R i - NYU Stern School of Business

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Referral engine email. Display. Paid & Organic Search. Direct Visits to company.com or. Affiliate Websites. Social M
The Long and Winding Road: Modeling the Influence of Channels in the Online Purchase Funnel Hongshuang Alice Li Doctoral Candidate

P.K. Kannan Ralph J. Tyser Professor of Marketing Science

Robert H. Smith School of Business University of Maryland, College Park, MD © Copyright 2008

Paid & Organic Search

Social Media

Costs vary Effectiveness varies

Referral engine

Direct Visits to company.com or Affiliate Websites

email

Display

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online marketing expenditures.

WordStream independent estimate based on observed marketing. 3 © Copyright 2008 Used with permission.

The model uses Firm.com customer behavioral data for rewards and non-rewards members for all online marketing channels Rewards Member Non-Rewards Member

Organic Search

Direct Visit

E-Mail

Customer 1

Referral

Display Impression

Display Click-Through

Organic Search

Customer 2 4

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Research Questions • What does the firm lose by using last-click model to understand this phenomenon? • Is there carry-over effect from repeated visits through a certain channel? Is there spillover effect across different channels? • What is the impact of consideration and the nature of marketing interventions on online shopper? • What is the incremental effectiveness of these marketing interventions in bringing in visitors and in leading to a purchase? 5

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Conceptual Model Channels Considered

Customer-Initiated

Firm-Initiated

Search, Direct, Affiliates, Referral Channel

Display, E-Mail

Search Costs

Search Costs Spillover Effects

Visit Through Channels

Direct

Search

E-Mail

Carryover Effects

Benefits Purchase At Website

Benefits

Overall attractiveness of making a purchase = f(mean attribute level of service, cumulative information content of previous visits)

The Model

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Consideration Stage For each consumer “i” we have a vector of probabilities of considering each channel q

These probabilities are vectors of consumer specific variables Ri

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Purchase Stage • Utility of purchase on a visit through channel j J

Wijn =Wijn + ζ ijn =γ ij + ∑ γ ij ,k Gikn + ζ ijn k =1

j =1, ,J Informational Stock

G= ikn

n −1

( tikn −tikh ) × − d (1 λ ) , ∑ ikh k h =1

(1- Decay Rate)

• Probability of a purchase conditional on visit and consideration Pr( Bijn= 1| Ci , Vin=

j= )

exp(Wijn / τ )

1 + exp(Wijn / τ )

,

= j 1, ,J 9

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Visit Stage • Utility in making a visit to channel j U ijn = U ijn + ηijn = β 0,ij − βij Sijn + τ I ijn + ηijn

• Specification of “search” cost

j = 1, ,J

Inclusive value

J

Sijn =

exp( µ j Tijn + ∑ µ j ,k Lik ,n −1 ) k =0 J

1 + exp( µ j Tijn + ∑ µ j ,k Lik ,n −1 )

Prior Channel Visit

,

k =0

Cumulative time spent coming through a channel 10 © Copyright 2008

Putting it all together…. • Joint probability of consideration, visit and purchase P(= Bijn 1,= Vin j | = Ci ) Pr(= Bijn 1| Ci ,= Vin j ) P(= Vin j | Ci ) • Likelihood L( B= |θ )

Ni

I

J

2 J −1

ijn  = Σ × P C H α b ( | , ) ∏∏∏ ∑ i k  ijn1 bijn 0

= n 1 =i 1 =j i k =1

where

B

(1− Bijn )

 

= bijn1 P= (Vin j | Ci ; β , µ ,τ ) P= ( Bijn 1| C= j; γ , λ ) i , Vin bijn 0 = P(Vin = j | Ci ; β , µ ,τ )[1 − P( Bijn =1| Ci , Vin = j; γ , λ )] 11

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Data • Data from a firm in the hospitality industry • Path data for each customer • 68 days time window, from June to August in 2011. • 7 cohorts of customers, stratified sample. • Information on – the customer’s rewards tier, the channels they visited, and marketing interventions they encountered. 12

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Results – Consideration Stage

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Results – Visit Stage Channels Variables Visit Stage: Intercept Search Cost INV(tau) Search Cost: Cum time Lag_natural Lag_paid Lag_referral Lag_direct Lag_email Lag_display Lag_no visit

Organic Search

Paid Search Referral Direct E-Mail (Estimates are posterior means)

Display

2.27 -1.37 0.35

1.26 -1.96

-0.92 -3.58

0.40 -3.11

-0.36 -3.58

1.92 -1.56

-0.77 -2.10 -0.79 -0.38 0.47 0.74 -0.27 1

-1.15 -0.18 -1.97 -0.13 -0.29 -0.18 -0.27 1

-0.99 -0.20 -0.19 -2.43 0.03 -0.21 0.16 1

-1.41 0.07 0.11 0.05 -1.71 0.24 -0.04 1

-0.78 -0.30 -0.49 0.12 0.19 -2.04 0.11 1

-0.79 -0.25 0.43 0.01 -0.01 0.49 -1.26 1

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Results – Purchase Stage Channels Variables Purchase Stage: Intercept Info Stock - Organic Search Info Stock - Paid Search Info Stock - Referral Info Stock - Direct Info Stock - E-Mail Info Stock - Display Retention Rate

Organic Search

-1.29 0.68 0.03 0.16 0.22 0.28 0.07 0.73

Paid Search Referral Direct E-Mail (Estimates are posterior means) -0.94 0.17 0.44 0.03 -0.11 0.61 0.16 0.62

-1.11 -0.39 0.03 0.35 0.70 -0.15 -0.38 0.57

-1.29 0.21 0.23 0.18 0.73 0.08 0.22 0.59

-1.38 -0.21 0.04 0.11 0.22 0.83 0.28 0.69

Display

-1.39 -0.12 -0.26 0.44 0.47 0.06 0.40 0.47

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Attribution Comparison

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Attribution Comparison

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PAID SEARCH COHORT 1 (11/3 BOOKERS, no paid search during last week) COHORT 1 (11/3 NONBOOKERS, no paid search during last week) COHORT 2 (12/8 BOOKERS, no paid search during last week) COHORT 2 (12/8 NONBOOKERS, no paid search during last week) COHORT 3 (10/27 BOOKERS, paid search always on) COHORT 3 (10/27 NONBOOKERS, paid search always on) COHORT 4 (10/20 BOOKERS, paid search always on) COHORT 4 (10/20 NONBOOKERS, paid search always on) COHORT 5 (11/10 BOOKERS, no paid search during next-to-last week) COHORT 5 (11/10 NONBOOKERS, no paid search during next-to-last week) COHORT 6 (12/15 BOOKERS, no paid search during next-to-last week) COHORT 6 (12/15 NONBOOKERS, no paid search during next-to-last week) OFF ON OFF

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Thursday, December 15, 2011

Wednesday, December 14, 2011

Tuesday, December 13, 2011

Monday, December 12, 2011

Sunday, December 11, 2011

Saturday, December 10, 2011

Friday, December 09, 2011

Thursday, December 08, 2011

Wednesday, December 07, 2011

Tuesday, December 06, 2011

Monday, December 05, 2011

Sunday, December 04, 2011

Saturday, December 03, 2011

Friday, December 02, 2011

Thursday, December 01, 2011

Wednesday, November 30, 2011

Tuesday, November 29, 2011

Monday, November 28, 2011

Sunday, November 27, 2011

Saturday, November 26, 2011

Friday, November 25, 2011

Thursday, November 24, 2011

Wednesday, November 23, 2011

Tuesday, November 22, 2011

Monday, November 21, 2011

Sunday, November 20, 2011

Saturday, November 19, 2011

Friday, November 18, 2011

Thursday, November 17, 2011

Wednesday, November 16, 2011

Tuesday, November 15, 2011

Monday, November 14, 2011

Sunday, November 13, 2011

Saturday, November 12, 2011

Friday, November 11, 2011

Thursday, November 10, 2011

Wednesday, November 09, 2011

Tuesday, November 08, 2011

Monday, November 07, 2011

Sunday, November 06, 2011

Saturday, November 05, 2011

Friday, November 04, 2011

Thursday, November 03, 2011

Wednesday, November 02, 2011

Tuesday, November 01, 2011

Monday, October 31, 2011

Sunday, October 30, 2011

Saturday, October 29, 2011

Friday, October 28, 2011

Thursday, October 27, 2011

Wednesday, October 26, 2011

Tuesday, October 25, 2011

Monday, October 24, 2011

Sunday, October 23, 2011

Saturday, October 22, 2011

Friday, October 21, 2011

Thursday, October 20, 2011

Wednesday, October 19, 2011

Tuesday, October 18, 2011

Monday, October 17, 2011

Sunday, October 16, 2011

Saturday, October 15, 2011

Friday, October 14, 2011

Thursday, October 13, 2011

Wednesday, October 12, 2011

Tuesday, October 11, 2011

Monday, October 10, 2011

Sunday, October 09, 2011

Saturday, October 08, 2011

Friday, October 07, 2011

Thursday, October 06, 2011

Wednesday, October 05, 2011

Tuesday, October 04, 2011

Monday, October 03, 2011

Sunday, October 02, 2011

Saturday, October 01, 2011

Friday, September 30, 2011

Thursday, September 29, 2011

Wednesday, September 28, 2011

Tuesday, September 27, 2011

Monday, September 26, 2011

Sunday, September 25, 2011

Saturday, September 24, 2011

Friday, September 23, 2011

Thursday, September 22, 2011

Wednesday, September 21, 2011

Tuesday, September 20, 2011

Monday, September 19, 2011

Paid-Search Off Field Study

10K visitors who visited on Thursday, Nov 3 and PURCHASED 10K visitors who visited on Thursday, Nov 3 and DID NOT PURCHASE ON

10K visitors who visited on Thursday, Dec 8 and PURCHASED 10K visitors who visited on Thursday, Dec 8 and DID NOT PURCHASE

10K visitors who visited on Thursday, Oct 27 and PURCHASED 10K visitors who visited on Thursday, Oct 27 and DID NOT PURCHASE 10K visitors who visited on Thursday, Oct 20 and PURCHASED 10K visitors who visited on Thursday, Oct 20 and DID NOT PURCHASE 10K visitors who visited on Thursday, Nov 10 and PURCHASED 10K visitors who visited on Thursday, Nov 10 and DID NOT PURCHASE 10K visitors who visited on Thursday, Dec 15 and PURCHASED 10K visitors who visited on Thursday, Dec 15 and DID NOT PURCHASE

• Pause Paid Search during two separate weeks in Nov & Dec 2011

• All other marketing interventions remained the same

Estimating Incremental Effects Paid Search On

Use proposed model to predict conversions during this period assuming paid search on and assuming paid search off Paid Search Off

Compare with Actuals Paid Search is Off

Actuals 19

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Incremental Effects of Paid Search • Traffic from Search channel down approximately 10% • Over half of conversions attributed to Paid Search picked up by other channels – especially Organic Search • Rest of Paid Search conversions are lost (not captured by other channels) 21

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Issues • Analysis is on historical data • Data integration and analysis in near real time • Validating the results in near real time • Marketing actions to be proactive than reactive

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Thanks Q&A

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Path Analysis

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