Marketing Campaign Effectiveness

Wed Jan 08 2020

by John Hill

Business development often gets "stuck" because we can't develop resources fast enough. Marketing is the art of communicating the value of products or services to customers and potential customers. The marketing process is often a bottle-neck in business development, as we fail to find and persuade sufficient people of the value of our offerings.

The Marketing Funnel: a misleading metaphor

The marketing funnel is a classic visual tool for communicating the stages in the customer journey from unaware individual, to loyal customer - or even to becoming a promoter of our product. A simple funnel might have five stages through which potential customers (our market) will hopefully transition:

  1. Unaware

  2. Aware

  3. Consideration

  4. Conversion

  5. Loyal

Screenshot 2019-12-09 at 16.32.22

The funnel analogy, while a useful visual aid is actually a misleading metaphor. Unlike a physical funnel, in which gravity acts only to pull things through the funnel, in marketing, prospects are also able to transition back "up the funnel" - the wrong way!

A better way?

Quantitative models of marketing effectiveness are tricky to build with traditional tools like spreadsheets. But stock-flow simulation models are a great tool for understanding the complex dynamics at work, and experimenting with model assumptions and inputs to reveal more effective campaign strategies.

Screenshot 2019-12-09 at 16.18.18

We can think of each of our five funnel stages as being a stock quantity: number of unaware potential customers, or number of loyal customers. Individuals flow into, and out of, these stocks through time as our marketing campaigns reach them, and help them to transition towards becoming loyal customers. An effective marketing campaign efficiently converts unware potential customers into loyal, or promoting, customers.

Setting up the Model

We can set up a generic pipeline structure in Sheetless with the five Stock values for each pipeline stage (it would be trivial to add a sixth for promoting customers) and the corresponding flows of individuals into and out of these stocks in each time period. In the model example here, we simulate the development of potential customers for a product which is new-to-market over a 3 year (36 month) period.

The model structure quickly reveals the key drivers of marketing performance - the flows at each stage. In this demonstration model, these flows are crudely modeled with simple assumptions, but these assumptions could be replaced with better ones based on historical data, or peer analysis. Note that you can change any of the values in the model, or adjust the length of the simulation period to conduct "policy experiments" on this model.

Optimise Marketing Campaigns

Given a well-calibrated simulation model, we can quickly identify the optimal marketing mix across the five stages, cutting marketing costs, and increasing campaign effectiveness. The underlying model structure is generic, and underpins many real-world business process, including funnels and pipeline progression. You are also free to modify the model structure, for example by adding or removing stages to reflect the nuances of different products or customer segments.

You can get started with this model template here and register for a free account to save any changes you make.