The hardest question in the marketing profession
To the question of what the main goal of the research is, we often receive a single concise answer from our clients: „Was it worth it and how much was the media investment worth?”
An important and common question is how to spend the available budget most effectively?
What is econometrics?
These questions econometrics provides the best answers. Of course, this method is not perfect; no matter how advanced the statistics are, reality cannot be modeled with pinpoint accuracy. The econometrics that analyzes consumer behavior based on real past events in a time series provides the most accurate answers – considering that we also tend to make forecasts – the effectiveness of the method can be precisely measured at the end of the campaign.
Econometrics offers an effective solution for the researcher to determine how much sales a given campaign generates, how many visitors it brings to the website, or how much it increases awareness – practically every important KPI can be modeled, provided that it is available in a time series.
Let's take an example of modeling the sales of soft drinks: during the construction of the soft drink model, all factors affecting the KPI must be utilized, starting from macroeconomic data (e.g., with lower disposable income, soft drink consumption is also lower), through weather data (e.g., who wants to consume an ice-cold soft drink with lots of ice cubes on a cool, rainy autumn day – obviously, sales decrease on such days), to complex relationships related to price and marketing activities.
The model breaks down, filters, and isolates the effects attributable to each factor, thus showing what role they play (e.g., a TV campaign) in the evolution of soft drink sales and thus in the return on the campaign. This way, we can answer questions such as whether the increase in the KPI is indeed due to marketing activities, or if soft drink consumption is higher simply because of the prolonged dry, warm weather during the campaign, while the campaign itself contributed nothing to sales, making it appear successful only due to seasonal effects.
I wonder how many forints my campaign brought in?
Marketing research still rarely applies econometrics – at least in Hungary, as further west, companies specializing in econometrics have already been established. The method is rarely known not only among clients but even among research agencies in the country; however, its spread – taking into account the trends in foreign markets – will happen, albeit slowly. This is important, as the market research profession occasionally faces accusations that it is unable to innovate, develop, and has been trying to answer questions from clients with the same well-established procedures for years or even decades.
Yet the profession is ready to answer one of the most important questions, which is: how many forints did my campaign bring in with the help of various marketing tools, what is my ROI? Current market research is full of untapped opportunities, a good example of which is econometrics.
We are prepared to provide more accurate answers, and there is a lot of unused data at advertisers and agencies that occasionally remains untapped due to a lack of organizing force.
