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Breakthrough Approach to Marke0ng Mix Op0misa0on in Todays Consumer-driven World 4 October 2012
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The Marketplace is Changing Rapidly

More More diversity fragmented media among consump0on consumers

More marke0ng op0ons

More ways to buy

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The Demand for Marke0ng Accountability is Rapidly Increasing

Corporate marke,ng is the last bas,on of unaccountable spending.

- Google Chairman Eric Schmidt

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The Changes are Crea0ng New Challenges for Marketers

What size budget do we need?

How do we best allocate the budget?

How do we eciently reach target segments?

What are the short- and long-term eects?

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Marketers Are Struggling to Meet the Challenges

of CMOs told IBM they are underprepared for the growth in channel & device choices, 63% said it for demographic shiOs

65%

picked measurement, analysis and learning and integra9ng cross-channel marke9ng as #1 and #2 challenges in a Unica poll

>50%

of marke9ng execs told BCG they do not have the tools required to make trade-os across media vehicles

54% 9%

of marke9ng execs informed the CMO Council that they have a highly evolved, integrated marke9ng model
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A Revolu0on in Marke0ng is Underway

Planning Branding & Communica0on Execu0on Analysis Organiza0onal Behaviour

From Annual to Agile From Mass to Engaged From Siloed to Integrated From Historical to Forward-Looking From Cabals to Collabora0ves

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A ThinkVine Marke0ng Mux Op0misa0on Success Story

Business Goals Financial Acquire new customers with high life9me value Services Find the op9mal spend level and the ROI of tac9cs Discoveries Using ThinkVine soOware the company discovered A signicant shiO from tradi9onal media to digital would meet goals The eect of each marke9ng tac9c on acquisi9on volume and its ROI The likely eects of new marke9ng tac9cs at scale The shiO to digital would aect brand awareness in future years Ac0ons Made shiO to digital, beat customer acquisi9on targets in rst year Adjusted mix in second year to beXer balance short- and long-term Began integra9ng detailed digital data into planning

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Marke0ng Mix Today Op0misa0on Requirements What people want

Measure Marke9ng ROI Forecast marke9ng outcomes Analyse impact across channels Agile Accurate, objec9ve historical analysis and, more importantly, forecasts of Boardroom Metrics Volume, Sales, ROI, CLTV, etc. AXribu9on Mul9dimensional views All marke9ng tac9cs Consumer segments Geographies Reliable, ac9onable informa9on Collabora9ve process Flexible and up-to-date models Low total cost of ownership

Value people receive

Analyse the past, present and future Sharing business insights across the enterprise Achieving goals with rela9vely low investment
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Marke0ng Mix Op0misa0on Op0ons Regression-based Mix Agent-based Mix

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Marke0ng Mix Op0misa0on Op0ons

Regression-based Mix
Mathema9cal approach. Consultant/agency or internal teams do as a project. Technical capabili9es and marke9ng exper9se vary by company and analyst Historical analysis with some granularity teased out of the top-down model. Only sees large amounts and variances Forecasts extend history. Validity is bounded by % change. Granularity is oOen constrained. No consumers or new tac9cs in the forecast Forecasts are typically one number. Accuracy has a short half-life Fixed form equa9ons, changes are eec9vely new projects No collabora9on capability. No saved plans, typically no saved forecasts 5-6 gure project price plus add-on for simulators and updates
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Marke0ng Mix Op0misa0on Op0ons

Regression-based Mix
Mathema9cal approach. Consultant/agency or internal teams do as a project. Technical capabili9es and marke9ng exper9se vary by company and analyst Historical analysis with some granularity teased out of the top-down model. Only sees large amounts and variances

Agent-based Mix (ThinkVine)

Complex systems approach newly applied to marke9ng by using data about consumer behaviour. The soOwares simula9on capability and the marke9ng exper9se vary by company Historical analysis with signicant granularity for all types of marke9ng developed boXom-up, including on-line and o-line aXribu9on

Forecasts extend history. Validity is bounded Forecasts via forward-looking scenarios that by % change. Granularity is oOen constrained. make extensive use of custom consumer No consumers or new tac9cs in the forecast response data for all marke9ng types and levels Forecasts are typically one number. Accuracy has a short half-life Fixed form equa9ons, changes are eec9vely new projects No collabora9on capability. No saved plans, typically no saved forecasts 5-6 gure project price plus add-on for simulators and updates Forecasts are mul9-dimensional with signicant granularity. High accuracy over long periods Ongoing data updates, periodic recalibra9on if needed as part of subscrip9on Built-in collabora9on func9onality. Plans and forecasts are saved in the soOware 5-6 gure annual subscrip9on fee
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Organiza0onal Proles Inuence the Decision Regression-based Mix

Familiarity with regression is important to organiza9on Marketplace is changing slowly Only use a few types of marke9ng, dont plan to try new things Limited or no segmenta9on Minimal compe99on Plans are made once per year and rarely adjusted Collabora9on with &/or second opinion of agency isnt important Okay with 9me lag for new projects to get updates Internal or low-cost source

Agent-based Mix
Organiza9on is open to change, uses analy9cs for compe99ve advantage Marketplace is changing rapidly Use many types of marke9ng, experimen9ng with new things Segmenta9on is important Ac9ve compe99on Plans are updated throughout the year based on results Collabora9on with &/or second opinion of agency is important Want to run scenarios themselves Want to synchronize and integrate planning and execu9on
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Mix and Digital Cross-Channel Adribu0on Have Dierent Roles

Focus Objec0ve Emphasis Method Forecasts Advantages ThinkVine MMO Strategic planning Marke9ng budget op9miza9on Achieve key goals Digital X-Channel Adribu0on Tac9cal execu9on Campaign conversion op9miza9on Realize incremental gains

Eec9veness via behaviour simula9on Eciency via itera9ve execu9on Short- and long-term sales forecasts Breadth across all tac9cs, consumer segments and channels 2-8 week campaign forecast Depth within digital

ThinkVine can integrate detailed digital (and social, etc.) data to create a virtuous circle that improves both planning and execu,on

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A ThinkVine Marke0ng Mix Op0misa0on Success Story

Business Goals Increase market share in very compe99ve category Consumer Services Reverse decline in brand awareness Discoveries Using ThinkVine soOware the company discovered Erosion in brand recogni9on was crea9ng an ever-higher hill to climb Compe9tors television blitz had further eroded brand recogni9on The right budget level, mix and 9ming could quickly pay back Ac0ons Won Board approval to increase and shiO budget Increased television adver9sing focused on innova9on with corresponding digital content to facilitate path-to-ac9on Achieved objec9ves within six months, got second tranche funding Began digging deeper into the eects of pricing in the mix
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ThinkVine Marke0ng Mix Op0misa0on Sogware

Agent-based Modelling (ABM) Overview

Regression wasnt invented for marke,ng mix; it was applied to it.

Is agent-based modelling new? ABM has been around since the 1940s with roots in the hard sciences Very good at understanding how many moving parts inuence an outcome Used extensively by Boeing, WHO, DoT
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ThinkVine Marke0ng Mix Op0misa0on Sogware

Agent-based Modelling (ABM) Overview Why hasnt agent-based modelling been applied to marke9ng un9l now? Lack of need yesterdays marketplace was less complex, more homogeneous Lack of compu9ng power simula9ons are computa9onally intensive to run Lack of data & applied IP about consumer response to marke9ng
ThinkVines marke,ng mix op,misa,on soJware harnesses the advantages and advancements of ABM to address the growing complexity in todays marke,ng landscape.
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ThinkVines Sogware: Sim City for CMOs

ThinkVines marke9ng mix op9misa9on soOware enables you to simulate the results of your marke9ng plans in a marketplace where a representa9ve popula9on of simulated people consume media and purchase products the way real people do

Marke0ng Ac0vi0es

Sales

It combines demographic, consumer behavior and market data with your data and advanced analy9cs to deliver the forward-looking informa9on you need to maximize results accurate forecasts with rich, mul9dimensional informa9on by consumer group, type of marke9ng, product, channel and geography
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Find the Op0mal Investment Level to Meet Your Objec0ves

ROI and Gross Margin by Total Marke0ng Investment

Max ROI
2011 $100 MM Spent What If? $145 MM Budget What If? $300 MM Budget

Max Margin

The soOware enables your team to easily run What If? scenarios. You can nd the op9mal investment levels to meet various strategic and tac9cal objec9ves.
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Iden0fy the Marke0ng Plan Most Likely to Deliver the Best Results
Comparison of 2012 Marke0ng Plan Alterna0ves
+8.8% +4.7%

185

Units (MM)

+1.8%

+2.9% -1.2%

173 170

175

178

168

2011 $180 MM Spent

2012 $180 MM Budget Same Mix as 2011

2012 $175 MM Budget Cut $5 MM in Print

2012 $180 MM Budget Shig $5 MM Print to TV

2012 $180 MM Budget Shig $5 MM Print to Digital

2012 $185 MM Budget Shig $5 MM Print to Digital Add $5 MM TV

The soOware enables fast, objec9ve comparisons of marke9ng plan alterna9ves. You can vary spending levels, 9ming, mix of tac9cs and consumer groups targeted.

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Discover Which Marke0ng Tac0cs Will Yield High ROI

ROI by Type of Marke0ng Ac0vity

The soOware analyses and predicts how marke9ng tac9cs inuence purchases. You see granular informa9on about how each performs in the context of the overall plan.
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Learn What Works Best by Consumer Segment

Marke0ng Tac0c Eec0veness By Consumer Group 50+ Auent TV 50+ Other <30 Auent Other <30 0% 10% 20% 30% 40% 50% 60% Radio Print Digital Ads Search Mobile

The soOware reveals how well marke9ng tac9cs work alone and in combina9on by consumer group. You can tune your mix to eciently reach segments you target.
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Understand the Short- and Long-Term Value of Marke0ng

160 140 120 Units (MM) 100 80 60 40 20 0 2012 2013 2014 The soOware forecasts current and future year eects of marke9ng plans. You can see the cumula9ve value of new marke9ng strategies and ini9a9ves.
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Eect of Proposed Marke0ng Plans By Year 19% 22% 26% 74% 50%
78% Base

Brand value

25% 2014 Plan 18% 38%

81% Base

28%

2013 Plan 2012 Plan Pre-2012 Base

Forecast Results of New Marke0ng Ini0a0ves

Planned Marke0ng Mix
Mass Media 67%

Proposed Mix with Mobile Added

Mass Media 61%

Digital 22%

Promo0ons 11%

Digital 22%

Promo0ons 11% Mobile 6%

Unit Sales Forecast

Total Units (000s)

2012 Original
36,928

2012 Add Mobile

38,109

% Change
3%

The soOware provides informa9on about the likely value of all marke9ng tac9cs, including tac9cs not used before. You understand the poten9al before you invest.
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ThinkVine Marke0ng Mix Op0misa0on Sogware

Our Approach

ThinkVine replicates reality by crea9ng a custom, simulated marketplace in which you can measure purchase behaviour across consumers and by marke9ng ac9vity. 1

Build Agent Popula0on

Consumer agents are congured to be highly representa9ve of a popula9on using demographic and media consump9on data.

Add Customer Data

The agents behaviour is informed by customer-supplied data about the category, the product, pricing, marke9ng ac9vity, etc.

Create Market Model

ThinkVines experts develop a custom model in which the agents respond to marke9ng ac9vity and make purchases within the category in a realis9c way.

Ongoing Planning

The soOware enables marketers to quickly and easily run scenarios in a frequently updated marketplace and get a rich, objec9ve set of decision-making informa9on.

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 Demographics
Building an Agent Popula0on

Sample Consumer

Male 47 Years Old Caucasian Income, $110,000 / yr.

We mathema9cally recreate a representa9ve popula9on of target markets by sta9s9cally drawing from empirical distribu9ons of many variables Targe9ng variables include geography, income, age, ethnicity, etc.
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 Media Consump0on
Building an Agent Popula0on

We assign the agents media consump9on behavior by tapping a variety of widely- accepted sources of consumer behaviour data We use patent-pending IP to sample from these known distribu9ons and assign media exposure probabili9es As a result, some agents watch a lot of television (and have higher exposure probabili9es) while others will watch liXle to no television (and have lower probabili9es)

# of minutes watching television per day

# of minutes using social media per day

# of minutes shopping online per day

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 Consumer Agents
Building an Agent Popula0on

The soOware now contains a marketplace of agents that is representa9ve of the consumers in your marketplace It also contains marke9ng science-based rules about response and purchase behaviour

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 ThinkVine Marke0ng Mix Op0miza0on Sogware: Your Data

Adding Customer Data

Required Data

Marke0ng plans Media, promo9on, marke9ng, digital Sales data Syndicated data, internal sales data Enhance & Improve Your Results Market research data Segmenta9on, price elas9city, exogenous factors, addi9onal general and demographic-based media consump9on data, etc.

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 Purchasing Behavior
Adding Customer Data

We use the customer data to congure the agents so their purchase behaviour matches how consumers actually purchase within the specic category

Category Purchase Frequency

Brand Awareness

4
Purchase Probability

~90% ~20%
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Crea0ng the Market Model

A Bodom-up Approach That Predicts More Accurately

1 Training the system
ThinkVines analysts develop and calibrate a custom model that recreates past sales from the boXom up by establishing consumer-centric rules that t historical results.

2 Proving the system

Once the system is trained, we validate it by comparing the most recent 6 months of actual sales (hold out data not used to train the system) to a simula9on of that 6 month period.

3 Using the system

Once the model has been calibrated & validated, it is ready to accurately forecast future sales and provide rich decision support informa9on for each marke9ng plan and what if scenario.

Train

Prove
Validate with hold out data

Use
Forecasts

Calibra9on using demographic, consump9on, plan, research & sales data

2 Years Sales History

1-2 Quarters

Future

Simulated Actual

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ThinkVine and Partners Deliver Value Quickly and Over Time

Congura0on & Ini0al Guidance

Agile, objec0ve marke0ng planning & op0misa0on

Analysis of recent marke9ng ac9vity Recommenda0ons for immediate changes in the marke9ng mix

Respond quickly to market and budget changes by running What If? analyses of marke9ng plans

See forecasts with rich informa0on by consumer group, marke9ng tac9c, channels and geography

Iden0fy new opportuni0es for growth and savings

Accurate forecasts

See the eects of media you havent tried before Create eec0ve, ecient integrated plans across all marke9ng ac9vi9es Receive expert ongoing marke0ng support

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Sample Screens: Create Scenarios at a High-level or In Detail

High-level By group & year

In Detail By type & week

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Sample Screens: Compare Plans, Review by Tac0c, Segment, Etc.

Compare ROI of plans, lter High-level results by 9me, By group & year segment, etc.

Long-term eects of plans Due to and ROI by tac9c and segment

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A ThinkVine Marke0ng Mix Op0misa0on Success Story

Business Goals Consumer Increase market share while maintaining margins Products Improve overall marke9ng ROI Discoveries Based on recent success with a specic consumer group, the agency recommended doubling the targeted radio ads at mid-year Using ThinkVine soOware the company discovered Ads drive trac to store, but in-store price drives purchase decisions The marginal return from more ads to the group would be very low There was a large consumer group with more upside poten9al Ac0ons Adjusted its marke9ng mix to achieve its business goals Now quan9es all proposed changes via planning soOware

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ThinkVine's marke9ng mix op9misa9on soOware provides B2C marketers with the forward-looking informa9on they need to get the maximum return across all of their marke9ng investments. See a 2 minute video overview at

www.thinkvine.com
or call

+1 513 842 5900

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