Marketing ROI

Real Or Imaginary

7 Ways to make it real

Background

Marketers

• 8/10 believe their marketing budgets are under-funded

CFOs

• I have never found CFO that didn’t believe a lot of marketing investments are wasted

But 75% of the value of most companies is the Brand… so maybe there is some common ground

Measuring ROI

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ROI = ( (Acquisition (#) * Margin (€) ) + retention effect - Investment

Investment (€)

ROMI = Price Premium (€) x Market Share (#)

Marketing Investment (€)

What is the biggest issue …

• People don’t know and are not measuring

▫ R = Return

▫ I = Investment

• Because it is difficult, does not mean it should not be done… or you shouldn’t worry about it..

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Without measurement R or I It doesn’t make sense to talk About techniques

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In

66

57

55

55

51

49

40

34

34

30

30

23

21

19

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Incremental sales

Changes in brand awareness

Total sales from marketing

Purchase intent

Attitudinal changes

Market share

Number of leads

Ratio of ad cost to revenue

Cost per lead

Reach/frequency

GRPs delivered

Cost per sale

Media post buy analysis

Financial value of brand equity

Customer lifetime value

Which is closest to your company’s current

definition of marketing ROI? description

Source: ANA – Forrester 2005

If a perfect world you would measure profits you can also measure profit drivers …

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QUICK AND EASY WAYS TO BUILD

YOUR MARKETING ROI

Most marketing doesn’t

work

…you gotta get started measuring

According to nielsen research

• A study of 862 packaged goods promotions. ▫ 50% no impact,

▫ less than 1 in 10, plus 10%

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As long as you are not measuring what is working You are burning money…

Finance people can improve

marketing decisions

You might not want to get involved

but you should

Diversity trumps ability

• Imagine you have 2 groups ▫ 10 smartest people

▫ 10 random people

• The random groups almost always outperforms ▫ A different toolset

▫ “Stupid” questions that spark thinking

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• Research at KU Leuven over 2 years… 10 groups working on 10 marketing tasks ▫ All non-marketers

▫ All male marketers

▫ All female marketers

▫ Mixed marketers

▫ Mixed marketers + non-marketers

Solving marketing problems…

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Relative results

Absolute results

Most Advertising doesn’t

sell

Get Involved… keep your marketing team

focused on the basics

Half my advertising doesn’t work..

That would be a bit optimistic

Depending on the study… 80-90% of advertising does not work…

Why ….

▫ Lack of a benefit

▫ No reason to believe

▫ No call to action

▫ No clear message

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If you’re confused… Consumers are also likely to confused

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Quick test...What is it?

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Confusion is not a good strategy for success.

Clarity

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Let a customer say NO because what you offer doesn’t apply to them.

But NEVER let a customer say

NO because they don’t understand what you’re offering.

A golden rule of advertising

Most products fail

learn to shoot the ugly puppies early

My shoot the puppy checklist

• Is there a benefit (real or perceived)

• People willing to pay (enough)

• Cost of cut-through acceptable

• People will see the benefit buy again / recommend to others

• Will someone hate the product

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Target ROI’s for new products Investment Investment Return ROI Cum_invest Cum_Return Cum ROI

1 100 2000 2000% 100 2000 2000%

2 100 150 150% 200 2150 1075%

3 100 100 100% 300 2250 750%

4 100 100 100% 400 2350 588%

5 100 50 50% 500 2400 480%

6 100 50 50% 600 2450 408%

7 100 25 25% 700 2475 354%

8 100 25 25% 800 2500 313%

9 100 10 10% 900 2510 279%

10 100 10 10% 1000 2520 252%

11 100 5 5% 1100 2525 230%

12 100 4 4% 1200 2529 211%

13 100 3 3% 1300 2532 195%

14 100 2 2% 1400 2534 181%

15 100 1 1% 1500 2535 169%

16 100 1 1% 1600 2536 159%

17 100 1 1% 1700 2537 149%

18 100 0 0% 1800 2537 141%

19 100 0 0% 1900 2537 134%

20 100 0 0% 2000 2537 127%

Totals 2000 2537 127%

Throw out 4 losers and your ROI increases 159%

Throw out the winner and your ROI falls to -72%

We get bored long before

consumers

Stop changing…

Repeat what works, until you are sure it is no

longer working

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White

Odours Fresh

Off the market Boring ! But market Leader

1 * 1 * 1 * 1 = Beauty

1 * 1 * 1 * 0 = Failure

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We often offer

too much choice

Cut, kill, eliminate extra choice

Less is more !

• Proctor & Gamble reduced the number of Head and Shoulders SKUs to 15 from 26, eliminating the least popular varieties, and saw an increase in sales of 10%

• The Golden Cat Corp. eliminated 10 of its worst-selling kitty-litter SKUs, and saw sales rise 12% (while cutting distribution costs in half) - resulting in an 87% increase in profit

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Pricing is too often

forgotten

Work together… sell value

and talk about pricing

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A good starting point… explain break-

even analysis

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Unit

Price - Cost = Profit * Volume = Profit

Today 10 - 9 = 1 * 100 = 100

Break-even 11 - 9 = 2 * 50 = 100

Expected 11 - 9 = 2 * 90 = 180

Summary

• Make a commitment to start measuring ▫ No perfect solution is no reason not to start now

• Help build transparency (so you can repeat what works) ▫ Investments , Return

• Cut and kill: ugly puppies, new cute advertising, weak brand extensions

• Get involved with marketing ▫ Keep them focused on the basics

▫ Get involved in the pricing game

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MINDS&MORE cvba

MC Square Building, Lambroekstraat 5A, 1831 Diegem

Tel: +32 (0)2 719 02 55, fax: +32 (0)2 719 00 10, info@mindsandmore.biz

www.mindsandmore.biz

In the Fast Bridge network we have ex-entrepreneurs (20), academics (12) and industry experts (30+). Our specializations are: • Helping companies expand their business internationally • Leveraging social media to build brands • New product and brand development • Innovation coaching and support About half our clients work on a retainer basis. For others we get paid based on the results we deliver. The 3 things that make our company different from most other consulting companies are: 1/. A stronger focus on business execution 2/. We work with more senior consultants 3/. We are willing to link our payments directly to a client’s business results.

Contact

bryan@fast-bridge.com +32-475-860-757

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