Brand Equity Proves Highly Effective in Driving Insurance Quotes
Challenge
- Following its recent acquisition, this mid-size auto insurance firm was under pressure from shareholders and the board to deliver an analytically-grounded case to continue significant marketing investment behind the brand.
- Thanks to a marketing mix model developed internally by their analytics team, the client had a firm grasp of advertising’s short-term impact. However, the internal model could not quantify the influence of brand equity or deduce advertising’s long-term effect and overall impact on quotes.
- In order to justify continued investment, the firm needed to quantify the long-term effects of advertising on brand equity and base sales. From there, they could optimize their media mix and ensure that any increased investment would be directed towards the most efficient messaging.
- The client looked to Marketscience to optimize their media mix, balance sales with brand equity and, ultimately, help build the business case for continued investment behind their brand.
Solution
- Marketscience set out to understand how brand equity affects business outcome, how the long-term impact of advertising differs from shorter-term impact and what the optimal allocation is across messages to maximize returns. To that end, and working closely with client stakeholders, Marketscience identified the following key business questions:
- Which brand equity metrics are the most important?
- What is the relationship between brand equity and baseline quotes?
- What is the long-term effect of advertising on brand equity, which ultimately leads to baseline quotes?
- What is the short and long-term combined effect of advertising on quotes?
- What is the optimal message mix (brand vs. de-positioning vs. savings)?
- Marketscience then designed an analytics framework to identify which of the 15 brand equity measures had the strongest relationship with baseline quotes. Once the right brand equity measure was determined, an econometric model was built to measure the impact of brand equity on baseline quotes, while also controlling for other variables like seasonality and macroeconomic factors.
- A dynamic linear model was also developed to compare its “moving base” against the baseline derived from the client’s short-term marketing mix model. This step ensured confidence in the client’s baseline as the target metric, confirming the two highly correlated with one another.
- Marketscience built a second econometric model to measure the long-term effect of advertising on brand equity, accounting for any lagged effects, carry-over effects, and diminishing returns.
- Having both models in place, the relationship between advertising and baseline quotes by way of brand equity could be quantified.
- Finally, Marketscience created a simulation tool that enabled the client to scenario plan different media allocations by message type, adjusting for the differences in response during the short and long-term while capturing the overall effect on quotes.
Results
Marketscience effectively optimized the message mix to balance short-term sales growth with long-term brand equity and provided a number of valuable insights for the client:
- Brand equity had a contribution of over 50% to baseline quotes.
- TV & video drove 70% of brand equity in the long term, which translated to 37% of baseline quotes and 19% of total quotes.
- Brand messaging was the most efficient in driving quotes in the long-term, generating twice as many than savings and three times as many than de-positioning on a per-GRP basis.
- Investing more in brand messaging at the beginning of the year (to take advantage of its long tail and low levels of diminishing returns) would maximize the number of quotes in a current calendar year.
As a result of Marketscience’s analysis, the media mix was optimized to generate more quotes with the same budget. More importantly, the client was armed with the insights it needed to build a case for an increased marketing investment, which in turn drove further increase in profitable quotes.
What we did
- Short- and Long-term Effects via Marketing Mix Models
Client Quote
“Marketscience armed us with the data we needed to optimize our marketing investments. Their comprehensive approach enabled us to derive greater value from our marketing budget and gave us the data we needed to secure support for a significant increase in spend.”