By Greg Silverman, Aug 03, 2020
Marketing is undoubtedly one of the most important business departments. From market research to targeted advertising, marketers are integral to reaching your revenue targets. Of course, to make money, businesses need to spend money as well. The most recent Gartner survey on CMO spending found that marketing expense budgets typically average 10.5% of company revenue.
While marketing budgets have remained stable over the past few years, it’s also one of the most flexible costs for businesses to increase or decrease. What started as an optimistic year for marketers was quickly turned on its head due to the COVID-19 pandemic. Now, nearly 70% of brands will decrease ad spend in response to an uncertain future, Influencer Marketing Hub reported.
Now, it’s more important than ever that marketing teams optimize their resources to ensure their messaging is reaching the right consumer at the right time so they will purchase their product over an alternative. Prescriptive analytics helps marketers take action to turn a shot in the dark campaign into a strategic plan to target the most profitable audience.
In times of uncertainty, marketing spend is one of the first areas businesses cut back on. Why? Likely because of the sentiment conveyed by the old saying “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” This quippy statement, while a slight exaggeration, does hold some truth: Justifying marketing spend is difficult.
Many companies struggle to provide a value calculation for their marketing investments, and without certainty, executives are hesitant to invest more spend into unproven strategies. Web Strategies highlighted a few ways businesses typically track marketing ROI. However, these formulas and ratios never truly account for how human behavior ultimately impacts sales. Even attribution models like marketing mix modeling - while effective at providing insights into media investments - are typically not robust nor swift enough to support the complexity of the marketing questions businesses need to answer under a time crunch.
Ultimately, businesses require more insight to justify their marketing efforts than media spend and consumer response; they need to simultaneously meet multiple objectives influenced by human behavior. Optimizing marketing spend in uncertain times means letting go of past performance and ROI and instead forecasting how the current market will react to a new media mix.
With a process that provides digestible results and recommendations for a strategic course of action, senior leaders are able to see the value in the marketing plan. By buying into this vision, businesses deploy and drive change to make every marketing dollar do more. Of course, this isn’t simply accomplished overnight. Organizations need prescriptive support to achieve these goals.
Prescriptive analytics has the power to quantify marketing actions, which is especially important for helping marketers optimize the customer experience they are responsible for creating. Here are a few other ways prescriptive analytics supports effective marketing spending:
Quantify ROI: This approach helps senior leaders identify how marketing fits into the overall business strategy and identify new opportunities for growth.
Optimize Budgets: Prescriptive analytics informs users how to best allocate their budget across channels, marketing and sales funnels, different products, and even audience segments. This level of detail also helps marketers determine when and how customers are engaging with their brand to formulate the customer lifecycle and most important touchpoints.
Identify Sensitive Levers: Speaking of touchpoints, prescriptive analytics is also equipped to quantify the incremental contribution of individual marketing levers such as campaign, offer, messaging, calls to action and other performance metrics. Determining which are the most sensitive in the customer journey helps marketers enhance them.
Respond to External Factors: This advanced analysis helps businesses understand how external factors like competitors are going to react so you can always stay a step ahead.
Ultimately, prescriptive analytics helps marketers deliver a plan of action with a very rapid turnaround time. Rather than maintaining a solution, business users who are not necessarily analytics experts are able to focus on the interpretation of the results to guide their actions. This effectively creates an automated, accessible solution that is available to help marketers optimize their spending.
Marketing departments across a variety of industries benefit from a prescriptive analytics approach that not only forecasts future events but actually provides a roadmap of the best course of action to reach your revenue target. This analysis, accomplished through simulation, allows media teams and their agency partners to adjust their investment levels while their tactics are still in flight. The ability to be agile and shift marketing spend to higher performing areas has been proven to quadruple return for some businesses.
While maximizing marketing ROI is undoubtedly one of the most important things businesses use prescriptive analytics for, it’s not the only benefit of using a simulated model. Businesses that utilize simulation also reap the benefits from:
A Consistent Framework: A semi-automated process also provides a consistent framework within the models that allows users to input weekly level competitive, environmental and consumer insights and track them against internal sales data. These models are calibrated to precisely simulate real-world activity and are updated on a necessary cadence - sometimes monthly depending on business needs.
A Full View of the Consumer’s Mindset: Understanding the full view of the consumer’s mindset and their path to purchase (along with competitors' actions), helps marketers identify the performance of media at a very granular level and how variables such as pricing and messaging have impacted the effectiveness of their strategy.
Forecasting Future Sales: By leveraging simulation to find a solution, managers run various scenarios to provide the most optimal return on media investment, the most effective mix of channels, the likely outcomes from applying different media conditions and the impact of competition on business when they take action, all to forecast sales.
With an in-house prescriptive analytics tool, business users have the answers to their complex marketing questions at their fingertips. After comparing predicted sales to market outcomes, organizations continue to tweak their model so it’s able to predict sales outcomes with extreme precision and great confidence.
Concentric streamlines all marketing metrics on a single platform that serves as the source of truth for marketers and analysts alike. The end-to-end measurement system accurately tracks marketing spend, impressions, sales and revenue driven by each investment so business leaders are able to understand the value of their media spend and optimize their budgets.
Contact us today to learn about how Concentric helps enhance marketing strategies.