A Framework for Achieving Media Optimization

Long gone are the days when direct marketing meant a customer chooses something out of a catalog and places an order. Technology and cultural changes have provided marketers a vast array of choices, and made the art of communicating with customers infinitely more complex. The proliferation of distribution channels and media options is a prime example.

It’s well understood that channel of purchase—phone, Web or store—is a customer decision. Somewhat less obvious is that media selection—the choice of direct mail, e-mail, telemarketing, print or broadcast—is a marketing investment decision crucial to a company’s capacity to compete effectively and sustain a marketing advantage.

But after a decade of raised expectations, these channel-media dynamics have not led to optimal return on investment for many markers. As media expands and becomes more addressable, resource allocation to each media decreases, inefficiency increases, as does pressure for measurability.

In fact, marketers still are in the infancy stages of truly understanding and optimizing their investment across all media. Companies are not achieving media optimization, which I will define as the best allocation of investment across the various media in order to maximize total revenue across all available channels.

The trouble is that marketing departments aren’t structured to isolate the impact of each media, to sift through and identify the contribution each makes to revenue return. That’s partly because you can’t optimize what you can’t integrate. Executives charged with different media and channels don’t talk to each other. Another reason is that traditional campaign metrics, response rates and ROI, are no longer sufficient. The fact that data analytics continues to be under-leveraged is a third reason.

The following is an overview of strategic and analytical techniques that can help companies impose a disciplined framework for planning, testing and measuring together:

Marketing Metrics – Trend studies of high level marketing metrics, including media as a percentage of sales, new names growth and multi-buying rates. This tool provides insight into the overall health of a business. However, it is very tactical and metrics alone don’t indicate what action should be taken.

Media Influence Research – Surveying customers to understand which media or channel created awareness and influenced a purchase generates an understanding of interaction between media types, and sets a lower performance hurdle for more influential media. But survey data is not as reliable as behavioral data and is not real time.

Channel Migration – Solves companies’ need to understand what media is driving to what channel, customer behavior across channels and how to improve the customer experience across channels.

Response Attribution – Compares customers’ order activity to their promotion history to determine if the order can be attributed to a specific campaign. Attributes orders from all channels. This tool helps determine the cross channel impact of retention activity. However, it’s only available for retention media and there is danger of counting the same revenue twice.

Regional Market Tests – Uses regional test and control markets to evaluate the impact of additional media spend. This method provides for testing different media spend levels with low risk but can extrapolate poorly when rolled out nationally.

Incremental Modeling – Maximizes customer response rates at the lowest possible cost and is a preferred tool for identifying customers who are more likely to respond to an offer via an addressable media, who might not have purchased, and who aren’t likely to purchase in response to a general brand message.

Media Mix Modeling – This is Econometric modeling applied to examining how marketing and advertising stimuli affect a company’s sales. It uses statistical regression techniques and is based on past history. Key uses include predicting future sales and isolating the effects of each media.

Pierre Charchaflian ([email protected]) is vice president and general manager for retail solutions at Epsilon.