Agent Based Modelling

Background

Increasingly corporations are using performance measures that assess the business unit’s ability to add economic value

The dilemma for the sales and marketing department is that while we do know the sales results (volume) and the inputs (all the sales and marketing activities) we do not know the impact of each of the activities

On the other hand we do know that the Pareto Rule suggests that most of the results will be driven by a few of the activities – we just do not know which ones

Intuition and experience only takes us so far. At some point the Law of Diminishing Returns suggests that the gains made will be at an uneconomic cost

Goal

What the corporation needs is a method of assessing the impact each of the individual sales and marketing variables both individually and in combination, recognising that each is likely to impact the others in some way

In turn this allows the corporation to focus its efforts on the most productive activities, reduce those activities that contribute less and to develop “what if” analysis to test the impact of future initiatives

The Model Techniques

The modelling techniques make use of the latest learning from complexity science and provide us with tools far more powerful than those of the more traditional econometric models.

The Results

Significant results are starting to be seen from operational management to customer behaviour

Typical questions that can be addressed include

• Which “20%” of your sales and marketing effort drives “80%” of your sales?

• Which activities drive sales growth at the point of sale?

• What is the ‘best’ option for every customer or sales individual in the country right now?

• Which are the ‘best’ sales force activities?

• Which are the ‘best’ trade marketing activities?

• What is the current ‘best’ option for increasing earnings through sales & marketing activity?