The true power of sales modelling – from audits to market growth guidance
“A model is a simplification of reality built for a specific purpose.” – Adam Grummit, Capacity Management – a Practitioner Guide: Best practice, 2009.
Throughout my first project based on sales modelling methodology, I was fascinated by its ability to give so many precise answers to quite sophisticated yet common questions that are high on the agendas of CMOs across industries.
Does my media strategy make sense? Does it generate a solid uplift to company sales as well as bring profits? How much does each marketing input contribute to sales, and how much should I spend on each? How should I allocate the budget to get the most out of a marketing investment?
A sales modelling philosophy
With the growing availability of data sources and the increasing complexity of media mixes, the sales modelling approach still seems to resonate with the hearts and minds of marketers. Richard Marnell, Senior Marketing VP at Viking River Cruises, provides a clear reflection on the high relevance of sales modelling: “Blending offline and online marketing requires skill and knowledge. Creating a unified customer experience across all those touch points is even more difficult.”
The whole sales modelling philosophy evolved around a solid science-based solution aiming to document that marketing actually impacts short-term company sales and is sometimes even profitable and therefore worth investment. Indeed, Forbes recently collected some benchmarks confirming that sales modelling can help marketing organizations realize cost efficiencies of 10% to 25%.
More than an audit tool: start spotting growth potential
Nowadays, sales modelling provides marketers with more than just a good audit tool. It opens the doors to strategic discussions and long-term initiatives with a focus on customer centricity and brand building.
The interpretation of sales modelling results often emphasizes the potential – and need – to be more aware of drivers for different consumer groups and segments. It also shows the danger of getting carried away with price wars and ending up well-known for nothing – in other words, selling generic products and services to basically everyone.
I often see relief on the faces of data analysts, media planners and CMOs after a project is over. In addition to discovering the return on marketing investment for their annual report, they also gain a holistic understanding of what they are doing, both short and long term. Companies are no longer satisfied to just receive acknowledgement for marketing investment decisions. They aim to understand the consequences of these decisions and to be presented with a critical analysis of their business model.
During the last couple of years, sales modelling has become more and more relevant as a diagnostic tool for growth potential and a starting point for discussions on why we see things as they are in the current business model.
Ask bigger questions
A recent client story exemplifies my experience working on “diagnosing” media and brand strategies. We approached a critical moment of the presentation to this very successful retailer, a moment that most of our clients look forward to in sales modelling projects. Specifically, we were addressing the question “Are our marketing activities profitable or not?” But the client seemed to remain indifferent – even after hearing that their marketing activities generated a ten-fold return on investment.
“Okay, our media mix is profitable”, they responded, continuing, “This is fine, but how good is the profitability compared to other retailers in the industry? How well are we performing compared to other companies who have similar media channels in the mix? And what about the long-term effects on our brand? Should we be happy with this, or should we switch focus to more long-term brand building activities? And by the way, what about the message we communicate to consumers – are we covering their needs well enough? How much should we talk about prices with our consumers? And finally, understanding the optimal timing for marketing – this is also very important.”
What should you be looking for?
Whenever I encounter engagement and curiosity about the opportunities provided by sales modelling insights, I feel particularly happy and satisfied with my job. This is because I am convinced that the essential value of sales modelling is to deliver actionable advice based on understood and well-processed insights. I strongly believe that the companies that are doing well and/or want to do better are way beyond the need for straight answers to their questions, but are instead looking for support in making decisions that accelerate the growth of their businesses.
With this perspective in mind, one can still argue that sales modelling is a good starting point for simplifying a complex reality with a model that aims to explain it. This also enables businesses to approach specific key questions, whether about better understanding the customer, identifying the roles of different brands in the wider portfolio of products and services or anything else.
Sales modelling is a powerful tool that goes far beyond auditing and ROI tracking. The sooner one is aware of the growth opportunities that it can provide while creating a deeper understanding of (and logic to) marketing initiatives, the more one can challenge the process of insight generation in the organization. The organization, that, first of all, should relate to your function and be tailored to your reality as a marketer.