Measuring Marketing Performance and ROI

© Robert Shaw 2008 1

Robert ShawRobert Shaw

[email protected]@vbmf.com

Measuring PerformanceMeasuring Performance

Maximising ROIMaximising ROI

Measuring PerformanceMeasuring Performance

Maximising ROIMaximising ROI

MarketingFinancial

Contribution

maximise


Experience and knowledge:

Brands, money and maths

20 years experience as consultants to over 250 brands

Advisory roles: CIM, CIMA, CIPS, DMA, ICAEW, IDM, IPA, ISBA

Publication of over 100 books and articles: latest in HBR May 07


Steps in the processSteps in the processSteps in the processSteps in the process

Formulateproblem

AnalyseFinancial

Data

AnalyseNon-Financial

Data

Use theModels

MakeDecisions

Well defined?Explanations?Decisions?Over-complex?Over-simple?

Ample data?Accurate?Complete?Judgement?

Sound?Practical?Useful?

Good design?What-if?Scenarios?Optimisation?Risk analysis?

Buy-in?Understanding?Used in practice?

STEP 1 STEP 2 STEP 3 STEP 4 STEP 5


Step 1 Step 1 Formulate the ProblemFormulate the Problem

Step 1 Step 1 Formulate the ProblemFormulate the Problem

and how to maximise its financial contribution?


Marketing is widely misunderstoodMarketing is widely misunderstoodMarketing is widely misunderstoodMarketing is widely misunderstood


Is marketing just decoration?Is marketing just decoration?Is marketing just decoration?Is marketing just decoration?


marketing marketing adds adds valuevalue

marketing marketing adds adds valuevalue


Strong Brands Create ValueStrong Brands Create Value

Source: Interbrand/Citibank league table, 2000

StockMarket Value

NetBook Value

Intangibles as %of market cap.

Brandvalue

$142 bn $10 bn $73 bn93%

$69 bn $10 bn $16 bn85%

$81 bn $44 bn $34 bn46%

$194 bn $21 bn $53 bn89%

$217 bn $44 bn $3 bn80%


Marketing is the Marketing is the sourcing and sourcing and harvesting of harvesting of

moneymoney

Marketing is the Marketing is the sourcing and sourcing and harvesting of harvesting of

moneymoney

€


Past Future

Why?

Where?

How?

Models help decide how to maximise profitsModels help decide how to maximise profitsModels help decide how to maximise profitsModels help decide how to maximise profits


Step 2: Step 2: Analyse Financial DataAnalyse Financial Data

Step 2: Step 2: Analyse Financial DataAnalyse Financial Data


Maximising the value added byMaximising the value added by4 key marketing decisions4 key marketing decisions

Maximising the value added byMaximising the value added by4 key marketing decisions4 key marketing decisions

PRODUCT PRICE

PLACE PROMOTION


Revenue patterns Revenue patterns How fast will new products replace old ones?How fast will new products replace old ones?Revenue patterns Revenue patterns How fast will new products replace old ones?How fast will new products replace old ones?

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

May

-98

Jul-9

8

Sep-9

8

Nov-98

Jan-9

9

Mar

-99

May

-99

Jul-9

9

Sep-9

9

Nov-99

Jan-0

0

Mar

-00

May

-00

Jul-0

0

Sep-0

0

Nov-00

Jan-0

1

Mar

-01

Val

ue

Sal

es (

$)


Revenue patterns Revenue patterns How much effect do singles have on albums?How much effect do singles have on albums?Revenue patterns Revenue patterns How much effect do singles have on albums?How much effect do singles have on albums?

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

27

29

31

33

35

37

39

41

43

45

47

49

51

53 2 4 6 8

10

12

14

16

18

20

22

24

26

28

http://www.amazon.co.uk/gp/product/images/B0009353JQ/sr=1-1/qid=1178028402/ref=dp_image_0/203-3996053-0512718?ie=UTF8&n=229816&s=music&qid=1178028402&sr=1-1


Revenue patterns Revenue patterns How much advertisingHow much advertising is too much? is too much?Revenue patterns Revenue patterns How much advertisingHow much advertising is too much? is too much?

0%

5%

10%

15%

20%

25%

49 77 105 133 161 189

Week

Sa

les

up

lift

0

5

10

15

20

25

30

35

40

45

50

Th

ou

san

ds

Salesuplift

Spend


Revenue patterns Revenue patterns How much will we sell on promotion?How much will we sell on promotion?Revenue patterns Revenue patterns How much will we sell on promotion?How much will we sell on promotion?

0

10

20

30

40

50

60

70

80

90

100

1 14 27 40 53 66 79 92 105 118 131 144 157 170 183 196


Revenue patterns Revenue patterns How much will price rises reduce sales revenues?How much will price rises reduce sales revenues?Revenue patterns Revenue patterns How much will price rises reduce sales revenues?How much will price rises reduce sales revenues?

01,0002,0003,0004,0005,0006,0007,0008,0009,000

10,000

050100150200250300350400450500

Volume

Price


Revenue patternsRevenue patternsDo pricing and advertising mutually support?Do pricing and advertising mutually support?Revenue patternsRevenue patternsDo pricing and advertising mutually support?Do pricing and advertising mutually support?

0%

100%

200%

300%

400%

500%

600%

Unadvertised PriceReduction

Ad Feature + PriceReduction

Display + PriceReduction

Ad Feature +Display + Price

Reduction

% S

pik

e ove

r B

efore Synergy

In Store Display

Ad Feature

Unadvertised Price Off


Revenue patterns Revenue patterns Is long-term growth slowing down?Is long-term growth slowing down?Revenue patterns Revenue patterns Is long-term growth slowing down?Is long-term growth slowing down?

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

wk 1 wk 27 wk 1 wk 27 wk 1 wk 27 wk 1 wk 27


-30%

-20%

-10%

0%

10%

20%

30%

Jan-89

Jan-90

Jan-91

Jan-92

Jan-93

Jan-94

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

-300

-200

-100

0

100

200

300

Beef % change BSE mentions

Revenue patternsRevenue patternsWhat are effects of a health scare?What are effects of a health scare?Revenue patternsRevenue patternsWhat are effects of a health scare?What are effects of a health scare?


Step 3Step 3Analyse Non-Financial DataAnalyse Non-Financial Data

Step 3Step 3Analyse Non-Financial DataAnalyse Non-Financial Data


What is a Brand?What is a Brand?What is a Brand?What is a Brand?

A promise…

…that the customer can

achieve a desired set of

outcomes


Two brand perspectivesTwo brand perspectivesTwo brand perspectivesTwo brand perspectives

Aspirations

Perceptions

YOU CUSTOMERS


Model what customers need and wantModel what customers need and wantModel what customers need and wantModel what customers need and want

Observation

Buying

Who Why

How

What

Where When

Interview

Group discussion

Revenue analysis

Staff feedback

PlansActions

Actionable insights come from combining multiple sources of information

CUSTOMER DATA SOURCES

Mystery shopper


Involved

Uninvolved


Sex

Sport

Politics

Religion

Wine

Beer

Soap


Rational Emotional


Blind test 44% 51%

5%

Named test 65% 23%

12%


"In the factory, we make

cosmetics;

in the store we sell hope."

Charles Revson


Model how customers relate to what you offerModel how customers relate to what you offerModel how customers relate to what you offerModel how customers relate to what you offerHigh Involvement

Negative reduced(pain, thirst)

Positive added(pleasure, esteem)

Low Involvement

B

A

F C

D

G

E

Band aidPizzaPizza

H

I

J

Sports car Life insurance


• Paper towels

• Life insurance

• Contact Lens

• Sports car• Auto insurance • Console TV

• Family car• Stereo

component• Expensive watch• 35 mm Camera

• Eye glasses • Wallpaper• Washer/dryer

• Portable TV• Car battery

• Hair colouring• Exterior paint• Battery razor

• Instamatic camera

• Credit card• Complexion/face soap

• Ground coffee • Family/steak restaurant• Motor oil • Headache remedy

• Dry bleach

• Suntan lotion

• Chicken• Insecticide

• Wine for dinner parties

• Inexpensive watch

• Low tar cigarette• Pizza

• Deodorant soap

• Peanut butter• Insect repellent• Fast food restaurant• Frozen

baked goods

• Fruit • Imported beer• Regular

cigarettes

• Regular shampoo

• Donut frozen• Donut shop• Non-disposable

razor• Diet

soft drinks

• Light beer

• Regular beer• Regular

soft drinks

• Disposable razor • Liquid

hand soap• Salty snacks

• Greetings card

• Perfume

• Liquid bleach

• Barbecue sauce

• Women’s magazine

•Toothpaste • Jeans • Wine for self

HIGH INVOLVEMENT

LOW INVOLVEMENT

THINKING FEELING

• Salad oil

• Economy car


4. Use the models4. Use the models4. Use the models4. Use the models


What’s the market for snow?What’s the market for snow?What’s the market for snow?What’s the market for snow?

Technologist with idea

Analogues

Market research

Business case

Rejected ideas

Rejected ideas


Modelling the financial resultsModelling the financial resultsModelling the financial resultsModelling the financial results

Profit / cash flow

Product options

Price

Distrib’n &Advertising

Variable costs

Fixed costs

Demand

Costs

Revenue

NPV & IRR


5. Make Decisons5. Make Decisons5. Make Decisons5. Make Decisons


How to speak with CEO and CFOHow to speak with CEO and CFOHow to speak with CEO and CFOHow to speak with CEO and CFO

Prepare with:

Financial analysis and

Non-financial analysis

Don’t use jargon and specialist language

Show them the evidence

Set out the options and alternatives

Show predicted results of alternatives

Choose what has the best financial return on marketing

Measuring Marketing Performance and ROI

Business

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