Marketing Profs

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Optimization means "the action of finding the best solution." Mathematical programming, or optimization modeling, is a branch of mathematical modeling that is concerned with finding the optimal solution to a problem.

Initially, optimization was used as a way to mathematically determine the optimal allocation of scarce resources. The concept has been borrowed by businesspeople to aid decision-making.

Optimization has been used in the areas of the manufacturing supply chain, airline revenue yields, and financial investment risk assessment. More recently, the concept is being adopted by marketing.

You've probably heard phrases such as site optimization, search engine optimization, event optimization, and campaign optimization. A more recent concept with broader application to marketing is the idea of marketing optimization.

Marketing optimization addresses determining the optimal subset of combinations that will maximize profit.

Marketing's primary responsibility to the organization is to generate profitable revenue growth. It would seem that maximizing profit is a relatively easy thing to do: just achieve the full profit potential for each and every customer. Easier said then done.

The sheer number of customers, products, and communication channels creates complexity, often making it difficult to find the right set of customer-product-channel combinations that will maximize profit while ensuring customer satisfaction.

At the same time, product life cycles are getting shorter, competition is fiercer, market fragmentation and the number of segments are greater, and change is accelerating, adding further complexity to making marketing decisions. Marketing optimization is designed to help address this level of complexity.

With the use of data and analytics, a company can develop marketing optimization processes and models that help determine which customers should be offered which product through which channel, and which purchases customers make via what channel that are the most profitable.

It can also help determine the maximum possible profitability of a multi-offer campaign and the optimal mix of offers to send each customer.