Bottom Line Analytics
Predictive Analytics to Improve Marketing Performance Management

Today, marketing and advertising remain among the highest single line-item costs on a corporation’s income statement. Over 100 years ago, an early 20th-century retail executive named John Wannamaker famously said, “I know that half my advertising budget is wasted; I just don’t know which half.” Since then, marketing has often developed a reputation of being exempt from all the rigors of benefit-cost analysis. Nevertheless, globally, over 700 billion dollars is being spent on advertising annually. With all marketing costs considered, global marketing spending most likely exceeds one trillion dollars. The staggering level of investment in marketing today means that CEOs and Heads of Marketing must understand the value that marketing produces. Bottom-Line Analytics(BLA), is a full-service marketing analytics agency on a mission to provide marketing mix modeling and marketing investment optimization for maximizingthevalueof marketing investments .

The company’s marketing models and tools are designed to quantify how marketing efforts and investments can generate incremental revenue and sales for leading brands. Coupled with its simulation and optimization technology, BLA can provide direct guidance on how a brand can grow its sales while maximizing the productivity coming from every marketing dollar spent. From its 25 years of experience, BLA can safely and confidently show any marketer or CEO how they can extract an additional two to ten percent revenue from the marketing dollars they spend. In an interview with CIO Applications, Michael Wolfe, CEO of BLA, shares with us his insights on how his company enables their clients to achieve just this.

Could you give our readers a brief overview of Bottom-Line Analytics?

BLA is a relatively small-boutique consultancy focused on advanced analytics. We have a presence in the US, UK, and Europe and have done work globally. Our clients include state lotteries, retailers, hospitality firms, food service, health care organizations, financial services, and consumer products brands. We have a broad array of analytical applications, from pricing analytics to brand positioning work, market segmentation, and marketing effectiveness analytics. Advanced analytics and technology are at the core of what we do. These include machine learning, neural networks, mathematical optimization tools, and data visualization.

How do you engage with your customers, and can you describe the benefits they receive from your services?

When we engage with a new client, we know that we will need to build trust right from the get-go. That is because we will deal with confidential sales and financial data; and we willalso need to learn about each client’s business and marketing strategies, and who their key customers are. All of this requires a non-disclosure agreement between our companies. Therefore, the first thing we do with a client is meet with them; and they will present their marketing strategies for the coming year and beyond. We will most likely interface with executives from marketing, finance, IT, and marketing research.

During this meeting, a client project manager (CPM) will be assigned to coordinate and manage all necessary tasks, such as data collection, arranging internal meetings and delivering presentations. We will also get client feedback on timing, deadlines, and how they define success from this project from these early conversations.

Our second task is to map out the timing and elements of data collection.
Here we define the amount and periodicity of the historical data we will be collecting. The data we need to collect includes:
• Sales over time by some geographic aggregate.
• Measures of marketing penetration or distribution.
• End-user product pricing in sufficient detail and promotion, and media dataandcostsovertime

A detailed data collection plan is formulated, which spells out timing deliverables and responsibilities. People from marketing, finance, IT, and the client’s media agency will likely be involved at this stage. Once the data is collected and delivered to BLA, the data will be aggregated and summarized. BLA will then present this data to the client for final approval. Concurrent to this meeting, BLA will also offer an architecture or diagram to the client, mapping out how the model will work and which data elements will be designed into the predictive analytic models.

Upon approval of all the steps leading to this point, BLA will then embark on an analytics exercise which includes constructing and validating the predictive marketing models, as well as developing a real-time simulator that will connect all marketing activities and other inputs to sales and revenue outcomes. Additionally, a mathematical optimizer will also be implemented to enable the optimization of marketing spending and to help quantify the dividends of revenue that the client can expect by following this optimized plan. For instance, a certain BLA clientspent 30 million dollars on advertising and promotion over the past year and wanted to know how much that same 30-million-dollar budget would perform if it were optimized. Our optimizer then moved dollars from less to more productive activities and arrived at a revenue level six percent greater than the last year’s sales total. It amounted to an increased profit of 270 million dollars, all without requiring any additional budget.

What are the key differentiators that keep you ahead of your competitors?

We evaluate advertising differently than our competitors. We look at and measure advertising into three distinct components: a short-term ad effect, a long-term ad effect, and the impact of the ad message or creative effort. The short-term ad effect encompasses an immediate lift in sales or revenue concurrent to the airing or display of the ad. It usually measures first-time customer acquisition. The long-term impact of advertising occurs and builds over a longer time horizon. It measures repeat purchases from customers and embodies loyal customer behavior. On top of this, we also measure the impact of the media message or creative. For long-term ad effect and impact of media message, we have developed validated algorithms and tools for measuring these elements of the media equation. Our competitors generally only measure the short-term impact from advertising. All things combined, BLA’s measure of the financial returns of advertising will be greater than what mostcompetitorsmeasure. Our approach will show a positive profit to advertising spend in many instances, while others are more likely to show negative returns.

What does the future hold for your company?
We believe in a bright future. Although we compete with large companies such as AC Nielsen, we position ourselves as innovators in this field when measuring a larger marketing mix. For example, some clients have shifted from our econometric methods to marketing measurement in the past five years to more digital-focused tools, such as digital attribution modeling. In addition, as the digital world moves away from third-party cookies, companies will rely more on our comprehensive cross-channel econometric approach.

According to a survey from the Fournaise Consulting Group, “73 percent of CEOs think marketers lack business credibility and are not the business growth generators. They are still too far from demonstrating how the cross-channel marketing strategies and campaigns they deploy grow their organization’s top-line regarding more customer demand, more sales, more prospects, more conversions, and more market share.” We will continue to optimize the marketing efforts of all our customers, now and for the years to come.