Marketing Calculator

Measuring and Managing Return on Marketing Investment

Guy R. Powell, Guy R. Powell

• Publisher: Wiley
• Year: 2012
• Print ISBN:
  9780470823958
• Edition: 1
• eBook ISBN:
  9781118507827
• Topic: Business
• Subtopic: Marketing
• Index: Business

This book uncovers the components of driving increased marketing effectiveness and can be applied to just about every industry and marketing challenge. It demystifies how marketers can significantly improve their measurement and management infrastructure in order to improve their return on marketing effectiveness and ROI. They will be able to significantly improve their tactical and strategic decision-making and finally be able to respond to John Wannamachers' "half of my advertising is wasted; I just don't know which half." With this in hand, they will be able to avoid the budget cutting ax, become a critical component of corporate success and enhance their careers.

Even in a crowded theoretical marketing environment there are three new concepts being introduced:

1. The Marketing Effectiveness Framework to help marketers talk the talk of marketing effectiveness within marketing and with the C-Suite.
2. The Marketing Effectiveness Continuum to help marketers understand the organizational issues and change management associated with delivering long lasting enhanced marketing effectiveness.
3. The Marketing Accountability Framework to help marketers begin to collect data that is meaningful to improving their marketing effectiveness and to become accountable for their results.

It is one of the only marketing books covering the topic at a global level. It includes a great number of specific case studies from North America, Asia, Europe and Africa. The cases cover the following industries: Telecommunications, consumer packaged goods, home repair services, travel, utilities, software, restaurants, alcoholic and non-alcoholic beverages and others. It can also be used to support marketing education at the university level.

Whether the reader is a marketer, business analyst, C-level executive, this book will help them to understand the key issues surrounding the measurement of marketing effectiveness. More than that however, is how each of the concepts can be directly applied to their marketing environment. Each of the concepts are applied to the different types of businesses (business-to-business, OEM, consumer, NGO and others) so they can quickly make them actionable.

Section 1

What is Marketing Effectiveness?

Chapter 1

Introduction to Marketing Effectiveness

What truly drives competitive advantage in today’s world? How does your company stay ahead when your nearest competitor can simply copy your product’s features, and put an improved version on the market a few months after your launch? If it’s true that a company has two, and only two, basic functions—innovation and marketing1—and innovation can only provide a fleeting advantage, then it is up to marketers to deliver a competitive advantage through improved marketing.

• There are certainly product differentiators—Microsoft was able to win the operating system and desktop productivity wars with a superior product, great marketing, and “stick-to-itiveness.” When the Microsoft juggernaut comes to your category, watch out or you will be lying by the wayside.
• There are messaging and creative differentiators—Witness the success of the Aflac Duck, which catapulted the company from an annual pre-duck growth rate of 12 percent to a post-duck growth rate of 28 percent in the first year and 29 percent in the second.2
• You can monopolize the messaging medium—Most of the available baseball, football, and basketball stadium-naming opportunities are gone. The purchase of rights to a sports stadium, such as AT&T Park in San Francisco,3 allows that company a messaging channel that cannot easily be duplicated by their competitors. That’s why these opportunities are so hot—as are product placements in movies, music videos, and electronic games.
• There are pricing differentiators—Wal-Mart has built one of the world’s largest companies by putting all of their promotional dollars, their economies of scale, and their enormous purchasing power directly into lower prices.
• There are channel differentiators—Companies can be more successful selling through one channel than another. Amazon.com has the online book category locked up, though they are no longer limited exclusively to books. Barnes & Noble is catching up online, but has also been able to maintain its position in the bricks and mortar channel.

But can your marketing effectiveness also drive incremental profit, market share, and revenue increases? Can the way you manage, measure, and execute the business of marketing also lead to continuously improving corporate results?

Your ad agency gets paid the big bucks to come up with those incredibly creative, ingenious, and novel commercials. Their “out-of-the-box” thinking can really pay off in the overcrowded and cluttered advertising space—creating increased awareness, brand equity, and imagery scores envied by the rest of the category. But it is possible that you can achieve even greater returns by properly timing (or flighting) and coordinating your media across all appropriate media channels, while simultaneously focusing on pricing, product, and channel initiatives.

Can you drive even greater returns by understanding the future? With a detailed knowledge of how consumers will respond to competitive, channel, exogenous, and other consumer actions, can you minimize risk and optimize your marketing across a set of expected scenarios?

This book will enable you to frame your thinking about marketing and marketing effectiveness. It will show you that marketers need to optimize their actions on a number of different levels. In an ideal world, with perfect information, in which the entire company marches to very specific orders from “on high,” it might be possible to achieve some unsurpassable level of marketing performance. We “mere mortals,” however, must work in an imperfect world, with imperfect information, and with managerial imperfections—yet still deliver extraordinary results.

Companies optimizing the way they execute their marketing typically see several percentage points in increased market share. That’s what this book is about. It’s about a methodology and framework that will allow you to manage the business of marketing to deliver the next level in marketing effectiveness—even in the face of imperfect information and an imperfect organization.

Improved marketing effectiveness is not just a tactical advantage: it is also a strategic advantage. How do we know this? In this world where there is little difference between competitive offerings, how can one vendor grow market share while others lose share? If one competitor is able to grow share by managing the business of marketing better than the competition, then they have delivered a strategic advantage in the marketplace. This is the power of getting it right, not only in the design and execution but also in the follow-on measurement and management. We can turn improved marketing tactics—based on a science of improved marketing effectiveness—into an engine that drives growth in revenue, profit, share, and stock value.

This book explains how smart marketers drive continuous improvement in their operations in order to beat shareholder expectations and grow their stock prices faster than the rest. By executing marketing activities with a given strategy more effectively than the competition, marketers can deliver higher revenue for the same dollar invested, more profit, higher growth, and greater market share—and at a lower level of risk.

This book is applicable to all businesses and organizations—whether small, medium, or large; whether manufacturer, channel, or service provider; whether business to consumer, business-to-business, ingredient brands, original equipment manufacturer (OEM), or cause marketer/political entity—this book provides insight into how to drive more revenue, profit, growth, and share for the same marketing dollar.

Results can be spectacular. My own experience has proven that the application of these concepts can deliver multiple share points for a consumer package goods company and US$100–120 million in incremental revenue opportunities for a quick-serve restaurant chain without any increase in the marketing budget. I’ve attached a series of case studies illustrating similar gains across a number of industries and continents. You can finally find the 50 percent of your marketing that isn’t working.

Issues and objections

Many issues concern marketers when it comes to improving marketing effectiveness. Having spoken with thousands of marketers, I’ve summarized most of them into just a handful:

• “Is there a way to establish a direct cause and effect link between marketing and revenue?”
• “How do I overcome the lack of available data?”
• “Is there a way to implement a test program to determine marketing effectiveness?”
• “How can I use analytical rigor to help grow the business?”
• “How can I evaluate the ROI of past programs and project the ROI for future programs?”
• “How can I predict the success of, and optimize the launch of, a new brand or product?”
• “How do I juggle marketing investments between longer-term brand building and shorter-term, direct-response marketing?”
• “Are there any tricks to collecting accurate tracking data from the sales force?”
• “How do I allocate spending between local versus national initiatives?”
• “Will I need to change my strategy in order to implement improved marketing effectiveness?”
• “Is there a way to develop consistent success metrics across the globe?”

These are all valid issues representing real concerns that marketers have about improving marketing effectiveness. This book is designed to help marketers to understand the answers to each of these questions and to develop an approach to building an infrastructure of continued learning and improvement. When asked how to eat an elephant, the smart answer is “one bite at a time.” Improved marketing effectiveness, and its many nuances, can lead to great learning and an improved organizational infrastructure. Just get started: one bite at a time.

Probably the biggest and most frequently voiced objections are:

• “We can’t afford the data. We would rather spend that money on more marketing.”
• “We can’t get the data. Our retailers are afraid they will be revealing trade secrets to us.”
• “Using a more analytical approach in marketing is too radical. We believe only great creative4 can produce great results.”

Yes, it is true that improved marketing effectiveness takes money, time, and effort. “There ain’t no such thing as a free lunch.”5 But the payoff can be big: higher revenue, bigger budgets, more responsibility, and larger bonuses.

After completing an exhaustive, US$5 million analysis of their marketing, Yahoo! reallocated US$40 million toward clearly defined marketing tactics. “If you got US$40 million on a blunt instrument, what can you get on an instrument that’s really well defined or at least better defined?”6 asked Jeannie Bunker, Yahoo! Vice President, Marketing Execution and Customer Analytics.

Brand advertising and marketing effectiveness

Why do marketers spend money on brand advertising, as opposed to direct-response marketing? Why spend money on marketing activities that aren’t expected to deliver direct and immediate results, especially when the vice president of sales, the CFO, and the CEO want results and “want them now!”?7 Why take precious budget money and spend it on things that may deliver results, but not this month, this quarter, or even this year?

There are many reasons why we spend money on brand marketing. Some of the reasons include:

• To generate long-term revenue—though short-term revenue is also generated. Marketing must not only help deliver sales this period, they need to set up the company for success next period, and the one after that.
• To improve the response to direct marketing—over what you would achieve without the brand-advertising support. Brand marketing typically will directly improve the results of direct marketing. Increase the value of the brand and the response from direct marketing efforts improve. Integrated marketing campaigns build on this concept, in which the investments in each of the individual media channels are intended to support each other to deliver better results than those obtained by advertising in one channel alone.
• To be able to charge higher prices—Consumers and businesses buy not just on price, but also on value. They need to be convinced that they are getting some additional value for one “equal” product versus another. For consumer marketers, how can Nike, for example, charge US$129 for a pair of sport shoes, when you can buy an equivalent pair of imported knock-offs for US$29? In the consumer’s case, there is some extrinsic value in the Nike brand that allows the company to successfully charge an additional US$100 over an imported knock-off. For business-to-business (B2B) marketers, a similar phenomenon exists, although the reasons may be different in terms of how employee decision makers evaluate risk and job security versus the functionality and cost of ownership of a product or solution. For example, for years IBM was a safe bet because “you can’t get fired buying IBM.”
• To be able to gain access to specific channels of distribution—This applies more to smaller manufacturers, but could also apply to larger manufacturers that may be perceived to be dropping a brand. Unless the distribution channel is convinced that the manufacturer will help them drive “pull” (i.e., consumers will be motivated to pull the product off their shelves), the channel will tend toward not carrying the product. If the manufacturer isn’t going to support and in...

Table of contents

• Cover
• Contents
• Title
• Copyright
• Dedication
• Acknowledgments
• Preface
• Section 1: What is Marketing Effectiveness?
• Section 2: The Marketing-Effectiveness Framework™
• Section 3: The Marketing-Effectiveness Continuum
• Section 4: The Marketing-Effectiveness Culture
• Bibliography
• List of Figures and Tables
• Index