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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
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.
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Seitenzahl: 397
Veröffentlichungsjahr: 2012
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Contents
Acknowledgments
Preface
Section 1: What is Marketing Effectiveness?
Chapter 1: Introduction to Marketing Effectiveness
Issues and objections
Brand advertising and marketing effectiveness
Aligning marketing effectiveness with brand strategy
Marketing effectiveness: The new marketing imperative for the 21st century
The US $1,000,000 question
What is marketing effectiveness?
The ROI of marketing ROI
Marketing effectiveness: The new strategic advantage
Marketing effectiveness and marketing objectives
Marketing effectiveness: A chapter-by-chapter overview
Section 2: The Marketing-Effectiveness Framework™
Chapter 2: Strategy, Creative, and Execution: What You Do in the Marketplace
The marketing-effectiveness framework™
Chapter 3: Planning Around What You Can’t Control: The Competition, the Consumer, the Channel, and Exogenous Factors
The competition
The consumer
The distribution channel
Exogenous factors
Chapter 4: The Consumer: The Most Important Component in Any Marketing-Oriented Framework
The consumer
Segmentation
Information processing and the purchase funnel
Product choice model/Channel choice model
Consumption and purchase behavior
Sequential purchase process
Bringing it all together
Chapter 5: A Framework for Capturing Marketing-Effectiveness Data: The Marketing-Accountability Framework
The marketing-accountability framework
The 4P3C1E framework
Success metrics
Section 3: The Marketing-Effectiveness Continuum
Chapter 6: Introducing the Marketing-Effectiveness Continuum
Climbing the marketing-effectiveness continuum
Chapter 7: Activity Trackers
Activity tracker cameo
Activity trackers
The activity tracker test
Challenges facing activity trackers
Tracking activities
Getting started as an activity tracker
How can marketers improve their activity tracking?
Becoming an activity tracker
Chapter 8: Campaign Measurers
Campaign-measurer cameo
Campaign measurers
Challenges facing campaign measurers
ROMI methods for campaign measurers
How can marketers improve their campaign measuring?
Eight steps to becoming a campaign measurer
Case studies
Case study 1—A/B testing: Plumbing repair services in North America
Case study 2—Direct marketing and CRM: Mobile telecommunications company in Asia
Case study 3—Last-touch attribution: Dental equipment supplier in North America
Case study 4—Loyalty marketing: International hotel chain based in Asia
Case study 5—Rebate redemption: Gas utility in North America
Case study 6—Direct measurement: Enterprise software in the Asia-Pacific
Chapter 9: Mix Modelers
Mix-modeler cameo
Mix modelers
Challenges facing mix modelers
How can marketers improve their mix modeling?
Seven steps to becoming a mix modeler
Case studies
Case study 7—Marketing-mix modeling: Regional restaurant chain in North America
Case study 8—Marketing-mix modeling: Kids’snacks in the United Kingdom
Case study 9—Marketing-mix modeling: Mobile telephone service provider in Asia
Case study 10—Marketing-mix modeling: Premium lager beer in Europe
Chapter 10: Consumer Analyzers
Consumer-analyzer cameo
Consumer analyzers
Challenges facing consumer analyzers
Projecting the future
How can marketers improve their consumer analyzing?
Becoming a consumer analyzer
Case studies
Case study 11—Agent-based modeling and simulation: Consumer packaged goods in North America
Case study 12—Agent-based modeling and simulation: Carbonated soft drinks in North Africa
Case study 13—System dynamics: Fast-moving consumer goods in India
Case study 14—Agent-based modeling and simulation: Unsweetened tea in Japan
Chapter 11: Brand Optimizers
Brand-optimizer cameo
Brand optimizers
Becoming a brand optimizer
Section 4: The Marketing-Effectiveness Culture
Chapter 12: It’s Time to Just Get Started!
The marketing-effectiveness culture
Challenges in moving up the marketing-effectiveness continuum
Implementing the marketing-effectiveness culture
Chapter 13: Conclusion: Put Marketing on the Critical Path to Success
Marketing effectiveness and you
Improved marketing effectiveness requires support throughout the company
Put marketing on the critical path to success
Bibliography
List of Figures and Tables
Index
Copyright © 2008 John Wiley & Sons (Asia) Pte. Ltd.
Published in 2008 by John Wiley & Sons (Asia) Pte. Ltd.
2 Clementi Loop, #02-01, Singapore 129809
All rights reserved.
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No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as expressly permitted by law, without either the prior written permission of the Publisher, or authorization through payment of the appropriate photocopy fee to the Copyright Clearance Center. Requests for permission should be addressed to the Publisher, John Wiley & Sons (Asia) Pte. Ltd., 2 Clementi Loop, #02-01, Singapore 129809, tel: 65-6463-2400, fax: 65-6463-4605, e-mail: [email protected]
This publication is designed to provide accurate and authoritative information with regard to the subject matter covered. It is sold with the understanding that the Publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional person should be sought.
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Library of Congress Cataloging-in-Publication Data
ISBN 978-0-470-82395-8
Dedication
To my wife, Karen, for putting up with me.
To Robert, Collin, and Kristin.
To the children of the United Methodist Children’s Home. The mission of the United Methodist Children’s Home is to serve the needs of children and their families in crisis. Ten percent of the royalties derived from the sale of this book will be contributed to this worthy charity. If you would like to learn more about the United Methodist Children’s Home, please contact it directly at 500 S. Columbia Drive, Decatur, GA 30030, or www.umchildrenshome.org.
Acknowledgments
My greatest thanks and appreciation go out to many marketers who have helped me to write this book. Some of them helped directly—many indirectly. Having trained many, many marketers in workshops around the world, each of their questions and concerns helped me to keep searching for new ways to explain the concepts of marketing effectiveness. The methods I devised for explaining each of these concepts are incorporated into the writing for this book.
Initially, Ken Karakotsios and Jack Koch and, later, Doug Chalmers of DecisionPower, Inc. provided input and insight into some of the advanced concepts concerning the chapter on consumer analyzers. Their new software helps marketers make better decisions in the face of uncertainty. We spent many an hour discussing and emailing different sophisticated marketing concepts.
Darren Choo, Ken Karakotsios, Tim Manns, Donna Peeples, Dominick Popielski, Gurdeep Puri, Aseem Puri, and others helped with the development of the case studies. Roy Young of MarketingProfs and Brian Carroll of InTouch, Inc. provided inspiration and input to complete the book and get it to the publisher. Sami Jajeh and Rory Carlton helped very early on with some of the concepts at a high level and helped me to crystallize them into a logical, presentable outline. Svy Nekrassas provided great feedback and kept the topics very practical. John Riddle provided valuable editing of the initial draft and helped to improve the writing in a number of areas. David Radin, Harry Crytzer, Karl Hellman, Greg Thompson, and Katie Kuppelweiser were kind enough to provide key feedback on specific topics in the book. Their input was very valuable in tightening up some of the explanations of certain concepts.
Sajan Koch, Claire Koch, and Ramesh Sundararajan of InsightAsia helped with gaining valuable input from the Asia-Pacific region for the book and in the development of its marketing plan.
Lastly, thanks go to Laura Gallagher. She spent a lot of time helping with the editing of the copy to make sure I got the text clear and grammatical. I still don’t know if I will ever understand all of the English grammar rules that have plagued me since second grade.
Preface
The concepts in this book have been honed through countless marketing-effectiveness workshops, presentations, and consulting projects, both in the U.S. and other countries. These concepts have been presented at many symposia, conferences, and expositions. Most importantly, they have been used to drive increased marketing return on investment (ROI) for many organizations—organizations of many different types and sizes, in many different types of marketing environments. There have been very few, if any, industries not involved in one of these sessions. These materials reflect both the input and the results of those training sessions.
Four key concepts have been presented for the first time in written form in this book:
The marketing-effectiveness framework
The marketing-effectiveness continuum
Last-touch attribution
The marketing-accountability framework
They build on other strategic and tactical marketing concepts that you are, or should be, familiar with. If you can internalize these four concepts and implement them within your organization, they will help you to prove and improve your marketing effectiveness and ROI.
Many of the concerns a marketer has with marketing effectiveness surround the never-ending battle for truth, justice, and the right versus left brain. Those of us that are left-brained don’t have any trouble with analytics. We love numbers. Those of us that are right-brained love abstract thought and concepts.1 We’re creative and express things in nonnumeric terms. However, successful marketers must have synapses firing on both sides of their brains. Marketers must not only develop creative ways to communicate with their customers, but now they must also analyze their results in order to measure what they’ve done, compare them against plan, determine what worked and what didn’t, and then iterate for the next round of improvement. Marketers must combine both creativity and analytics. This book will help them do just that.
Those marketers delivering both creativity and analytics will be highly successful and will uncover many latent nuggets of gold. They will see revenue, profit, and market share grow faster than the competition. They will build a competitive advantage that will be hard to beat. The C-suite will finally consider marketing as a critical investment in the path of corporate success. It will no longer be an expense to hide amongst the other overheads. Bonuses will grow. Your marketing will finally be recognized for the tangible success it brings to the organization. It will be on the critical path to success.
But the first step to improving your marketing effectiveness, especially for the more creative, is getting started. Think of it as the next level of creativity. Think of it as bringing creativity to analytics. JUST GET STARTED!
Endnote
1. Funderstanding, “Right Brain vs. Left Brain,” http://www.funderstanding.com/right_left_brain.cfm.
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.
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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,
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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 creative
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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 invest in the product, why should the channel?
Because all other things are equal
—When the products and prices are equal in a highly contested category, brand advertising should increase the likelihood your product will be chosen.
Aligning marketing effectiveness with brand strategy
How does improved marketing effectiveness support your brand value? Marketing effectiveness is defined as making marginal improvements to the marketing mix. But what if those changes seem to indicate major shifts in one, or all, of the 4Ps8 (Price, Place, Product, and Promotion), response to changes in the 3Cs (Consumer, Channel, and Competition),9 or changes in exogenous factors (the 1E)? Should we make that change? By definition, the improvement of marketing effectiveness based on a model cannot, and should not, require a change in the strategy—that is, in the strategic position of the company or the brand. It should only require minor changes in the 4Ps or 3Cs in the context of that strategy. If, however, the model seems to indicate that the product has potentially been incorrectly positioned, then further analysis should be undertaken. The strategic position can change, especially when that change is supported by proper data-based analysis. Improved marketing effectiveness should not lead to major changes in the 4Ps, but only minor changes. For example, consider the following:
Price
—A temporary price change can be considered as a tactical change; e.g., buy one get one (BOGO) free is essentially 50 percent off, but, for most brands, a permanent change of 50 percent would probably be considered a strategic change in position. For example, what would happen to Godiva Chocolatier’s strategic position if they permanently dropped their price by 50 percent?
Place
—Adding incremental new channel and shelf space, or moving from the food and drug channel into convenience stores, can be in alignment with the strategy. Entering a whole new type of channel, on the other hand, may be considered a strategic change. For example, would Rolls-Royce change their strategic position if their cars were offered in Wal-Mart?
Product
—Adding new attributes to a product can be considered a simple competitive initiative or a competitive response, but doesn’t necessarily change the strategic position of the product or brand. These attributes could be additional scents, flavorings, or software features. For example, The Coca-Cola Company’s offering of Cherry Coke might be more strategic than their later offering of Diet Cherry Coke.
Promotion
—Changing the flighting or media spend levels would normally be considered a tactical change, but to stop advertising altogether for a heavily supported brand would be considered a strategic change. For example, if The Coca-Cola Company stopped supporting the Olympics, wouldn’t that be considered a significant, strategic, board-level decision?
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Now consider a similar differentiation along the 3Cs dimensions:
Consumer
—Improved segmentation, based on lifestyles as opposed to demographics, would be a tactical improvement to drive incremental sales of electronic video games to teens and the X-generation. However, targeting these games to seniors in the “greatest generation” might be considered a strategic change. Responding to a consumer boycott of a specific brand or series of brands, such as French wines, could be considered either tactical or strategic, depending on the type of action taken.
Channel
—Developing a channel certification program that increases the number of certified value-added resellers would be considered a tactical change in the channel. Conversely, providing your software for download directly from your website might be considered a strategic change, designed to undercut and short-circuit your current channel partners.
Competition
—Responding to a temporary competitive price cut could be considered tactical, whereas permanently setting your pricing 20 percent lower than the competition might be considered more strategic.
There is a continuum of changes that can be made in any of the 4P or 3C dimensions: some more tactical in nature, some more strategic. As the analytics surrounding improved marketing effectiveness become more sophisticated, marketers can begin to make improved tactical and, sometimes, improved strategic decisions.
Marketing effectiveness: The new marketing imperative for the 21st century
In general, marketing has not been effective at driving consistent positive results. During the heyday of the late 1990s, spending exorbitant amounts of money on different marketing schemes was de rigueur. Millions were laid out to get those infamous 30 second spots at the Super Bowl. Now, of course, many of those companies have disappeared altogether.
The tech boom busted and many marketers were out of a job. September 11, 2001 put the U.S., and parts of the global economy, into a tailspin. Now, in order to keep our jobs, marketers have to prove our worth. We have to become more creative and deliver programs that can drive more revenue and profit at the same cost and we have to prove that they are better than any previous program.
Many statistics reveal the following:
Thousands of products are launched and quickly fail.
Most sales promotions lose money.
Most advertising investments are wasted: “Half of my advertising is wasted; I just don’t know which half.”—John Wannamacher’s famous quote.
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Management has even begun to lambaste marketers. The quote that probably goes to the crux of the situation comes from David Packard of Hewlett-Packard: “Marketing is too important to be left to the marketing department.” Top management—the team responsible for the bottom line—is too gun-shy to leave the future of a campaign in the hands of a marketing team.
“More money is wasted in marketing than in any other human endeavor (other than government, of course).„
Al Ries and Jack Trout,The 22 Immutable Laws of Marketing12
How could the CEO and founder of one of the most successful technology companies in the world make a statement like this, if marketing had been doing the job it was supposed to be doing? Is this the plight of marketers? In all but a few companies, marketing has done a bad job at selling its results back to the rest of the company. Are their results really that bad?
Marketing spends most, if not all, of its time understanding the requirements and language of the company’s external consumers, but little time understanding the needs and requirements of its internal consumers—the CEO, the CFO, and the other executives in the C-suite.13 Understanding, measuring, and communicating the results of your marketing in terms that your internal consumers can understand is critical to increasing corporate results and lengthening your tenure.
How can marketers be satisfied with an average tenure for a CMO of only 23 months?14 For those of us who are numbers-challenged, 23 months is the average. This means that many of the CMOs are in their positions for even less than 23 months—significantly less! And, to add insult to injury, this number is on the decline.
In order for marketers to stem the tide of shrinking tenures, we need to not only start delivering, but also to prove and improve the results of our marketing efforts.
The US$1,000,000 question
How will you respond when the CEO comes to your office and says, “I want to give you an extra US$1 million for your budget?” Or, more importantly, how will you respond when the CEO asks, “Where should we cut US$1 million? Tell me why we shouldn’t take it out of the marketing budget.”
This book was written to help marketers answer this simple yet critical question. This question becomes even more important when it is put in the context of the shareholder. What would the shareholders rather have
The only department in the company that can deliver both increased revenue and increased profit is marketing, which I am defining here to include the personal selling—or sales—function. In the accounting department, purchasing a cash management system can only drive costs lower. In manufacturing, installing a new, faster machine can increase capacity and lower manufacturing costs. Neither of these investments can drive increasing revenue. Only investments in marketing can do that—yet for many companies marketing budgets are the first to be cut and the last to get incremental investments. Clearly, marketing has not done its job at promoting its own effectiveness to those that count—the CEO, the CFO, and the rest of the C-suite. An inability to measure results is no longer an acceptable excuse. “I can’t get the data” has to be removed from our vocabularies. We need to replace it with “this is our success metric and here is how we are going to measure it.”
We need to answer the above question with a response such as, “If you cut the marketing budget by US$1 million, we will see a decline in revenue of US$6 million over the next four months.” If we’re able to answer this simple question in this fashion, the CEO will go looking somewhere else for that infamous US$1 million.
What is marketing effectiveness?
The purpose of marketing effectiveness is to optimize marketing spend for the short and long term in support of, and in alignment with, the brand strategy by building a market model using valid and objective marketing metrics and analytics.
Marketing spend
—This includes all consumer-facing investments made to drive incremental revenue and profit. Kotler defines these as direct marketing, public relations, channel promotions, advertising, and personal selling.
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But they must also include customer service and support, as well as marketing to the social network.
Short and long term
—Marketing has to make the right decisions to drive incremental short-term results, such as revenue, profit, cash flow, or share, and to put the company into a position to reap long-term results.
Brand strategy
—Actions to drive incremental marketing effectiveness must never change the strategic position of the company, product, or brand. If the results of the analysis indicate that a change in brand strategy may be called for, then this is now well past the confines of the definition of improved marketing effectiveness. It doesn’t denigrate the need for strategic change; it just means that the discussion and analytics must proceed to the next level of complexity.
Market model
—Having a model of what works and what doesn’t, and by how much, allows marketers to make the right marketing decisions. By developing marketing plans that spend in the right areas, in the right amounts, and at the right time, marketers can deliver extraordinary results.
Valid and objective marketing metrics and analytics
—Models of consumer response to marketing stimuli must be based on the right data, the right metrics, and the right analytics. “The evidence tells the story,” states Grissom from the popular television series,
CSI: Crime Scene Investigation.
If there is any hint of unsound analysis of the evidence, Grissom’s conclusions will be thrown out of court. For marketers, the decision process will be stymied and marketers might as well go back to making marketing decisions based solely on gut feel.
Marketing effectiveness has two primary components: optimization of the consumer-facing actions (direct marketing, public relations, channel promotions, advertising, personal selling, and customer support and service) and the organization of the infrastructure to support the optimization of these actions. This book will focus primarily on the optimization of the consumer-facing marketing actions. A future book will discuss the optimization of the infrastructure.
The ROI of marketing ROI
Focusing on marketing ROI and metrics can yield big payoffs:
Reduction of inefficient spending
Reallocation of marketing spending to improved tactics
Shortened marketing process times
Growth in the top line
Increased profit
Marketing professionals who focus on marketing metrics and accountability earn more than those who don’t
Reducing inefficient spending by reallocating the budget can have enormous implications. Internally, some groups, departments, and managers will lose influence, responsibility, personnel, and decision-making authority. Others will gain. Externally, agencies will lose spending by their clients—leading to lower commissions and potentially fewer personnel. The political battle for and against improved marketing effectiveness will have just begun.
Cutting marketing process time through improved workflow can also produce many benefits. The company can become more responsive to competitive threats. It can become more aggressive in the marketplace and overall costs can be reduced. I’ve seen savings of up to US$10 million in hard costs simply through the improved management of marketing assets in large automotive and financial organizations. Other soft costs, such as those saved through improved productivity, are also reduced. Marketing value is increased, including value generated through improved brand consistency or accelerated response to competitive actions.
Of course, growth and profit can be accelerated. And, we can get paid bigger bonuses.
Finally, marketers will be able to determine the value and effectiveness of brand marketing, as well as direct marketing.
Marketing effectiveness: The new strategic advantage
Often, when we think of strategic advantage we think of product differentiation, or the development of a differentiated brand value for a particular consumer segment, or many other combinations of real or perceived differentiation in the minds of the consumer. But, in many industries, very little differentiation is possible. For instance, what is the intrinsic difference between the ways that Verizon offers cellular service versus AT&T Mobility?
Both offer their services through company-branded retail outlets. Both advertise with similar messages. One has the fewest lost connections. The other has the biggest network. Although one may have a short-term advantage through exclusive deals with new cell phone models, does one or the other really have better coverage? Does one have a better product or service? Are there really significant differences in their pricing plans? Is customer service from one provider significantly different than the other? Can any of the 4Ps not be almost exactly duplicated by the other provider? Can the consumer really tell any difference?
Indeed, many industries face these same types of challenges. There is no underlying opportunity for the manufacturers to differentiate themselves, and yet each must continue to beat and exceed analyst expectations. Many have begun to do this through process automation, improved consumer service, and improvement in other areas. The last opportunity for them to make substantial improvements is now in their marketing operations and processes. The delivery of persuasive, effective communications into the marketplace can be optimized and enhanced in significant ways to drive increasing revenue, profit, cash flow, growth, and share at lower cost and risk.
Whether a company has a significant, perceived differentiation in the marketplace or not, it can develop a strategic advantage in the way it executes its marketing. In cases where there is little left to differentiate, strategic advantage can still be gained by doing one thing better than the competition.16 It doesn’t matter whether the company is a Fortune 100 consumer-packaged-goods (CPG) provider, a mid-tier OEM components provider, or a small business, as in each case it may have competitive advantage in its own category. But, in order to stay alive, it must continuously find new ways to deliver strategic advantage. The improvement of marketing effectiveness is that new strategic advantage.
Marketing effectiveness and marketing objectives
There are many objectives for marketing, but in particular they must include:
The development, nurturing, and enhancement of the strategic positioning of the company’s brands, products, and/or services in the eyes of their consumers.
The development, nurturing, and enhancement of creative concepts to reflect the strategic positioning of the company’s brands, products, and/or services in the eyes of their consumers.
The expeditious definition and execution of marketing communication processes to meet and exceed corporate revenue and profit goals for the short and long term at low risk and least cost.
Marketing effectiveness is centered on the pursuit of these objectives—emphasizing the results and risk side of the equation. It includes the development and continuous improvement of the related infrastructure to support the pursuit of these goals, but it doesn’t typically include the effective development of marketing strategy and creative concepts, although it could. For the purposes of this book, however, the effective development of the marketing infrastructure, as well as the effective development of the strategy and creative concepts, will not be discussed. Rather, this book concerns itself with the efficiency, effectiveness, and continuous improvement of the execution of the strategy and creative concepts in the marketplace.
Marketing effectiveness: a chapter-by-chapter overview
Marketing effectiveness has many facets. Use this overview to quickly find topics that would help further your understanding of marketing.
Section 1—What is Marketing Effectiveness?
Chapter 1—Introduction to marketing effectiveness
Chapter 1 introduces the concept of the marketing-effectiveness framework. Each of the components of this framework are discussed. Many of these concepts may be familiar to most marketers, but they are presented here in the context of how to prove and improve marketing effectiveness. Once this framework has been explained, it is used throughout the book as a basis to get across the other marketing-effectiveness concepts. This section be a comprehensive review of key marketing concepts and will be a valuable foundation for all marketers.
Section 2—The marketing-effectiveness framework™
Marketing effectiveness can be improved in many ways. For example, it can be improved not only with a better strategy but also with better creative and tactics. In order to deliver increased marketing effectiveness, marketers must act in the marketplace, measure results, and then use the proper tools to analyze them. With the proper measurement and analysis of results, marketers can easily improve their strategy, creative, and tactics. The Marketing-Effectiveness Framework was developed to help marketers put structure around the ways they gather market data, analyze that data, and then improve strategic, creative, and tactical decisions.
For any marketing concept to deliver improved results, it must have the consumer at the center. Marketers can then develop their strategy, creative, and tactical activities to their advantage. Unfortunately, there are also other influences acting in the marketplace: there are other competitors, with their own strategy, creative, and tactics; the distribution channel; and exogenous factors, such as the weather, interest rates, and seasonality. Against these influences, consumers make decisions and respond. The Marketing-Effectiveness Framework describes the interaction of these influences on consumer response so that marketers can target improved results measurement and analysis to deliver improved marketing performance.
The following four chapters describe the Marketing-Effectiveness Framework, starting with a model of your own actions in the marketplace. The next chapter looks at how factors outside your control can be modeled, which is followed by a chapter on the modeling of consumer response. This section ends with a description of the marketing-accountability framework demonstrating how marketers should structure the way they capture data.
Chapter 2—Strategy, Creative, and Execution: What You Do in the Marketplace
A marketer’s actions are geared around three dimensions: strategy, creative, and execution. In order to understand marketing effectiveness, we need to understand where the levers of improved marketing effectiveness are located. Each of these dimensions influences the ability of marketers to prove and improve their marketing effectiveness.
Chapter 3—Planning Around What You Can’t Control: The Competition, the Consumer, the Channel and Exogenous Factors
Marketing effectiveness is driven not only by our actions, but by those of the competition, the consumer, and the channel, plus other exogenous factors that are outside of our control and our competitors’ control. By understanding the impact of past influences, we can determine what their effect was on our marketing effectiveness. Looking to the future, we can use this information to develop scenarios that improve the ROI of marketing activities.
Chapter 4—The Consumer: The Most Important Component in Any Marketing–Oriented Framework
Only with a clear understanding of how consumers respond to market stimuli can we build an effective model of our marketing actions. A consumer-centric model, whether for business-to-business or consumer markets, is a must in order to fully understand the short- and long-term impact of marketing actions. Four dimensions of consumer response behavior are discussed, including consumer response to advertising information, consumer choice at both the brand and channel levels, and consumer purchase and consumption behavior.
Chapter 5—A Framework for Capturing Marketing-Effectiveness Data the Marketing-Accountability Framework
In order to improve marketing effectiveness, marketers must capture data from many sources. The marketing-accountability framework provides architecture to help marketers structure the capture of that data and prioritize it so that they can progress along the marketing-effectiveness continuum.
Section 3—The Marketing-Effectiveness Continuum
The marketing-effectiveness continuum covers many concepts critical to improving marketing effectiveness. It discusses how marketers can move from one level to the next in managing a complex organization to improve their performance. By taking small, defined steps, the organization can clear the path to measurable improvements. Lastly, the company can set short-, medium-, and long-term goals to understand how to achieve these advancements with a given level of investment in the organizational infrastructure.
Each of the chapters in the marketing continuum includes a cameo, based on real companies, to bring to life some of the challenges and insight that can be gained from each level of the continuum.
Presented at the end of each chapter are actual case studies from many different industries from around the world—each utilizing different analytic techniques. Because of the confidential nature of client relationships, the numbers, countries, categories, brands, and attributes have been disguised in some fashion to make certain that any presented information would not reveal any valuable, confidential knowledge about the categories and brands. In addition, data sources for some of the information have not been provided because they might inadvertently reveal the exact brand or brands discussed. However, data sources are standard sources in the industry, including Nielsen, TNS, IRI, Millward Brown, and many others.
Each of these case studies should be read and understood to uncover insights and methodologies that might help you in analyzing your own brands and categories. None of the numbers presented convey actual results from specific projects in the described markets. Currencies are expressed in U.S. dollars for the U.S. and in local currencies for other countries, or converted to U.S. dollars when the country is also disguised.
Chapter 6—Introducing the Marketing-Effectiveness Continuum
The marketing-effectiveness continuum helps marketers to set goals and determine concrete steps in order to continuously improve their marketing effectiveness. The five primary steps (activity trackers, campaign measurers, mix modelers, consumer analyzers, and brand optimizers) are introduced and explained. Organizational implications are also introduced.
Chapter 7—Activity Trackers
One of the key components of improving marketing effectiveness is to track all marketing activities taking place within the category. These include marketing’s activities, as well as those of the sales and service functions. As the company gets more sophisticated in its marketing analytics, the activities of the competition, the channel, and, potentially, the suppliers must also be tracked.
Chapter 8—Campaign Measurers
Campaign measurers often use last-touch attribution to determine the impact of their marketing. This method can be very effective, especially for business-to-business marketers, to determine what works and what doesn’t, and by how much. Here, marketers learn how this level of measuring marketing effectiveness can be used to support the management of complex organizations.
Chapter 9—Mix Modelers
Mix modelers can determine the effectiveness of their marketing across the entire mix. With the right data, marketers can measure the effectiveness of most, if not all, of their marketing activities. Armed with this information, marketers can start to spend more on the right things and less on the wrong things.
Chapter 10—Consumer Analyzers
Consumer analyzers look to the future in order to develop scenarios and project the effectiveness of their marketing actions, given the expected actions of the competition, the channel, changes in the consumer base, and exogenous factors. At this level, marketers can make the best tactical decisions to launch new products, respond to competitive action, and understand how exogenous factors can influence the future of the market.
Chapter 11—Brand Optimizers
At all prior levels in the marketing-effectiveness continuum, marketers are optimizing their marketing investments to drive increased revenue, profit, or market share. Brand optimizers correlate the impact of their marketing activities against the value of the brand as it is expressed in changes in the value of the stock. This leads to the optimization of decisions for the long term and can help to determine the value of a brand to support mergers and acquisitions.
Section 4—The Marketing-Effectiveness Culture
Building a culture of continuous improvement in marketing requires a change in culture. Just as Total Quality Management and Six Sigma17 processes improved the quality of output and reduced costs in operations, building a marketing-effectiveness culture can do the same for the marketing function. All marketers, including marketing managers, will find this section important in helping them to design their organization and determine compensation schemes.
Chapter 12—It’s Time to Just Get Started!
Achieving improved marketing effectiveness is not just about making a once only change in the analysis of marketing results. It is a continuous process, requiring training and organizational change to support continuous improvement. Regardless of the amount of data a company collects, there is always more data and analysis that can be done. Yet this must be tempered against the associated cost, potential benefits, and the risk.
Chapter 13—Conclusion: Put Marketing on the Critical Path to Success
Marketing should no longer be considered an expense, but must be a considered an investment in the future of the company. It must be part of the critical path to corporate success. In so doing, companies can be more successful than the competition, and grow faster. Marketing effectiveness is a strategic advantage that can be continually improved to stay ahead of the competition.
Not only does improved marketing effectiveness have benefits for the company, it has benefits for the marketer. Those marketers who can prove the effectiveness of their marketing will earn more, and their careers will advance faster, than those who can’t.
Endnotes
1. “A business has two, and only two, basic functions: marketing and innovation.” Peter Drucker, author and management consultant.
2. Linda Kaplan Thaler, Robin Koval, and Delia Marshall, Bang! Getting Your Message Heard in a Noisy World, (New York: Doubleday, 2003).
3. And this may change again as soon as this book is published.
4.
