Modeling is a powerful tool that is worth considering when determining how best to spend your marketing dollar. At its simplest, modeling looks for patterns in data to predict future behavior. That data could be past behavior. If someone bought diapers last week, it is very likely they will buy them again this week. It could also include demographics such as age and gender or, in a B2B context firmographics, the number of employees and annual sales volume. Attitudinal information, such as willingness to purchase a product, could also be used in a model. The power of modeling comes from the fact that it weighs all of the factors and results in a unique algorithm that predicts future behavior. Instead of the usual “spray and pray” approach, modeling enables you to focus your dollars where they will have the most effect.
Two articles in the Wall Street Journal last week offered real life examples of how models can solve business problems. I have seen clients use attrition models and proportional hazard models to determine which customers are likely to leave. Google is building an attrition model to identify which of its employees are most likely to leave the company for another opportunity. Presumably Google will target those employees most likely to leave and be able to retain valuable talent that might otherwise walk out the door.
Chrysler’s digital agency has designed a media modeling system according to the Wall Street Journal. It sounds like a marketing mix model and is being used to allocate Chrysler’s marketing dollars. At a basic level, this model tells Chrysler how much money needs to be spent on marketing to drive a certain number of vehicle sales based on the web traffic generated. By monitoring online activity and tying it to their marketing campaigns, Chrysler has determined how many web visits translate into sales. The media modeling system, including enhancements based on the ongoing performance of television advertisements, has helped Chrysler determine how to structure their marketing campaign and tweak marketing in real time to drive results.
These two examples may not fit your exact situation but they highlight the power and value of modeling.