Unit-5

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.
Different types of store layouts and designs

 Grid.
 Herringbone.
 Loop, or racetrack.
 Free-flow.
 Boutique.
 Straight or spine.
 Diagonal.
 Angular.

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 sale
ability 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 jur y
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.