MMA Global introduced an analysis showing that outcome-based marketing plans can outperform traditional reach-based marketing plans by more than 50% on return on ad spend (ROAS).

 

The growth strategy, Outcome-Based Marketing 2.0 (OBM2), represents a major step forward in validating how marketing organizations can achieve profitable growth by targeting more responsive audiences.

The OBM2 strategy enables brands to align budgets, channel allocation, and audience targeting directly with ROAS tied to those consumers who are more likely to respond to and be impacted by a brand’s advertising.

MMA found that a marketing campaign organized around the most responsive target audience for a brand — dubbed the “movable middles” — will yield far better outcomes than traditional media plans optimized for reach. Movable middles are defined by having a mid-range probability of buying an advertised brand; they are proven mathematically to have five times the responsiveness to that brand’s advertising and are unique to each brand. While they overlap somewhat with heavy buyers, they also include medium, light, and non-buyers. This helps marketers not only achieve good returns, but also expose their brand to a larger group of receptive consumers for long-term growth.

Outcome-Based Marketing
Joel Rubinson, the former Chief Research Officer for the Advertising Research Foundation

Joel Rubinson, the former Chief Research Officer for the Advertising Research Foundation, conceptualized the methodology behind OBM2 strategy (in part based on work conducted two years ago) on MMA’s behalf. Rubinson worked in conjunction with global information services and technology company Neustar to leverage their agent-based simulation models that incorporate media consumption and purchase behavior data from their targeting platform. These models uncover the individual consumer-level activities and market-level factors that are predictive of purchase intent with a high degree of accuracy. This approach helped find non-buyers with similar purchase probabilities and predicts where and how to target these important audiences.

“We are incredibly grateful to Neustar for working with us by providing their team’s amazing support and advanced innovative modeling techniques to predict media consumption and purchase behavior across 100% of U.S. households. This capability was invaluable to proving Outcome-Based Marketing 2.0’s value,” said Greg Stuart, MMA CEO. “MMA has been on a decade-long pursuit of a more disciplined understanding and implementation of ‘modern marketing’ for CMOs responsible for higher levels of business growth and profitability for their businesses. This new strategy is one more leap forward to achieve this as well as to raise the stature and gravitas of marketing as a whole.”

In a proof-of-concept study, MMA and Neustar deployed agent-based simulation methodology to target the movable middles on behalf of a brand of frozen pizza in the U.S. market. The analysis proved:

  • An Outcome-Based Marketing 2.0 plan optimized to target the movable middles outperforms a traditional reach plan by more than 50% on ROAS
  • Targeting the movable middles helps marketers increase marketing outcomes across the board versus traditional reach-based approaches, including attracting more non-buyers, increasing total consumer reach, and increasing buyer-penetration across light, medium, and heavy buying groups
  • Movable middles can be predicted with 99% accuracy for each brand, regardless of industry vertical.
Outcome-Based Marketing
Norman de Greve, CMO, CVS Health, and Chair of MMA’s North American Board

“The MMA always tackles the toughest marketing challenges, particularly when it comes to data and marketing optimization. Empirical evidence and analytics validate OBM2 as the most effective approach to improving return on advertising spend.” said Norman de Greve, CMO, CVS Health, and Chair of MMA’s North American Board.

The MMA always tackles the toughest marketing challenges, particularly when it comes to data and marketing optimization. Empirical evidence and analytics validate OBM2 as the most effective approach to improving ROAS.

“We want to ensure the brands we sell in our stores have the best chance of being considered for purchase — and MMA’s work is a welcome addition to any brand’s planning toolkit to help deliver results in an efficient and effective way,” noted Kay Vizon, Director of Media Services for Kroger. “I support this advancement in planning and applaud the MMA for their ongoing push to uncover ground-breaking and data-driven approaches to further brand growth.”

“We cracked the code on ad responsiveness when we realized that using a beta distribution to model consumer probabilities of purchase was the connection between ad responsiveness and targeting,” added Rubinson. “We are, in essence, arbitraging the opportunity to push harder on the groups of consumers that will predictably buy more of a product when exposed to advertising.”

Outcome-Based Marketing
Marc Vermut, Vice President, Marketing Solutions at Neustar

“This research uncovers why audience targeting recommendations based on ROAS and purchase probability work,” said Marc Vermut, Vice President, Marketing Solutions at Neustar. “It found that a marketing campaign organized around those ‘movable middles’ — the most responsive target audience for a brand — will yield far better outcomes than standard media plans optimized for reach.”

Marketing campaign organized around those ‘movable middles’ will yield far better outcomes than standard media plans optimized for reach.

Additional categories, including detergents, nutrition bars, and margarine, will be run through the same analysis in the coming months. The MMA has raised funds and expects to validate this planning approach in real-world, in-market experiments that will last a full year called “Brand as Performance.”

Noted marketing academics, including University of Oxford’s Dr. Felipe Thomaz and Dr. Andrew Stephen, as well as UCLA Graduate School of Management’s Dr. Dominique “Mike” Hanssens, have conducted a review of the methodology used in creating this new growth strategy and support MMA and Neustar’s model. Both universities are developing other complementary assessments and research that validate the findings. Meanwhile, a white paper on OBM2 can be found here.

 

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Portada Staff

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