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Sales Modelling in the Performance Sector, Part 1

Assuming you are asking yourself questions like these:

  • How high is the return on investment of my online and classic marketing activities?
  • Which of my advertising channels present the greatest potential for growth?
  • How do I optimally allocate my advertising budget among the various advertising media?
  • How does the classic advertising affect buying behavior in my online shop?

You will find the answers thanks to an established research tool: sales modelling. In strategic marketing it is the ideal basis to take important decisions, although currently it is rather used in the conventional sector.

Many online companies (and also many “classic” companies) do not yet use sales modelling to plan their online activities, simply because they often do not possess sufficient knowledge in this field. In the long term however this reduces the efficiency of every campaign. QUISMA is the very first performance marketing agency that uses this scientific approach to optimise clients' campaigns.

Sales modelling is a multivariate analysis in which many factors, i.e. sales, advertising, seasonal effects, price etc. are considered in the context of their causal relationships. The goal of assembling the data is to analyze the return on investment with respect to achieved sales, from which recommendations can be extrapolated. In the majority of cases the causal relationship between achieved sales or turnover will thereby be analyzed with factors such as online and offline advertising as well as external factors.
The following graph shows factors that can be included in the sales modelling:

Possible factors considered in a sales modelling

Possible factors considered in a sales modelling

For example, online advertising can be search engine advertising, search engine optimization, display advertising, or affiliate marketing. Additionally, activities in the conversion optimization sector can be integrated into the modeling because of their positive effect on sales. Conventional advertising activities are subsumed mainly under the category of print and TV, which usually is included in the evaluation in the form of GRPs. In addition to advertising activities, external factors such as price-management, seasonal effects, macroeconomic factors, weather, public relations, etc. may also be included.

Sales modelling enables the extrapolation of forecasts concerning future success based on past data. After the influence of individual factors on sales is predicted, data can be projected into the future based on the calculation. The sales process can be represented with the data. Based on the model, it is possible to identify the effects of individual changes on sales. As a result, the advertising budget for future efforts can be associated with the earnings-maximization goal.

Advertising companies can thus use sales modelling as a tool to better plan future marketing and investment decisions. Modelling enables better strategic decisions since it reveals complex interrelationships, which are not visible to the naked eye. The classic sector often resorts to sales modelling since it provides strategic management a better foundation for decisions than conventional tools and solutions. QUISMA strives to use this knowledge in the online sector so that campaigns can be better planned and structured. Econometrics serves as the basis for every strategy and supplies advertisers with realistic forecasts.

As a follow-up to this entry the next article will be about the core of sales modelling: the regression analysis. Regression analysis is an econometric method, which examines the relationship between dependent variables and one or more independent variables. Methodology and relevance for practical application will be explained in depth and an example will be given on how it can be integrated in sales modelling in the online sector.

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