As a manager at some point you have probably found yourself asking the question, "what's the best marketing plan I can develop?" Any time you ask a question with word "best" in it, you are asking a question about optimization.
When it comes to marketing analytics, how best can a company optimize its resources? Based on our experience with clients, we've found that the optimization questions are usually related to a client's level of decision-making.
Typically, senior executives plan at the portfolio level. Their questions are often centered around how to best allocate marketing investments across channels and audiences.
On the other hand senior managers may be responsible for developing targeted marketing programs. Their questions may have to do with how to best allocate investments within a campaign or how to select and target "best customers" within a list or segment.
There are established analytic solutions within the industry to address each type of optimization need. A solution for most senior level planning questions is marketing mix analysis. The solution can answer questions such as, "how can our company maximize overall sales by allocating marketing expenditure across media channels?" Marketing mix analysis can be used for any analysis that attempts to answer cross-channel/cross-product planning questions.
A solution for many mid-level planning optimization questions is constrained optimization. Constrained optimization is most commonly used when a marketing organization uses an incentive-based strategy (i.e. offers or discounts) to affect customer behavior. It can answer questions such as "what level of incentive should I provide to each customer segment in order to maximize overall campaign ROI?"
Common solutions for list-specific communications include response and lift modeling. These tools can answear questions like, "who should we mail on a list in order to maximize campaign ROI or how can we generate incremental profits?
About the author: Rafael Bradley is an analytics director at Peppers & Rogers Group, focusing on the automotive and retail industries. Contact him at email@example.com.