How to maximize marketing ROI in an uncertain world

From global economic uncertainty and market shocks like Covid-19 to ever-changing regulations and fragmented consumer habits, ensuring marketing investments deliver maximum impact on brand preference and sales is increasingly challenging. Against this backdrop, the 60%+ of companies which cut their marketing budgets in 2020 as a result of Covid-19 are now looking to maximize results, while new market dynamics continue to evolve.

With so much to consider, understanding your marketing effectiveness, brand impact, and knowing where and how to invest is more important than ever. Standing still simply isn’t an option in the fast-moving world we live in. In this Whitepaper, GfK experts Spencer Ng and Gavin Morgan discuss 6 of the most critical considerations that marketers must focus and take action on to accurately measure marketing effectiveness and optimize brand impact in both the short and longer terms.

In recent years, the rise in investment in fast-paced digital channels has led to a demand for measurement techniques that could match their speed and agility – namely digital attribution techniques.

The successful deployment of digital marketing effectiveness measurement may depend on the collection of third-party cookies that track the consumer journey from ad exposure to conversion. Using cookies to collect digital attribution data requires the collection of Personally Identifiable Information (PII), such as the type of devices and web browsers being used, and the individual media channels and platforms that consumers access to discover brands.

However, there are growing concerns regarding the sharing and use of PII data among governments, businesses, and consumers themselves. As a result, regulatory changes such as GDPR and direct actions from the major technology companies are leading to restrictions in this data, making attribution more difficult and driving the need for alternative techniques for measuring marketing effectiveness – including solutions that are less reliant on PII data.

Spencer Ng, Marketing Analytics Lead, APAC at GfK, explains: “Third-party cookies have already disappeared from some web browsers, including Firefox and Safari. This leaves advertisers only able to collect PII for authenticated web users using these platforms, i.e. , those who are logged in. That’s quite a low proportion, as most people browse anonymously.

“Further to Google’s recent announcement that it will delay the blocking of third-party cookies from Chrome, work in progress with alternative solutions, and growing industry pressure to find a universally accepted solution, the road ahead remains unclear.

“Brands might now have a little more time to find and adopt privacy-compliant solutions, but the changes are afoot. Marketers should consider the benefits of marketing mix models, as such solutions do not rely on PII data and also provide a longitudinal, consistent and comparable view of marketing effectiveness across all media channels, above the line (ATL) and below the line (BTL).

Adopting techniques that remain valid in the face of data privacy issues and other shifts in the marketing landscape is important, but equally critical is the leveraging of solutions that measure the impact of all marketing investments. Marketing Mix Modelling (MMM) is again a viable solution, as it provides holistic measurement across all sales drivers and media channels. This includes offline media channels such as traditional TV and print advertising – something that digital attribution can’t by its nature offer.

Gavin Morgan, Global Marketing Analytics Lead, at GfK, comments: “Not only is MMM able to capture the effects of investments across all media channels, but when working with partners with access to the right level of information, it also provides the ability to understand the impact of investments at a granular level. MMM has the ability to measure BTL activities such as price and in-store promotions, as well as the impact within specific sales channels across traditional bricks and mortar stores, plus online and direct-to-consumer channels.

“These benefits, combined with the opportunity to measure seasonality and non-controllable events such as Covid-19, offer brand owners a comprehensive understanding of sales drivers and how to optimize spending for future success.

“For some brands, with traditional media still securing ca. 50% of spend in some categories, BTL often demanding the lion share of overall budgets and the immediate effects of Covid-19 negatively impacting sales in the region of 20-50%, it is critical to adopt solutions such as MMM that can provide insights to measure and optimize performance across all of these different investments and sales drivers.”

The growth in digital channels and market-tracking technologies has resulted in data and performance metrics becoming available at more granular levels than ever before. This data granularity is excellent at powering more accurate measurements and delivering very robust investment recommendations.

In fact, at GfK, we find our marketing mix models are significantly improved when we leverage our proprietary store-level data, offering up an improvement in RSQ from 0.6 to 0.8 in explained sales performance to our clients.

Modeling at store level provides the ability to leverage the many thousands of variations in execution and investment drivers, and their subsequent impact on sales, to develop more accurate results, predictions, and prescriptive insights.

Aggregated versus granular MMM

Spencer comments: “The growing availability and access to media execution metrics down to weekly levels, and the ability to differentiate between tactics, objectives, and formats across campaigns, often deployed differently across markets and regions, significantly advances both inputs and outputs of MMM solutions.

“These data granularity benefits aren’t just vital for media investments. Investments in price and in-store promotions also vary considerably at a local level and, when combined, deliver significant sales impacts. Measuring these variables at a granular level is also critical to accurately identifying relationships and predicting how investments could respond and therefore be optimized in the future.”

In addition, the growing ability of MMM to be increasingly granular will continue to offer greater breadth, depth, and agility in measuring marketing ROI. MMM provides the ability to ‘slice and dice’ analysis to compare performance and sales drivers across time periods, campaigns, and marketing objectives.

Building privacy-safe, holistic and granular marketing models is key to ensuring the most robust explanation of past investments and sales and marketing drivers. But what about the future? This is where the power of prediction and optimization comes to the fore, fueled by state-of-the-art machine learning techniques.

However, it shouldn’t just be about the machines. While capable of analyzing thousands of marketing permutations in minutes, the results from MMM technology can sometimes be too blunt and potentially limited when fully accounting for subtle, near-term changes or future trends.

Says Gavin: “Machine learning and advanced techniques, such as the genetic algorithms we adopt at GfK, can reproduce a vast number of permutations of marketing mix possibilities and transform them into powerful recommendations for how to plan for the future. The advanced algorithms not only robustly identify critical brand sales drivers, they also work hard to accurately develop insights to understand the response to changes in investments and provide guidance on optimum investment levels.

“In essence, MMM helps to identify the ‘survival of the fittest marketing mix’ by processing thousands of ‘'what if’ scenarios and arriving at the best one, dependent on objective, to maximize marketing ROI – all at the press of a button and within minutes.

“However, a human layer of insight on top of this is critical. Consulting experts who not only offer deep knowledge of your brand and category, but also specialists in media planning and advanced simulation tools, can make for very powerful combinations, and lead to both predictive and prescriptive action-oriented recommendations.

“Combining and enabling these elements through the use of powerful reporting and optimization tools also proves hugely beneficial. Not only do these capabilities allow for deeper interrogation of performance and sales drivers, and the ability to analyze marketing ROI across channels and campaigns, they also guide future planning.

The integrated AI and human benefits of MMM

“Tools that leverage the capabilities and insights of machine learning to predict the outcome of planned investments, and that can actively prescribe a media investment plan based on specific objectives, will further streamline the media planning process. This fuels collaboration across planning departments, enabling teams to share and collectively refine their plans to achieve the best outcome and maximize ROI.

“These tools can be used to continuously monitor brand performance and response to media investments to embed a culture of continuous learning and ROI optimization.”

Measuring, and subsequently optimizing, marketing ROI is typically a short-term consideration; even more so in recent years with the rise in online channel investments and focus on performance marketing metrics.

However, this approach is typically at conflict with the key drivers of brand success, the objectives of many CMOs, and often with the actions of consumers exposed to brand marketing – all of whom have certain degrees of longer-term response. For many brands, a positive ROI contribution can’t be delivered in the short-term, hence longer-term sales impacts and ROI should also be considered.

Addressing these topics isn’t simple. A variety of approaches can be adopted to unlock these insights, with a combination of methods typically being combined. The availability of data and metrics to use for such analysis often further limits measurement. However, this shouldn’t stop brand owners asking these questions and trying to overcome the challenges.

To gain a complete picture of marketing effects, one approach to consider is the integration of specific metrics from Brand Health Assessments, such as GfK Brand Architect, into the MMM models. and thereby leveling the playing field between various forms of upper marketing funnel and lower funnel advertising. Media channels with other objectives such as branding may now be measured against the same KPI (e.g., sales) as performance marketing.

How the attribution of such brand insights can complete the picture can be seen in the results below (GfK MMM norms 2014-2020):

Spencer explains: “Understanding the impact of brand on sales, alongside other drivers, can be highly illuminating. It’s a sad fact that the pandemic has eroded brand loyalties, with almost half of consumers switching to new brands during lockdown. Businesses aiming to build, maintain and retain customer relationships with longer-term strategies will therefore be keen to measure brand effects over time to gain a holistic view of their achievements.

“Furthermore, measuring brand effects as part of the marketing mix assists with both short and long-term decision-making. MMM enables marketers to run analysis over long timeframes, therefore, allowing the longer-term effects of marketing to play out. This enables us to offer guidance on how to develop plans to deliver both short- and long-term benefits.”

Developing a deep understanding of the drivers of your brand sales and marketing ROI is a major step toward making the most of your available budget. But with potentially millions of dollars at stake, it’s imperative to contextualize and calibrate your research insights and recommendations before pushing the button on your next media plan and campaign.

“Measuring marketing ROI isn’t a one-off exercise,” says Gavin. “And while powerful in isolation, contextualizing and calibrating results adds a further layer of depth and guidance on how to optimize further. It’s equally important to benchmark results against norms, both for your specific brand and categories but also against industry benchmarks. This knowledge helps identify strong-performing attributes, tease out critical best practices and determine how to further refine strategies.”

Case study: GfK Benchmarks

GfK’s own marketing mix modeling studies show that approximately 15% of sales in the tech and durables category are driven by media and promotional investments, with on average 8% from ATL investments.

Price promotions and traditional TV advertising investments deliver strong sales contributions within the overall investment mix. However, when reviewing media ROIs, digital delivers around 50% above-average returns in the short term.

These norms typically vary across industry verticals and geographies, which is why it’s so important to benchmark performance and leverage learnings from multiple viewpoints.

Alongside context, the calibration of marketing ROI results with other approaches designed to measure marketing and brand effectiveness ensures plans will deliver against intended objectives. Calibration can also enable the adoption of a continuous feedback loop and “test and learn” approach to marketing investment and ROI optimization, helping marketers move towards developing and leveraging agile, “always-on” capabilities that can help build further strengths and insights into what works and what doesn’t.

Adds Gavin: “Enriching models and calibrating with other techniques such as GfK’s Store Level Test and Control, or campaign-specific analytics including GfK Brand Lift studies, can help marketers develop an even broader picture of their marketing investments and campaign performance. Used collectively, lower-budget marketing investments can first be tested in controlled environments before scaling more widely and consolidating to build insights that help measure and optimize against all business-critical KPIs.”

Change is the only constant for brand owners today and with unexpected shocks like Covid-19, the need to be agile, deal with uncertainty and constantly re-evaluate success drivers is paramount. GfK’s research tells us that, without the right tools and guidance, 26% of marketing budgets can be wasted on ineffective channels – a far from ideal scenario in today’s precarious financial climate (GfK, 2020).

However, adopting the right measurement techniques and prescriptive analytics solutions can bring greater degrees of certainty to your planning and investment decisions. Modern MMM solutions offer privacy-compliant measurement, and when working with the right partners, can leverage granular data to deliver holistic multi- media and sales channel marketing ROI insights.

Furthermore, they can actively guide your future investment decisions via predictive and prescriptive analytics geared toward maximizing ROI for your brand and delivering both short- and long-term success.

GfK’s own advanced MMM solution, Marketing Mix Optimizer (MMO), incorporates many of the critical considerations discussed in this Whitepaper. Many of our models are powered by proprietary store-level weekly data, measuring execution-level ATL and BTL investments across and within key offline and online sales channels. They are also increasingly adapted to measure and inform e-commerce and digital native business models, as well as measuring brand and longer-term ROI effects, including non-controllable factors such as Covid-19.

MMO’s sophisticated algorithms and predictive and prescriptive delivery solutions enable marketers to simulate thousands of investment scenarios, allowing them to optimize per-platform spend and maximize ROI.

Concludes Spencer: “With GfK’s MMO, you get the best of both worlds – market-leading technology driven by advanced machine learning, and specialist, personalized advice and support from our expert team. GfK has wide experience in successfully running MMMs across the globe, supporting the tech and durables sector and many other industry verticals.”

Find out more and request a consultation today

Please visit the MMO web page today to read more about GfK’s Marketing Mix Optimizer and request a consultation with a member of our specialist MMM team.