UNIT-5: RETAILING & ADVERTISING ANALYSIS (8 HRS)

Market Basket Analysis: Computing two way and three way lift, RFM Analysis, Allocating Retail Space
and Sales Resources: Identifying the sales to marketing effort relationship & its modeling, optimizing sales
effort.
Advertising Analysis: Measuring the Effectiveness of Advertising, Optimizing advertising, Pay per Click
(PPC) Online Advertising.
MEANING OF RETAIL ANALYTICS
Retail analytics is the process of providing analytical data on inventory levels, supply chain movement,
consumer demand, sales, etc., that are crucial for making marketing, and procurement decisions. The
analytics on demand and supply data can be used for maintaining procurement level and also for taking
marketing decisions.
Retail analytics is used to help make better choices, run businesses more efficiently, and deliver improved
customer service analytics.
Retail analytics software collects lot of data ranging from pricing information, stock levels, catalogue
assortments, discounts, and much more. This information is stored and collected into large databases where
it is processed using statistical algorithms to record and track trends and patterns. From this data, there is a
huge breadth of intelligence that can be extracted, allowing marketers to make data-informed decisions on
anything from creating on-the-fly pricing strategies, to accurately benchmarking seasonal discounts. This
software helps to mitigate the risks of human assumptions that can trigger margin loss, overstock situations,
and missing the boat on market trends.
FEATURES IN A RETAIL ANALYTICS TOOL
Retail analytics software allows to develop a deep understanding of historical trends, helping to facilitate the
building of an accurate, fact-based case to provide insights into future trends and pricing movements. The
following are six must-have features in a retail analytics tool:
1) Active and Customised Competitor Monitoring→ It is essential to have control over the source of the
data. As a fundamental base for intelligence, having the ability to control who and what the marketers
are monitoring in the marketplace is of the utmost importance. Any data set must have a minimum of
three sources to be measured, with five being the optimal number, and should comprise the competitors
and other retailers that fit the product catalogue and style that the marketers are offering through online
or offline store.
2) Ability to Drill Down into the Data→ The most effective strategies in profitable departments stem
from taking a holistic view of the market landscape while still being able to drill down to granular detail.
Having the ability to track data at all market stages - from supply chain metrics and merchandising and
catalogue assortment, through to retail pricing and discounting - enables all stakeholders to make critical
decisions at exactly the right point in time. This can be the difference between being the biggest winner
in a category or the biggest loser. Knowledge on where products are located and which are selling
through (or not) allows the retailer to make informed decisions and act quickly.
3) Trend Prediction→ The ability to identify trends in order to create a successful product catalogue
offering while maintaining a well-balanced stock level and sizing range is challenging. With the right
platform, reports can be produced that assess the rate at which certain ―on-trend‖ catalogue items are
selling through, allowing supply chain operators and merchandisers to select and identify an optimised
and profitable product catalogue. The accumulation of historical data and analysis can help create a clear
picture of what will be in demand in upcoming months.
4) Action Triggers and Alerts→ These functions automate the process of dynamically setting pricing and
product assortments across categories in real-time, helping to save time and effort, while also optimising
pricing updates. Making the right decision based on predictive intelligence and retail analytics is all
about being the first one to interpret and leverage a situation as it unfolds. Manually making time-
sensitive modifications to the assortment of products across multiple platforms can be next to impossible
given the number of product items and outlets managed.
5) Real-time Competitor Benchmarking→ Pricing agility in a post-recession, price-sensitive consumer
landscape can be very challenging. In this day and age it is becoming easier for consumers to effectively
price check and shop around for the best deals, both in store and online. Therefore, benchmarking the
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 pricing against competitors‘ in real-time will enable marketers and their team to make swift and effective
changes to pricing strategy. This removes the burden of lengthy, manual researching of competitors‘
pricing, a process which oftentimes delays actions and ultimately renders repricing effort ineffective.
6) Onsite (website) Recommendations and Cross-sell Suggestions→ As shoppers proceed through an
online store, searching for and selecting items to purchase, the recommendation engine serves up items
that might be of interest to them based on their browsing history and trends in the analytics platform.
This may include products that the shoppers are viewing and/or placing in their shopping carts, slow-
selling product lines, and trending items. The engine can deploy various strategies including product-
bundling and discounting to maximise product up-selling and cross-selling effectiveness.
IMPORTANCE OF RETAIL ANALYTICS
Retail analytics is the process of providing valuable data on inventory levels, supply chain movement,
consumer demand, sales, and much more that can be used for a variety of applications like maintaining
procurement levels and making crucial marketing decisions. Importance of retail analytics is given below:
1) Customer Behaviour Insights→ The first and foremost advantage of leveraging retail analytics is that
they offer tangible and actionable insights into customer behaviour. Managing any aspect of a business
becomes many times easier when one knows how to measure the return on investment. Retail analytics
makes this possible. From studying the social responses to a product to gauging how a campaign
improved the store‘s conversion rates, retail analytics give a highly accurate picture to retailers of what
works and what does not.
2) Improving Marketing ROI→ As established, retail analytics help in measuring return on investment
across various aspects of business management. Consequently, they can have a deep impact on
enhancing the ROI from marketing endeavours. Since a store manager can measure the effect of in-store
influences on purchase patterns, he can alter future campaigns accordingly. He can focus on effective
campaigns and streamline marketing initiatives based on what clicks with its specific clientele. DSD
Retail analytics also help in assessing the viability of customer loyalty programs, seasonal discounts,
one-time offers etc.
3) Optimising In-Store Operations→ In-store analytics offer a profound understanding of the consumer
behaviour inside the store. Tracing their shopping patterns and dwelling times can unlock innumerable
opportunities for all kinds of retail operations, from individual stores to sprawling shopping malls.
Managers can better fathom the kind of layouts that catch eyeballs, the product placements that draw
maximum attention and the service delivery quality that customers feel more pleased with. With these
metrics at hand, retailers can analyse the best staffing options, the most appealing design techniques and
the most effective selling tactics.
4) Managing the Basics→ Retail analytics can play a vital role in elevating the efficiencies in everyday
business management. Predictive analytics allow the seller to take swift actions for decision-making on
stocking, tracking, and restocking SKUs regularly. By keeping a track of how often a particular product
moves from the shelves to the shopping carts, sellers can chart the trends that are dominant in the current
market. This information can also help them in identifying their most popular items and then focusing on
these and similar products for increased sales.
5) Enhancing Loyalty→ By giving meaningful insights into customer behaviour, retail analytics helps in
bolstering the relationship between a store and its visitors. It allows the retailer to get the right
information across to the right recipient and ensure a rewarding shopping experience for the buyer. By
personalising marketing content, remembering purchase history and preferences, retailers are able to
showcase the relevant products and offers to the most responsive audience and thereby enhance the
propensity in them to buy. This also augments the brand resonance with the customers who feel more
valued. Naturally, this increases the loyalty that they feel towards the store.

MARKET BASKET ANALYSIS

In simple words, the market basket is a list of some fixed items that are used to track the inflation and
overall price movements of a specific market in an economy. In other words, it is a basket that contains a set
of standard goods or services that people commonly buys. Market basket tracks the cost of living of various
groups.
A market basket contains some sample goods and services to know the inflation. The Government put some
goods or services as a sample into an imaginary market basket and calculates the average cost of living. The

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prices or cost of different periods is compared to know the inflation of an economy. In this technique, the
inflation rate is the change in the cost of living of two baskets.
A Market Basket Analysis:
1) Is performed with transactional data. For example product items included in each invoice.
2) Establishes the strength of association between pairs of products purchased together.
3) Enables the businesses to identify patterns of co-occurrence (how likely that two or more events take
place together).
4) Produces rules in the form of if-then scenarios. These rules are probabilistic (How likely is an event to
happen, not that it will always happen).
MBA is one of the fundamental techniques used by large retailers to uncover the association between items.
In other words, it allows retailers to identify the relationship between items which are more frequently
bought together. Market basket analysis creates actionable insights for:
1) Designing store layout
2) Online recommendation engines
3) Targeted marketing campaign/sales promotion/email campaign
4) Cross/up selling
5) Catalogue design
OBJECTIVES OF MARKET BASKET ANALYSIS
Market basket analysis can be used effectively to increase the overall spending from the customer by placing
complimentary items close together or bundling such items at a discounted price. Following are the
objectives of market basket analysis:
1) Helps in Setting Prices→ Market basket analysis helps a retailer to identify which SKU‘s are more
preferred amongst certain customers. For example, milk powder and coffee are frequently bought
together, so analysts assign a high probability of association compared to cookies. Without market
basket analysis retailers would usually mark down on coffee on certain days, assuming coffee will be
sold at certain times. However, market basket analysis can point out that whenever a customer buys
milk, they end up purchasing coffee as well. So whenever the sale of milk and coffee is expected to rise,
retailers can mark down the price of cookies to increase the sales volume.
2) Arranging SKU Display→ A common display format adopted across the supermarket chains is the
department system, where goods are categorized as per department and sorted. For example, groceries,
dairy products, snacks, breakfast items, cosmetics, and body care products are properly classified and
displayed in different sections. Market basket analysis helps identify items that have a close affinity to
each other even if they fall into different categories. With the help of this knowledge, retailers can place
the items with higher affinity close to each other to increase the sale. For instance, if chips are placed
relatively close to a beer bottle, customers may almost always end up buying both. In contrast, if they
were placed in two extremes, then the customer would just walk in the store buy beer and leave the store
causing lost sales of chips.
3) Customizing Promotions→ Marketers can study the purchase behavior of individual customers to
estimate with relative certainty what items they are more likely to purchase next. Today, many online
retailers use market basket analysis to analyse purchase behavior of each individual. Such retailers can
estimate with certainty what items the individual may purchase at a specific time. For example, a
customer fond of barbecues would likely purchase meat and barbecue sauce on some weekends. So
retailers can customize offers to create a combo of 21bs of meat with one pack of. barbecue sauce at a
discounted price every weekend to increase his purchase frequency.
4) Identifying Sales Influencers→ All items in a retail store have some relationship with each other - be it
strong or weak. In most cases, the sale of one item is driven by the increase or decrease in the sale of
other items. Market basket analysis can be used to study the purchasing trend of a certain SKU. For
example, two SKUs can exhibit a strong affinity for a period of time and suddenly decrease because of
various factors ranging from an increase in the price of one SKU, new brand introduction, or
unavailability of a certain brand in the SKU. For example, if Corona is the favourite beer among the
consumers, and the brand is suddenly removed from the beer SKU, the sales of chips will go down as
well, even though the sales of other beer brands are steady. These way marketers can understand the
influence of such activities in the sales figure.

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BENEFITS OF MARKET BASKET ANALYSIS
The market basket analysis will help the retailers to better plan their store layout and make the necessary
changes. This analysis helps marketer discover association rules between products. Following are some
benefits arising out of this analysis are:
1) Store Layout→ Based on the insights from market basket analysis one can organize your store to
increase revenues. Items that go along with each other should be placed near each other to help
consumers notice them. This will guide the way a store should be organized to shoot for best revenues.
With the help of this data one can eliminate the guesswork while determining the optimal store layout.
2) Marketing Messages→ Whether it is email, phone, social media or an offer by a direct salesman,
market basket analysis can improve the efficiency of all of them. By using data from MBA one can
suggest the next best product which a customer is likely to buy. Hence marketer will help his customers
with fruitful suggestions instead of annoying them with marketing blasts.
3) Maintain Inventory→ Based on the inputs from MBA one can also predict future purchases of
customers over a period of time. Using initial sales data, one can predict which item would probably fall
short and maintain stocks in optimal quality. This will help one improve the allocations of resources to
different items of the inventory.
4) Content Placement→ In case of e-commerce businesses, website content placement is very important.
If goods are displayed in right order than it can help to boost the conversions. MBA can also be used by
online publishers and bloggers to display content which consumer is most likely to read next. This will
reduce bounce rate, improve engagement and result in better performance in search results
5) Recommendation Engines→ Recommendation engines are already used by some popular companies
like Netflix, Amazon, Facebook, etc. If marketer wants to create an effective recommendation system for
his company then he will also need market basket analysis to efficiently maintain one. MBA can be
considered as the basis for creating a recommendation engine
6) Advertising and Promotion→ Modern retailers are using market basket analysis‘for making
advertising and promotions more predictable by understanding how consumers respond to various offers
and communications. For example, this technique will help companies in the retail industry to know
when and where a discount will have an impact on top-line sales and cut down on unnecessary
reductions. It will give retailers a clearer picture of whether their promotional activities are merely
shifting revenue around or if it is genuinely contributing to boosting the gross sales.
7) Precise Targeting and Improved ROI→ By understanding what exactly their customers need, retailers
can easily engage in specific targeting. Companies in the retail industry are using market basket analysis
to optimize campaigns and promotions for with margins and sales uplift with more precise campaigns.
This method will also yield good ROI as only the right customers who might be interested in the
campaigns are targeted.
8) More In-Store Traffic→ Retail companies can use market basket analysis to get a better understanding
of what products and offers will drive more traffic to the stores. This can be done by correlating market
basket analysis with foot traffic counts to understand what customers purchased when they were in the
store. Once a retailer successfully identifies what initially bought the customers to the store, they can use
market basket analysis to determine how to make their customers come back to the store next time.
9) Optimised Store Layout→ Players in the retail industry can use market basket assessment to enhance
their space planning and visual merchandising, consequently ensuring better efforts to cross-sell and
upsell. For example, it will help retailers identify if end caps in the retail store are helping to drive more
sales. In case they are, it can be analysed if they are also driving sales of complementary products.

MARKET BASKET ANALYSIS AND LIFT

Lift is the most commonly used tool in market basket analysis. The lift for a combination of purchase
products and/or day of week is defined by this equation: (The actual number of times combination occurs)
divided by (Predicted number of times combination occurs if items in combination were independent).
Computing Two-way Lift
On a given visit to a store, a consumer‘s market basket is simply the list of products purchased by the
customer. Market basket analysis is therefore concerned with extracting information from consumers‘

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market baskets that can be used to increase a retailer‘s profit. Most of the time, market basket analysis draws
actionable insights after looking at the association between products bought during a given transaction.
For example, for most supermarket customers there is a positive association between the purchases of
cereal and bananas because a shopper who purchases cereal is more likely than a typical shopper to purchase
bananas.
Lift is probably the most commonly used tool in market basket analysis. The concept of lift enables the
analyst to easily identify combinations of items (like handbags and makeup or cereal and bananas) that tend
to be purchased together. The lift for a combination of purchase items and/or day of week is defined by
Equation 1:
(Actual number of times combination occurs)
(Predicted number of times combination occurs if items in combination were independent)
A two-way product lift therefore is simply a lift involving two products and can easily be computed in Excel.
It can be generalized to situations involving the computation of lifts involving more than two items or other
transaction attributes (such as day of week).
To practice computing lift, you will use the superstore transaction data in the file marketbasket.xls. Below
figure shows a subset of the data. The day of the week is denoted by 1 = Monday, 2 = Tuesday ... 7 =
Sunday. For example, the first transaction represents a person who bought vegetables, meat, and milk on a
Friday.

For the superstore data, the lift for meat and vegetables would equal:
(Actual number of transactions where meat and vegetables were purchased)
(Total number of transactions) × (Fraction of times meat was purchased) × (Fraction of time vegetables were purchased)
To be more specific, suppose that in 1,000 transactions, 300 involved a meat purchase, 400 involved a
vegetable purchase, and 200 involved a purchase of meat and vegetables. Independence of meat and
vegetable purchases implies that the likelihood of a transaction involving meat is 0.30 irrespective of a
transaction involving a vegetable purchase. Thus independence implies that 1,000 (0.40) (0.30) = 120
transactions should involve purchase of meat and vegetables. Because 200 transactions involved a purchase
of meat and vegetables, knowing that a transaction involves meat makes it 1.67 times (200/120) more likely
that a transaction involves vegetables. This is consistent with Equation 1, which tells you that the lift for
vegetables and meat is:
200
–––––––––––––––– = 1.67
1,000(0.40)(0.30)
Product combinations with lifts much greater than 1 indicate items tend to be purchased together. This is
valuable information for the retailer because placing products with large lifts near each other in a store
display can increase sales based on the assumption that the sales of one product will stimulate sales of the
other product. Because handbags and makeup have a large lift, this explains why Bloomingdale‘s placed
handbags and makeup together.
Promoting cross-selling of products with high lifts can also stimulate profits. Therefore, in the
Bloomingdale‘s example, giving a customer who purchases at least $50 of makeup a coupon for 20 per cent
off a handbag would likely yield increased profits.

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Computing Three-Way Lift
The other way to look at lift is as a ratio of three probabilities. To illustrate how the concept of lift applies to
three or more attributes associated with a transaction, consider calculating the lift for the purchase of baby
goods and DVDs on Thursday. This lift would be computed as follows:
(Actual number of Thursday transactions where baby goods and DVDs were purchased)
(Total number of transactions) × (Fraction of transactions with DVDs) × (Fraction of transactions with baby goods) × (Fraction of
transactions with DVDs)
One can use the same concept to compute for the superstore data the lift of an arbitrary combination of two
products and a day of the week. See below figure and the Initial worksheet in the marketbasketoptimize.xls
file.

Complete the following steps:

1) In cell Q14 use the array formula = Sum ( (INDIRECT (P13) = $P$14) × (INDIRECTCT (N13) = 1) ×
(INDIRECT (013) = 1) ) to compute the actual number of transactions involving vegetables and baby
goods on Friday. This formula computes three arrays:
a) An array containing a 1 if the day of the week matches the number in P14 (here a 5) and a 0
otherwise.
b) An array containing a 1 if the vegetables column contains a 1 and 0 otherwise.
c) An array containing a 1 if the baby column contains a 1 and 0 otherwise.
2) For each row of data the array formula in Q14 creates a new array. Create the new array element in any
row by multiplying the three listed arrays. A 1 is obtained in a row of the product array if and only if
baby goods and vegetables were bought on Friday.
3) Sum up the entries in the product array to yield the actual number of Friday transactions where baby
goods and vegetables were purchased.
4) In cell R14 compute the predicted number of transactions involving baby goods and vegetables
purchased on Friday with the following formula:
IF(N13<>013, VLOOKUP(N13, K9:L14, 2, FALSE)*L7*VLOOKUP(013, K9:L14, 2, FALSE)*
VLOOKUP(P14, K17:L23, 2), 0)
5) If you enter the same product class twice, this formula yields a 0. Otherwise, multiply (total number of
transactions) * (fraction of baby transactions) * (fraction of vegetable Transactions) * (fraction of Friday
transactions). This gives a predicted number of Monday meat and vegetable transactions (assuming
independence).
6) Finally, in cell S14, compute the lift with the formula = IF(R14=0, 1, Q14/R14 ).
The lift for vegetables and baby goods on Friday is 0.85. This means that on Fridays vegetables and baby
goods are bought together less frequently than expected.

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ALLOCATING RETAIL SPACE AND SALES RESOURCES
The placement of merchandise within the store in the most profitable manner is called space management. It
is one of the most important activities because the location of merchandise at different location, have
different values. Some parts of store are more valuable because customers visit those more frequently, which
results in higher sales. It is easier to make sales along. Space closest to the entrances and exits is the most
valuable, and values decrease further into the store.
Space management is the important part of designing and planning the layout of the store. Retailers assign
more space for merchandise that registers a higher volume of sale. Under this principle of retail space
allocation, it is always favourable for retailers to have large stocks of goods which experience high demand
to avoid stock-out situation and inconvenience to the customers. Retailers have to decide about the sales data
to be used for the allocation of space among merchandise. Three options available with retailers are
historical sales data, market share, and projected sales.
Retailers tend to use historical sales data as it is easy to access and provides market inputs in terms of the
preferences of the target segment. Data related to the share of the product sale as a proportion of its total
turnover is important for space allocation. This share data is preferred by retailers due to its ease of access
and the high value placed on fast-moving products by most retailers. Projected sales are advantageous to
retailers as they take into consideration historical sales data, which exhibits preferences of its target segment
and also incorporates sales estimates for new and promising product categories.
OBJECTIVES OF SPACE MANAGEMENT
The management of retail space is concerned with a number of key objectives:
1) To optimise both short-term and long-term returns on the investment cost of retail space.
2) To provide a logical, convenient and inspiring interface between the product range and the customer.
This can be particularly important in a large store, where customers can easily become overwhelmed and
lost.
3) To make sure that the right selection of products is available; that products fit into the retail space and
that stock-outs are avoided. Choice for the customer is maximised when the best selection for them is put
into the available space.
4) To obtain a high return on investment by increasing the productivity of retail space, this requires
effective utilisation of space for merchandise display and customer movement, and
5) To ensure a compatible, exciting, and rational interface between the customer, merchandise, and
salespeople.

SPACE MIX
For the retailer, space is money. The store has to be planned in such a way that it optimises the selling area
and minimises the non-selling parts. The selling area is used to present the merchandise and the non-selling
part is accounted for by circulation space, aisles, staircases, lifts, facilities, the back area, etc. The area mix
in a typical department store is: selling area about 60%, circulation area 15% and back area 25%.
The typical elements of space mix in a retail store may be defined as:
1) Check-in Space→ Assigned for products which attract the customer attention as soon as the customer
enters the store and makes the store attractive like beauty products and other cosmetics and jewellery
sections.
2) Red Carpet Space→ This is the space allocated in store which is in the centre of store. As the consumer
moves inside the store the area on both the sides of the consumer is known as red carpet space.
3) POP Display and Selling Space→ Assigned for interior displays, product demonstrations and sales
transactions.
4) Merchandising Space→ Allocated to items that are kept in inventory for selling.
5) Customer/Circulation Space→ Assigned for the comfort and convenience of the customer, including a
cafe or food court, dressing rooms, lounges and recreation areas for children.
6) Personnel Space→ Assigned to store employees for lockers, lunch breaks and restrooms.
7) Back Office/Storing Space→ Storing as the name suggests is the space where the inventory is being
stores. It basically includes warehouses, godowns etc.
8) Checkout Space→ Checkout space is generally allotted to the products which generate impulse buying
on the-part of consumer and also the space from where consumer is suppose take exit.

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9) Dead Space→ Dead space is the space which cannot be utilised in the store due to some specific
reasons.
RETAIL SPACE MANAGEMENT STRATEGIES
Space Management in a different dimension is the job of a Retailer. Retailers can view vendors as those who
would obtain the space for rent. In this view, the Retailer needs to take space-related decisions very
carefully. Some of the decisions that have an impact on marketing are:
1) Space Configuration→ While the retail chain would be interested in a standardised and replicable space
configuration of the stores to preserve its identity, the vendors would be interested in a special space
provision for its products in order to enhance visibility. This means a compromise required on both
sides. The introduction of concepts like ―Shop-in-shop‖ is a step in that direction. Food World
accommodating the growing importance of MTR as a major ready-to-eat products vendor in Bangalore
and providing a corner for MTR in their Outlets is a good example of this kind.
2) Shelf Position→ The way in which the outlet positions shelves in a store determines the effect of visual
merchandising on consumers. Design interaction with the product category and shelf position has an
impact on sales. Therefore, a clear understanding of the store shelf positions with the prospective
vendors makes sense.
3) Shelf Allocation→ There are varying pressures towards allocation of shelves. One of the key
dimensions could be the margin from the product category or brand. Other important determinants are
remuneration paid for a favourable shelf allocation in the case of a large retail outlet. In addition,
introduction of a new category requires special shelf allocation. The vendor-retailer relationship helps in
sorting out the multiple pressures on shelf allocation effectively.
4) Special Store Needs→ This point is especially true in the case of a Heterogeneous Market like India as
well as the absence of a standardised store concept. Special store needs in terms of highlighting product
categories, makes the job of Space Management very difficult. Moreover, space itself may be a
constraint in the case of locations like the central business district of metros. Here an appreciation of the
space constraint by the vendor makes the job of Space Management much more effective.
RETAIL SPACE PLANNING PROCESS
A retailer goes through a number of stages when allocating space to products. These four stages will be as
follows:
1) Measuring Retail Space→ Although space in a store outlet is three dimensional, retail space is often
measured in square, rather than cubic units. Square units are appropriate where, for example, in fashion
retailing, a variety of single tier fixtures stand on the shop floor. Many fixtures, however, are multilevel
and so more appropriate ways of measuring space to allocate might be on the basis of linear or cubic
footage.
Measurements of space that are more specific to individual retailers might be useful, such as the number
of pages to be published in a catalogue or the total number of fixtures available in an outlet.
Space productivity depends on two principal measures of retail success which are sales and profits. Sales
volume and profitability can also be measured in relation to the amount of space used to generate those
levels of sales and profits. This can then be compared with the level of financial investment in that space.
The resulting measures express the productivity of retail space. Sales (or profits) per square meter is a
commonly used measure of retail space productivity, which is an important concept in the evaluation of
retail product management performance.
2) Dividing the Space into Selling Areas→ At this stage, space management is concerned with allocating
space to different product areas, defined according to individual retail businesses but usually on the basis
of product department or category. The amount of space will be determined to a greater extent on
previous performance indicators, typically sales values. However, some products, because of their
physical characteristics may need disproportionate amounts of space in relation to sales. In a department
store, home furnishings may need a relatively large amount of space to generate a good level of sales
because the products are bulky, a large variety of merchandise is needed for customers to choose from
and a lot of display space is needed to do the product justice.
On the other hand, jewellery is a high value product category that needs relatively small amounts of
space for display and selling purposes. The stage a product category is at in its lifecycle is likely to
influence the space allocation at this level. If a category is growing, then more space should be allocated,
whereas a declining category needs to have its space rationalised.
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3) Determining the Layout→ At this stage product adjacencies will be decided, and the location of the
selling areas will be determined. Individual outlet characteristics will influence this stage of the planning
process; for example, location of entrances, set walkways around the store, lift and escalators, pillars and
divisions all need to be taken into consideration in a store plan. In a catalogue the product categories that
are going to go at the front of the book need to be decided. The relationships between one product
category and another also have to be considered when determining the layout.
4) Determining the Space Allocation of Product Lines→ This involves the allocation of space on
individual fixtures to each product line or stock keeping unit. The availability and characteristics of
fixtures, individual product performances, product features and characteristics and the compatibility of
products will all have a bearing on these decisions. Many retailers use sophisticated computerised space
allocation systems at this stage.

IDENTIFYING THE SALES TO MARKETING EFFORT RELATIONSHIP

Sales and marketing are both working towards the same goal: securing business and helping their company
grow. Sales is a direct process in which the salesperson talks to the customer and steers them towards
making a purchase. This might be in person, over the phone, or using a digital communication medium like
email or even social media. The process might be very long, taking place over multiple conversations in
which the salesperson learns about the customer and their pain points, and helps them understand how the
product on offer can help solve them. It could also be a very short process consisting of a single
conversation in which the salesperson lays out the terms of the deal and processes the sale.
Marketing is a much more holistic process that is designed to increase awareness of a brand or product to the
target consumer as a whole. Rarely will a marketer deal one-on-one with a customer.
The methods, tactics, and channels used by the marketing department look very little like they did even 15
years ago. It is primarily digital, including (but not limited to):
1) Content marketing
2) Social media marketing (SMM)
3) Email marketing
4) Organic traffic and search engine optimization (SEO)
5) PPC ads
6) Influencer marketing

1) Collaborate on Sales Content Creation→ A recent CSO Insights study showed that 32% of a sales
rep‘s time was spent looking for or creating sales content. Creating content that sales teams can use in
their proposals and throughout the selling process is a major factor in an outstanding sales enablement
strategy. Both sales and marketing need to work together to understand their audience and create
targeted content that speaks directly to customers.
2) Inform Outbound Emails: In an ideal world, all sales would be inbound with customers lining up to get
their hands on your product or service. But the reality is that, at some point, sales needs to be in charge
of sourcing and contacting their own leads. To effectively do this, sales should work with marketing to
be knowledgeable on what marketing materials are already readily available. Marketing and sales can
also work together to create new, dynamic material that focuses on the winning strategies of each
department. This creates a unified brand image and voice.
3) Systemise Lead Scoring: Marketing and sales teams need to have an ongoing conversation about lead
conversion — what is working, what is not, who it is working for, etc. Creating and converting MQLs to
SQLs and, ultimately, to win deals is an always moving target — that is why it is important to ask these
questions, to figure out why it is working or not working. Those changing results and targets of a
company‘s ―why‖ increase the urgency for clear communication and getting on the same page. Both
sales and marketing teams need to create one system for scoring and evaluating. The system is entirely
conditional and depends entirely on the product, the audience, and the buying cycle. Turning an MQL
into an SQL too soon can hurt conversion, so you need to find the sweet spot in the life cycle. This can
only be found by trial and error, communication, and evolution.
4) Develop Buyer Personas: Sales is the front line of any successful company. They know who is buying
and why those customers are motivated to buy in the first place. Marketing understands the industry at
large and who they should be targeting. The best buyer personas are born from a mixture of marketing
research and insights from your actual customer base. The sales team can provide important insights and
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 generalizations on the leads they‘re interacting with the most, while marketing research can inform
broader insights like patterns and commonalities. Sales and marketing must direct their efforts at the
same prospects and be completely aligned on decisions and pricing. Together, sales and marketing need
to create comprehensive buyer personas to better target their ideal customer, increase acquisition, and
create targeted ads and pitches that are symbiotic.
5) Leverage Marketing to Showcase Sales Team’s Expertise: Ideally, sales teams are brilliant at lead
generation and closing sales but are not always their own best advocates when it comes to selling
themselves. That is why they need marketing team‘s power to create materials that showcase their
expertise.
6) Hold Regular Meetings: Even the most amicable and aligned departments need actual face time to
develop their internal relationships and sense of how the other works. Hold regular meetings to discuss
new strategies, go over the results of current campaigns, and learn more about each team‘s processes. An
added benefit is getting marketing‘s feedback and insight on the sales team‘s agenda, and vice versa.
7) Break Down Barriers: Aligning sales and marketing teams may require more than weekly meetings,
and it might take a refresh in terminology and perspective. Break down departmental barriers and replace
the concept of a sales funnel with a revenue cycle. Work through the foundation of what that revenue
cycle should look like. This is the time when both sales and marketing get to flex their muscles and bring
their expertise to the table. Remember, some areas will overlap, but they may be called different things.
The marketing department may be focused on digital assets and ROI, while the sales team may be
looking at the same assets regarding what types of sales leads they generate. Work together to determine
the best lead generation techniques and ROI as a team instead of by department.
8) Use Collaborative Analysis: When marketers are trying to align two departments, it is not enough to
just focus on KPIs and collaborative practices. When they are breaking down departmental barriers, the
lines will likely blur between what the marketing and sales teams are working on. It is important to
analyze and measure the results as a team, which will help everyone get on the same page about ROI and
understand how collaborative efforts are impacting your bottom line. The team ROI may require both
departments to analyze email campaigns or lead generation data to determine what is working and what
is not. Looking at these numbers individually just pushes your teams back into a silo situation where the
work becomes fragmented.

MODELLING THE MARKETING RESPONSE TO SALES FORCE EFFORT

It is the job of marketing managers to determine the profit maximizing allocation for products, shelf space
and at times the sales force as well. The key here is to understand how the changes in the allocation affect
the product sales. To better understand this, the relationship between the resources allocated and the
response achieved must be charted out on a graph.
1) The Power Curve: y = axb→ Values of a and b that best fit the power curve can be found with Excel
Trend Curve. Assuming 0< b<l, the power curve exhibits diminishing returns, i.e., each additional ad
yields fewer extra sales.

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2) ADBUDG Curve→ The ADBUDG Curve was developed by MIT Professor John Little. This curve is
used to chart the graph of response to sales or advertising. The ADBUDG Curve can sometimes be S-
shaped, which means that for a small amount of marketing effort little sales response is observed, and for
an intermediate amount of marketing effort, increasing returns are observed and finally beyond a certain
point, decreasing returns to marketing response are generated.
Suppose the marketers want to determine a curve that predicts the sales of a product as a function of the
sales effort allocated to the product. Researchers have found that the response to a sales force effort can
often be well described by the ADBUDG function of the following form.
(b – a)xc
Sales of drug i when x calls are made for drug i = a + ––––––––
(d + xc)

An S curve starts out flat, gets steep, and then again becomes flat. This would be the correct form of the
sales as a function of effort relationship if effort needs to exceed some critical value to generate a
favorable response. To illustrate how an ADBUDG response curve can be fit to a product, try and
determine an ADBUDG curve that shows how unit sales of a drug depend on the number of sales calls
made on behalf of the drug.

3) The Gompertz Curve: y = a*exp (-c exp (-bx))→ Any change in profit resulting from allocation of
additional shelf space is modelled by the Gompertz Curve. The Gompertz curve is also an S-shaped
curve.

OPTIMISING SALES EFFORT

Optimising the sales team requires continuous monitoring to evaluate the systems, processes, people, and
technology at disposal. However, the fundamental difference between high and low performing sales teams,
according to an HBR survey of 786 sales professionals, is the sales process ―50% of participants from high-
performing sales organisations said they had sales processes that were closely monitored, strictly enforced or
automated.‖ Sales optimization is the discipline of maximising your sales team‘s performance by analysing
past interactions, guiding sales reps how to sell effectively, and managing future sales incentives. There are
several ways by which sales effort can be optimised:
1) Establish Long-Term Goals→ Every company wants to grow revenue year on year. But the only
sustainable way to achieve this growth is by ignoring quick-wins and establishing long-term goals
focused on quality. The best way to achieve long-term growth is by creating the right sales culture. So,
rather than emphasizing short- term goals like hitting monthly quotas, celebrate long-term milestones
like client anniversaries or upsells.
For example, one of the core values at LinkedIn is to ―act like an owner‖ which empowers employees to
behave and make decisions as though it were their company. This change in mindset empowers
individuals to look for sustainable revenue streams instead of immediate revenue and commission:
a) Low-quality revenue creates short-term value
b) High-quality revenue drives long-term value
It is better to have predictable and profitable revenue streams to build long-term growth.
2) Build an Ideal Customer Profile→ Building an ideal customer profile or buyer persona helps you
focus on the right type of prospect. It‘s better to create long-term strategic relationships with ideal

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 customers rather than chasing short-term quick wins elsewhere. Building your buyer persona takes you
past demographics and deeper into buying behaviours and emotional characteristics such as:
a) Likes/Dislikes
b) Buying patterns
c) Motivation to purchase services and products
d) Feelings and emotions that will trigger them to buy
e) Common objections (and how to handle them)
3) Track and Analyse Sales Data→ If you are going to optimize your sales team, then you need an
effective way to track and analyse sales data. Tracking sales leads gives your team access to metrics on
what needs doing and what has already been done as part of the sales process. Team members can also
compare how they are performing against peers, which promotes healthy competition.
4) Spot Holes in the Pipeline→ Have you got issues in prospecting, nurturing, closing or upselling? It is
important to check your sales pipeline regularly to ensure you do not have any holes. For example, if it
takes 200 days to convert a prospect to a new customer and your conversion rate is 10%, then you should
have at least 200 prospects in your pipeline. Without enough prospects, you would not hit your sales
target. If you spot a hole - i.e., you do not have enough prospects - then you can take action to fix the
problem. Depending on the size of your sales team, there are several tools you could use to monitor your
pipeline. For smaller teams, you could use a spreadsheet to spot any holes as you record your sales data.
5) Align Sales and Marketing Teams→ Although sales and marketing teams have similar goals to
increase revenue and growth, they often struggle to work together effectively. According to a report
from Marketo, sales reps ignore 50% of marketing leads.
a) Sales reps puzzle why they have to generate their own leads.
b) Marketing execs do not understand why sales ignore their leads.
Who is right and who is wrong does not matter. But finding a way to work together is essential. Three
ways to align sales and marketing teams are:
a) Share Funnels: Create one funnel, so each team knows what the other is doing.
b) Share Accountability: Create joint goals and objectives, so both teams are accountable for results
and have to perform to a high level.
c) Share Planning: Create strategic and operational plans together, and hold regular review meetings.
By working together, marketing teams can provide the right type of content and qualified leads that
enables sales teams to retain and win more customers.
6) Strategically Assign Territories→ Many sales teams neglect to assign territories strategically and
therefore miss a sales optimization opportunity. Sales territory management aligns salespeople with the
most appropriate customer base - whether that is by geography, vertical, expertise, or past relationship.
Each territory is unique. And in order to optimise sales, it is important to assign your top performing reps
to the most valuable accounts in each territory.
7) Nurture and Manage Leads Effectively→ Nurturing and managing leads is an essential step in the
sales optimization process. Timing is crucial. Contact leads too soon, and you may lose them and their
business forever. That is why building relationships is important. Investing time with the right prospects
can lead to long-term customer relationships. And remember, long-term relationships not only generate
more revenue but also enhance your credibility in the market. According to SBI, sales reps tend to give
up on reaching a prospect after 3-4 unsuccessful attempts. But their research shows that on average
prospects respond or decide to answer after 9x nurture impressions.
8) Monitor and Provide Continuous Feedback→ If you want your sales process to be effective you need
to identify, track, and measure the right data. Salespeople need to know what KPIs they‘re working to,
and you need to provide continuous feedback on their progress.
a) Identify KPIs: Use metrics that improve sales performance rather than vanity metrics. HBR lists 12
sales metrics that matter most.
b) Collect Data: Use tools that make it easy for salespeople to input and update data. Or consider
automating the process where possible. According to HubSpot: ―Over 20% of sales professionals
cited manual data entry as their top CRM challenge. Other issues included lack of integration with
other tools and invalid or incorrect data.‖

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MEASURING EFFECTIVENESS OF ADVERTISEMENT
Organisations allocate a major portion of the total budget on advertising now-a-days. In order to assess the
worthiness of allocating a huge sum of funds towards advertising, advertisers wish to determine the
usefulness of advertising. It is necessary to compare the functioning of advertising activities with the
established objectives of the organisation to evaluate its effectiveness. This performance determination
process is called ‗measuring advertising effectiveness‘.
Objectives related with advertising may include sales objectives and/or communication objectives. The
evaluation process calculates how far the sales and communication objectives have been accomplished with
the help of advertising. If it is unsuccessful in achieving the planned objectives, it will result in wastage of
advertising funds.
Rise in sales figures after advertising, indicates whether the advertising campaign has been successful or not.
It can be concluded that advertising campaign has been effective if there is a sharp rise in the sales figures.
The other way of evaluating advertising effectiveness can be by identifying as to what extent the
advertisement has been successful in accomplishing communication goals. This method includes conducting
an interview session with few customers to find out if they can remember the advertisement, slogan and the
brand name stated in the ad, or if the message stated in the ad is interpreted correctly by them, etc. If the
response is positive and they are able to remember the details, then ad is said to be quite successful. Thus, at
this very step, the firm can locate the deficiencies and take remedial measures during the next advertising
campaign.
METHODS OF MEASURING ADVERTISING EFFECTIVENESS
Several techniques can be used to evaluate the different constituents of an advertising campaign. The two
most comprehensively used evaluation mechanisms are as follows:
1) Message Evaluations→ Under this method, the advertisement copy (or the message) as well as the
whole advertisement infrastructure (or the physical setup of the advertising) is examined to know the
efficiency of the advertisement. It includes examining commercials, newspaper ads, billboards, coupons,
etc. It also includes analysing the people involved in commercials (whether on TV or radio). Both the
cognitive elements concerning an ad (like recall and recognition along with attitudinal and emotional
responses) are considered while evaluating an advertisement message.
2) Evaluating Respondent Behaviours→ This mechanism deals with evaluating the apparent customer
responses to different advertising efforts. Customers‘ responsive behaviour may include inquiries, store
visits or actual buying of the product. The techniques used for evaluating respondent behaviours are
based on numbers, like, determining total number of redeemed coupons, total number of calls made in a
telemarketing plan and sales fluctuations in terms of numbers or values. Majority of advertising
agencies, now-a-days, are asked to represent convincing evidence of the success of their ads and this
evidence can be developed by analysing the respondent behaviour. Total number of coupons redeemed,
number of customers visiting the stores, alteration in sales figures, etc., act as evidence for measuring
advertising effectiveness.
Thus, the above mentioned techniques are helpful for marketing managers to generate short-term results and
achieve long-term favourable outcomes.
TESTS FOR MEASURING ADVERTISING EFFECTIVENESS
The advertising has wide range of testing techniques or the methods to choose for evaluation purpose. What
methods or techniques he is going to use is dependent on when he is going to measure the ad effectiveness.
Accordingly, there can be three sets of methods to meet his needs namely, pre-testing, concurrent testing and
post-testing methods.
1) PRE-TESTING OF AD→ It is preferred because it enables the advertiser to know how effective an ad
is likely to be, before spending the budget and adopting ad actions. The advertiser should use only those
messages and media which prove to be the strongest in producing the desired results. It includes
following tests:
a) Check-List Test→ A check-list is a list of good qualities to be possessed by an effective
advertisement. A typical check- list provides rating scale or basis for ranking the ads in terms of the
characteristics. These characteristics may be—honesty—attention getting—readability—
reliability— convincing ability—selling ability and the like. The ad that gets highest score is
considered as the best.

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 b) Opinion Test/Consumer Jury→ This involves a group of potential buyers of the product who
compare and rank several advertisements according to their preference, interest or the influence to
buy the product. Their reactions may be required either to the entire advertisement or about specific
features of ads such as illustrations, headlines, themes, slogans, etc. Accordingly, the top ranking ad
gets selected.
c) Dummy Magazine and Port-Folio Test→ A group of ads, usually a mixture of ads to be tested and
control ads are placed in a portfolio. The ads can also be placed in dummy copies of newspapers or
magazines. Dummy magazines are used to pre-test the ads under conditions of approximation
resembling normal exposure. The respondents are asked to go through the portfolio, reading
whatever interests them and taking as much time as they want. After they finish looking at the whole
portfolio, the respondents are asked to recall the ads that they can remember. Such recalls may be
unaided or aided, depending on the objective of testing. The ad with highest recall score is taken as
the best.
d) Inquiry Tests→ Another method of pre-testing an advertisement is the inquiry test. An
advertisement may carry a coupon or invitation to consumers to respond or reply or request for a
sample. By making an offer to consumers, some advertisements get an immediate response from the
consumers in the form of enquiries or sales which help in measuring the advertisement‘s worth.
e) Theatre Tests→ In theatre tests, attitudes towards a set of brands are measured. In the context of a
TV show, respondents are presented a number of advertisements, including those to be tested.
Respondents use electronic equipment to indicate what they like or dislike as they view TV
commercials shown in a theatre setting.
f) Laboratory Testing→ In this type of testing, pre-test measures can be taken using special
laboratory equipments such as eye cameras, pupil metrics, brain waves, etc., which can be used to
measure respondent‘s physiological responses to advertising including galvanic skin response, eye
movement, pupil dilation, brain pattern analysis, etc.
g) Trailer Test→ Respondents are shown products and they see or listen to commercials in trailers at
shopping centers and receive coupons for advertised products. Redemption rates indicate
commercials‘ influence on buying behaviour.
2) CONCURRENT TESTING OF AD→ Concurrent or coincidental testing is that which takes place
while the ads are running. The feedback is received from such testing and corrective actions can be taken
while the ad campaign is on. It includes following ads.
a) Co-Incidental Surveys→ This is called as coincidental telephone method also whereby a sample of
households is selected, calls are made during the time programme broadcast, the respondents are
asked whether their radio or television is on, and if so, to what station or programme it is tuned? The
results of the survey are used to determine the share of response for the advertisement.
b) Consumer Diaries→ This method involves giving the families a diary or individual diaries to the
members of the family. The selected families and individual respondents are asked to record the
details about the programme they listen or view. The diaries are collected periodically to determine
the scores.
c) Mechanical Devices→ The mechanical devices used to measure the ad effectiveness concurrently
are more common to broadcast media. These are—Audio meters— Psychogalvanometer—
Tachistoscope and Truck Electronic Unit.
d) Traffic Counts→ Traffic counts are of special applicability to outdoor advertising. One can get
good deal of information through traffic counts. This counting is done by independent
organizations— may be private or public. This work is also undertaken by advertising agencies. For
instance, how many automobiles and other vehicles were exposed to a bulletin board or a poster or a
wall painting and how many times? These all can be determined.
3) POST-TESTING OF AD→ It is applied after the ad has ended to find out how far advertising has been
successful. It includes following tests:
a) Inquiry Test→ It is controlled experiment conducted in the field. In inquiry test, the number of
consumer inquiries produced by an advertising copy is considered as to the measure of its
communication effectiveness. Therefore, the number of inquiries is the test of effectiveness which
can be produced only when the ad copy succeeds in attracting and retaining reader or viewer
attention.

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 b) Split-Run Test→ A split-run test is a technique that makes possible testing of two or more ads in the
same position, publication, issued with a guarantee of each ad reaching a comparable groups of
readers. Different copies of ads are created and placed into one magazine or newspaper. It is an
improvement over the inquiry test in that the ad copy is split into elements like appeal—layout—
headline and so on. Here also, the readers are encouraged to reply the inquiries to the given address.
c) Recognition Test→ Recognition is a matter of identifying something as having seen or heard before.
It is based on the memory of the respondent. In such tests, readers are shown magazines or
newspapers page-by-page with which they are familiar and they are asked to point out the
advertisements they saw and read. It attempts to measure the ad effectiveness by determining the
number of respondents who have read or seen the ads before. The recognition method helps to
measure the interest shown by the respondents though one has to make sure that the respondent does
not confuse specific advertisement with similar or identical ones seen elsewhere.
d) Day-After Recall Test→ Recalling is more demanding than recognizing as a test of memory. Day-
after recall test is the most widely used method to test television commercials. It involves
respondents to answer as to what they have read, seen or heard without allowing them to look at or
listen to the ad while they are answering. After an on-air exposure of a finished commercial in a city,
viewers are interviewed to determine if they can recall the message. Recall may be unaided or aided.
e) Sales Test→ The effect of TV commercials can be measured through the use of consumer panels
located in a number of cities. These consumer panels are being used to understand their purchase
behaviour as well as usage behaviour. Marketers can also use different media in different locations to
see which one is more effective in generating sales. Alternatively, sales changes in different markets
can be monitored to compare the effects of different messages.
In practice, no single technique may be found suitable to test all ads. Depending on the specific objectives of
the advertisement campaign, often a combination of different techniques may have to be used to get
effective results.
IMPORTANCE OF MEASURING ADVERTISING EFFECTIVENESS
Measuring advertising effectiveness is important for the given below reasons:
1) Justifying the Cost of Advertising→ Advertising involves a lot of cost. The amount spent on
advertising can be justified by measuring advertising effectiveness. In this regard, the cost-benefit
analysis is adopted whereby comparison is made between the advertising benefits and the cost incurred
on advertising. The expenses incurred can be justified to the higher organisational executives and
authorities, if advertising benefits exceed the cost. By doing so, it is made sure that the expenses incurred
on advertising do not go to waste. Furthermore, the justification also helps in increasing the advertising
expenditure (if required) in the future.
2) Exercising Control on Advertising Campaign→ Control over the ad campaign can be exercised
through advertising effectiveness evaluation. It helps in knowing whether or not the outcomes of the ad
campaign are in compliance with the predetermined objectives of the ad. Corrective actions and remedial
measures can be taken in time if the outcomes of the ad campaign are not in compliance with the
predetermined objectives of the ad.
3) Evaluating Ad-Copy→ The advertising copy as well as the message in the ad copy can be assessed by
measuring the effectiveness of advertising. The desired outcomes cannot be expected from the
advertisement if the appeal made in the advertisement and the brand name is not understood by the target
audience. Therefore the drawbacks in advertising copy, viz., drawbacks in the appeal made, content of
the message, etc., can be identified by measuring the effectiveness of the ad. This will also help in
designing more effective ads in the future.
4) Comparing Different Market Areas→ Comparison can be made among different geographical market
areas to know which market area is comparatively fruitful for the firm. A firm operates in various market
areas and its ads also are also carried in those areas. Evaluations of the results of all the market areas are
performed after some time period. This is done from the perspective of the level of change in the display
of the dealer, level of change in the customers‘ attitude regarding the firm‘s product, level of change in
sales, etc. By doing so, the strong and the weak market areas can be determined which would help the
firm in designing appropriate and proper marketing strategies for its weak and strong market areas.
5) For Effective Media Planning and Media Scheduling in Future→ The impact of various media can
be known by proper evaluation of the effectiveness of advertising. This will help in making improved
decisions related to media scheduling and media selection, such as choosing appropriate media vehicle,
15
 purchasing appropriate time and space in the media, timing of the ad, its frequency, suitable TV
programs and channels to broadcast the ad, and so on.
6) Knowing the Saturation Point of Advertising→ The saturation point of advertising is the point past
which negligible or zero sales response is generated through advertising. Before this point, the
advertising should be stopped. The saturation point of advertising can be known by evaluating the
effectiveness of the ad. This is achieved by making a comparison between the advertising‘s marginal
cost and its generated revenue. When the marginal revenue becomes at par or less than the marginal cost
of advertising, then further expenditure on advertising should be stopped.
7) Reducing Wastage in Advertising Expenses→ Ads which are ineffective in getting the message across
and in increasing the sales of the organisation can be identified through a proper evaluation of
advertising effectiveness. Spending on wasteful advertising is reduced by discontinuing such
advertisements.
8) Keeping in Touch with New Trends in Advertising→ The firm can keep in touch with the current and
the emerging trends in the field of advertising through the evaluation of advertising effectiveness. The
field of advertising is dynamic. It is not necessary that an advertisement will be effective tomorrow if it
is effective today. The tastes, preferences and attitudes of people change. Therefore, the latest trends in
the field of advertising and people‘s preferences towards advertisements can be known by evaluation of
advertising effectiveness.
DIFFICULTIES IN MEASURING ADVERTISING EFFECTIVENESS
Following are the major difficulties which are faced while measuring advertising effectiveness:
1) Advertising is not the only Factor Affecting Sales→ It is assumed under most of the ad effectiveness
evaluation methods that sales are affected only through advertisements. However, an increase in sales
can be the result of several other factors like, price change, schemes for sales promotion, improvement in
the features of the product, etc. Therefore, it would be wrong to assume that advertising is the only factor
affecting sales.
2) Effect of Past Advertisement→ It is also assumed under most of the ad effectiveness evaluation
methods that advertisement conducted in the test period is the reason behind the customers‘ response in
the test area. However, past or previous advertisement can also be the reason for the response of the
customers. For example, there is a possibility that an individual had seen an ad a long time back but did
not purchase the product at that time due to lack of financial resources or due to absence of need.
However, there is also a possibility that the individual is still carrying a very positive impression of the
past ad. The individual can buy the product at present time if he/she has the need and the adequate
financial resources. Therefore, here it can be said that the past ad is responsible for the sale of product in
the present.
3) Difficult to Evaluate the Effectiveness of Goodwill Advertisement→ Improving the organisation‘s
image in the long run, by fulfilling certain social responsibilities like generating awareness regarding
environment and pollution control, etc., is the purpose behind goodwill advertisements. The advertiser
cannot measure the impact of such ads on the goodwill, image or sales of the organisation.
4) Ad-effectiveness using a Communication Objective is not sufficient in itself→ Certain product
advertisements might not increase sales but may attain the communication objectives. Similarly, certain
ads of products might be entertaining and attractive but not effective enough to increase sales. It is
possible that such ads grab the attention and are easy to recall because of catchy jingles, punch-lines and
visuals, but the products are still not purchased. This might be because those products are not liked by
the viewers. For example, many viewers might be remembering the very attractive ad of Royal Stag with
Ranveer Singh. But the Royal Stag products are still not purchased by those viewers. Therefore, it is not
sufficient to evaluate advertising effectiveness on the basis of objectives of communication only.
5) Subjective Method for Measuring Advertising Effectiveness→ Several ad effectiveness measurement
methods have been proposed by experts. However, these methods do not provide standard criteria for the
evaluation of advertising effectiveness. Therefore, they are highly subjective. Several criteria are
available such as sales increase, ability to grab attention, entertaining, convincing, humorous,
memorable, etc. There is a possibility that an ad is effective as per one criterion and ineffective as per
another.
6) Not Suggestive in Nature→ The advertisements are classified as either effective or ineffective by most
of the ad effectiveness measurement methods. However, they are not suggestive, i.e., they do not
recommend or suggest ways to increase the effectiveness of the ads.
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7) Difficult to Evaluate Percentage Response→ Certain degree of customer response is required for
measuring the effectiveness of the ads. However, the advertiser cannot measure the response generated
due to the advertisements because the overall number of media readers or viewers is unknown. This
number is known if direct mail advertising is adopted but not exactly known if the message if spread
through mass media vehicles like, newspapers, magazines, television, radio, etc.

OPTIMISING ADVERTISING
In a world shaped by digital, customer interactions define a brand‘s success. For marketers, this can be a
significant challenge. While digital advertising is growing rapidly, it is struggling with wasted spends,
leaked revenues, and ineffective targeting and tracking of the operators (advertisers and publishers) in the
ecosystem. Studies indicate that the total wastes in the advertising ecosystem ranges from 2% to 4% of the
overall campaign spend.
Advertisers and publishers can ensure better ROI for their campaigns by analysing spend allocations at each
step of the advertising campaign cycle to curb revenue leakage. Marketers can drive deeper customer
engagement through relevant customer insights. To supercharge that cycle, they need a campaign strategy
built on a strong enterprise marketing technology platform - one that accelerates innovation with analytics.
This will help track marketing campaigns and regulate how they perform at each step with respect to dips
and raises in sales.

ONLINE/INTERNET ADVERTISING
Online advertising is any type of marketing message that shows up with the help of the Internet. That means
it could appear in a web browser, search engine, on social media, on mobile devices, and even in email.
Savvy advertisers are increasingly making use of this forum for reaching consumers, for a number of
reasons:
1) It is relatively inexpensive,
2) It reaches a wide audience,
3) It can be tracked to measure success (or failure), and
4) It can be personalised for a target audience.
There are different types of online advertising: banner advertising, video advertising (either placed before or
embedded within a video), search engine advertising and social network advertising. These different
manifestations are a consequence of the fast-paced development of the Internet and Internet technologies.
The age of the Internet has taken the world by storm in the last decade and has changed the way consumers
behave and buy products. With this charge has come a new type of consumer that is more educated and able
to do vast amounts of research before making a purchasing decision. It has also brought about a consumer
that spends a lot of time online, whether it is for personal or professional reasons. This gives marketers new
opportunities to interact with their customer base and reach out to different audiences.
This is where online or digital advertising is able to aid businesses in reaching more of their target audience
in less time. The world of digital advertising, although relatively new, is still rooted deep in the fabric of
traditional advertising. This means that companies are able to add a digital form of advertising to existing or
upcoming campaigns that have always relied on traditional mediums. Tying the offline and online strategies
together sets the company up for success in its next advertising campaign and will do well in reaching the
specific audience. Digital advertising refers to marketing media that is digitally displayed. Digital
advertising technology exists on the Internet, on smart -phone and hand-held media devices, and even on
automobiles and billboards. Businesses and product manufacturers use digital advertising to build or
maintain a brand image and market products and services to consumers.
COMPONENTS OF ONLINE ADVERTISING
There are a variety of different components that combine to create internet marketing campaigns. Some of
the key components are:
1) Websites→ The first step in an internet marketing campaign is to create and set-up a website. A website
will include a lot of text, some images, and perhaps even audio and video elements. This gives visitors a
clear picture of the message that one may send about the company. It will show potential customers, the
features and the benefits of the products or services that the company is offering. Some websites include
lead capture for customers or even sell their product or service directly through the website. These

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 websites are essentially the same as brochures or mail order catalogues. They are a wonderful way to
start establishing the business and getting noticed.
2) Search Engine Marketing→ Search engine marketing is another component of internet marketing. This
means that a website is marketed through search engines by improving the ranking of the site through
search engine optimisation, pay per click advertising, or pay for inclusion listings in directories. This is
similar to offline advertising that is done through listings in the yellow pages.
3) E-Mail Marketing→ The next component is e-mail marketing. This distributes information about the
products or services or is used to get feedback from customers about products or services through e-mail.
Customers and prospective customers can supply their e-mail addresses or one can choose to purchase
email addresses through lists. There are various e-mail methods that are used including newsletter
distribution or mass mailings or even offering the customers special things related to the company‘s
products or services that are being offered. This is basically the same as direct mail advertising that is
done offline.
4) Banner Advertising→ Banner advertising allows for placement of advertisements on a website for a
price. There are many providers that are offering banner advertisements on their sites. It can be a very
effective part of internet marketing campaign and can increase the traffic. Newspaper and magazine ads
would be the offline comparison to banner advertisements.
5) Press Releases on Internet→ Press releases on the internet require a story being written about a
company, products, services, or website. These stories or articles must be newsworthy and very attention
getting. There are many sites on the internet that are centered on press releases.
6) Blog Marketing→ The next component is blog marketing. This is where comments are posted, opinions
are shared, or announcements are made. This can be done through hosting a blog or by adding comments
and URLs in blogs that are related to the business and the offers available online.
7) Article Marketing→ The last component of internet marketing is article marketing. This means that one
can write articles that are centred on the business and then publish them on different internet sites that
relate to articles. Articles are normally passed around the internet and shared with others. Article
marketing can give one a huge boost to the business and to website traffic. This helps to target much
more audience, because the articles are specific to what company is offering.
PURPOSE OF ONLINE ADVERTISING
The purpose of internet advertising is as follows:
1) Solicitation→ A common perception of advertising is related to solicitation, or encouraging consumers
to purchase the goods and services of a company or organization. Advertising can be found in the form
of print advertisements in newspapers and magazines, billboards, telephone directories, fliers, and
mailers, or in electronic media such as the Internet, radio, and television. This type of advertising
typically promotes a particular product or service, introduces a new offering, or promotes a sale or
upcoming event.
2) Marketing and Promoting→ Marketing and promotional efforts use advertising as a vehicle to move
forward the agenda or image of a person, group, organization or event. For example, a music concert
promoter may use advertising as a method for elevating the image of his client and his upcoming music
tour. A promotion in this sense is a form of advertising that does not always urge consumers to make an
immediate purchase, but compels them to become more interested in and invested in the subject of the
ads.
3) Raising Awareness→ Advertising campaigns designed to raise awareness employ many of the same
principals of solicitation advertising. These advertising messages are not trying to sell the consumer
something, but are working to make them aware of an issue. Examples include approaches used by non-
profit and community organizations to inform the public about issues such as shortages in blood banks,
pollution in cities, or the importance of particular medical screenings.
4) Education and Information→ Advertising is frequently used as a vehicle for educating and informing
the public about various issues. For example, the advertising campaign of a road safety coalition might
focus on the potential consequences of driving without a seatbelt by providing statistical information and
disturbing images. Political campaigns also use education and information in advertising by promoting
voting records, stands on issues, and credentials for office.
5) Negative Advertising→ Advertising can be used to criticize or put down competition. Consider
billboards that denounce the actions of a county commissioner up for re-election, or fliers that provide
voters with detailed accounting of wasteful government spending. In this instance, the individual or
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 organization purchasing advertising is not trying to sell a product or raise awareness of an issue, but is
lolling for an effective way to create negative publicity for another entity in order to gain an advantage.
6) Cost Acquisition per Customer→ Online advertisement ensures that the cost incurred to get customers
is pretty less as compared to other mediums. It is a simple equation, if the cost of acquisition is low for
the business, one will end up making more profit. It makes sense to spend online especially when the
overhead cost of a company is extremely high.
TYPES OF ONLINE ADVERTISING
The different types of internet or online advertising are explained as follows:
1) Pop-ups→ Pop-up ads are a form of online marketing where the intent is to advertise a product as well
as attract web traffic and/or capture email addresses. They are typically generated by JavaScript and
appear as secondary browser windows.
Contents vary, ranging from company promotional videos and opt-in forms meant to generate leads to
messages with the latest news. Although many Internet users consider pop-up ads obtrusive, they are
good at grabbing users‘ attention and can be effective as a marketing strategy once marketers leverage
their advantages.
2) Interstitials→ Interstitials are advertisements that appear between the content of two web pages. This
type of advertisement is not as annoying as pop-ups because the ads tend to run in between the loading
of the two pages.
A good aspect of interstitials, for the advertiser, is that the ads cannot be stopped as easily as pop-ups
can be. With pop-ups, one can just hit the exit button, but if someone wants to see the content after an
interstitial, he/she has to wait for the entire ad to play.
3) Banner Ads→ Display or banner ad is the most popular form of advertising. These internet-based
banner ads are very similar to the still print ads published in newspapers and magazines. These ads are
small in size and static in nature which are usually placed on the websites which are most visited on the
internet.
The websites which place these ads generate their revenue through CTRs (Click-Through Rates). These
rates are as low as 0.3 per cent. However, the rates of banner ads for B2B companies are higher than that
of B2C companies.
4) Sponsorships: Another common form of advertising is sponsorships. There are two types of
sponsorships. Regular sponsorships occur when a company pays to sponsor a section of a site, for
example, Clairol‘s sponsorship of a page on GirlsOn.com and Intuit‘s Turbo Tax sponsorship of a page
on Netscape‘s financial section. A more involved agreement is the content sponsorship, in which the
sponsor not only provides dollars in return for name association but participates in providing the content
itself. In some cases, the site is responsible for providing content and having it approved by the sponsor;
in other instances, the sponsor may contribute all or part of the content. Due in part to the lack of
effectiveness of banner ads, sponsorships have been increasing in popularity.
5) Push Technologies: Push technologies, or webcasting technologies, allow companies to ―push‖ a
message to consumers rather than waiting for them to find it. Push technologies dispatch web pages and
news updates and may have sound and video geared to specific audiences and even individuals.
For example, a manager whose job responsibilities involve corporate finance might log on to his or her
computer and find new stories are automatically there on the economy, stock updates, or a summary of a
speech by Alan Greenspan. Companies provide screen savers that automatically ―hook‖ the viewer to
their sites for sports, news, weather reports, and/or other information that the viewer has specified. Users
can use personalisation—that is, they can personalise their sites to request the kinds of specific
information they are most interested in viewing.
6) Links→ While considered by some as not a type of advertising, links serve many of the same purposes
as are served by the types discussed above.
For example, a visitor to one site may click on a link that provides additional information and/or related
materials at another site. At the bottom of the homepage at women.com are a number of links to
magazines, including Cosmopolitan and Good Housekeeping among others. Clicking on one of these
takes the visitor to the magazine‘s site and usually a pop-up for a subscription to the magazine appears.
Other forms of advertising, such as ads placed in chat rooms, are also available.

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PPC OR PAY-PER-CLICK: PAID SEARCH
Paid search marketing is the process of gaining traffic by purchasing ads on search engines. It is sometimes
referred to as CPC (Cost-Per-Click) marketing or PPC (Pay-Per-Click) marketing. Unlike some digital
advertising where you pay for impressions, an impression is considered a page view; with PPC search, you
only pay if your ad is clicked on.
Pay-per-click is the placement of a small ―ad‖ on the search results page for a specific keyword or keywords
in return for a specified payment when a visitor actually clicks on that ad. Keep in mind that the advertiser
pays nothing to appear on the results page per se; they only pay the amount they have agreed to (or bid for)
when someone actually clicks on their ad and is taken to the ―landing‖ page on their website. Therefore, the
term ―pay per click‖ means just what it says: the advertiser pays each time a visitor clicks on their ad.
In a search engine, the paid search ads are usually found at the top, bottom, and right-hand side of the search
engine results page, often denoted by ―sponsored listings‖ or ―ads‖. Paid search results are advertisements.
A business pays to have their ads displayed when users do a search containing specific keywords. The ads
are typically displayed above and to the right of organic search results. The exact placement of the ads is
determined by both a bidding process and quality score.

BENEFITS OF PPCS
The benefits of pay-per-clicks are given below:
1) Speed→ Advertisers can quickly drive a significant amount of traffic to their website through PPC
marketing. If managed effectively, PPC marketing is one of the fastest digital marketing strategies to
drive traffic and conversion growth.
2) Precision→ Creating a highly-targeted audience to show ads to is straightforward - especially on search
and shopping networks.
3) Agility→ Performance data is available almost immediately, which makes it easier to quickly make
adjustments to improve chances for a successful campaign.
4) Measurement→ With effective conversion tracking, advertisers can see the ROI of their ads.
LIMITATIONS OF PPCS
Following are the limitations of PPCs:
1) Cost→ Depending on the competition and the industry a marketer work in, PPC marketing can be very
expensive. Some ad placements can cost over $100 per click.
2) Waste→ Due to the technical nature of most PPC platforms, wasted ad spend is common without
knowledge of the platform.
3) Volume→ PPC marketing, especially on the search network, often depends on search volume. If users
are not searching for the product or service a marketer offer, search and shopping ads will not generate
much traffic.
DIFFERENCE BETWEEN PAID AND NATURAL SEARCH
Difference between paid and natural search are as follows:
1) Highly Qualified Visitors will Come to Your Site→ Just as with organic search, paid search attracts
visitors who are already interested in what your site does. If they were not, they would not have been
searching in the first place.
So it makes sense that searchers who click paid search listings are more likely to buy than visitors
arriving at your site from clicking a banner ad, e.g. But paid search listings get lower click through rates.
2) You See Immediate Results→ The biggest difference between paid search advertising and organic
search is that paid search offers near instantaneous traffic to your site. You can launch a campaign
immediately by paying your money, writing your ads, and bidding your way to the top of the paid results
- all without changing a line of code on your website. Organic search, in contrast, takes much longer to
kick in.
3) Unlimited Keyword Targeting→ Organic search has a natural limit in the number of keywords that can
be targeted. Although it is best to use existing pages on your site as search new landing pages as your
keywords become more obscure. Because organic search landing pages must be deeply linked into the
navigation of your site, there is a natural limit of how many landing pages (and therefore how many
keywords) you can target. Because paid search landing pages need not be part of the site‘s navigation,
you can target as many paid search keywords as you can justify the investment for.

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4) Unequalled Adjustability→ It is difficult to make changes to your website to support organic search,
especially if you have a medium to large site. If your inventory runs low on your best-selling product,
your organic search results will keep pouring visitors into your site.
If you reduce your product‘s price, it could take days for the organic search results to reflect it. Paid
search, however, can adapt to these changes as they occur. You can stop buying the keyword for an out-
of-stock item in paid search, and you can remove the item from product search. You can reflect price
changes as they happen. You can ratchet up your investment during your busy season and taper it off at
other times. What is more, you can constantly monitor the return on your investments and make changes
each day to increase profitability. Paid search is probably the most flexible form of advertising available
today.
5) Less Click through Rate→ Except for high purchase intent keyword searches, users click on paid
search listings at a lower rate than organic search listings. Users seem more reliable and trustful to click
at organic search results.
6) Better Click Through Rates→ Click through rates are better for organic search results except for
searches using keywords that denote high purchase intent.
7) Cost→ The more competitive the keyword, the more the bid price is for each click on the displayed ad.
Paid search requires a level of expertise to manage these campaigns. Otherwise, a lot of money will be
spent to attract unqualified traffic. While organic search are free of cost.
8) Specific Targeting→ Pay-per-click campaigns can be tailored to reach specific audiences. Examples of
partitioning include geo-targeting, industry, device targeting, location-based targeting, educational level,
age, etc., in organic search no specific targeting.
9) Trust and Credibility→ With high search engine rankings comes a perception of credibility on the part
of searchers. High search rankings imply industry authority and. leadership. This perception translates
into more trust and a greater likelihood to click through to the site.
10) Distrust→ Consumers do not always trust paid ads and often avoid them in paid search. They place
more trust in organic rankings.
11) Momentary→ The ads disappear as soon as companies stop paying for them in paid search but not in
organic search. It is long lasting and no issue of payment.
ADVANTAGES OF ONLINE ADVERTISING
Advantages of internet or online advertising are as follows:
1) Wider Ad Coverage→ The online advertising gives ads a much wider global coverage and this helps in
making online advertisements reach more audiences, which may ultimately help in getting better results
through online advertising campaign. With internet advertising, companies can also specify the range of
advertisement coverage which helps the advertiser to enjoy a better advertisement campaign.
2) Targeted Audiences for Better Response→ When compared with offline advertising, online
advertising always helps the advertiser to reach the targeted audience and this helps in making the
campaign more profitable and getting more relevant leads.
3) Affordable→ Another main advantage of online advertising or marketing is the much affordable price
when compared with the traditional advertising costs. With a much lesser cost one can advertise on the
net for a wider range of audience and geographical locations.
4) Easy to Track and Measure Conversion→ Measurability and easiness to track the conversion makes
online advertising miles ahead on the traditional advertising methods. A lot of effective analytics tools
are available to measure online advertising campaigns which help in more improvisation of the ads.
A company will get a clear picture regarding who viewed the ads, who clicked, the number of leads
generated and the amount of money that has been spent so far for internet advertising activities.
5) Speed→ Online advertising is faster than any of the offline advertising activities and the company can
start sending out their online ads to a wider audience, the moment company starts its advertising
campaign.
So if one has a large targeted audience online at the time of triggering online advertisements, then the ad
will be served to majority of the audience in no time. The execution speed of the internet advertising
methods gives it a clear advantage over other traditional advertising methods.
6) Informative→ In online advertising, the advertiser is able to convey more details about the
advertisement to the audience and that too at relatively low cost. Most of the online advertising
campaigns are composed of a click-able link to a specific landing page, where users get more

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 information about the product mentioned in the ad. Once the visitor reaches the landing page, he will get
a clear picture about the product or services and decide whether to buy or not.
7) Flexible Payment→ Payment flexibility is another added advantage of online advertising and
marketing. In offline advertising the company needs to pay the full amount to the advertising agency
irrespective of the results. But in online advertising there is the flexibility of paying for only qualified
leads, clicks or impressions. This is something that will help the company to manage its ad budget in a
better way.
LIMITATIONS OF ONLINE ADVERTISING
Limitations of online advertising are as follows:
1) Banner Blindness→ One of the major disadvantages of online advertising is that it has been used to
such extents that the users have developed a blind eye to most online ads. The top online advertising
agencies across the world rely on innovative approaches to tackle this blindness.
2) Intrusive→ Web banners, if not placed systematically, can be intrusive and distracting elements for the
internet users. There have been some horrible instances of agencies flooding sites with so many banners
that it became virtually impossible for the user to work on them. Online advertising agencies need to
understand that optimisation rather than maximisation is the name of the game here.
3) Click Fraud→ Depending on how the company pays for the online advertising, it may encounter a
common form of ad-result fraud based on inflated click through results. If the ad placement costs rely on
the number of clicks the messages receive, the competition can pay people to inflate the click rate and
drive up the costs.
4) Receptiveness→ Although some consumers do not object to viewing ads on the websites they visit,
others either ignore or refuse to click on them. Because these ads appear in a setting within which the
viewer may not expect to see commercial messages - on a news or informational site, e.g.,- the message
runs the risk of failing to connect with an audience that dislikes and even distrusts online ads.
Because online ads run above or alongside the content viewers really want to see or read, they can be
seen as nuisances rather than added value.

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