Insights into Purchase Funnel Dynamics · Pankaj Kumar. Purchase Funnel Traditional brand metrics...
Transcript of Insights into Purchase Funnel Dynamics · Pankaj Kumar. Purchase Funnel Traditional brand metrics...
10/06/2010
Insights into Purchase Funnel Dynamics
Pankaj Kumar
Purchase Funnel Traditional brand metrics gaining more importance
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• Successful brands leverage a greater and integrated number of marketing levers today as:
– Traditional media is losing its importance
– There are much greater number of marketing touchpoints offline and online
• All geared towards creating buzz, building awareness, and moving/ impacting customers through the purchase funnel
Marketing Strategy Tied to Funnel MetricsProvides more strategic and actionable insights
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• Understand WHAT marketing efforts are engaging customers WHERE and HOW
• Quantify the impact of various marketing investments on the funnel metrics and total sales
•Target Market
•Media
•Message
Marketing
Strategy
•# of customers
•Volume
•RevenueSales
Customer
Progression
• Perceptions
• Actions
Understanding Purchase Funnel DynamicsKey issues
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• Marketing activities are not all designed to have immediate effect on sales
– Some are intended to drive demand by increasing awareness, changing brand perceptions and future purchase behavior
• When looking at trade-offs across different types of marketing activities, if all marketing effects are not captured then:
– Spend optimization may skew towards the types of activities whose efforts are best captured thus harming the brand in the long-run
Quantifying Purchase Funnel DynamicsKey issues
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• While marketing mix models capture the short-term impact of marketing activities on sales, they do not capture well the effect of marketing activities on purchase funnel metrics
– Use techniques not suitable for modeling evolving phenomena such as awareness and perceptions
– Substantial data requirements and tough to capture impact as they change slowly over time
Modeling Purchase Funnel DynamicsFor actionable insights
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• Each stage is unique, and should be modeled.What drives “awareness,” for example, may or may not drive “consideration” or “purchase.”
• While unique, the stages are in fact related.Changes in any one stage either reflect upon or drive change in another.
• The stages are not just related – they’re sequentially related. Awareness leads to consideration, but the opposite is not true.
An approach to econometrically modeling “purchase funnel”
In more technical terms:
We jointly model a correlated sequence of awareness, consideration, and choice through a system of models with correlated errors. Not modeling the whole purchase funnel as a jointly correlated system will result in erroneous results, both in terms of significance of variables and magnitude of impact of variables.
Modeling Purchase Funnel DynamicsFor actionable insights
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• Each stage is unique, and should be modeled.What drives “awareness,” for example, may or may not drive “consideration” or “purchase.”
• While unique, the stages are in fact related.Changes in any one stage either reflect upon or drive change in another.
• The stages are not just related – they’re sequentially related. Awareness leads to consideration, but the opposite is not true.
Pr(Awareness) = f(factors influencing awareness)
Pr(Consideration) = f(factors influencing consideration)
Pr(Purchase) = f(factors influencing purchase)
Not Aware, Aware, Not Consider,Consider, Not Purchase, Purchase
Model
An approach to econometrically modeling “purchase funnel”
In more technical terms:
We jointly model a correlated sequence of awareness, consideration, and choice through a system of models with correlated errors. Not modeling the whole purchase funnel as a jointly correlated system will result in erroneous results, both in terms of significance of variables and magnitude of impact of variables.
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Brand Image
Trustworthiness
Longevity in business
Appealing to wide variety
For someone like me
Privilege to have their cards
Treating their customerswell
Maintaining reputation during crisis
Card Features
Annual fee
Late payment fee
Interest rate on balance
Interest rate on cash advance
Acceptance at various retail
Easy to apply & get approved
Rewards program
Modeling Purchase Funnel DynamicsCredit card market
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Aware47%
Consider10%
Choice3%
Aware60%
Consider19%
Choice9%
Aware49%
Consider13%
Choice6%
Aware22%
Consider5%
Choice1.3%
Credit Cards: Purchase funnelAbsolute metrics
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Aware47%
Consider10%
Choice3%
Aware60%
Consider19%
Choice9%
Aware49%
Consider13%
Choice6%
Aware22%
Consider5%
Choice1.3%
32%
44%
27%
45%
21%
31%
20%
26%
Credit Cards: Purchase funnelConversion rates
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Capital One NH Chase Freedom Amex Blue Discover More
Trustworthiness 6.33 7.01 7.35 7.42
Longevity in business
6.75 7.63 8.22 7.73
Appealing to wide variety
7.01 7.28 6.72 7.67
For someone like me
6.41 7.03 6.28 7.27
Privilege to have their cards
5.74 6.60 6.57 6.65
Treating their customers well
6.19 6.94 7.08 7.37
Maintainingreputation during crisis
6.43 6.90 7.33 7.40
Credit Cards: Brand ImagePerception ratings
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Capital One NH Chase Freedom Amex Blue Discover More
Annual fee 6.89 7.28 6.71 7.70
Late paymentfee
5.08 5.89 5.18 6.11
Interest rate on balance
5.07 5.84 5.27 6.05
Interest rate on cash advance
4.94 5.73 5.15 5.85
Acceptance at various retail
7.97 8.08 6.71 7.10
Easy to apply & get approved
6.96 6.97 6.03 7.08
Rewards program
6.97 7.05 6.96 7.22
Credit Cards: Brand FeaturesPerception ratings
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Brand Image
Trustworthiness
Longevity in business
Appealing to wide variety
For someone like me
Privilege to have their cards
Treating their customers well
Maintainingreputation during crisis
Card Features
Annual fee
Late paymentfee
Interest rate on balance
Interest rate on cash advance
Acceptance at various retail
Easy to apply & get approved
Rewards program
Aware47%
Consider10%
Choice3%
+ 3%
+ 1.2%
+ 5.3%
+ 2.7%
American Express Blue CardPurchase funnel model estimates
+ 0.5%
Note: Numbers in red are elasticities interpreted as 1%
increase in Trustworthiness results in 3% increase in
consideration.
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60
80
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1 2.8 4.6 6.4 8.2 10
Co
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bab
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RatingTrustworthy Product for me Retail Acceptance
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American Express Blue CardImpact on consideration
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80
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0 20 40 60 80 90
Pu
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ase
Pro
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Consideration Probability (%)
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Pu
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Treat Customer Well Rating
American Express Blue CardImpact on purchase
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Brand Image
Trustworthiness
Longevity in business
Appealing to wide variety
For someone like me
Privilege to have their cards
Treating their customers well
Maintainingreputation during crisis
Card Features
Annual fee
Late paymentfee
Interest rate on balance
Interest rate on cash advance
Acceptance at various retail
Easy to apply & get approved
Rewards program
Aware49%
Consider13%
Choice6%
+ 1%
+ 3.3%+ 4%
+ 1%
Chase Freedom CardPurchase funnel model estimates
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40
60
80
100
1 2.8 4.6 6.4 8.2 10
Co
nsi
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Pro
bab
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(%
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RatingProduct For Me Treat Customer Well
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Chase Freedom CardImpact on consideration
0
20
40
60
80
100
1 2.8 4.6 6.4 8.2 10
Pu
rch
ase
Pro
bab
ility
(%
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RatingTreat Customer Well Rewards Program
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Chase Freedom CardImpact on purchase
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Brand Image
Trustworthiness
Longevity in business
Appealing to wide variety
For someone like me
Privilege to have their cards
Treating their customers well
Maintainingreputation during crisis
Card Features
Annual fee
Late paymentfee
Interest rate on balance
Interest rate on cash advance
Acceptance at various retail
Easy to apply & get approved
Rewards program
Aware60%
Consider19%
Choice9%
+ 0.3%
+ 4% + 5%
+ 3%
Capital One No Hassle Rewards CardPurchase funnel model estimates
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20
40
60
80
100
1 2.8 4.6 6.4 8.2 10
Co
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rati
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Pro
bab
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(%
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RatingWide Appeal Balance Interest
20
Capital One No Hassle Rewards CardImpact on consideration
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0 10 20 30 40 50
Pu
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ase
Pro
bab
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Consideration Probability (%)
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40
60
80
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1 2.8 4.6 6.4 8.2 10
Pu
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ase
Pro
bab
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Retail Acceptance Rating
Capital One No Hassle Rewards CardImpact on purchase
Insights into Purchase Funnel DynamicsKey takeaways
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• Traditional purchase funnel analyses are based on just quantifying:
– The levels of awareness, consideration, purchase intent and
– The conversion ratios from awareness to consideration to purchase intent
• Possible to econometrically model the path to sales through purchase funnel model
– All stages are modeled probabilistically and depend on various factors
– All the stages are jointly estimated as each stage is sequentially related
– Determine which marketing activities, sources, perceptions, and features drive awareness, consideration, and choice
Insights into Purchase Funnel DynamicsKey takeaways
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• The model is estimable with cross-sectional survey data thus:
– Reducing the requirement for continuous tracking survey data for slow changing metrics
– Reducing the massive data requirement and “time-series” specific issues in a marketing mix modeling context
• Provides clear recommendations and what-if scenario simulations based on causal econometric modeling
• Facilitates optimal allocation of marketing investments
10/06/2010
Insights into Purchase Funnel Dynamics
Pankaj Kumar