This time last year we chose to launch marketingQED to a Global audience at the Festival of Media event in Montreux.  At this unique event,  we had the opportunity to exhibit our software suite and introduce our take on how to plan, measure and improve marketing spend.  Having found our products to be so well received, and having had some really constructive conversations that developed into client relationships,  we jumped at the chance at the invitation to return last week for 2012.

The fact is that Charlie and his team at C2 (the founders and organisers of the event)  are true media event champions who gently mix the right delegates together in a relaxed and focussed environment.

The key to a great conference is the subject matter, the quality of the speakers, the agenda and the debate. The theme of the conference was “When data becomes insight: beauty in numbers and the science of storytelling”  and we were treated to a packed agenda -  which included, the Head of Brand at Barclays, David Wheldon, the CTO of Amazon.com, Werner Vogels, the CMO of PepsicCO, Salman Amin, and an interactive panel involving 8 Agency Heads. The event was immaculately chaired by Roger Parry, Chairman and co-founder, MSQ Partners who did a terrific job of keeping the audience engaged and entertained.

It was fair to say that there was an overall sense of optimism for the future, that big data need not be scary (although It appears that like our CCO John, Werner Vogels the CTO of Amazon also dislikes the term “Big Data”),  that the tried and tested principles of listening and responding to customers is now even more fundamental.   Whilst online has created untold new customer engagement opportunities, as Salman remarked from Pepsi, it has actually opened up a proliferation of opportunity for video platforms – predicting that 90% of the internet will be video by 2015.

The highlights of the feedback that we received at our stand were;

• An agreement that there is a great need for quick answers to the ROI challenge
• General disquiet about attribution techniques (ROI techniques such as “last click” matching) and their proliferation
• A need for the marketing eco-system to embrace off-line as well as on-line concerns (something we’re obviously closely associated with ourselves)

Hopefully we offered a different perspective on the challenge of managing effective communications and we were the only organisation to literally fly their (branded) flag at the event (via the yacht that our Austrian team had moored next to the venue).

We thoroughly enjoyed ourselves again this year and we look forward to continuing a range of conversations that started at this unique event. We hope to see you again next year – probably in the Black Pearl!

PS if anybody is trying to get hold of our Head of BD, Phil, his phone has dried out now after his unfortunate slip into a freezing Lake Geneva – to remind you his number is 07771 863 110

What does Brad Pitt's 2012 Oscar nomination for a film about baseball have to do with the challenges currently facing consumer marketing departments? A lot. Let me explain.

I’m a Maths graduate, so let’s start with some statistics. In 2002 the Oakland Athletics baseball team spent $41 million on players’ salaries, and the Boston Red Sox spent $108 million. Yet the A’s finished first in the American League West with 103 wins, setting a record by winning 20 consecutive games, while The Red Sox finished second in the East Division, winning 93.

It was a feat nobody saw coming and it was entirely down to one thing: the Oakland A’s young general manager Billy Beane started playing Moneyball.

Beane abandoned the scout-led approach based on opinions and collective knowledge that had ruled baseball drafting. Instead, he took a quantitative approach called “Sabermetrics,” which applies statistical analysis to baseball records in order to evaluate individual players’ regular performances. In 2002, the A's stopped looking for ‘star’ players and began looking for more effective ones. The subjective knowledge of scouts watching players took a backseat to measuring players’ statistical contribution through specific measures, such as how often he reaches a base.

Ten years later, marketing is having its own Moneyball moment. For too long, marketers have been their own scouts, making emotional decisions about the marketing mix that are just as ‘hit and miss’ as scouting in baseball. In reality, like the scouts, marketers still look for a ‘star’ rather than effective marketing mix.

Since the 1960s, marketers’ gut feel and experience have been underpinned by various forms of statistical analyses to accurately link spend and media choice to market share. The weakness these approaches share, beyond just cost, is the inability to accurately predict consumer responses. The inflexible, laborious processes they use yield a non-dynamic, infrequent and increasingly irrelevant ‘snapshot approach’.

A Beane-like revolution in the analysis of marketing is underway: adaptive modelling. Using rapid, continuous aggregation and analysis of mass segments of data, and an understanding of the context of individual campaigns, marketers can begin to accurately predict consumer behaviour.

Through adaption, marketers can make faster, better and dramatically cheaper judgements. Analysis is now an essential part of the everyday decision-making process, so marketers can achieve much, much more, with a lot less.

Consumer marketers are under pressure to demonstrate return on investment from their marketing decisions. And like baseball, the stakes are high. A percentage point movement in market share can result in the gain or loss of hundreds of millions of pounds. This pressure will grow as economic uncertainty and the proliferation of online and offline channels combine with new business models to increase the challenge of managing an ever-more complex marketing mix, against tight budgets. This kind of pressure has to drive change, and it is.

Sabermetrics was a watershed moment for baseball, just as adaptive modelling is for marketing. Moving from art to science - by drawing on the objective metrics behind the past performances – marketers can focus their budget and time on those campaigns that are proven to deliver results.

In the wake of Billy Beane’s breakthrough, the New York Mets, New York Yankees, San Diego Padres, St. Louis Cardinals, Boston Red Sox, Washington Nationals, Arizona Diamondbacks, Cleveland Indians, and the Toronto Blue Jays hired full-time Sabermetric analysts. Teams which resist Moneyball are falling behind and similarly, marketers that ignore adaptive modelling risk finding themselves knocked out of the park too.

This article was first published on thedrum.co.uk

I'm delighted to announce that we will be opening an office in Japan along with our colleagues at Brainpad, Inc.. You'll find all the details in our press release.

We very much hope that this agreement will enable our clients in Japan to access local expertise to help them better understand and improve the value generated through their marketing activities.

In the 21^st Century, we’re all living increasingly rapid lives. The phrase “life at the margins” reflects this – we’re often making decisions about the next best activity or trying to work out the benefits of tiny differences between things.

Scientists call these decisions "marginal decisions" – decisions that we make where we try to judge the outcome of very small changes in the impact of an activity. Good decision-making requires us to compare the additional (marginal) costs of alternative actions with the additional (marginal) benefit that each action might generate. Most choices involve doing a little more or a little less of something; few choices are all or nothing decisions.

Marketers are not immune to having to make these marginal decisions on a daily, weekly or annual basis. Decisions which require this thinking might include which particular promotion to run in a specific period, in which key account to provide extra support and through which advertising channels to promote products.

So how do we make these decisions? What information do we require? If we’ve been good and are following best practice, we will no doubt be looking for data to help us make these decisions. The most frequently used metrics when trying to make these decisions is that of “Return on Investment” or ROI.

When most people talk about ROI, they normally mean something called the Average ROI. For example, suppose a promotion costs £50,000 to run and the profit generated is £100,000, the Average ROI ratio is 100,000 / 50,000 = 2*. Typically we’ll have a series of these average ROI ratios to look at and then we’ll need to use this information to make our investment decisions.

So the next question is this - does the Average ROI ratio provide enough insight to help marketers make the best decisions? Do we just invest in the one with the highest average ROI? The answer to this questions is “no” and the reason should be obvious if you’re familiar with the Law of Diminishing Returns.

One of the most important things we learn, when marketing our products and services, is that the law of diminishing returns applies to marketing. This means that we acknowledge that doing twice as much of something rarely if ever gives twice the impact. We therefore need to evaluate our spending options at different levels to establish just what impact diminishing returns will have on the levels of return that we can expect. In this example, we will estimate the returns from an activity at three different levels of investment.

Figure 1

 Take a look at figure 1. Here the Average ROI figures are calculated for us at three points on the chart – you can see that the value of the Average ROI is changing as we move along the curve. This is important and often missed in more simplistic analyses.

Figure 2

Now look at Figure 2 – here we’ve joined the dots and we can now quickly see what the relationship is between investment and the return we expect to see from an activity. The “Marginal ROI” is the return we get for the next unit invested – in mathematical terms this is known as the gradient of the line.

Figure 3

If we were to compute the marginal return at each point on the curve, we’d quickly be able to work out where the marginal return went from being greater than 1 to less than 1. It’s this point that’s key – at this point, your marketing is going from being profitable to being unprofitable**.

Computing the marginal return involves using some fancy maths or more simply we can use a package like modelQED to work this out for us.

A little bit more work with a tool like optimiseQED will let us know how much more or less we should be investing in the activity given our ROI objectives. This is a far more powerful way to address the resource allocation challenge than by either using guesswork or simply investing in the activity which generates the highest average ROI.

As the Marketing Effectiveness industry evolves, we will increasingly see marketers talk about Marginal ROI as the killer KPI – the one that matters most and helps them make decisions. Make it a part of your vocabulary now and begin to share this knowledge with others.

*There is variation in the definition of ROI with some preferring the formula (Return – Cost) / Cost. The definition used in this article (Return / Cost) is directly comparable to the definition above although care should be taken when using either ratio to ensure the definition is clearly given.

**For the purposes of this article, we have assumed that all response functions are linear or diminishing and so-called “S-shaped” curves are excluded. Interpretation of this family of curves should be done with a little more care using a tool like optimiseQED to determine the right investment strategy.

1. We don't need a higher marketing ROI - we're rich
2. We've never thought about it
3. We don't know how to check it
4. We were told it wasn't possible

My guess is that no organisation is going to claim number 1 (maybe Apple or some sovereign wealth funds might disagree) and if you're answering 2 or 3 then it's time to think again and ask a few questions. Answer number 4 and it's time to get another advisor (e-mail us and either we'll help you or we'll point you in the right direction).

Next time someone quotes Wannamaker at you, ask them to name an organisation who still regard knowing how just 50% works as acceptable. Please feel free to pass on our details we'll go and help them out because it's no longer rocket science!

Sometimes you may find that our articles are thought provoking and I’m sure that quite often, you’ll have opinions on the text. Do let us know your thoughts.