Title : Increasing Return of Marketing Investment (ROMI) Case of an Indonesian Fintech Startup Company

Vol 6 No 8 (2023): Volume 06 Issue 08 August 2023

Article Date Published : 30 August 2023 | Page No.: 6029-6043 | Google Scholar | Crossref doi for this article

Abstract :

During 2023 global economic recession, economic growth is forecasted to decrease from 6% in 2021 to 2,7% in 2023, causing higher inflation and decreasing consumers buying power. Therefore decreasing investors’ appetite for the private market. The Venture Capital (VC) investors are avoiding risky start-ups and opt a more secure investment, making start-ups are struggling to raise funds and expected to survive at least for the next few years. PT ABC is an Indonesian fintech start-up company, providing payment system that offers free interbank transfer service for more than 7 million users and hundreds of companies and SMEs to date. As a start-up company funded by Venture Capital investors, PT ABC is impacted directly by the decreasing of investor appetite to fund. The survival strategy of PT ABC is to shift the business goal from “market growth” to “revenue growth”, with the implementation of cost cutting and increasing revenue. The functions that get the most of cost cut is Marketing, as employee layoff is not an option in PT ABC. Currently, PT ABC’s CMO does not an existing method to justify the marketing spending and how it ties with annual revenue goal, therefore does not have any insight of which marketing channels are productive and unproductive to revenue gain, which is the basis to determine where the cost should be cut from.

Marketing Mix Modelling (MMM) is a multilinear regression with time series analysis that uses spending of each marketing channel as independent variable and sales revenue as dependent variable, with the purpose to determine the Return on Investment (ROI) as a measure of profitability, added with the Economic Value Added of Marketing (EVAM) as a measure of the production of shareholder value. This research is supported with AARRR framework to understand in which stage of the customer journey flow that requires the most support from marketing and sales. The solutions from MMM analysis are in the form of marketing budget proposals to boost revenue, also the implementation of MMM dashboard. From the AARRR framework, obtained the insight that PT ABC’s users took a longer time to understand the product value, however, once the users are activated, they tend to be loyal user. Therefore, the stage between Acquisition to Activation requires the most attention and support from the marketing and sales team.

Keywords :

AARRR, EVAM, Marketing Mix Effectiveness, Marketing Mix Modelling (MMM), ROI.

References :

  1. One Asia Lawyers. (2022). A Company’s Sole Responsibility is to Profit https://oneasia.legal/8898
  2. Baldridge, Rebecca; Curry, Benjamin. (2022). What Is A Startup? The Ultimate Guide https://www.forbes.com/advisor/business/what-is-a-startup/
  1. Mehta, Sanjay. (2021). Why startups burn before they earn (updated) https://www.linkedin.com/pulse/why-startups-burn-before-earn-updated-sanjay-mehta/
  2. Hower, Lewis. (2022). Understanding What Your Startup’s Burn Rate Really Means https://www.svb.com/business-growth/cash-flow-management/startup-burn-rate-cash-flow
  3. Hill, R. Carter, William E. Griffiths and Guay C. Lim. (2012). Principles of Econometrics, 4th Edition.
  4. Wolfe, Michael J., Crotts, John C. (2011). Marketing Mix Modeling for the Tourism Industry: A Best Practices Approach. International Journal of Tourism Sciences, 11:1, 1-15, DOI: 10.1080/15980634.2011.11434633
  5. Kuncuk, S. U. (2017). Visualizing Marketing: From Abstract to Intuitive. Palgrave Macmillan.
  6. Pandey, S., Gupta, S., Chhajed, S. (2021). Marketing Mix Modeling (MMM) – Concepts and Model Interpretation. International Journal Of Engineering Research & Technology (Ijert), Volume 10, Issue 06. https://ssrn.com/abstract=3877291 
  1. Loon, Weillin Tan Wei; Ariffin, Shaizatulaqma Kamalul; Wahid, Nabsiah Abdul Wahid. (2022). The Influencing Factors Affecting Consumers Buying Decision Towards “Made In Malaysia” Product: A Proposed Model. International Journal Of Education, Psychology And Counselling (IJEPC). Volume 7 Issue 47 (September 2022) PP. 79-89
  2. Abedian, M., Amindoust, A., Maddahi, R. and Jouzdani, J. (2022), “A game theory approach to selecting marketing-mix strategies”, Journal of Advances in Management Research, 19 No. 1, pp. 139-158. https://doi.org/10.1108/JAMR-10-2020-0264
  3. Baidya, Mehir; Basu, Partha. (2008). Effectiveness of marketing expenditures: A brand level case study. Journal of Targeting, Measurement and Analysis for Marketing, 16(3), 181–188. doi:10.1057/jt.2008.12
  4. Kumar, R. (2017). Market Mix Modeling (MMM) — 101. https://towardsdatascience.com/market-mix-modeling-mmm-1013d094df976f9
  5. Cain, PM. (2010). Integrated Brand Marketing and Measuring Returns. Macmillan Publishers Limited
  6. Tripathi, Hitesh. (2021). Marketing Mix Modelling (MMM) — a potential solution. http://www.17bigdata.com/marketing-mixmodelling-mmm-a-potential-solution/
  7. Cain, P.M. (2014). Dynamic Marketing Mix Modeling and Digital Attribution http://www.timberlakeconsultancy.com/mainWebsite/pdf/marketing-mix-modelling-and-return-on-investment.pdf .
  1. Daly, Dominique. 2020. What is Marketing Mix Modelling? 3 Benefits & Limitations https://blog.hurree.co/blog/marketing-mix-modeling 
  1. Hegewald, M. (2019). Marketing Mix Modelling Step-by-Step — Part 1: Building the Model. https://medium.com/swlh/marketing-mix-modelling-step-by-step-part-1-702c793d91fd
  1. World Economic Outlook: Countering The Cost-Of-Living Crisis (2022) https://www.imf.org/en/Publications/WEO/Issues/2022/10/11/world-economic-outlook-october-2022
  1. Investments plateau across SEA in 2022 as recession looms (2022) https://www.techinasia.com/sea-sees-plateauing-investment-sizes-2022-recession-looms
  2. Hanlon, Annamarie. (2022). The segmentation, targeting, positioning (STP) marketing model https://www.smartinsights.com/digital-marketing-strategy/customer-segmentation-targeting/segmentation-targeting-and-positioning/ 
  1. LeBlanc, Dan. (2023). What is Customer Profitability Analysis? | Complete Guide https://www.daasity.com/post/how-to-do-a-customer-profitability-analysis
  2. AARRR Pirate Metrics Framework https://www.productplan.com/glossary/aarrr-framework/
  3. Yuan, Jacky (2020). Marketing Mix Model Guide With Dataset Using Python, R, and Excel https://medium.com/analytics-vidhya/marketing-mix-model-guide-with-dataset-using-python-r-and-excel-4e319be47b4 

Author's Affiliation

   Fitria Rahmidenia Shevico
School of Business and Management, Institut Teknologi Bandung, Indonesia

   Mustika Sufiati
School of Business and Management, Institut Teknologi Bandung, Indonesia

Copyrights & License

Fitria Rahmidenia Shevico, Mustika Sufiati, 2023

This work is licenced under a Creative Commons Attribution 4.0 International License.

Article Details

How to Cite :

Increasing Return of Marketing Investment (ROMI) Case of an Indonesian Fintech Startup Company. Fitria Rahmidenia Shevico, Mustika Sufiati , 6(8), 6029-6043. Retrieved from https://ijcsrr.org/single-view/?id=12476&pid=11944

Most read articles by the same author(s)

Fitria Rahmidenia Shevico, Mustika Sufiati,

View

195

Citation

Downloads

Article Details