Measuring Marketing Effectiveness - Closed-Loop Attribution vs. MMM's
October 5, 2023
In the digital age of advertising, one lingering question still challenges marketers: how to definitively link advertising efforts to actual sales? And in Sampler’s case, how to definitely link sampling efforts to actual sales.
Navigating through an array of methodologies like brand lift studies and focus groups, industry professionals are tirelessly working to "close the loop", tracing the customer's journey from initial advertisement exposure to the final point of purchase. This concept, though steeped in jargon, can be explained with an analytical peek into the closed-loop attribution model, especially when compared with the industry standard, Market Mix Modeling. Using the real-world example of the digital sampling company, Sampler, we can illustrate this concept more clearly.
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Closed-Loop Attribution: Unveiled Through Sampler
Closed-loop attribution, which also operates under the moniker of closed-loop measurement, primarily aims to gauge the direct impact of marketing activities on sales, thereby "closing the loop". This model recognizes not just the ultimate goal - sales enhancement, but the smaller, yet significant milestones that pave the consumer's journey to purchase. For instance, we recently embarked on a campaign where we sampled pet food and were able to link the campaign's effectiveness to sales at a US retailer. This tactic can illuminate the pivotal moments that steer a consumer from being merely aware of a product to making a purchase, offering an enriched analysis of the campaign's influence.
Comparative Analysis with Market Mix Modeling
In contrast, Market Mix Modeling (MMM) offers a more overarching approach, leveraging statistical analyses to quantify the various marketing elements' impact on sales and ROI. It generally analyzes a multitude of factors including economic variables and competitive actions to provide strategic insights into marketing effectiveness, facilitating budget allocation and strategic planning at a macro level.
While MMM’s gives a holistic view, closed-loop attribution delves deeper, scrutinizing individual consumer journeys in greater detail. Leveraging the digital prowess of companies like Sampler, this model stitches data from diverse touchpoints, building a nuanced narrative of consumer behaviors and responses to marketing stimuli.
Sampler: A Case Study in Closing the Loop
Let's explore this through Sampler's campaign: Aiming to carve a niche in the pet food market, Sampler orchestrated a digital sampling campaign for a leading pet food brand. Initially, they sought to generate awareness by distributing samples of a new pet food brand through various online platforms, targeting pet owners in the US. Following this, they traced the consumers' journey from receiving the sample to making purchases at a specific US retailer, tracking the increase in sales generated from this sampling campaign.
In a closed-loop attribution perspective, the analysis extends beyond just the impact of the sampling; it investigates the symbiotic relationship between sampling and the consequent rise in sales, knitting a coherent narrative of the consumer's journey from sample receipt to purchase.
To "close the loop" in advertising essentially entails weaving a narrative that illustrates the consumer's pathway from initial advertisement exposure to a purchase decision, capturing the finer nuances and individual steps in this journey. While Market Mix Modeling serves to provide a broad picture for strategic planning and budget allocations, closed-loop attribution, as demonstrated by Sampler's campaign, provides a detailed roadmap of individual consumer journeys. It not only pinpoints the destination but meticulously maps every nuance of the journey leading to the final purchase, offering a comprehensive, 360-degree view of the advertising efficacy. Through strategies like Sampler's, companies can truly close the loop, linking each element of the marketing campaign to tangible sales results, and thereby optimizing their advertising strategies with precise data-backed insights.
And one more thing to note: In many cases, Closed-loop attribution faces hurdles including data integration complexities, attribution accuracy issues, and the requirement of substantial time and resources. It sometimes overlooks offline influences and faces scalability issues, especially as the number of marketing touchpoints increases.
But Sampler has a significant edge.
By harnessing first-party data directly from consumers, Sampler can develop a more nuanced and accurate understanding of the consumer's journey from exposure to purchase. This direct data collection not only minimizes data fragmentation but also facilitates more precise attribution of sales to specific marketing touchpoints, thereby optimizing marketing strategies and maximizing the potential of closed-loop attribution.
In the dynamic and competitive pet food market, the choice between using closed-loop attribution and MMM hinges on the specific objectives of the campaign and the kind of insights the brand is looking to discover. For micro-level, detailed analysis of individual campaigns, especially when focusing on the digital realm, closed-loop attribution is the tool of choice.
Conversely, for macro-level analysis and strategic planning that encompasses a broader view of the market and considers a wide array of variables, MMM stands as a robust option.
Ultimately, a harmonized approach that leverages the strengths of both models can potentially yield the most comprehensive insights, aiding in the creation of highly effective, data-driven marketing strategies for pet food products or any CPG.
About the Author
Alexandra Panousis is a business transformation leader and a Director of the board at Sampler. With 20 years of experience as a CEO of large media agencies, Alex has a passion and track record of transforming and innovating. She is known for delivering growth by leading at the forefront of complex change and is a strong believer that technology is an enabler in the transformation journey. Alex loves to write about media, technology and marketing.