insights into purchase funnel dynamics · pankaj kumar. purchase funnel traditional brand metrics...

10/06/2010

Insights into Purchase Funnel Dynamics

Pankaj Kumar

Purchase Funnel Traditional brand metrics gaining more importance

2

• Successful brands leverage a greater and integrated number of marketing levers today as:

– Traditional media is losing its importance

– There are much greater number of marketing touchpoints offline and online

• All geared towards creating buzz, building awareness, and moving/ impacting customers through the purchase funnel

Marketing Strategy Tied to Funnel MetricsProvides more strategic and actionable insights

3

• Understand WHAT marketing efforts are engaging customers WHERE and HOW

• Quantify the impact of various marketing investments on the funnel metrics and total sales

•Target Market

•Media

•Message

Marketing

Strategy

•# of customers

•Volume

•RevenueSales

Customer

Progression

• Perceptions

• Actions

Understanding Purchase Funnel DynamicsKey issues

4

• Marketing activities are not all designed to have immediate effect on sales

– Some are intended to drive demand by increasing awareness, changing brand perceptions and future purchase behavior

• When looking at trade-offs across different types of marketing activities, if all marketing effects are not captured then:

– Spend optimization may skew towards the types of activities whose efforts are best captured thus harming the brand in the long-run

Quantifying Purchase Funnel DynamicsKey issues

5

• While marketing mix models capture the short-term impact of marketing activities on sales, they do not capture well the effect of marketing activities on purchase funnel metrics

– Use techniques not suitable for modeling evolving phenomena such as awareness and perceptions

– Substantial data requirements and tough to capture impact as they change slowly over time

Modeling Purchase Funnel DynamicsFor actionable insights

6

• Each stage is unique, and should be modeled.What drives “awareness,” for example, may or may not drive “consideration” or “purchase.”

• While unique, the stages are in fact related.Changes in any one stage either reflect upon or drive change in another.

• The stages are not just related – they’re sequentially related. Awareness leads to consideration, but the opposite is not true.

An approach to econometrically modeling “purchase funnel”

In more technical terms:

We jointly model a correlated sequence of awareness, consideration, and choice through a system of models with correlated errors. Not modeling the whole purchase funnel as a jointly correlated system will result in erroneous results, both in terms of significance of variables and magnitude of impact of variables.

Modeling Purchase Funnel DynamicsFor actionable insights

7

• Each stage is unique, and should be modeled.What drives “awareness,” for example, may or may not drive “consideration” or “purchase.”

• While unique, the stages are in fact related.Changes in any one stage either reflect upon or drive change in another.

• The stages are not just related – they’re sequentially related. Awareness leads to consideration, but the opposite is not true.

Pr(Awareness) = f(factors influencing awareness)

Pr(Consideration) = f(factors influencing consideration)

Pr(Purchase) = f(factors influencing purchase)

Not Aware, Aware, Not Consider,Consider, Not Purchase, Purchase

Model

An approach to econometrically modeling “purchase funnel”

In more technical terms:

We jointly model a correlated sequence of awareness, consideration, and choice through a system of models with correlated errors. Not modeling the whole purchase funnel as a jointly correlated system will result in erroneous results, both in terms of significance of variables and magnitude of impact of variables.

8

Brand Image

Trustworthiness

Longevity in business

Appealing to wide variety

For someone like me

Privilege to have their cards

Treating their customerswell

Maintaining reputation during crisis

Card Features

Annual fee

Late payment fee

Interest rate on balance

Interest rate on cash advance

Acceptance at various retail

Easy to apply & get approved

Rewards program

Modeling Purchase Funnel DynamicsCredit card market

9

Aware47%

Consider10%

Choice3%

Aware60%

Consider19%

Choice9%

Aware49%

Consider13%

Choice6%

Aware22%

Consider5%

Choice1.3%

Credit Cards: Purchase funnelAbsolute metrics

10

Aware47%

Consider10%

Choice3%

Aware60%

Consider19%

Choice9%

Aware49%

Consider13%

Choice6%

Aware22%

Consider5%

Choice1.3%

32%

44%

27%

45%

21%

31%

20%

26%

Credit Cards: Purchase funnelConversion rates

11

Capital One NH Chase Freedom Amex Blue Discover More

Trustworthiness 6.33 7.01 7.35 7.42


6.75 7.63 8.22 7.73


7.01 7.28 6.72 7.67

For someone like me

6.41 7.03 6.28 7.27


5.74 6.60 6.57 6.65

Treating their customers well

6.19 6.94 7.08 7.37

Maintainingreputation during crisis

6.43 6.90 7.33 7.40

Credit Cards: Brand ImagePerception ratings

12

Capital One NH Chase Freedom Amex Blue Discover More

Annual fee 6.89 7.28 6.71 7.70

Late paymentfee

5.08 5.89 5.18 6.11


5.07 5.84 5.27 6.05


4.94 5.73 5.15 5.85


7.97 8.08 6.71 7.10


6.96 6.97 6.03 7.08

Rewards program

6.97 7.05 6.96 7.22

Credit Cards: Brand FeaturesPerception ratings

13

Brand Image

Trustworthiness



For someone like me




Card Features

Annual fee

Late paymentfee





Rewards program

Aware47%

Consider10%

Choice3%

+ 3%

+ 1.2%

+ 5.3%

+ 2.7%

American Express Blue CardPurchase funnel model estimates

+ 0.5%

Note: Numbers in red are elasticities interpreted as 1%

increase in Trustworthiness results in 3% increase in

consideration.

0

20

40

60

80

100

1 2.8 4.6 6.4 8.2 10

Co

nsi

de

rati

on

Pro

bab

ility

(%

)

RatingTrustworthy Product for me Retail Acceptance

14

American Express Blue CardImpact on consideration

15

0

20

40

60

80

100

0 20 40 60 80 90

Pu

rch

ase

Pro

bab

ility

(%

)

Consideration Probability (%)

0

20

40

60

80

100

1 2.8 4.6 6.4 8.2 10

Pu

rch

ase

Pro

bab

ility

(%

)

Treat Customer Well Rating

American Express Blue CardImpact on purchase

16

Brand Image

Trustworthiness



For someone like me




Card Features

Annual fee

Late paymentfee





Rewards program

Aware49%

Consider13%

Choice6%

+ 1%

+ 3.3%+ 4%

+ 1%

Chase Freedom CardPurchase funnel model estimates

0

20

40

60

80

100

1 2.8 4.6 6.4 8.2 10

Co

nsi

de

rati

on

Pro

bab

ility

(%

)

RatingProduct For Me Treat Customer Well

17

Chase Freedom CardImpact on consideration

0

20

40

60

80

100

1 2.8 4.6 6.4 8.2 10

Pu

rch

ase

Pro

bab

ility

(%

)

RatingTreat Customer Well Rewards Program

18

Chase Freedom CardImpact on purchase

19

Brand Image

Trustworthiness



For someone like me




Card Features

Annual fee

Late paymentfee





Rewards program

Aware60%

Consider19%

Choice9%

+ 0.3%

+ 4% + 5%

+ 3%

Capital One No Hassle Rewards CardPurchase funnel model estimates

0

20

40

60

80

100

1 2.8 4.6 6.4 8.2 10

Co

nsi

de

rati

on

Pro

bab

ility

(%

)

RatingWide Appeal Balance Interest

20

Capital One No Hassle Rewards CardImpact on consideration

21

0

20

40

60

80

100

0 10 20 30 40 50

Pu

rch

ase

Pro

bab

ility

(%

)

Consideration Probability (%)

0

20

40

60

80

100

1 2.8 4.6 6.4 8.2 10

Pu

rch

ase

Pro

bab

ility

(%

)

Retail Acceptance Rating

Capital One No Hassle Rewards CardImpact on purchase

Insights into Purchase Funnel DynamicsKey takeaways

22

• Traditional purchase funnel analyses are based on just quantifying:

– The levels of awareness, consideration, purchase intent and

– The conversion ratios from awareness to consideration to purchase intent

• Possible to econometrically model the path to sales through purchase funnel model

– All stages are modeled probabilistically and depend on various factors

– All the stages are jointly estimated as each stage is sequentially related

– Determine which marketing activities, sources, perceptions, and features drive awareness, consideration, and choice

Insights into Purchase Funnel DynamicsKey takeaways

23

• The model is estimable with cross-sectional survey data thus:

– Reducing the requirement for continuous tracking survey data for slow changing metrics

– Reducing the massive data requirement and “time-series” specific issues in a marketing mix modeling context

• Provides clear recommendations and what-if scenario simulations based on causal econometric modeling

• Facilitates optimal allocation of marketing investments

10/06/2010

Insights into Purchase Funnel Dynamics

Pankaj Kumar

insights into purchase funnel dynamics · pankaj kumar. purchase funnel traditional brand metrics...

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