George Schildge May 15, 2018

Return on Marketing Investment: 4 Steps to MarketingSpending Performance

matrixmarketinggroup.com/return-marketing-investment

A SYSTEMATIC APPROACH TO IMPROVE YOUR RETURNON MARKETING INVESTMENT

The rapidly changing marketing landscape has resulted in increased clutter, fragmentedaudiences, and high costs

To prosper in today’s environment is all about return on marketing investment andmarketers must dramatically improve the impact of every marketing dollar they spend. Ifmarketing dollars are not contributing to brand building, according to the new rules ofmarketing, just what are they contributing to? For many, the old saying, “I know half myadvertising isn’t effective – I just don’t know which half,” is truer than ever.

In the last few years several brands including Starbucks, Discovery, and Home Depot havegrown from obscurity to ubiquity very quickly and cost-effectively. Why have some marketersmade marketing effectiveness a source of competitive advantage while others have beenstalled by clutter and rising costs? Looking closely at the best brand builders, clear patternsemerge. Using approaches described below, successful marketers are spending smarter,focusing on new points of leverage in a more complex, dynamic marketing environment. As aresult, they are building brands more quickly, cheaply, and efciently.

Both B2B and B2C companies spend a lot of money on marketing communications. But is all

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that money well spent? Marketing return on investment helps companies measure the returnon investment. For marketers (and management), there are benefits associated with using thismeasurement, including setting budgets, justifying marketing spend; deciding what to spendon, comparing marketing efficiency with competitors; and holding themselves accountable. It’snot an easy metric to measure, because it can be hard to determine how much incrementalfinancial value a marketing program add. It can also be difficult to figure out which incrementalprofits are attributable to which programs. Measuring the lag time associated with mostmarketing spending investment is another common challenge. Despite these challenges,measuring marketing return on investment is worth it. Ideally, your marketing program is notonly affecting sales and profits this year but is also strengthening your brand equity andcustomer relationships over time.

Companies spend a lot on marketing communications. In fact, global spending on media isexpected to reach $2.1 trillion in 2019, up from $1.6 trillion in 2014. But is all that money wellspent? And more fundamentally, does marketing work? Marketing ROI analysis can helpanswer those questions. SO let’s dive in.

The New Environment: Not Business as Usual

Several key changes in the marketing environment have put an end to business as usual inmanaging marketing spending. This holds true for startups and small businesses as well.

The Number of Touchpoints has Exploded

The rapid growth in consumer touchpoints fueled by the Internet and other technology-drivenchannels, including social media, VR, AI, e-mail, social media, call centers, ATMs, Web TV,kiosks, and new interactive mobile technology – has created a wide new array of options forbuilding brand presence.

The rapidly changing marketing landscape has resulted in increased clutter, fragmentedaudiences, and higher costs. 40.5 percent of all U.S. media spending is now digital. At thisrate, the 50 percent mark might not be too far in the future. In fact, recent studies have shownthat increases in advertising expenditures led to increases in sales in only about 50 percent ofthe cases examined. It is not only advertising that is suffering from questionable effectiveness.Analysis of trade promotions across 65 product categories suggests only 16 percent wereprotable. In this environment, many marketers struggle to sustain, let alone grow their brands,spending and essentially wasting more and more money on advertising, promotions, and othermarketing efforts.

To understand how to select the right touchpoints – and spend the right amount of money inthe right way against them, it is important to understand the forces that are shaping brandpresence today.

Technology has dramatically increased the power of the grapevine to shape brand presence

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Technology has dramatically increased the power of the grapevine to shape brand presence –by equipping more consumers with more information than they’ve ever had, and by making iteasy for them to share that information quickly.

When consumers were asked what compels them to visit a company’s Website, 57 percentsaid a word-of-mouth recommendation, compared to only 42 percent who were inuenced byan online ad. Technology also gives consumers the tools to spread the word rapidly. Emailword of mouth has become “word of mouse,” a powerful shaper of brand presence because itgrows exponentially. Fully 92 percent of consumers who learned about a Website from a friendwill pass it on to another friend. But, content marketing is driving more organic search trafficwith over 70% of clicks go to organic searches that rank on the first page of Google. Searchengine optimization is important.

Consumers now organize their own Web and ofine communities around products andcompanies that they support – or want to rally against. These groups range from supportnetworks for purchasers of failed products to interest groups promoting ethical or politicalcauses. These can become fast and powerful channels of communication outside the directcontrol of marketers.

Word of mouth can work both ways. While positive word of mouth can quickly promote abrand, negative word of mouth can quickly do damage. In one instance, consumerspropagated an e-mail campaign calling for a boycott of a prominent apparel brand, falselyaccusing the company of racism. Although the company acted quickly to set the recordstraight, the brand suffered. Social media and brand reputation must be monitored closely.

Marketers must actively manage and inuence the information ow around their brand,knowing how and when to intervene so that they don’t lose control of their brand’s image.

Alliances Multiply Consumer Touchpoints

Increasingly, marketers are forming partnerships to multiply their consumer touchpoints, whilebootstrapping acceptance among consumers through association with partner brands.

Starbucks, for example, is renowned for extending its brand presence into more consumptionoccasions through alliances with companies such as Barnes & Noble, United Airlines, and Ben& Jerry’s. Alliances abound on the Internet as companies form agreements to hot-link theirsites. Amazon.com has an extensive program, including nancial and other incentives, topopulate other sites with its hot-linked icon.

The key is to choose partners that reinforce and effectively deliver the desired brandpositioning.

Consumer Experience is Playing a Greater Role in Brand Loyalty

Now more than ever, consumers’ direct experiences drive brand perceptions more thantraditional advertising. This is partly due to agging consumer condence in advertisingmessages. Yankelovich research shows that 93 percent of consumers do not have great

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condence in the advertising messages of large corporations. Consumer experience is alsoplaying a greater role because of the changing nature of winning value propositions. Asfunctional benets (e.g., technical features of a car) become commodities that are easilyreplicated, process and relationship benets (e.g., the experience of buying a car and theongoing connection and afnity with the brand) increasingly drive purchase decisions, word ofmouth, and loyalty. This interplay of functional, process and relationship benets deepens theexperience for the consumer far beyond what a traditional advertising message could deliver.

Saturn was one of the rst to successfully introduce process and relationship benets into theautomotive category by offering no-haggle pricing and programs to make customers feelvalued, respected and part of a special club. Through online information and owners’ groups,Saturn customers can manage the buying process and access national service.

Saturn owners even trust the dealers – a signicant achievement. Each customer is welcomedinto the “Saturn Family” and is invited to owner picnics and other events. Saturn’s advertisingsupports the message that something different is being offered. Through these efforts, Saturnhas nurtured deep loyalty without signicant distinctiveness in the car itself.

The interplay of functional, process, and relationship benefits deepens the experience for thecustomer

Starbucks, another leader in experience-based loyalty, grew from 11 stores to over 1,000 inunder 15 years with very little advertising – relying instead on the delivery of a superb coffee-drinking experience to the consumer. Starbucks’ consistency and attention to detail in thesensory experience – the smell and taste of the coffee, the music and décor that reinforce therelaxed brand personality – have effectively retained the core customer base while signicantlygrowing the franchise. And along the way, the company has managed to rejuvenate what wasa fairly stagnant coffee category.

The importance of consumer experience in building brand equity means that, in addition toadvertising, sponsorships, and promotions, marketers need to use marketing vehicles thatimprove the customer relationship or buying processes, such as consistent store operations,responsive call centers, and information-rich Websites.

Collectively, the forces described above increase the options for marketers, but the result maybe double-edged. Marketers have more effective and more efcient vehicles at their disposalto address specic brand needs, but the sheer number of vehicles and their combinations andinteractions create complexity and cost that many nd difcult to manage.

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A New Approach to a Better Return on Marketing Investment.

In this complex environment, any marketer can become more successful by taking a moresystematic approach to developing the marketing plan. Below we describe an approach thattakes advantage of the broadening set of marketing options while focusing the right amount ofspending in the right places to build brand presence quickly, effectively, and efciently.

Focus on the bottlenecks to the growth of your brand

To spend where the investment will work hardest, marketers need to know exactly what standsin the way of brand growth. This means diagnosing the specic barriers or bottlenecks thatimpede greater use of, and loyalty, to the brand.

While bottlenecks vary from situation to situation, depending on the product category, targetsegment, and life stage of the brand, they can appear at any stage of the consumer’s decisionprocess – awareness, consideration, experience, or loyalty (see Table 2).

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Awareness. Awareness bottlenecks often derive from one of two problems. Either the brand ishaving difculty breaking through the competitive clutter, or marketing programs are notaddressing the “type” of awareness relevant to the brand.

Breaking through clutter can sometimes be achieved with sheer scale by out-spending thecompetition. More cost-effective awareness can be achieved with creative measures

that deliver high impact for the dollars spent. In a fragmented world, well-created sales funnels,highly 1:1 messaging and content, innovative PR and media events can cut through the clutter.

Failing to develop the right type of awareness can allow signicant bottlenecks to developwithin your buying cycle. While many brands have aided awareness above 80 or 90 percent ifthis is just awareness of the brand’s name and not of the brand’s proposition, consumers areless likely to act on their awareness.

Consideration. Most consumers have a repertoire of two to three brands from which theyselect on any given purchase occasion. Marketers, therefore, face two challenges withconsideration: rst, making the brand relevant so it enters consumers’ consideration set; andsecond, making it distinctive enough to drive consumer choice. Lack of relevance ordistinctiveness to the target segment can be caused by real or perceived gaps in the brand’semotional or rational benets, or in the brand’s communication or delivery of these benets.

For example, one nancial services company analyzed its customers based on their uniqueneeds and discovered very different consideration bottlenecks by segment. In fact, twosegments had conicting perceptions of the brand’s heritage, creating bottlenecks with both

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groups. Wealthy young “Internet junkies” who adjusted their investment portfolios frequentlyhad difculty accepting the company as a dynamic online broker, given the company’s regionalbricks and mortar beginnings. At the same time, many wealthy retirees viewed the brand –which had only recently expanded nationally – as an upstart which had not yet earned itsstripes.

Experience. Marketers face two primary bottlenecks in moving from consideration toexperience. The rst is the lack of a compelling call to action; the second is difculty in gainingaccess to the brand.

A powerful call to action is needed in many categories to overcome the consumer inertia thatdevelops when switching is difcult, or a brand becomes part of a consumer’s routine.

Access becomes a bottleneck to experience when consumers have strong consideration for abrand but have difculty in purchasing it due to weak retail distribution, limited hours ofoperation, or other factors.

ETRADE, for instance, demonstrates the importance of a powerful call to action. WhileETRADE’s low price positioning was enticing, it may not have been enough for consumers togo through the work of switching account information and funds from one online broker toanother. Taking the offer just a bit further did, however, push consumers to trial; using the callto action of “Up to 25 trades on us!”, an extraordinary number of online traders went fromconsideration to experience.

A call to action can bring consumers to the store or a Web site, and in categories likepackaged goods, can often be very effective at the point of sale. In-store promotions forpackaged goods abound because research shows that over 70 percent of consumers have notdecided which brand they will buy before they are in the store.

Loyalty. Cementing loyalty is often critical to brand protability, as loyal consumers typicallyspend more and purchase more frequently. Inspiring loyalty requires a powerful consumerexperience, reinforcement of the reason for purchase, a consumer-friendly repurchase cycle,and increasingly, some form of emotional afnity between the brand and the consumer. Inmost categories, consumers fall into loyalty segments ranging from “dissatised defectors,”who will abandon your brand at the next opportunity, to “emotive loyalists,” who develop deepbonds with brands and are unlikely to switch (see Table 3). Identifying loyalty bottlenecksbegins with understanding a brand’s penetration of loyalty segments versus key competitors.

An accurate, fact-based understanding of a brand’s real consumer bottlenecks will helpmarketers focus attention and resources on the critical drivers and quickly improve brandstrength and value.

Tips for Getting Started

Map how a consumer in each of your segments typically moves from awareness of yourbrand to consideration, to experience, and to loyalty.

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Measure leading indicators, drivers, and results at each stage. For example, a soft drinkmanufacturer measures consideration, but also its relative scores on the rational andemotional image attributes that contribute to that consideration (“refreshing,” “cool,” etc.).Use proxies where the best metric isn’t available – one packaged goods company usesgrocery store distribution as a proxy for all chain store distribution.Ensure metrics and performance expectations are appropriate, given:

Industry context – an insurance company can compete with much lower levels ofawareness than a fast food chain;Life stage of your brand – an established brand may need to focus onmaintaining consideration and sustaining scores inexperience, while a new brandmay need to focus on awareness and consideration;The consumer segment in question – mortgage loyalty should be higher amongthe afuent segment than among the mass market;The channel structure – the bottleneck can be with an intermediary, despitehealthy consumer demand.

Look for performance changes over time as well as gaps versus competitors – a catalogcompany found that although trial and usage were high compared to.Competing brands, both were declining rapidly, signaling issues with the appeal of thebrand among the untapped market.Understand root causes – such as in the example of the bank that understood its keyissue to be its resolution of consumer complaints, rather than the factors that drove theinitial complaint.Set up a scorecard for ongoing performance tracking to provide early warning of futurebottlenecks.

2. Use a More Relevant and Diverse Set of Presence-Building Methods

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Armed with an informed view of a brand’s bottlenecks, the marketer must then craft programsthat employ the most appropriate set of traditional and new presence-building vehicles andtactics.

It is deceptively easy to simply base this year’s programs on last year’s, or to fall into sector“group-think.” Why should GM and DaimlerChrysler, for example, employ nearly identicalmarketing spending, when they likely are experiencing bottlenecks that are unique to each oftheir brands? (See Table 4.) Moreover, while traditional vehicles such as mass advertising willcontinue to be an important part of many marketing programs, it is important to consider abroader set of marketing vehicles – especially those that shape a consumer’s brandexperience and spark positive word of mouth – which may more effectively and efcientlyachieve marketing objectives.

The Right Tool for The Job

The key to presence building is not necessarily the use of more vehicles or to blanket all thetouchpoints. The key is to select the right vehicles at the right time to address specicbottlenecks in the consumer decision process. Leading marketers often nd it helpful toassemble internal and external “rules of thumb” about the role of different marketing vehicles inmoving consumers through their decision process for a particular product category (see Table5). By recording the impact a brand has with its presence activities, and by constantlyexperimenting with new vehicles, these rules of thumb become more powerful and prescriptiveover time.

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Break Through the Clutter

There are no limits to the creativity that can be brought to the challenge of creating andemploying new marketing tactics. In fact, the more innovative and fresh the approach, themore likely it is to break through the awareness clutter. State Farm, for example, garnered freePR to spark positive word of mouth through its “Dangerous Intersections” program, addressingawareness and consideration bottlenecks head-on. The company reached into its proprietarydatabase to supply the media with a list of the most dangerous intersections across severalmajor cities. The media – hungrier than ever for content, due to the growth of media outletsand the explosion of “infotainment” – turned the information into a big story. Nightline, Dateline,USA Today, local papers and TV stations all carried large features which credited State Farm.Citizens wrote to their local papers and politicians demanding that something is done about theproblem. As a result, State Farm strengthened its image with millions of consumers as aconcerned, caring institution (one survey showed 50 percent of adults were aware of thecampaign) and delivered real benets, in the form of information, at a fraction of the cost of amajor media campaign.

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Equally creative is the art of turning “vanguard” consumer segments, which help establish newtrends, into powerful product ambassadors. Abercrombie & Fitch became legendary for hiringthe “cool kids on campus” to work at their stores, offering attractive discounts and very exiblehours as inducements. These kids, in turn, use their discounts to build their wardrobes andbecome very inuential walking billboards for the brand at their schools. For a company whosechallenge is to get key segments to consider its products, the ambassador vehicle is extremelypowerful.

While most trends eventually die, Nike has shown that seeding the vanguard can be asustainable presence-building model, as long as the pace of new product development staysahead of individual product life cycles.

The Power of Experience

As the portfolio of brand building vehicles grows, so too does the challenge of maintaining aconsistent customer experience across all touchpoints.

Recognizing the importance of this consistency, Victoria’s Secret trains its call center staff toperpetuate the romance of the brand in the way they discuss the product; to cross-sell productand suggest alternatives when desired items are out of stock; and to help callers with sizing

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and other questions. This is in sharp contrast to many other companies who focus telesalesstaff primarily on efciency objectives such as the number of calls, time per call, and dollarsper hour.

In the search for new and innovative brand-building vehicles, marketers must not forget thepotential of their existing resources. Retailers, for example, can use merchandising andservice to create an in-store experience that becomes their most powerful loyalty- building tool.Our work has shown that adjusting store operations – including sales staff behaviors, back-room practices, and visual merchandising – to better reect brand objectives can result insustained 10 to 20 percent sales increases versus comparable stores.

Aveda, specializing in premium personal care products, does not do a great deal of advertisingbut has built and sustained its brand through its multisensory store experience: a distinctivearoma; soothing new age music; trendily coiffed and made-up store personnel and minimalistdécor. Starbucks, GAP, and Disney are all legendary for driving brand growth through the in-store experience they provide for consumers.

Getting Intermediaries (Channels) Involved

Marketers working in channels with strong intermediaries can employ combinations ofconsumer pull and intermediary push to create a reinforcing loop of awareness, consideration,experience, and loyalty.

In the pharmaceuticals category, for example, Novartis (like many others) supplements direct-to-consumer print ads with direct marketing to physicians. A diet drug producer extended thisapproach recently by marketing to an unconventional intermediary – the hairdresser.

Similarly, branded apparel manufacturers like GAP and Jones of New York work withdepartment store retailers like Macy’s and Lord & Taylor to build their brands. Themanufacturer helps the retailer to improve in-store experience and cosponsors targetedadvertising to draw people into the stores. In return, the retailer promotes the product with oorspace and in-store sales support.

Tips for Getting Started

Question old assumptions about your brand’s spending mix – the fact that a vehicle hasalways been used may not make it appropriate for current bottlenecks.Don’t let traditional organizational boundaries between marketing and other functionslimit your presence-building options – including the full suite of activities that affect abrand’s health (e.g., sales initiatives, public relations events, the Internet), regardless ofwhich department manages them.Evaluate the performance of existing vehicles against each stage in the consumerdecision process and build an institutional memory of what works where, when, and why.Constantly experiment with new presence-building tools – companies that were earlyadopters of the Internet as a marketing vehicle were handsomely rewarded.Consider changing how you use existing vehicles to make them more powerful in

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removing bottlenecks, as Abercrombie & Fitch did with their sales associates.Develop a fact-based understanding of every customer touchpoint – could you takebetter advantage of these?Ensure that vehicles are consistent with desired image associations for your brand –e.g., a bowling sponsorship may not support an innovative, contemporary personalitypositioning.

3. Create a Dynamic Marketing System to Accelerate Brand Building

With the most appropriate tools to address a brand’s bottlenecks selected, breakthroughmarketing effectiveness then requires getting the tools to work together in an integrated way.Each part of the marketing program (advertising, sales events, promotions, call centers, etc.)should contribute to a common goal – removing brand bottlenecks. When this is done well, thebrand’s marketing “system” can take on a life of its own, and create a virtuous cycle of thebrand building. These brand-building dynamics create value which is more than the sum oftheir parts. Studies on the combined impact of advertising and promotion among packagedgoods brands suggest that the combination of these activities drive volume gains far in excessof the total gain achieved by advertising and promotion conducted independently.

Victoria’s Secret, for example, exploited a powerful dynamic with its brand. To entice moremale customers, Victoria’s Secret took the non-traditional step of advertising an Internetfashion show for lingerie during the Super Bowl. The Victoria’s Secret’s Super Bowl ad was nota means to an end, but rather an opportunity to advance male consumers beyond awarenessto consideration by bringing them to the Web for a deeper brand sell. Victoria’s Secret Internetfashion show attracted over 1.5 million viewers, shattering all previous records, and creatingoverwhelming media buzz and word of mouth. Importantly, the show brought new malecustomers into Victoria’s Secret stores, where they could have a rich rst experience with thebrand.

Sometimes building quantitative dynamic models can yield essential insights, especially incomplex situations where second-order effects, feedback loops, and non-linear relationshipscan create counterintuitive results. A spirits company generated such counterintuitive insightswhen it quantitatively modeled the dynamic interrelationships between its marketing actionsand consumers’ responses across three major markets. The model clearly indicated the impactof investments in marketing levers – individually and in combination – on total brand netpresent value. Because of the dynamics at play, the optimal combination of levers wassometimes different from hypotheses developed before the modeling exercise. Ultimately, themodel suggested very different strategies for each of the three markets – resulting in a 30percent increase in brand net present value. (See Table 6.)

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Marketers can launch a virtuous cycle of brand-building by using their consumers as an activepart of the brand-building system. Most of us are familiar with the shampoo commercial thatsays, “I told two friends, and they told two friends, and so on ….” The power of positive word ofmouth within a presence-building system is that it generates exponential growth, where eachnew consumer becomes the brand’s ambassador for the next. The trick is to build a catalystfor this word-of-mouth cycle around your brand. The producers of the Blair Witch Project kick-started that movie’s ubiquitous word of mouth by seeding buzz on Internet chat roomsfrequented by college students. To sustain this word of mouth, the movie’s producerspromoted a content-rich Internet site that made visitors feel like they were part of a private club– showing scenes not included in the movie, and detailing the mythology surrounding the BlairWitch. Only when the word of mouth reached its apex did the producers introduce traditionalmass advertising to sustain the movie’s momentum (see Table 7).

An important cautionary note: a dynamic system can turn against a brand if marketers fail tothink through and avoid unintended outcomes. Many packaged goods marketers have landedin this territory by launching promotional discounts that merely drove pantry loading rather thanbuild the brand’s consumer franchise.

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Tips for Getting Started

To get started, draw on your management team’s experience to map the currentinterrelationships among marketing vehicles, consumer reactions, and brand outcomes.Initially focus on describing the connections between two vehicles (e.g., how directresponse television advertising should feed leads to call centers). Build outward fromthese simple connections, rather than trying to come up with the total system all at once.Measure rates of change of key indicators such as awareness, image perceptions,distribution, trial, and repurchase to understand what is causing consumer movement.Choose and sequence marketing vehicles to amplify positive relationships (e.g.,capitalizing on growing consumer purchase intent with trade-focused initiatives toincrease distribution) or to dampen negative relationships (e.g., canceling promotionsthat merely train the customer to wait for deals).Estimate the impact of planned marketing initiatives on future brand performance – andthen ne-tune the marketing program accordingly. In some situations, this needs to be

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done quantitatively. In others, it can be done qualitatively – visually mapping out thelikely causal links among the initiatives, consumer reactions, and brand performance.Explore the use of quantitative systems models to understand the impact of usingdifferent combinations and sequencing of marketing vehicles.

4. Invest in the “Spending Zone” (Sweet-spot) to Accelerate the Pace of BrandBuilding

Given the increasing number of vehicles and their growing cost, it has never been moreimportant to spend the right amount of money – no more, no less – on each element. Toaccelerate brand presence, marketers must invest in this “zone” of effectiveness – the optimalbrand-building investment above minimum critical mass and below diminishing returns.Spreading the spend too thick or too thin will lead to wasted investment.

A leading packaged goods company has used an understanding of the zone in advertising toeffectively manage marketing investment across its portfolio of brands (see Table 8). Thecompany determined that some of its smaller brands could not support signicant broadcastadvertising, and what was being spent was too small to break through the clutter of thecategory. The company stopped national advertising for these brands, and instead invested inbuilding awareness and trial for the brands within leading retail outlets – again, achieving abetter match between bottlenecks and marketing vehicles. This also allowed them to focustheir internal and agency talents on building powerful advertising for their major brands. Afterthis move, the small brands grew due to more concentrated investment at retail, and the largerbrands experienced image and share gains from more effective advertising copy.

Rules of thumb can be established to nd the zone in other market vehicles. For example, a16/23

chain of donut shops found a “sweet spot” market penetration level by comparing the numberof stores for a given population with the sales in each store. Below a critical mass of stores,consumers would not encounter the chain frequently enough for it to become part of theirroutine. Likewise, by examining the same data they determined the point at which storesbegan to compete with one another and store sales declined. This information is now used toplan the development of new markets to achieve maximum protability.

Similarly, a gasoline retailer found an effectiveness zone for the pace of capital improvementsto its station network. By comparing the time horizon over which site improvements were madewith market share movements, the company found that the most signicant share gains wereachieved when they blitzed a local market and upgraded all their facilities within a 6-monthperiod. While the total spending was the same as when they phased these improvements inover several years, with a blitz they reached a rapid critical mass of consumer awareness andexperience of the new store concept.

Tips for Getting Started

Select the most relevant metrics for the intensity of the marketing activity and the relatedconsumer response (e.g., advertising reach and consumer’s strategic message recall).Be creative about what could be analyzed in this way. Retailers, for example, couldexamine how store productivity varies by market penetration.Be careful not to choose dependent variables that are too far removed from themarketing activity. For example, there are too many variables at play to relateadvertising directly to sales or share growth, but advertising can be related to changes inconsumer attitudes which ultimately lead to sales.Create a library of quantitative rules of thumb regarding zones of effectiveness for eachmajor vehicle by gathering data from multiple sources: internal data from multiplemarkets, publicly available data, data from partners such as ad agencies or researchfirms.Launch local market pilots to gather data where gaps exist.Track internal and competitor data (spending and impact) over time for the mostimportant vehicles. Changes in competitor spending and/or consumer behavior will shifteffective zones over time; as a result, the effective spending zone will also change.

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Putting It Altogether – Two Examples

Two real examples from two very different industries show how the application of these stepscan dramatically improve your return on marketing investment.

The Renewal of Rolling Rock

The renewal of Rolling Rock beer illustrates the power that lies in challenging conventionalcategory wisdom and focusing on the true bottlenecks for the brand.

Rolling Rock – a leading U.S. domestic specialty beer brand – stalled in the early 2000s whenthe import and microbrew segments took off. After ten years of steady growth, the brandlanguished. Margins also fell as a result of price promotions that tried – but failed – to stimulateconsumption. Labatt USA (LUSA), the brewer and distributor of the brand, began to worry thatit had hit the end of its lifecycle and could no longer compete.

Instead of launching into the usual round of marketing actions – changing agencies, shootingsome new creative, initiating a national promotion – LUSA marketing managers rolled up theirsleeves and rebuilt the marketing program from the ground up.

The real bottlenecks. The team began by laying out the consumer decision process andpotential bottlenecks for specialty beer, drawing on their own experiences and recent researchon consumer behavior in the category.

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The team initially hypothesized that brand image was creating a bottleneck for Rolling Rock atthe crucial consideration stage. As sexier imports and microbrews like Corona and Pete’sWicked Ale ooded the market, consumers likely found Rolling Rock to be a bit tired. The teamthought the core attributes of the brand – its old Latrobe heritage and quirky individualism –were probably passé. The product itself was also a problem, they surmised since the microshad likely shifted the consumer palate toward darker, more bitter tastes. The micros brewingindustry has exploded and so has mico-roasting for coffee.

But benchmarking Rolling Rock versus competitors throughout the decision process told adifferent story. Consideration was falling behind, but surprisingly, consumers still related to thecore attributes of the brand. While usage was indeed falling behind the competition, thedecline in consumption followed – not led – a decline in retail distribution. The LUSA teamrealized that it was a trade distraction – not consumer disenchantment – that was causingRolling Rock’s performance decline. In effect, the explosion in imports and microbrewsdistracted wholesalers from effectively distributing the brand to retailers and bars. As the brandlost shelf space and share of tap handles, consumption fell – despite a healthy image andintent to purchase among consumers.

The right marketing vehicles. Given the nature of the bottlenecks, money focused on largemedia buys and consumer promotions would have been wasted. Instead, the companyengineered a dramatic (and low-cost) turnaround of the brand by addressing the bottleneck ofconsideration and loyalty in its wholesaler network, supplemented by some creative changesto the brand to renew interest among retailers and consumers.

LUSA began by reminding wholesalers of the disproportionate margins available to them onRolling Rock versus other brands on a per unit basis. They then announced a rejuvenatedmarketing program for Rolling Rock. First, they overhauled the packaging – returning to thepainted label, long-neck bottle – to give wholesalers a talking point with retailers and “on-premise” customers (as well as make the bottle stand out more at the point of purchase).Second, they updated and committed to a promotion called “Bucket of Rocks” – designed tocreate on-premise trade excitement around the brand and shift on-premise preference fromdraft (especially microbrews) to bottles. Third, they created new advertising – not to shift theimage of the brand, but to reinforce traditional equities (e.g., heritage, quality).

Positive brand dynamics. By focusing on the wholesalers, the LUSA team hoped to turn thevicious cycle plaguing Rolling Rock into a virtuous cycle.

They were successful. As the wholesalers got excited about the brand again, they becamemore vocal proponents of it with on- and off-premise players. As retailers displayed the brandprominently and the bars promoted it with the “Bucket of Rocks” campaign, incrementalconsumption grew. The new packaging and the trade prominence sparked word of mouth,which accelerated usage. As consumption grew, Rolling Rock’s contribution to tradeprotability increased. As a result, the trade pushed the brand even more, further acceleratingconsumption.

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The Rolling Rock zone. Because LUSA focused its efforts on vehicles that addressed its speci c bottlenecks, and because it was able to kick-start positive brand dynamics, it was able to spend signi cantly less than it might have to renew Rolling Rock. For example, concerning advertising, Rolling Rock as a specialty brand could never justify the media buy that a mainstream brand such as Budweiser would make. The LUSA team chose to invest enough in advertising to convince the wholesalers that it was committed to the brand – and to reinforce the messages it was giving consumers at the point of purchase through its packaging, displays, and promotions. For Rolling Rock, the advertising “zone” was in the millions of dollars – not the tens or hundreds of millions.

The Rolling Rock marketing program has been a resounding success. The brand has emerged from the microbrew/import discontinuity stronger than ever. Over the past 3 years, revenue has increased an average of 7 percent per year.

The Launch of an E-commerce Business

The holiday marketing program of a major “clicks and mortar” retailer – with a large storenetwork and an emerging Internet channel – illustrates how these return on marketinginvestment rules apply equally to Internet businesses. In the last 6 months of 2014, thecompany was struggling to make its Internet business viable. To meet aggressive nancialgoals for its Website, fundamental changes to their marketing spending program were neededin time for the critical Christmas buying season. This retailer successfully employed theapproach we describe, proving its value online and ofine.

Experience and loyalty bottlenecks. The company had been focusing almost exclusively onbuilding awareness for its site among Internet users. While this approach was attracting arespectable number of visitors to its site, “look-to-buy” ratios ranged from 1.0 to 1.5 percent –well below best practice players, and repurchase was similarly weak. To make the site anancial success, the presence-building focus needed to break the experience and loyaltybottlenecks by converting existing site visitors into customers and then ensuring that thosecustomers returned.

New vehicles drive conversion. Despite spending over 90 percent of its marketing budget ononline advertising, only 15 percent of site trafc could be traced back to this vehicle. Clearly,these funds could be better applied to vehicles which would remove the site’s experience andloyalty bottlenecks among existing visitors.

To drive rst purchase, the company employed a diverse set of online and ofine tools. Trialdiscount coupons were included with targeted credit card statements, with the agreement thatinsertion costs would be based on the redemption that was achieved.

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Sweepstakes rewarded purchases with chances to win large cash prizes; attractive lossleaders were tied to minimum purchases, and free shipping was offered above a minimumpurchase size. Instead of signicant online advertising, e-mails with promotional offers weretargeted at site visitors. To promote online trial activities, the company found synergies withthe broadcast advertising of its brick and mortar business. To ensure that the company wasnot luring customers to a fundamentally poor site, efforts were made to improve thefunctionality of the site and make the assortment more relevant to Internet customers.

Building the loyalty dynamic. The company knew that if they could encourage rapidrepurchase, they would capture an ever-expanding share of their customers’ wallet and thatthe growing loyalty of these customers would generate new site trafc through positive word ofmouth. To drive repeat purchase, the company focused on ensuring a positive rst-purchaseexperience and on inducing a quick second purchase. To create a positive rst-purchaseexperience, the company marshaled its organizational resources to ensure that all orders wereshipped within 24 hours, and that service recovery was promptly initiated if that standard couldnot be met. To induce a shorter cycle time on second orders, discount certicates were mailedout immediately after a customer’s rst purchase was made.

Always in the zone. To make the most of a limited marketing budget, the company examinedits previous marketing spending activities to understand where sweet spots existed. While thefocus was shifted away from Internet advertising, there remained some sites where a limitedpresence was needed to sustain current trafc growth on the company’s site. Beyond thishandful of related sites, the law of diminishing returns was clearly in evidence. The companyeven found a sweet spot in the size of prizes needed for its promotional activities, withprevious promotional data showing that prizes below a million dollars would not induce trial.While building new awareness was not a primary focus, the company ensured that the siteremained top of mind with consumers by piggybacking the URL on the company’s ofineassets (advertising, store counters, shopping bags, etc.).

Through these activities, they generated a staggering one billion incremental impressions for acost of less than $1 million.

Following this marketing spending approach, the company turned its struggling Internetbusiness into an important contributor to its overall bottom line. In the 3 weeks beforeChristmas, the site attracted more visitors than it did in the preceding 6 months, and mostimportantly, conversion increased by over 50 percent. By the end of 2014, the company haddoubled its original sales projections.

Where to Begin

As has been illustrated in each example, the four-step approach to improving return on

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marketing investment is most powerful when marketers challenge their traditional assumptionsabout the brands they manage. A great deal of discipline and creativity is required to questionlong-held beliefs about brand equity, marketing vehicles, momentum and resource allocation.Every marketer must go through his or her own process of examination, but “Tips for GettingStarted” should help.

From our experience, we recommend keeping the scope of a new return on marketinginvestment effort manageable. For example, select one brand from the portfolio or focus onone market for a national product. By overhauling one brand or one market, you have theopportunity to get to know the four-step process before rolling it out to the full portfolio.

While many of the examples discussed here have dealt with the revival of weak or strugglingbrands through improved return on marketing investment, there is no reason to limit thisapproach to problem-solving. Even strong brands can be made stronger and will requireequally creative approaches to keep them vital. Further, strong brands can lose theirmomentum if left to coast. The four-step approach can help to keep even the strongest brandsfrom stalling out.

The rules of brand building have changed because the fundamental dynamics of howmarketers connect with consumers and stay connected to build loyalty have changed.Marketers who master these rules, and manage their spending based on a deeperunderstanding of the bottlenecks, the vehicles, the brand dynamics, and the “zone,” will be thewinners. This applies to all businesses, from startups, small businesses to enterprise thatwants a better return on marketing investment.

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