Market Basket Analysis

Market Basket Analysis is one of the most common and useful types of data analysis for
marketing and retailing. The purpose of market basket analysis is to determine what products
customers purchase together. It takes its name from the idea of customers throwing all their
purchases into a shopping cart (a “market basket”) during grocery shopping. Knowing what
products people purchase as a group can be very helpful to a retailer or to any other
company. A store could use this information to place products frequently sold together into
the same area, while a catalog or World Wide Web merchant could use it to determine the
layout of their catalog and order form. Direct marketers could use the basket analysis results
to determine what new products to offer their prior customers.

In some cases, the fact that items sell together is obvious every fast-food restaurant asks their
customers “Would you like fries with that?” whenever they go through a drive-through
window. However, sometimes the fact that certain items would sell well together is far from
obvious. A well-known example is that a supermarket performing a basket analysis discovered
that diapers and beer sell well together on Thursdays. Though the result does make sense –
young couples stocking up on supplies for themselves and for their children before the weekend
starts – it’s not the sort of thing that someone would normally think of right away. The strength
of market basket analysis is that by using computer data mining tools, it’s not necessary for a
person to think of what products consumers would logically buy together – instead, the
customers’ sales data is allowed to speak for itself. This is a good example of data-driven
marketing.

Once it is known that customers who buy one product are likely to buy another, it is possible
for the company to market the products together, or to make the purchasers of one product the
target prospects for another. If customers who purchase diapers are already likely to purchase
beer, they’ll be even more likely to if there happens to be a beer display just outside the diaper
aisle. Likewise, if it’s known that customers who buy a sweater and casual pants from a certain
mail-order catalog have a propensity toward buying a jacket from the same catalog, sales of
jackets can be increased by having the telephone representatives describe and offer the jacket
to anyone who calls in to order the sweater and pants. Still better, the catalogue company can
provide an additional 5% discount on a package containing the sweater, pants, and jacket
simultaneously and promote well the complete package. The dollar amount of sales is
guaranteed to go up. By targeting customers who are already known to be likely buyers, the
effectiveness of marketing is significantly increased – regardless of if the marketing takes the
form of in-store displays, catalog layout design, or direct offers to customers. This is the
purpose of market basket analysis – to improve the effectiveness of marketing and sales tactics
using customer data already available to the company.

Store layout, Design and Visual

Merchandising, Atmospherics
 Store layout

It is the process of managing the floor space adequately to facilitate the customers and to
increase the sale. Since store space is a limited resource, it needs to be used wisely.

Space management is very crucial in retail as the sales volume and gross profitability depends
on the amount of space used to generate those sales.

Optimum Space Use

While allocating the space to various products, the managers need to consider the following
points −

 Product Category −
o Profit builders− High profit margins-low sales products. Allocate quality space rather than quantity.
o Star performers− Products exceeding sales and profit margins. Allocate large amount of quality space.
o Space wasters− Low sales-low profit margins products. Put them at the top or bottom of shelves.
o Traffic builders− High sales-low profit margins products. These products need to be displayed close to
impulse products.
 Size, shape, and weight of the product.
 Product adjacencies − It means which products can coexist on display?
 Product life on the shelf.

Retail Floor Space

Here are the steps to take into consideration for using floor space effectively −

 Measure the total area of space available.

 Divide this area into selling and non-selling areas such as aisle, storage, promotional displays,
customer support cell, (trial rooms in case of clothing retail) and billing counters.
 Create a Planogram, a pictorial diagram that depicts how and where to place specific retail products
on shelves or displays in order to increase customer purchases.
 Allocate the selling space to each product category. Determine the amount of space for a particular
category by considering historical and forecasted sales data. Determine the space for billing counter
by referring historical customer volume data. In case of clothing retail, allocate a separate space for
trial rooms that is near the product display but away from the billing area.
 Determine the location of the product categories within the space. This helps the customers to locate
the required product easily.
 Decide product adjacencies logically. This facilitates multiple product purchase. For example, pasta
sauces and spices are kept near raw pasta packets.
 Make use of irregular shaped corner space wisely. Some products such as domestic cleaning devices
or garden furniture can stand in a corner.
 Allocate space for promotional displays and schemes facing towards road to notify and attract the
customers. Use glass walls or doors wisely for promotion.
 Store Layout and Design
Customer buying behavior is an important point of consideration while designing store layout.
The objectives of store layout and design are −

 It should attract customers.

 It should help the customers to locate the products effortlessly.
 It should help the customers spend longer time in the store.
 It should motivate customers to make unplanned, impulsive purchases.
 It should influence the customers’ buying behavior.

Store Layout Formats

The retail store layouts are designed in way to use the space efficiently. There are broadly three
popular layouts for retail stores −

Grid Layout − Mainly used in grocery stores.

Loop Layout − Used in malls and departmental stores.

Free Layout − Followed mainly in luxury retail or fashion stores.

Design and Visual Merchandising, Atmospherics

Visual Merchandising
 It is the activity of developing floor plans and three-dimensional displays in order to engage
customers and boost sales. Both, products or services can be displayed to highlight their
features and benefits.

It is based on the idea that good looks pay off. It requires creativity and an eye for presenting
the products or services aesthetically so that the customers find it appealing and are motivated
towards buying. Visual merchandising involves displaying products or services aesthetically
using various objects, colors, shapes, materials, designs, and styles to attract the customers.

Identifying the Sales to Marketing

Effort Relationship and its Modeling
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’s primarily digital, including (but not limited to):

 Content marketing
 Social media marketing (SMM)
 Email marketing
 Organic traffic and search engine optimization (SEO)
 PPC ads
 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. Systemize lead scoring

Marketing and sales teams need to have an ongoing conversation about lead conversion —
what’s working, what’s not, who it’s working for, etc. Creating and converting MQLs to SQLs
and, ultimately, to win deals is an always moving target — that’s why it’s important to ask
these questions, to figure out why it’s 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’s 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 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 your sales team’s expertise

Ideally, sales teams are brilliant at lead generation and closing sales but aren’t always their own
best advocates when it comes to selling themselves. That’s why they need your 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 your 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 you’re trying to align two departments, it’s not enough to just focus on KPIs and
collaborative practices. When you’re breaking down departmental barriers, the lines will likely
blur between what the marketing and sales teams are working on.

It’s 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. Your team ROI may require both departments to analyze email campaigns or lead
generation data to determine what’s working and what’s not. Looking at these numbers
individually just pushes your teams back into a silo situation where the work becomes
fragmented.

MARKETING MIX MODELING (MMM)

Marketing mix modeling (MMM) is statistical analysis such as multivariate regressions on

sales and marketing time series data to estimate the impact of various marketing tactics
(marketing mix) on sales and then forecast the impact of future sets of tactics. It is often used
to optimize advertising mix and promotional tactics with respect to sales revenue or profit.

The techniques were developed by econometricians and were first applied to consumer
packaged goods, since manufacturers of those goods had access to good data on sales and
marketing support.[citation needed] Improved availability of data, massively greater
computing power, and the pressure to measure and optimize marketing spend has driven the
explosion in popularity as a marketing tool. In the recent times MMM has found acceptance as
a trustworthy marketing tool among the major consumer marketing companies. Often in the
digital media context, MMM is referred to as attribution modeling.
 Marketing mix modeling is an analytical approach that uses historic information, such as
syndicated point-of-sale data and companies’ internal data, to quantify the sales impact of
various marketing activities. Mathematically, this is done by establishing a simultaneous
relation of various marketing activities with the sales, in the form of a linear or a non-linear
equation, through the statistical technique of regression. MMM defines the effectiveness of
each of the marketing elements in terms of its contribution to sales-volume, effectiveness
(volume generated by each unit of effort), efficiency (sales volume generated divided by cost)
and ROI. These learnings are then adopted to adjust marketing tactics and strategies, optimize
the marketing plan and also to forecast sales while simulating various scenarios.

Components of Marketing mix modeling (MMM)

Marketing-mix models decompose total sales into two components:

 Base Sales: This is the natural demand for the product driven by economic factors like pricing, long-
term trends, seasonality, and also qualitative factors like brand awareness and brand loyalty.
 Incremental Sales: Incremental sales are the component of sales driven by marketing and promotional
activities. This component can be further decomposed into sales due to each marketing component
like Television advertising or Radio advertising, Print Advertising (magazines, newspapers etc.),
Coupons, Direct Mail, Internet, Feature or Display Promotions and Temporary Price Reductions. Some
of these activities have short-term returns (Coupons, Promotions), while others have longer term
returns (TV, Radio, Magazine/Print).

Elements measured in Marketing mix modeling (MMM)

(i) Base and incremental volume

The very break-up of sales volume into base (volume that would be generated in absence of
any marketing activity) and incremental (volume generated by marketing activities in the short
run) across time gain gives wonderful insights. The base grows or declines across longer
periods of time while the activities generating the incremental volume in the short run also
impact the base volume in the long run. The variation in the base volume is a good indicator of
the strength of the brand and the loyalty it commands from its users.

(ii) Media and advertising

Market mix modeling can determine the sales impact generated by individual media such as
television, magazine, and online display ads. In some cases it can be used to determine the
impact of individual advertising campaigns or even ad executions upon sales. For example, for
TV advertising activity, it is possible to examine how each ad execution has performed in the
market in terms of its impact on sales volume.

(iii) Trade promotions

Trade promotion is a key activity in every marketing plan. It is aimed at increasing sales in the
short term by employing promotion schemes which effectively increases the customer
awareness of the business and its products. The response of consumers to trade promotions is
not straight forward and is the subject of much debate. Non-linear models exist to simulate the
response. Using MMM we can understand the impact of trade promotion at generating
incremental volumes. It is possible to obtain an estimate of the volume generated per promotion
event in each of the different retail outlets by region. This way we can identify the most and
least effective trade channels. If detailed spend information is available we can compare the
Return on Investment of various trade activities like Every Day Low Price, Off-Shelf Display.
We can use this information to optimize the trade plan by choosing the most effective trade
channels and targeting the most effective promotion activity.

(iv) Pricing

Price increases of the brand impact the sales volume negatively. This effect can be captured
through modeling the price in MMM. The model provides the price elasticity of the brand
which tells us the percentage change in the sales for each percentage change in price. Using
this, the marketing manager can evaluate the impact of a price change decision.

(v) Distribution

For the element of distribution, we can know how the volume will move by changing
distribution efforts or, in other words, by each percentage shift in the width or the depth of
distribution. This can be identified specifically for each channel and even for each kind of outlet
for off-take sales. In view of these insights, the distribution efforts can be prioritized for each
channel or store-type to get the maximum out of the same. A recent study of a laundry brand
showed that the incremental volume through 1% more presence in a neighborhood Kirana store
is 180% greater than that through 1% more presence in a supermarket.[6] Based upon the cost
of such efforts, managers identified the right channel to invest more for distribution.

(vi) Launches

When a new product is launched, the associated publicity and promotions typically results in
higher volume generation than expected. This extra volume cannot be completely captured in
the model using the existing variables. Often special variables to capture this incremental effect
of launches are used. The combined contribution of these variables and that of the marketing
effort associated with the launch will give the total launch contribution. Different launches can
be compared by calculating their effectiveness and ROI.

(vii) Competition

The impact of competition on the brand sales is captured by creating the competition variables
accordingly. The variables are created from the marketing activities of the competition like
television advertising, trade promotions, product launches etc. The results from the model can
be used to identify the biggest threat to own brand sales from competition. The cross-price
elasticity and the cross-promotional elasticity can be used to devise appropriate response to
competition tactics. A successful competitive campaign can be analyzed to learn valuable
lesson for the own brand. television & Broadcasting: the application of MMM can also be
applied in the broadcast media. Broadcasters may want to know what determine whether a
particular will be sponsored. This could depend on the presenter attributes, the content, and the
time the program is aired. these will therefore form the independent variables in our quest to
design a program salability function. Program salabibility is a function of the presenter
attributes, the program content and the time the program is aired.
Measuring Advertising
Effectiveness | Pretesting and
Post Testing
The managerial responsibility in the area of advertising does not come to an end with the
execution of an advertising programme. Any sound managerial effort is finally interested in
goal attainment and, therefore, always ready to evaluate the results.

Evaluation of advertising or advertising effectiveness refers to the managerial exercise aimed

at relating the advertising results to the established standard of performance and objectives so
as to assess the real value of the advertising performance.

This evolution exercise is also known as advertising research. It is an attempt to know whether
the message designed properly has reached the greatest number of prospects at the least
practical cost.

It is an attempt to measure whether the time, talent and the treasure invested in the creative
activity has resulted in attaining the goals of profit maximization to the advertiser and
satisfaction to the consumers at large.

What is to be measured?

It is quite obvious that in the area of ad effectiveness evaluation, the advertiser is to measure
the ad effectiveness.

However, it is not clear as to what is ‘ad effectiveness’?

Ad effectiveness evaluation is a research activity and by its very nature, it is to establish the
cause and effect relation between the efforts and the results. This ad effectiveness is to be seen
in five areas namely, markets, motives, messages, media and overall results.

In each area, one is to look in for the advertising ability and the achievements in the light of
preset objectives. Advertising testing is indispensable because, it enables to get down to the
facts, to decide on spending to guard against the mistaken notion that you have to keep in touch
with latest trends, to separate wheat from the chaff, the sheep from goats, the winning ideas
from the duds, to multiply the results from the rupee investments so made.

When to test?

Testing of ad effectiveness is possible at any stage of advertising process. It can be done before
the advertising campaign begins or during its run or after the campaign is fully run. Pre-testing
gives the maximum safety as much is not lost; concurrent testing makes him to lose little more
as the advertising process has advanced.

Post-testing results in maximum loss if it fails as the whole show is over and he gets the post-
mortem report, as to what has happened. Nothing is certain unless and until, we are sure about
the accuracy and reliability of feed-back that the advertiser gets from such research.

How to test?

Fortunately, 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.

I. Pre-testing methods

1. 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.

2. Opinion test

Opinion test or consumer jury test is one that obtains the preference of a sample group of typical
prospective consumers of the product or the service for an ad or part of it. The members of the
jury rate the ads as to their head-lines, themes, illustrations, slogans, by direct comparison.

Getting preference from a juror is better than getting it from a member of general public or an
ad expert.

Jury’s preference is arrived at by seeking answers to the questions as to which ad was seen
first?

Which was most convincing?

Which was most interesting? And so on.

Accordingly, the top ranking ad gets selected.

3. Dummy magazine and port-folio test

Dummy magazines are used to pre-test the ads under conditions of approximation resembling
normal exposure. A dummy magazine contains standard editorial material, control ads that
 have been already tested and the ads to be tested. The sample households receive these
magazines and the interviews are conducted to determine recall scores.

Port-folio test is like that of dummy magazine test except that the test ads are placed in a folder
that contains control ads. The respondents are given these folders for their reading and
reactions. The test scores are determined in the interview. The ad with highest score is taken
as the best.

4. Inquiry test
It involves running two or more ads on a limited scale to determine which is most effective in
terms of maximum inquiries for the offers made. These inquiry tests are used exclusively to
test copy appeals, copies, illustrations, and other components.

Any of these elements may be checked. The point that is to be checked is changed and all other
components are unaltered, to get the score.

5. Mechanical tests
These mechanical tests are objective in nature unlike the one already explained. These help in
provide good measures as to how respondent are eyes and emotions reaching a given
advertisement.

The most widely used mechanical devices are:

 Eye Movement Camera

 Perceptoscope
 Psycho-galvanometer and
 Tachistoscope.

II. Concurrent Testing Methods

1. 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 or the
programme.

2. Consumer diaries
This method involves giving the families selected in advance of 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.

3. Mechanical devices
The mechanical devices used to measure the ad differences concurrently are more common to
broadcast media.

These are:
 Audio meters
 Psychogalvanometer
 Tachistoscope and
 Truck Electronic Unit.

4. 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 organisations 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? Can be determined.

III. Post-testing methods

1. Inquiry tests
It is controlled experiment conducted in the field. In inquiry test, the number of consumer
inquiries produced by an advertising copy or the medium 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 or the medium succeeds in attracting and retaining reader or viewer attention. To
encourage inquiries, the advertiser offers to send something complimentary to the reader or the
viewer, if he replies.

2. 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 group of
readers. 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 keyed or the given address.

3. Recognition tests
Recognition is a matter of identifying something as having seen or heard before. It is based on
the memory of the respondent. It attempts to measure the ad effectiveness by determining the
number of respondents who have read or seen the ads before. To arrive at the results, readership
or listenership surveys are conducted.

4. Recall tests
Recalling is more demanding than recognizing as a test of memory. 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.

There are several variations of this test. One such test is Triple Association Test which is
designed to test copy themes or the slogans and reveals the extent to which they have
remembered.

5. Sales tests
Sales tests represent controlled experiment under which actual field conditions than the
simulated are faced. It attempts to establish a direct relationship between one or more variables
and sales of a product or service. It facilitates testing of one ad against another and one medium
against another.

To sum-up, ad effectiveness testing is a must to avoid costly mistakes, to select the best
alternative from the apparently equal alternatives, to resolve the differences of opinion and to
add to the store of knowledge having deep bearing on advertising effectiveness and efficiency.
Ad effectiveness testing can be at three levels namely, prior to, during and after the release of
an ad.

There are many methods to choose. The final results depend on the validity, reliability and the
relevance of each method employed. Testing, if done in good faith, can payout its costs and
rich dividends too.

Optimizing Advertising
The purpose of quick advertising optimization is to find slices of inventory that provide a
positive return-on-investment (ROI) for your campaigns. With Exact Drive you can optimize
to a Cost per Click (CPC) or Cost per Acquisition (CPA).

The concept of advertising optimization isn’t very complicated: it’s taking past performance
and applying it to a future goal, such as cost per click (CPC) or cost per acquisition (CPA). If
you’re likely to get a click, spend a lot; if you’re not, spend a little or don’t buy at all.

Even though it appears easy to provide example advertising optimization that way, in practice
it can be hard to do. Should we calculate the click through rate for a whole website or a specific
section? Does the creative itself make a difference to performance? Does frequency? Recency?
Should we break out click through rate by day of the week? Geographic region? Can we bucket
groups of similar sites with low volume and still optimize (apply a click through rate) to that?
These are just a handful of questions that can be related to advertising optimization.

There’s one more piece to consider, and that’s the “Learning Stage.” Before you can decide
how to calculate or optimize click through rates or conversion rates or any other performance
metric, you have to get some initial data of some kind. Basically, buying ad impressions to
learn on usually has a much lower return on investment (ROI) than buying “optimized” because
you are flying relatively blind, so you want to strategize a bit when buying and bidding in the
learn stage.

All of this makes advertising optimization more complex than it seems. Good advertising
optimization has a lot of “levers” that can be tweaked, and we would like to offer our clients
the ability to tweak them using their own intuition and experience in combination with our
analytics and reporting system.

Here are some of the types of things you can affect your campaign within the Exact Drive
advertising optimization system:
(i) Learn budget: We recommend starting with roughly 20% of your campaign budget if you
need a ballpark figure, but you can choose how much to spend on learn.

(ii) Learn bids: We use a specially calculated metric called Estimated Average Price to get
started bidding.

(iii) Throttling: We cap bids according to how confident we are in our performance
calculations. This means, basically how much data we have to base click through rates and
conversion rates on. A good rule of thum is to dial your throttling up or down according to how
fast you need or want data.

(iv) Copy or pre-populate Learn: If you have learn data from other sources, we can get you
started ahead of the game.

(v) Getting out of Learn: How much data do you need to be confident of performance
accuracy? You can trust us or adjust the number of events you need to get out of learn.

(vi) Frequency-Recency Modifier: All bids, learn or optimized, are adjusted via a frequency-
recency modifier.

(vii) Projected learn modifier: This can affect how fast you decide to “give up” on certain
inventory or get out of learn and into optimized bidding.

(viii) Targeted Inventory: We optimize to groups of objects, such as a creative-campaign-

pixel-inventory tag bucket. If you target different inventory types, such as above and below the
fold, in different campaigns, you will effectively break out optimization.

Pay Per Click (PPC)

Online Advertising
PPC is an online advertising model in which advertisers pay each time a user clicks on one of
their online ads.

There are different types of PPC ads, but one of the most common types is the paid search ad.
These ads appear when people search for things online using a search engine like Google –
especially when they are performing commercial searches, meaning that they’re looking for
something to buy. This could be anything from a mobile search (someone looking for “pizza
near me” on their phone) to a local service search (someone looking for a dentist or a plumber
in their area) to someone shopping for a gift (“Mother’s Day flowers”) or a high-end item like
enterprise software. All of these searches trigger pay-per-click ads.
In pay-per-click advertising, businesses running ads are only charged when a user actually
clicks on their ad, hence the name “pay-per-click.”

Other forms of PPC advertising include display advertising (typically, serving banner ads) and
remarketing.

In order for ads to appear alongside the results on a search engine (commonly referred to as a
Search Engine Results Page, or SERP), advertisers cannot simply pay more to ensure that their
ads appear more prominently than their competitor’s ads. Instead, ads are subject to what is
known as the Ad Auction, an entirely automated process that Google and other major search
engines use to determine the relevance and validity of advertisements that appear on their
SERPs.

Working

As its name implies, the Ad Auction is a bidding system. This means that advertisers must bid
on the terms they want to “trigger,” or display, their ads. These terms are known as keywords.

Say, for example, that your business specializes in camping equipment. A user wanting to
purchase a new tent, sleeping bag, or portable stove might enter the keyword “camping
equipment” into a search engine to find retailers offering these items.

At the moment the user submits their search query, the search engine performs the complex
algorithmic calculations that the Ad Auction is based upon. This determines which ads are
displayed, in which order, and by which advertiser.

Since you have to pay for each click on your ads, it’s imperative to only bid on keywords that
are relevant to your business, so you can be sure to get ROI from your ad spend. A keyword
tool can help you find the right keywords to bid on that are both likely to drive sales or
conversions, and are not prohibitively expensive.