Marketing Optimization Modeling 101

Marketing Optimization Modeling 101

Companies expect their marketing to help them achieve the full profit potential for each and every customer. In fact, marketing’s primary responsibility to the organization it works for is to generate profitable revenue growth. The trick is to balance improving the value of your investment while maintaining or enhancing your customers’ satisfaction within your channels and touch-points. The sheer number of customers, products, and communication channels often makes this balancing act quite challenging. This challenge is compounded by shorter product life cycles, fierce competition, the rate of change, and fragmented markets.  

How do you find the right set of customer-product-channel combinations to maximize profit while also ensuring a positive customer experience?

You embrace optimization modeling. Efficient marketing optimization can help you address this complexity. Optimization modeling is designed to help you find the most advantageous solution to a given problem.  It is often used to improve yield and to aid in decision-making. When used effectively, you can use optimization modeling to maximize the value of your marketing investments without detracting from the customer experience.

Some areas we attempt to optimize through marketing include websites, search engines, events, and campaigns. However, we can apply optimization more broadly to the discipline of marketing as a whole if we think about Marketing with a capital M. Marketing with a capital “M” refers to the foundational elements of diagnosis, strategy, and planning — making sure you have a well-conceived, relevant and justified approach that connects the product or service you’re selling with the target audience and positions the company in a compelling way that is consistent across all channels.

Three Steps You Need to Optimize Your Marketing

Now that you’re convinced that optimizing your Marketing seems like a good investment, what do you need to start? We recommend these three key components:

  • Round up data related to customer engagement, marketing costs, product margins, pricing levels, and more. Some of these figures can be captured from Google Analytics, your CRM, SFA, ERP, and financial systems. Other stats may need to come from external sources such as third-party market research.
  • Convert the Marketing management problem into a Marketing programming problem. To solve a Marketing programming problem, you need a model that describes the variables. You’ll also need an equation to help you establish the optimal values for decision variables, such as profit maximization or achieving 30% brand preference (contact us if you’d like a useful equation to use as your starting point).
  • Achieving the optimal mix of Marketing value and customer satisfaction takes a systematic approach. It’s not a one and done type of deal. As you hone your model, systematically vary the inputs until optimization is achieved. This will help you find the best solution to fit your specific needs at a given time.

If you want to achieve customer satisfaction as your customers engage with you across your various channels and touch-points while maximizing your investment, then Marketing optimization is for you. The key is to collect and provide the necessary data, which is often the biggest hurdle for many companies. One of the best ways to start overcoming this hurdle is to create a data inventory and a data management plan. If you don’t have the expertise to do this in-house, tap experts who have proven track records in Marketing data and analytics.

 

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