Marketing mix modeling has proven to be an important practice in driving bottom line performance among leading retail and consumer goods companies. However, the complex technique of using regression-based models to calculate marketing’s impact on sales is often too time consuming and costly for some companies.
Recently, MillerCoors, CitrixOnline and about a dozen other companies have applied a new simulation technology designed to quickly forecast how different marketing plans would likely impact sales of their products. Using ThinkVine’s Emerging Marketplace, companies use a three-hour simulation test to find out whether print is a better decision than television advertising, or how much of their budget should be focused on new media opportunities.
“We have the ability to test multiple marketing plans and see which one is best,” says Jeff Mills, VP of Marketing at ThinkVine. Companies can expect to see the results from their ThinkVine simulations in three to four months following the implementation of their new marketing strategies, according to Mills.
ThinkVine’s approach is unique because it builds probability models based on actual demographics, says Mills. “Traditional marketing mix modeling (MMM) uses historical data that looks backwards,” he notes. “Our approach looks forward. We actually create a sample population of consumes that mirror the real world.”
ThinkVine populates its samples with individuals who have their own media consumption habits and spending wallets. When the economy rebounds, ThinkVine can change the available spending in the sample population’s wallets to reflect new spending habits. “We also include the probability that they will see a certain ad in a day,” says Mills.
From that sample population, marketers can break out specific consumer segments to test different marketing strategies. ThinkVine also can tailor the marketing mix based on local or regional specifications. “We can build in rules that reflect what actually goes on in the marketplace,” notes Mills, such as different laws around the sale of alcohol or healthcare products.
Simulations Capture Cross-Effects
By simulating different formulations of marketing tools, ThinkVine has uncovered some valuable insights for marketers. For example, while many industry experts believe that print advertising is dying out, ThinkVine has found that print is still a strong marketing tool. “We are capturing cross-effects from print advertising showing that consumers may first view a print ad, and then go to the website or store to purchase the product,” says Mills. “The print ad doesn’t get credit for driving the sale” but in actuality it was a strong influencer for the purchase.
ThinkVine also has found that marketers may need to re-examine the frequency of altering marketing plans. “Many marketers traditionally formulate marketing plans once a year,” Mills notes, “but we are finding that the pace of change in the marketplace is demanding that marketers revisit their plans, possibly quarterly.”
Although ThinkVine’s initial client base is primarily consumer products companies, the company is poised to work with retailers as well. “For retailers we may want to train the system a bit differently, possibly making trade promotion part of the mix,” Mills says.
For future projects, ThinkVine is looking to construct shopper simulation within the store, to help optimize store layout and drive more purchases.