Do Customer Mindset Metrics Explain Brand Performance Koen Pauwels Tuck School of Business at Dartmout with Marc Van

2. Branding experts vs quant modelers Kotler and Keller Capture customers� hearts and minds Hanssens, Parsons, Schultz Show me the money!

3. �How do you know if you are doing a good job for the customer? It is not shown in your profits this year but in your share of the customer�s mind and heart. Companies that make steady gains in mind share and heart share will inevitably make gains in market share and profitability.� Philip Kotler The usefulness of consumer metrics has been questioned and �researchers and companies find that they can bypass unobserved metrics� Gupta and Zeithaml 2006, p.8 Recently, the Marketing Science Institute defined as one of its research priorities for 2006-2008, the combining of behavioral and attitudinal data to predict brand performance.

5. Call for marketing accountability has increased, and is seen as a key to regaining marketing�s standing in the C-suite (Webster, Malter and Ganesan 2003). Many marketers believe that behavioral or output measures have to be complemented by mindset metrics (LaPointe 2005). Marketing�s role is in moving customers through different phases of the hierarchy. Specific actions that strengthened the position of the brand in customers �hearts and minds� may not have translated into purchases yet. Mindset metrics are needed to verify that marketing moved customers in the right direction (Keller and Lehmann 2006).

6. Research Questions Is there any interest in collecting mindset measures if hard data on purchases and marketing mix investments are already available? How large and how long are the effects of consumer mindset metrics versus marketing-mix on purchases?

7. Research Background Mindset metrics are the building blocks of the hierarchy of effects (HOE) model (Vakratsas and Ambler 1999). Central idea is that each advertisement exposure moves the consumer through an hierarchical sequences of events, ever closer to ultimate purchase (Palda 1966; Lavidge and Steiner 1961; Howard and Sheth 1969). Recently, mindset metrics and the HOE have been used to assess brand performance from a customer�s perspective (Keller and Lehmann 2006).

8. Research Background Review shows that the evidence on the sequence of effects is mixed � depends on a number of product category and consumer factors. Advocates of mindset metrics have hailed them as early warnings of performance of brands (Ambler 2003, Keller and Lehman 2005). Underlying logic is that if the marketing mix becomes less attractive relative to competitive offerings, the consumer may not react by switching to another brand. Mindset metrics may diagnose a decline in interest and thus provide management a chance for remedial action. All the more important if it is hard to regain a lost customer

17. Descriptive. Not a formal model, but a VARX that is going to allow me in a very flexible way to capture the dynamics in this phenomenon. Pricing is inherently dynamic, as are the other drivers. Competition (Store trffic) Past prices Demand Cost Category management Each of the these drivers/forces can extracted from this modelDescriptive. Not a formal model, but a VARX that is going to allow me in a very flexible way to capture the dynamics in this phenomenon. Pricing is inherently dynamic, as are the other drivers. Competition (Store trffic) Past prices Demand Cost Category management Each of the these drivers/forces can extracted from this model

19. Step 2: Generalized FEVD Quantify the dynamic influence of past purchases, price, promotions, advertising, distribution, awareness, consideration and liking on brand purchase. It provides a measure of the relative impact over time of shocks initiated by each of the endogenous variables. Percentage of variation in brand purchases for a brand that can be attributed to contemporaneous and past changes in each of the endogenous variables. Analogous to dynamic R-square.

24. Inertia 47% Own Marketing Mix 23% Price 7.5% Promotion 7.5% Advertising 4.4% Distribution 3.5% Competitive Marketing Mix 13.5% Price 3.4% Promotion 4.0% Advertising 3.0% Distribution 3.0% Own Mindset Metrics 8.5% Awareness 3.5% Consideration 2.7% Liking 2.2% Competitive Mindset Metrics 8% Awareness 2.7% Consideration 3.1% Liking 2.2%

27. Cumulative Performance Elasticity to Marketing Mix and Mindset Metrics

28. Cumulative Response Elasticity to Marketing Mix and Mindset Metrics

30. Wear-in of the Lead Effects on Brand Performance 

31. Mind metrics predict purchases over-and-above the part explained by marketing-mix actions awareness, consideration and affect metrics impact purchases above and beyond the direct effect of advertising, price and promotions. Competitive actions and competitive mindset metrics matter a great deal as well. Behavioral outcome models would benefit from inclusion of mindset metrics. Quantitative modelers should aim to include mindset metrics, while branding experts should aim to include competition. Conclusions

32. Conclusions Brand purchases are most responsive to distribution, followed by price, promotions and then advertising. Mindset metrics have significant cumulative effects on brand purchases, with liking/affect having the largest effect. Their lead time of about seven weeks allows brand managers room to recognize problems and take remedial action before purchases decline. As for the impact of marketing mix on mindset metrics, advertising has largest effect on awareness, distribution on consideration and price and promotion have largest effects on liking.

33. Our triple call to arms

34. Next steps Generalize to other categories and explain cross-category variation (involvement, storability,�) Explain variation across brands and time: which metrics should a growing brand focus on when? Analyze the sequence in mindset metrics: awareness ? consideration ? buy ? affect ? Generalize to other settings, such as more expensive products and longer purchase cycles

35. Thank you!