipeline value are important. Revenue analysis will give you an assessment of those programmes that drove only revenue. Pipeline value analysis will result in a larger pool of contacts and offer more of a macro view of marketing effectiveness.

STEP FOUR Allocate weightage to each touchpoint with relatively higher values to those near the last. Then use that to total up for each contact touchpoint over the sum of all contacts and touchpoints. If there are three touchpoints for example, the first one can be given the weightage of one; the second, three; and the last should be six. You can add complexity by considering any number of factors.

STEP FIVE Sum up all the values in each campaign to get an average score.

When you use this kind of analysis before taking a decision on the marketing mix, you’ll still find that the common ‘last touch’ activities (telephone, web visits and so on) get most of the credit. However, the typical ‘first touch’ activities (display ads, emails etc.) will yield better results than before.