February 16, 2011

Forecast Forensics: Are Channels Complimentary?

Let me ask you a question:
  • "For every dollar you increase the amount of demand you generate in Search, how much additional demand do you generate in all of your other advertising/physical channels?'
Can you answer that question?

If not, why not?  I mean, that's about as basic a question as you're ever going to run across, right?

The Forecast Forensics framework can be used to answer these questions.  After all, all of this multichannel stuff says that channels work together in a multiplicative way to grow our businesses exponentially, right?

So, I ran the framework for data I have.  I ran four simulations, across five years.
  • Simulation #1 = Base Case.
  • Simulation #2 = Grow Telephone Volume by $1.5 Million in Year Five.
  • Simulation #3 = Grow Search Volume by $1.5 Million in Year Five.
  • Simulation #4 = Grow Mobile Volume by $1.5 Million in Year Five.
Let's look at how other channels grow, when these channels grow.

Grow Telephone Demand By $1.5 Million In Year Five:
  • Telephone = Increase of $1.5 Million.
  • Online = Increase of $0.2 Million.
  • E-Mail = Increase of < $0.1 Million.
  • Search = Increase of < $0.1 Million.
  • Social = Increase of < $0.1 Million.
  • Mobile = Increase of < $0.1 Million.
Grow Search Demand By $1.5 Million In Year Five:
  • Telephone = Increase of $0.2 Million.
  • Online = Increase of $1.0 Million.
  • E-Mail = Increase of $0.5 Million.
  • Search = Increase of $1.5 Million.
  • Social = Increase of $0.1 Million.
  • Mobile = Increase of $0.1 Million.
Grow Mobile Demand By $1.5 Million In Year Five:
  • Telephone = Increase of $0.3 Million.
  • Online = Increase of $1.0 Million.
  • E-Mail = Increase of $0.7 Million.
  • Search = Increase of $0.3 Million.
  • Social = Increase of $0.1 Million.
  • Mobile = Increase of $1.5 Million.
In other words, each channel yields a different result.
  • Growing Telephone orders (i.e. sending catalogs to rural customers) results in a simple increase in the Telephone channel, without helping other channels.  Each Telephone dollar adds $0.20 across other channels. Catalog orders over the phone are not complementary to other channels, in this case.
  • Growing Search orders results in $1.5 million in Search and $1.9 million in other channels.  Each Search dollar you add results in $1.27 being added to other channels, as well.  Search is complementary to other channels, in this case.
  • Growing Mobile orders results in $1.5 million in Mobile and $2.4 million in other channels.  Each Mobile dollar you add results in $1.60 being added to other channels, as well.  Mobile is complementary to other channels, in this case.
As a marketer, you probably want to know this fact, right?  I mean, knowing this helps you allocate marketing dollars appropriately ... your attribution models aren't going to tell you this, so it is a pretty important fact to know, right?

Give the Forensics Forecast methodology a try ... you're going to be fascinated by what you learn about how customers interact with the channels you support!

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