Strategy | Pedro Laboy

Analytics, Marketing, Strategy

In marketing, “What” and “How” you measure is a factor of defined goals and available data.

Defined Goals

Sometimes a marketer’s goal is to meet certain non-financial objectives such as increased awareness or customer registrations. In these instances, these measures should be referred to as Return on Objectives (ROO) rather than Return on Investment (ROI)—which is a finance term that implies a financial return on a specific investment. Of course, all marketing activities should eventually be linked to some form of ROI measurement. The question is which kind. Is your stated financial goal to increase stock price? Profits? Quarterly sales? Cash flow? Customer value? EVA? Etc. It would be ideal if one could opt for all of the above. It is important to keep in mind, however, that these are realized over different life cycles and measured with different methodologies. Furthermore, using more than one or two ROI benchmarks often leads to organizational misalignment and loss of strategic focus. Achieving organizational alignment is one of the most important steps towards creating marketing that can be measured. Marketers should focus on developing the that services span the mediation and group discovery efforts that lead to alignment within an organization, as well as the more quantitative back end measurement strategies and implementations. At any rate, once goals are clearly articulated and agreed upon, the entire marketing measurement challenge becomes clarified.

Available Data

A quantitative model is only as good as its data input. We are all familiar with the phrase “garbage in, garbage out.” A metrics model must be appropriate for the kind of data available. For example, if your company has extensive customer data collected over long periods of time, a comprehensive ROI model can be put in place. However, if these data are not available a different, less precise, model would have to be developed. Even with extensive access to customer and market data, it is important to qualify the quality of these data. A simple ROI formula that can be applied to all businesses across all industries does not exist. Metrics models must be tailored to each corporation’s business model and corporate strategy to deliver information that is relevant to the defined goals. Such models can and should be developed.

Nov

Why CFOs Fail To Understand The Value Of Marketing

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Marketing, Strategy

One of the biggest challenges facing marketing today is the failure of financial executives to fully understand the true value of marketing. A few months ago I came across a KPMG survey where financial executives ranked marketing at the bottom of investments necessary to generate long-term growth. Training, information technology, human resources and R&D were all ranked higher.

Financial managers, especially CFOs, must understand that a company’s brands are an asset—an intangible asset but an asset nonetheless. However, brand investments are expensed and not capitalized. For example, it makes no sense to capitalize a machine that costs $100,000 over ten years but capitalize a marketing branding program that costs the same over one year. Under scenario 1, as shown in the accompanying table, the effect of the machine’s acquisition on the profit and loss statement for one year is only $10,000. Under scenario 2, revenue has decreased by $50,000 and as a result marketing is cut by $40,000, while the machinery investment is left alone. However, as outlined in scenario 3, we can see the true implications of our investments only if we look at them from a cash basis perspective. When both machinery and marketing are capitalized over only one year, the effect of both investments on cash is the same. But in reality, the useful life of the brand is likely to outlive that of the machine. Capitalization accounting principles are the main reason why marketing budgets are the first to be slashed when corporations are looking to trim costs. Accrued earnings do not deliver shareholder value; cash does. It is myopic to make investment decisions based solely on short-term accrual accounting implications.

	Scenario 1	Scenario 2	Scenario 3
Revenue	250,000	200,000	200,000
Machinery	10,000	10,000	100,000
Branding	100,000	60,000	100,000
Other Cost	90,000	90,000	90,000
Profit	50,000	40,000	(90,000)
Margin	20%	20%	(45%)

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Aug

The Engagement Funnel

Jul

Segmentation and Messaging

Jun

Doing More With Less In a Down Economy

In today’s faltering economy, marketers are under pressure to do more with less and make every dollar count. As profits evaporate and corporate budgets are slashed, marketing programs built solely on beautiful creative or humor are unlikely to make it pass the drawing board. CEOs and CFOs are asking marketers to implement programs based on demonstrable ROI models—however, this can only be achieved by leveraging technology and mining data in order to understand and predict purchase behavior.
Contrary to common belief, an ROI driven approach to marketing is no longer a strategy exclusive to large organizations with deep pockets. Increasingly, marketers at smaller companies are overcoming their fear of numbers and technology in order to follow a metrics approach to customer acquisition. This has been made possible by advances in technology and an array of low cost—and sometimes free—data collecting and mining tools.
Making marketing more effective and efficient requires more than simply collecting more data or purchasing data mining software. Having the right mindset and knowing what to do with the data collected are just as important. Marketers should adhere to the following strategies as they shift their marketing approach from one that speaks to a broad market to one that engages, acquires, and retains profitable customers.
Defining success
The cornerstone of a solid ROI-driven marketing strategy is a clearly defined set of goals or measures of success.
• Organizational alignment—Key players in sales, marketing, finance, IT, and HR should be aligned behind a common definition of success and a set of business goals. Goals must be specific, measurable, achievable, realistic, and time-bound (S.M.A.R.T.).
• Strategic alignment—All marketing tactics should support specific strategies and all strategies should drive defined business goals.
• Measurement—Define a starting point by benchmarking business goals. Establish milestones to ensure that strategies are on track, and progress is being made towards achieving the desired outcome.
Closing the loop
It is essential for companies to establish a measurable link between marketing initiatives and financial results.
• Targeting—Marketers should start by combining marketing strategies with data-gathering and analysis techniques to develop highly targeted campaigns based on customer insights and behavior.
• Close the funnel—Campaign results should then be tied to demand generation, sales conversion, and brand experience. This closed-loop funnel system creates a common view of the demand-to-sale-to-experience continuum across marketing, sales, and customers.
• Optimize—Closed-loop marketing allows companies to innovate value propositions and fine-tune marketing initiatives in order to continuously and efficiently acquire and retain valuable customers.
Collecting the data
Before companies start collecting data they should determine what, where, and how products are being sold, and who is buying them. Data gathering can be a daunting task. But costs and effort can be kept to a minimum, if companies follow a systematic and targeted approach.
• Profiling—Start by developing profiles that paint a demographic, geographic, psychographic, and behavioral picture for each customer—and assigns a monetary value to him or her. If individual profiles are not possible, break down your segmentation into as many groups as is feasible.
• Secondary data sources—Secondary data and information can be obtained through government reports, academic research, data brokers, and libraries.
• Primary data sources—Primary data and information can be obtained through interviews, focus groups, surveys, and customer transaction data.
• Become data-driven—From the Web all the way to the cash register, every customer point-of-touch should have a data collection component.
Eliciting a response
Companies should shun marketing strategies that rely solely on mass advertising. Rather, they should embrace a customer- and data-centric marketing approach that delivers the right value proposition, to the right customer, and at the right time.
• Call-to-action—If possible, all marketing initiatives should include a call-to-action that directs customers to purchase, visit a Web site, call a toll-free number, or otherwise interact with a brand’s many points of touch.
• Marketing mix—Call-to-action messaging combined with tracking technologies allows companies to determine which marketing initiatives are most effective in delivering the desired results—and thus, allocate resources accordingly.
Developing actionable instsigh
Mountains of data alone cannot guarantee business success. Often, those who “own” the data within an organization are either unable or unwilling to share and mine the data. Data collected must be mined and synthesized, in a timely manner, into relevant actionable insights. These insights should be put in the hands of decision-makers across the organization. Information should be grouped into four categories: customer, brand, effectiveness, and efficiency.
• Customer—Data collected should be used to determine which customers present the highest lifetime monetary value. Insights should be developed to identify how to best acquire and retain these customers.
• Brand—It is essential for a brand equity index to include measures that go beyond brand associations. Understanding how employees embody the brand is as important. Also, an effort should be made to quantify the impact of brand assets, such as patents or proprietary processes.
• Efficiency—Data and analytics should be leveraged to help companies stretch their marketing dollars. A key measure of efficiency is cost-per-acquisition (CPA). Marketers should track CPA and related metrics to ensure that the return marketing investment is maximized.
• Effectiveness—Just because a program is low-cost and efficient does not mean that it is effective. Metrics such as click-through rates and impressions are meaningless unless they can be linked to specific business goals. Rather, marketers should focus on measures that show that effective initiatives are resulting in growing sales and building long-term financial value.
Choosing the tools
Data-centric marketing strategies do not necessarily require heavy investments in hardware or software. Today, the right set of tools exists for companies both large and small.
• Database—Volume and scale allow larger companies to purchase enterprise-level databases and customer relationship management (CRM) systems from IBM and Oracle. Smaller companies can rely on relatively inexpensive, simpler tools. They can start by creating a database using Microsoft Access or MySQL, for instance.
• Lead management—For basic lead management, a product from Act! might suffice. Mid-size companies might choose to move one step up and purchase one of the many products offered by Salesforce.com.
• Web metrics—For most companies, Google Analytics is all they need to track and analyze Web traffic. There are a number of more advanced Web analytics tools in the market, with Omniture being the most dominant.
• Ad serving— Given the complexity and scope of ad placements made by large companies, they are likely to continue to rely on media agencies to handle ad planning and placement. Smaller companies can rely on a variety of tools to place and manage their media assets. Google’s Adword allows companies to place and manage both print and online media. A service from Spotrunner provides thousands of customizable TV ads, which can be bought and placed at a fraction of the price charged by advertising agencies.
• Data mining—For consumer companies with millions of customers, mining data collected might require advanced analytics tools such as SAS or MatLab—but these are fairly expensive and require special training and programming skills. Open-source business intelligence tools such as Pentaho provide a low-cost alternative, but require advanced programming skills. For companies with a small database, Microsoft Excel might be all they need. A popular alternative would be to outsource the data mining overseas.
As you can see, company size and budgets are no longer a roadblock to implementing data-centric customer engagement strategies. Start small, and scale up as business growth justifies larger investments in data systems and analytics. Remember, though, that being data-centric is not about implementing systems or tools; being data-centric is a mindset and business philosophy that marketers at all levels should embrace.

Feb

Targeting Decision Makers

Dec

Engagement Funnel Types

Engagement Funnel Types

Nov

Brand Value Creation

Brand Value Creation

Oct

Understanding Brand Value Creation

There are millions of brands in the United States. Most of these brands are sparks that are unable to ignite and create value for their owners. A few brands are shooting stars. They rise and reach market stardom, but swiftly lose focus and wither into oblivion. Only a selected number of brands become superstars; that is, they are able to build and retain value over time.

So what separates the sparks from the superstars? The answer is neither simple, nor straightforward. A winning formula for building a superstar brand can be elusive and differs from one industry to the next. Nevertheless, failure to understand brand value creation can prevent new brands from getting off the ground, and quickly chisel away at the value created by established brands.

Creating and sustaining brand value can be a complex and often daunting task. Gone are the days when marketing was synonymous with advertising, and a single ad placement on the Ed Sullivan Show or ABC’s World News allowed marketers to reach millions of consumers looking to spend their steadily growing, disposable income. Companies must now deal with a fragmented media landscape, as well as savvy consumers with short attention spans and high expectations. Furthermore, companies now face increasing pressure from an array of global competitors offering products and services of equal or higher quality, at lower prices.

Today, brand value creation requires marketers to skillfully manage a set of intricately related elements. These elements can be grouped into two categories: value drivers and value enablers.

Value Drivers

Value drivers are the set of building blocks that, when properly combined, allow a company to generate value. They are investment, innovation, brand platform, value proposition, and people.

1. Investment: Value creation cannot take place without investment—primarily financial investment. A common mistake made by marketers is to set unrealistic goals relative to available budgets. Business expectations should be aligned with the timing and amount of funds invested in creating and strengthening value drivers and enablers.

2. Innovation: Companies compete in an evolving market place. Businesses that thrive on change ultimately succeed, and those that fail to adapt inevitably fade away. Marketers need to continuously innovate their products, marketing approach, and business model in order to keep up with customers and stay ahead of the competition.

3. Brand Platform: A brand is much more than a logo or a name. Well-architected and clearly communicated platforms are key to building successful brands that drive revenue and outlive both business models and products.

4. Value Proposition: A compelling value proposition should be the foundation for all branding and marketing initiatives. Value propositions that clearly differentiate brands and evolve to meet customer needs are key to acquiring and retaining customers—and building financial value over time.

5. People: Innovative products and companies will certainly fail if the human capital necessary to support marketing and sales activities is not in place. Delayed product launches, unanswered calls, or long lines at the checkout counter are certain to anger customers and build negative brand equity that is expensive, and sometimes impossible, to reverse.

Value Enablers

Value enablers are the assets that allow value drivers to create and sustain brand value over time. They are measurement, knowledge, systems, alignment, and engagement.

1. Knowledge: Brand knowledge is an asset often ignored by most organizations. Mechanical tasks tend to be the spotlight of most employee training programs—how to fill out forms, handle inventory, etc. Companies should put equal focus on training programs that help employees engage customers, convey the right value proposition, and live the brand in their everyday work.

2. Measurement: Measuring and tracking the efficiency and effectiveness of marketing programs helps companies make the investments that drive the most value. From an efficiency perspective, marketers should focus on metrics that lower the cost of customer acquisition. Effectiveness benchmarks should focus on revenue generation, customer value, and brand equity.

3. Systems: A business system is much more than a computer network. It is the backbone of every organization. A business system can be a set of tools and networks that deliver the right information to decision makers. It can also be a human-driven process used to make products, marketing, or sales decisions. Business systems are key to
value creation.

4. Alignment: Organizational silo mentality can be a serious impediment to effective value creation. Marketing, finance, human resources, and IT should be aligned behind a common strategy, and work in unison to ensure that business goals are met. Within marketing, branding initiatives and marketing programs should be aligned with an overall business strategy.

5. Engagement: Historically, marketers have viewed their role as that of communicators. Their task was message development. Their tools were radio, print, and television. Their key metric was message recall. Today, marketers must be relationship managers. Their task is to engage consumers and turn them into loyal customers. Their tools must be media-agnostic, ubiquitous, and interactive. Their key metric should be customer lifetime value.

Properly blending and investing in the right value drivers and value enablers will ensure a healthy and lasting brand that drives revenue and builds shareholder value.

Sep

Published: Marketing Lost Its Clout