The telecom operator’s ad budget efficiency increased by 8 times

AGATA CASE STUDY

Hi! Today we will talk about how the use of mathematical models that underlie the AGATA algorithm allowed the telecom operator to reduce the advertising budget by 35%, while achieving an 8-fold increase of its efficiency.

The telecom operator’s ad budget efficiency increased by 8 times

AGATA CASE STUDY

Hi! Today we will talk about how the use of mathematical models that underlie the AGATA algorithm allowed the telecom operator to reduce the advertising budget by 35%, while achieving an 8-fold increase of its efficiency.

повышение выручки предприятия на рынке парфюмерии и косметики

About the client

The project was carried out at a branch of one of the largest Russian telecom companies, which has been operating in the market for 20 years. At that time, the company's annual income was 61.2 billion rubles, with net profit reaching 5.1 billion rubles. The operator had a large technical base (transmission lines, underground utilities, mobile communication stations, etc.) and covered all regions of the country, however, due to its structural massiveness, it could not easily adapt to market changes or update its product portfolio.

Issues

The reasons for the aforementioned problems were the company’s conservatism and sluggishness. During the transition of subscribers from fixed-line communications to mobile and Internet, the company's revenue decreased. While competitors were trying to develop and offer new products to consumers, the operator’s range of services remained practically unchanged. Attempts to expand it and market it were non-systemic, and the impetus for the implementation of any idea always started from top management’s question: “Why don’t we do this and that?”.

Having no real answer, employees took up the implementation of new products without first studying the target audience, the competitive environment and the need for this product in the company's assortment. In general, the company was not evaluating market data and its own resources on an ongoing basis.

To any operational questions the answer always was the same:

Management

Why is this happening like this?

Marketing department

This is how it is with us

Management

Why are these employees responsible for these processes?

Marketing department

We've always worked that way

Specialists used procedures, regulations and structures that they had “inherited”, and worked only within the framework of plans drawn up on the basis of their existing resources, without analyzing external data.

As a result, the company's sluggishness, delay in decision-making, lack of market data analysis and the need to radically change as a market follower - all this has jeopardized the success and competitiveness of the telecom operator.

What did it lead to?

Lack of analytical approach
The company had no idea what technical, technological and human resources potential it had. The management could not understand where the company was lacking, and could not calculate its capabilities for the implementation of new projects.

Because marketers did not constantly analyze market data, it became difficult for the company to navigate the changing market, understand the needs of subscribers, see potential target audiences and evaluate competitors. The lack of proper understanding of market segments led to untimely and fruitless product portfolio updates.
Wasting the budget
Without a clear systematic approach, the marketing budget execution was ineffective. Most of the operator's money went to building product knowledge and getting a presence in the local press. The money was distributed between the regional branches without clear justifications: “Let's allocate so many millions of rubles to this branch for promotion. Let them do what they want, but the sales plan must be fulfilled.”

As a result of this approach and the lack of control over the quality of budget implementation, the same advertising messages were broadcast in all regions and to all audiences, without segmentation.
Personnel inefficiency
The key resources of the telecom operator were the technical base and personnel. Moreover, the latter could play both into the hands of the company and against it. A large staff allows a company to grow a true professional - an employee can go through all stages of production, starting from the lowest position and up to the top. If such a person becomes a leader, he or she will know in detail all the nuances of the work processes. However, an employee without the necessary knowledge and expertise may end up in a managerial position just because “he has been here for a long time and knows everything.”

Evaluating the performance of employees in such a large company was not much easier due to the lack of information about the complexity of the processes and the number of employees required to complete them. For example, to achieve KPI, you need 3-4 specialists. Then, what should you do with the rest of the "extras"?

How the issues were solved?

Solutions

I. Market analysis

First of all, it was decided to analyze external and internal resources and understand where the company was not improving. To do this, we’ve assessed the technical and human resources of the telecom operator, as well as promising market segments and the company's capabilities, from which it was able to make profits based on existing resources.

1

Consumer behavior
Reasons why subscribers were refusing landline communication in favor of a mobile one
2

Potential for growth
Development and potential of mobile communications and the Internet
3

Product range
The B2B share in the product structure of other market players

The results obtained made it possible to identify segments of interest and form a marketing strategy that allowed the outflow of terrestrial communications to be compensated by other types of communications that the company should have in its product portfolio.

Solutions

II. Sources of growth and SKU optimization

Next, we’ve evaluated each product category: wired communications, television, mobile communications, the Internet, telephone communications, and others. For all these categories, a complete analysis was made, P&L was calculated, sales channels (existing and prospective) and geography (in which regions and through which sales channels it was necessary to add product categories) were determined.

Based on AGATA mathematical algorithms for calculating market standards, we’ve managed to find new sources of growth, allocate the required number of SKUs in each category and optimize the marketing budget, that is, determine what share a Promotion (1 out of 4P) should have. It turned out that with all sources of growth for all types of activities and product categories, the ad budget should’ve been significantly less than what had been historically laid down from year to year.

Solutions

III. Marketing budget optimization

Having studied the structure of the marketing budget, it was decided to stop allocating funds for Promotion to each branch separately. Now it was the total amount for a single advertising campaign, which was carried out by the head office in all the territories.

This approach led to a reduction in the number of promotion tasks for regional employees, a reduction in the marketing budget by 35% and an increase in the effectiveness of the advertising campaign by 8 times.

ALGORITHMS

7 steps for calculating an ad budget in an enterprise

Advertising budget has long been a stumbling block in the marketing department. And, if in B2C markets marketing costs are generally justified, in B2B this data is simply not there, and the marketing department is forced to look for other ways to justify the budget

SOlutions

IV. Strengthening trade policy (as a source of growth)

As a result of optimizing the marketing budget, the saved funds were redirected to other areas: trade marketing, development of a service policy (provision of free services in case of breakdown, replacement, etc.), stimulation of the company’s own sales staff. For example, now product offers to subscribers were made by the company's agents (call center employees and service technicians), which received remuneration.

Case results

-35%

ad budget optimization

by 8 times

effectiveness of advertising costs

+12%

marginal profit growth

+2 pp

market share growth

98%

sales planning accuracy

-51%

marketing staff optimization

-35%

ad budget optimization

by 8 times

effectiveness of advertising costs

+12%

marginal profit growth

+2 pp

market share growth

98%

sales planning accuracy

-51%

marketing staff optimization

Ultimately, the change in the company's internal processes made it possible to increase revenue by 254.6%, reaching 214.6 billion rubles, and net profit growing to 32.5 billion rubles. (+841.1%).

The mathematical models used in the case formed the basis of the AGATA algorithm. In addition, the platform allows you to create a motivation system for optimizing the human resources. So, after the new approach was implemented (as the advertising campaign of the telecom operator became centralized), the number of tasks for branch employees have been reduced, KPIs have become clearer, and the number of staff has been reduced by 51%, from 90 to 45 people.

What is the AGATA algorithm?

You can find out more information about the platform and sign up for a demo on the main website https://agata.io/