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Marketing ROI Measurement & Case Study for Telecom

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Wireless Telecom is a complex category, with multiple ad messaging from ads for cellphones, cellphone plans and branded messages claiming network superiority. This is an actual case study that sorts all of this out and illustrates the power of marketing measurement and ROI assessment

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Marketing ROI Measurement & Case Study for Telecom

  1. 1. Marketing Optimization Modeling Telecom Case Study
  2. 2. • The following is a real case study from a telecom industry. Data, labels and brand names have been masked to preserve confidentiality. Overview and Disclaimer
  3. 3. Outline  Model architecture  Background  Key Insights  Decomposing New Subscribers YE July 07: national, by region and across time.  New Subscribers variance drivers: drivers of New Subscribers trends YE July 07.  Relative sensitivities across media message mix: national and by region  The relative effectiveness of TV media messaging: national and by region  The relative impact of message executions and clutter: national and by region  The impact of media quality and persuasion: national and by region.  The impact of customer satisfaction on new subscribers  Marketing Return on Investment
  4. 4. Outline  Optimizing total Marketing Spending  Optimizing the marketing spending mix, national  Optimizing local marketing spending  Conclusions and recommendations  Model validations
  5. 5. Model Architecture Promotion By Individual commercial & message groupNational TV GRPs New Subscribers Jan05-Jul07 By week Region (4) x DMA(50) Competitor GRPs Competitors A, B and C Copy Quality Copy Test x GRPs weighted Local Radio GRPs by DMA and region Local OOH GRPs by DMA and region Local Spot TV GRPs by DMA and region Online Adv GRPs by week Local Product Promo Print ad spend by region/DMA: Price-off, Rebates, BOGOs and estimated Price Discount levels. National Promo Print ad promo spend natl pubs WSJ, USA Today. etc. Customer Sat. Customer satisfaction by DMA/Region Christmas, NCAA promo Seasonality Message Print Adv. National Print GRPs by media message By Month The most comprehensive model to-date includes drivers covering national TV, local print and secondary media, handset promotional advertising and discounts, competitive GRPs and Customer Satisfaction pooled by DMA and region.
  6. 6. Background  The client is a key player in a solid growth segment of the telecom industry. There are some unique aspects of this client and category.  The client produces and airs about 65 different TV commercial messages per year. At times, as many as 15 different commercial messages are aired in a single week. Because of this, we actually include the frequency or number of commercial executions per week, as the negative effect of too many messages (clutter) is a key issue.  The client and industry is a very heavy user of national TV advertising and such advertising is a very significant factor in driving new subscribers. Because of the heavy amount of advertising and promotion, it is critical to understand the effectiveness of each media and message.  Because of the large number of messages communicated to consumers, our efforts will also focus on understanding and quantifying the effectiveness of different media messages.
  7. 7. Background  The company’s media strategy centers around an architecture of different marketing messages. These messages include 1) branded messages, 2) product messages, 3) plans and pricing messages, 4) service messages and 5) messages related to a major new product launch during the year.  Because of the large number of messages communicated to consumers, our efforts will also focus on understanding and quantifying the effectiveness of different media messages. Because or modeling approach focuses down to the individual commercial level, we are equipped to do this
  8. 8. Key Insights  For the quarter ending July ’07, Company’s New Subscribers performance recovered significantly from the soft prior quarter, with a period-to-period gain of +19.3%.  The major news for the period includes a significant “lift” from the launch of a new smart-phone. This phone contributed a 4.4 percent incremental sales for the quarter and generated a lift of +23% for the first five weeks after it’s introduction in the last week of June  While the smart-phone was a significant contributor to growth for the period, Company’s media messaging generated about an equal positive impact. For the period, Company moved towards a more optimal allocation of media with lower execution frequencies for non- branded messaging and a significant increase in branded message media.  When analyzing media and marketing effects across regions, we continue to see a high degree of diverse effects. Each region has their particular marketing strengths and marketing-mix effects. The NE region was found to be the most impacted by competitive media. The SE region was most affected by TV media, while the West region was most impacted by secondary and radio media; and the Central region was most impacted by handset promotional print ads.
  9. 9. Key Insights  While Company improved considerably in the efficiency of their media messaging over the past quarter, considerable upside continues to exist by moving towards an optimal mix of media and marketing.  Company’s marketing spend is profitable, earning a 71% annual return on spending of about $900MM Given current marketing response, and assuming the current spending mix, positive marginal returns should be expected up to 2X current overall spending levels.  When considering optimization of the national media and marketing mix, the plan calls for higher GRPs for both branded and non-branded messaging, plus increases for product promotion and new product advertising. To balance the constant spending optimization, reductions in spending are indicated for print advertising, radio, OOH advertising, online and Spot TV. This solution is expected to net an additional +5.9% in new subscribers,  When considering optimization of local media, the plan indicates the greatest upside opportunity by shifting spending away from the SE and West regions and increasing spending in the NE and Central regions. This solution will add an additional +1.4% in new subscribers.  Overall, by implementing our optimal spending plan, we estimate Company can increase New Subscribers by +7.3% at constant spending.
  10. 10. Company National Decomposition of New Subscribers Year-Ending Ending July 07 34.1% 6.6% 9.5% 6.4% 4.2% 3.2% 7% 1.2% 1.8% 4.6% 2.0% 4.4% 6.9% 2.4% 65.9% BASE CUSTOMER SAT BRANDED.EXECUTIONS NONBRANDED.EXECUTIONS TV.BRANDED MESSAGE 1 TV.BRANDED MESSAGE 2 TV.BRANDED MESSAGE 3 TV.BRANDED MESSAGE 4 TV.TELECOM PLANS & PRICING MESSAGES TV.TELECOM PRODUCT MESSAGE TV.TELECOME SERVICES MESSAGE TV.NEW PRODUCT LAUNCH MESSAGE TV.COPY QUALITY RADIO OOH SPOTTV ONLINE PRINT PRODUCT PROMOS PROMOTION & SPONSORSHIP For the year ending July ‘07, marketing drove 59.5% of New Subscribers. Consistent with past models, branded message TV was the largest contributor at 20.4%, followed by non-branded message TV at 5.8%. Customer satisfaction was found to be a significant driver at 6.6%. Message print drove 6.9% of New Subscribers, while product promo- tional print drove 5.5% of New Subscribers and competitive media had a -6.8% impact
  11. 11. Company Regional Decomposition of New Subscribers Q107 -20% 0% 20% 40% 60% 80% 100% NE SE Central West National COMPETITIVE PRINT COMPETITOR B TV COMPETITOR A TV PROMOTION & SPONSORSHIP NEW PRODUCT LAUNCH MESSAGES NONBRANDED.TV.MESSAGE BRANDED.TV.MESSAGE COPY QUALITY HANDSET.PROMO PRINT ONLINE SPOTTV OOH RADIO NONBRANDED.EXECUTIONS BRANDED.EXECUTIONS CUSTOMER SATISFACTION When decomposing marketing impacts by region, we see a significant degree of heterogeneity. The NE region is significantly more impacted marketing drivers than the other Regions and also was more impacted by competitive media, especially Competitor A. The SE region had the largest impact from message TV and the Central region was most Impacted by product promotion.
  12. 12. Decomposition of Company New Subscribers by Week -100,000 0 100,000 200,000 300,000 400,000 500,000 600,000 01.02.05 02.06.05 03.13.05 04.17.05 05.22.05 06.26.05 07.31.05 09.04.05 10.09.05 11.13.05 12.18.05 01.22.06 02.26.06 04.02.06 05.07.06 06.11.06 07.16.06 08.20.06 09.24.06 10.29.06 12.03.06 01.07.07 02.11.07 03.18.07 04.22.07 05.27.07 07.01.07 COMPTV.PRINT COMPETITIOR B TV COMPETITOR A TV PROMOTION NEW PRODUCT LAUNCH TV NONBRANDED TV MESSAGE BRANDED TV MESSAGE COPY QUALITY PRODUCT PROMOS PRINT ONLINE SPOTTV OOH RADIO NONBRANDED EXECUTIONS BRANDED.EXECUTIONS CUSTOMER.SAT BASE The Company’s New Subscribers increased +19.3% for quarter ending July v. the prior quarter. Over the last five weeks of the period, we see a significant impact from the Smart-Phone launch, with this event driving over a +23% lift on New Subscribers.
  13. 13. Quarter Ending July v. Prior Variance Drivers as % of US -1.5% -0.9% -0.6% -0.3% -0.1% -0.1% -0.0% 0.2% 0.2% 0.3% 0.7% 0.9% 1.0% 1.2% 1.5% 1.6% 3.8% -4% -2% 0% 2% 4% 6% 8% CUST.SAT RADIO COMPETITOR A MEDIA PROMOTION ONLINE SPOTTV OOH COMPETITOR B MEDIA COMPETITIvE PRINT PRINT BRANDED MESSAGE TV COPY QUALITY PRODUCT PROMO NONBRANDED TV EXECUTIIONS NEW PRODUCT LAUNCH TV BRANDED TV EXECUTIONS BASE MOMENTUM NE SE CENTRAL WEST From the prior year, New Subscribers increased +7.8%. The SE and West regions posted the largest relative increases. All regions showed growth over the prior quarter, while the NE region posted a small decline. Branded TV executions and base momentum were the largest posi- tive drivers, while radio and declining customer satisfaction were the largest negative drivers.
  14. 14. Impact of Media Messaging 235,500 236,000 236,500 237,000 237,500 238,000 238,500 239,000 0 50 100 150 200 250 300 350 Company Mobile Subscribers Sensitivities to Weekly Message GRPs TOTAL NONBRANDED.TV. MESSAGES TOTAL.BRANDED.T V.MESSAGES TELECOM PLANS & PRICING MESSAGES TELECOM PRODUCT MESSAGE TELECOME SERVICES MESSAGE NEW PRODUCT LAUNCH MESSAGE 0 5 10 15 20 25 30 35 40 Company Incremental Gross Adds per Incremental 100 Message GRPs Northeast Southeast Central West Branded message TV is slightly over 2x more responsive to increases in GRPs than non- Branded message TV.. Per incremental GRP of spending, the SE region showed the highest total increase in New Subscribers per incremental GRP.
  15. 15. Media Message Impact per 100 GRPs 0 500 1,000 1,500 2,000 New Subs per Incr. 100 GRPs New Product Launch Message Telecom Services Message Telecom Products Message Telecom Plans & Pricing Message Branded Message 4 Branded Message 3 Branded Message 2 Branded Message 1 All Non-Branding Messages All Branded Messages When looking at the relative effectiveness of media messaging, we find that branded message media is about 135% more effective than non-branded messaging. Within branded messaging, Brand Message 1 showed the highest overall impact.
  16. 16. Impact of Media Execution Clutter Company Sensitivities to Weekly Commercial Media Executions 195,000 200,000 205,000 210,000 215,000 220,000 225,000 230,000 0 2 4 6 8 10 12 NonBranded Executions Branded Executions Company Incremental Subscribers per Incremental Media Execution -1000 -500 0 500 1000 1500 2000 Non-Network Executions Network Executions Northeast Southeast Central West As found in prior modeling exercises, message execution frequency impacts New Subscribers differently depending on the message, with branded message executions showing a positive impact, while non-branded executions have a negative impact on New Subscribers. Across the regions, there is some differences in how executions impact New Subscribers. While non-branded executions tend to show a negative impact nationally, their effect on New Subscribers was found to be positive in the West region.
  17. 17. Impact of Media Quality 88,000 90,000 92,000 94,000 96,000 98,000 100,000 102,000 104,000 10 15 20 25 30 Company Sensitivities to Copy Test Persuasion (weekly new subscribers) Copy Test… 0 100 200 300 400 500 600 Copy Test Persuasion Company Incremental Subscribers per Incremental +1 pt. Copy Test Persuasion Northeast Southeast Central West By weighting GRPs by copy-test persuasion scores, our model is uniquely able to measure the impact of qualitative differences in media across the message mix. With average copy Persuasion scores of 16, Company New Subscribers are about 5% higher than would occur if all copy scores were at the telecom norm of 12. On an annual basis, this is equivalent to about $274MM in customer lifetime value.
  18. 18. Impact of Customer Satisfaction Company Sensitivities to Customer Satisfaction 200,000 210,000 220,000 230,000 240,000 250,000 260,000 0% 20% 40% 60% 80% 100% FirstCallSat Company Incremental Subscribers per Incremental +1% Customer Satisfaction 0 5 10 15 20 25 Incremental Impact from +1Pt. CP Persuasion Northeast Southeast Central West For the first time, our models now incorporate a measure of customer service performance as a driver of New Subscribers. The measure determined to be most relevant was “First Call Proble Resolution”. In total, this metric drove a significant 6.6% of overall gross ads in the July quar- ter. Across the regions, the SE and Central regions showed the greatest impact, while the NE region was significantly less impacted than the other regions.
  19. 19. Marketing ROI  Overall, company makes a solid +71 percent positive return on $904MM in spending.  Most of net returns are generated through branded TV message advertising. Other positive return media include product promotion, non-branded TV and new product messaging. All other media generated negative net returns. Source for spending data: MEC
  20. 20. Total Marketing Spend and Net Returns $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $220,967.42$441,934.84$662,902.26$883,869.68$1,104,837.10$1,325,804.52$1,546,771.94$1,767,739.36$1,988,706.78$2,209,674.20 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 Gross.Adds Net Marketing Contribution Net Marketing Returns $MAnnual New Subscribers M Total Marketing Spend $M Current Spend  The chart below is a simulation of annual New Subscribers and net returns at various total spending levels, and assuming the current mix of spending. As shown, Company can expect to generate positive net marginal returns to marketing spending up to an overall increase of +100%. By implication, not only is marketing spending profitable, but will continue to be so at significantly higher spending levels.
  21. 21. • When optimizing marketing spend across media and local spend across regions, we find considerable upside for Company to improve marketing impact at current spending levels. • Our solution calls for substantial spending increases for branded message media, new product media and product promotion, while cutbacks are called for all other media forms. Across the regions, our solution also calls for local spending increases on local media (product promotion and secondary media ) for the NE and Central regions with cutbacks in the other two regions. Optimization has identified an upside of +5.9% in New Subscribers at constant total spending. Marketing Spending Optimization
  22. 22. Optimized Local Marketing Spending 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Subscriber Contribution Current Spend Optimal Spend West Central SE NE  The company spends about $219MM of its total budget on local marketing efforts. Despite our overall optimized solution for -20% less local spending, the Company can actually achieve an additional +1.4 percent subscriber growth by allocating funds more efficiently across the regions. This solution calls for increases in the NE and Central regions, with relative reductions in the other two
  23. 23. Conclusions and Recommendations  The modeling exercise conducted for this telecom company has afforded us the opportunity to learn considerably about the marketing dynamics of this company and the telecom business.  We learned that, with very heavy spending, this business is highly marketing dependent, and especially with respect to network TV advertising. Overall, company marketing efforts drive 65.9 percent of total new subscribers over the past year.  We learned that with the high spending and high frequency of commercials, that media message management and optimizing media message is a critical part of the marketing optimization equation. For this client, we determined that branded messages were significantly more effective than non-branded products, plans and services messages. As a consequence, the company should increase its investment in branded messages, and doing so has the upside of driving +4.3 percent higher new subscribers.  We learned that with a large number of media commercials, media execution frequency and clutter poses a risk to advertising impact and effectiveness. More non-branded media messages, in particular, pose a downside risk on media effectiveness.  We learned that media quality is a measurable and important component of the overall equation for media effectiveness.
  24. 24. Conclusions and Recommendations  The modeling also uncovered that customer satisfaction is important and is measurable driver of business performance for the company,  We learned that the company’s overall marketing investment generates a strong and positive ROI at 71 percent, but not all marketing channels generate positive returns. While national network TV and product promotion generate positive returns, the returns for print, OOH, radio, Spot TV and online advertising fall short of generation positive returns.  Through our modeling efforts, we also determined that the company has a two-fold opportunity for driving higher growth in subscribers through optimizing its marketing spending. Across the national marketing mix, the solution calls for higher spending in branded, non-branded and new-product advertising plus product promotion. By contrast, this solution also calls for a relative reduction in the less profitable media channels of print, OOH, radio, Spot TV and online media. Such a solution is expected to generate growth of +5.9 percent in new subscribers.  The second dimension and opportunity estimates that the company can generate growth of +1.4 percent by optimizing its local media spending. This calls for higher relative spending in the NE and Central regions and relative reductions in the SE and West Region.
  25. 25. Model Validations  The following shows actual and model fit charts for each of the four regions.  Overall, the fits and predictive capabilities of these models were extremely high. Total model R-squares averaged 98.8%. Holdout R-squares across 13 weeks of data were 99.6%, showing a high degree of predictive accuracy for these models. Total Mean Absolute Percent Errors across all models is +/- 2.0%.
  26. 26. 0 100,000 200,000 300,000 400,000 500,000 600,000 01.02.05 02.13.05 03.27.05 05.08.05 06.19.05 07.31.05 09.11.05 10.23.05 12.04.05 01.15.06 02.26.06 04.09.06 05.21.06 07.02.06 08.13.06 09.24.06 11.05.06 12.17.06 01.28.07 03.11.07 04.22.07 06.03.07 07.15.07 Actual Model Total US Actual And Model HOLDOUT R^2=99.6%OVERALL R^2=98.8% MAPE= +/-2.0%
  27. 27. Contact Michael Wolfe, President Bottom-Line Analytics LLC 770.485.0270 MJW@bottomlineanalytics.com www.bottomlineanalytics.com

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