To prosper in today ’s environment, marketers must dramatically … · 2018-05-11 · Social media and brand reputation must be monitored closely. Marketers must ac tively manage

Matrix Marketing Group 1

To prosper in today’s environment, marketers must dramatically improve the

impact of every marketing dollar they spend. If marketing dollars are not con-

tributing to brand building, according to the new rules of marketing, just what

are they contributing to? For many, the old saying, “I know half my advertising

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 have grown from obscurity to ubiquity very quickly and cost effectively. Why have some marketers made marketing effectiveness a source of competitive advantage while others have been stalled by clutter and rising costs? Looking closely at the best brand builders, clear patterns emerge. Using approaches described below, successful marketers are spend-ing smarter, focusing on new points of leverage in a more complex, dynamic marketing environment. As a result, they are building brands more quickly, cheaply, and efficiently.

The New Environment: Not Business as UsualSeveral key changes in the marketing environment have put an end to business as usual in managing marketing spending. This hold 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-driven channels, including social media,VR, AT, e-mail, call centers, ATMs, Web TV, kiosks, and new interactive mobiletechnology – has created a wide new array of options for building brand presence.

Yet the rapidly changing marketing landscape has resulted in increased clutter, fragmented audiences, and higher costs. 40.5 percent of all U.S. media spending is now digital. At this rate, the 50 percent mark might not be too far in the future. In fact, recent studies have shown that increases in advertising expenditures led to increases in sales in only about 50 percent of the 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 were profitable.3 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 other marketing efforts.

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

The rapidly changingmarketing landscape

has resulted inincreased clutter,

fragmented audiences, and

high costs


Word of mouth increasingly shapes brand presence. Technology has dramatically increased the power of the grapevine to shape brand presence – by equipping more con-sumers with more information than they’ve ever had, and by making it easy for them to share that information quickly.

When consumers were asked what compels them to visit a company’s Website, 57 percent said a word-of-mouth recommendation, compared to only 42 percent who were influenced by an online ad. Technology also gives consumers the tools to spread the word rapidly. E-mail word of mouth has become “word of mouse,” a powerful shaper of brand presence because it grows exponentially. Fully 92 percent of consumers who learned about a Web- site from a friend will pass it on to another friend. But, content marketing is driving more organic search traffic with over 70% of clicks go to organic searches that rank on the first page of Google. Search engine optimization is important.

Consumers now organize their own Web and offline communities around products and companies that they support – or want to rally against. These groups range from support networks for purchasers of failed products to interest groups promoting ethical or politi-cal causes. These can become fast and powerful channels of communication outside the direct control of marketers.

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

Marketers must actively manage and influence the information flow 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 partner-ships to multiply their consumer touchpoints, while bootstrapping acceptance among consumers through association with partner brands.

Starbucks, for example, is renowned for extending its brand presence into more con-sumption occasions through alliances with companies such as Barnes & Noble, United Airlines, and Ben & Jerry’s. Alliances abound on the Internet as companies form agree-ments to hot-link their sites. Amazon.com has an extensive program, including financial and other incentives, to populate other sites with its hot-linked icon.

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

Technology has dra-matically increased

the power of thegrapevine to shape

brand presence


Consumer experience is playing a greater role in brand loyalty. Now more than ever, consumers’ direct experiences drive brand perceptions more than traditional advertising. This is partly due to flagging consumer confidence in advertising messages. Yankelovich research shows that 93 percent of consumers do not have great confidence in the advertis-ing messages of large corporations. Consumer experience is also playing a greater role because of the changing nature of winning value propositions. As functional benefits (e.g., technical features of a car) become commodities that are easily replicated, process and relationship benefits (e.g., the experience of buying a car and the ongoing connection and affinity with the brand) increasingly drive purchase decisions, word of mouth, and loyalty. This interplay of functional, process, and relationship benefits deepens the experience for the consumer far beyond what a traditional advertising message could deliver.7

Saturn was one of the first to successfully introduce process and relationship benefits into the automotive category by offering no-haggle pricing and programs to make customers feel valued, 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 significant achievement. Each customer is wel-comed into the “Saturn Family” and is invited to owner picnics and other events. Saturn’s advertising supports the message that something different is being offered. Through these efforts, Saturn has nurtured deep loyalty without significant distinctiveness in the car itself.

Starbucks, another leader in experience-based loyalty, grew from 11 stores to over 1,000 in under 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 the sensory experience – the smell and taste of the coffee, the music and décor that reinforce the relaxed brand personality – have effectively retained the core customer base while significantly growing the franchise. And along the way, the company has managed to rejuvenate what was a fairly stagnant coffee category.

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

Collectively, the forces described above increase the options for marketers, but the resultmay be double-edged. Marketers have more effective and more efficient vehicles at theirdisposal to address specific brand needs, but the sheer number of vehicles, and their com-binations and interactions create complexity and cost that many find difficult to manage.

The interplay offunctional, process,

and relationshipbenefits deepens the

experience for thecustomer

1. Focus on the bottlenecks to the growth of your brand

To spend where the investment will work hardest, marketers need to know exactly whatstands in the way of brand growth. This means diagnosing the specific barriers or bottle-necks that impede greater use of, and loyalty, to the brand.

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

Awareness. Awareness bottlenecks often derive from one of two problems. Either thebrand is having difficulty breaking through competitive clutter, or marketing programsare not addressing the “type” of awareness relevant to the brand.

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


A New Approach to Marketing Spending EffectivenessIn this complex environment, any marketer can become more successful by taking amore systematic approach to developing the marketing plan. Below we describe anapproach that takes advantage of the broadening set of marketing options while focusingthe right amount of spending in the right places to build brand presence quickly, effec-tively, and efficiently.

Use a more relevant anddiverse set of presence – building vehicles

Understand exactly where and why you are losing consumers along thecontinuum from awareness to consideration to experience to loyalty;focus marketing resources against these “bottlenecks.”

Focus on the bottlenecks to the growth of your brand

Broaden your “tool-kit” of marketing vehicles beyond the traditional,being sure to consider those that will help shape a consumer’s brandexperience and drive word of mouth; focus resources on the vehicles that can remove your brand’s bottlenecks most quickly.

Create a dynamic marketingsystem to accelerate brandbuilding

Understand how your marketing vehicles and your consumers interact to build or erode the strength of your brand; sequence your marketingactivities to break down brand bottlenecks more quickly.

Invest in the “zone” toaccelerate the pace of brandbuilding

Kick-start rapid brand building by investing in the “zone,” or sweet spot,that exists above minimal critical mass and below diminishing returns forany marketing activity.

Table 1 A Systematic Approach to Marketing Spending Effectiveness


that deliver high impact for the dollars spent. In a fragmented world, innovative PR and media events can cut through the clutter.

Failing to develop the right type of awareness can allow significant bottlenecks to develop. While many brands have aided awareness above 80 or 90 percent, if this is just awareness of the brand’s name and not of the brand’s proposition, consumers are less likely to act on their awareness.

Awareness Consideration Experience Loyalty

Breaking through theadvertising clutter tobe noticed

Difficult to differenti-ate on functionalbenefits or communi-cate an ownablepersonality

Inconsistent branddelivery at point ofsale discouragesrepeat business

Web-enabled com-parision shopping isbreaking down loyalty

Brand is not top-of-mind whenconsumers are seeking quotes

Consumers believethey can get a betterprice elsewhere

Consumers don’tbelieve savings justifythe “hassle” ofswitching providers

The nature of thebrand’s proposition(e.g., low price) mayattract “rate shop-pers” with low loyalty

Consumers are notfamiliar with thestore’s assortment

Consumers do notlike what wearingthe brand’s label“says” about them

Stores are not in the right locations;lease line display not compelling

Service experience is poor

New brand and/orlow media levels donot register withenough consumers in a fragmented marketplace

Consumers perceiveanother brand to bemore effective or a better value

The brand is not available in the critical mass of storesneeded for it to be a“routine” purchase

Promotional activityused to induce trialand usage may trainconsumers not to bebrand loyal

Common bottlenecks

Directinsurance

Retail apparel

Packaged goods

Table 2 Typical Bottlenecks to Moving Consumers Through the Decision Process

When Richard Branson wanted to createawareness around the launch of VirginCola into the U.S., he drove a tank filledwith Virgin Cola into Times Square andgenerated massive amounts of free front-page publicity.

In building awareness, marketers mustacquaint consumers with more than just abrand’s name. For example, knowing thatGEICO is an insurer is not particularlyhelpful if the consumer is not also awareof GEICO’s basic value proposition – low-price insurance that is not available froma broker, only directly from GEICO.


Consideration. Most consumers have a repertoire of two to three brands from which they select on any given purchase occasion. Marketers, therefore, face two challenges with consideration: first, making the brand relevant so it enters consumers’ considerationset; and second, making it distinctive enough to drive consumer choice. Lack of relevanceor distinctiveness to the target segment can be caused by real or perceived gaps in thebrand’s emotional or rational benefits, or in the brand’s communication or delivery of these benefits.

For example, one financial services company analyzed its customers based on theirunique needs, and discovered very different consideration bottlenecks by segment. Infact, two segments had conflicting perceptions of the brand’s heritage, creating bottle-necks with both groups. Wealthy young “Internet junkies” who adjusted theirinvestment portfolios frequently had difficulty accepting the company as a dynamiconline broker, given the company’s regional bricks and mortar beginnings. At the sametime, many wealthy retirees viewed the brand – which had only recently expandednationally – as an upstart which had not yet earned its stripes.

Experience. Marketers face two primary bottlenecks in moving from consideration toexperience. The first is the lack of a compelling call to action; the second is difficulty ingaining access to the brand.

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

Access becomes a bottleneck to experience when consumers have strong considerationfor a brand, but have difficulty in purchasing it due to weak retail distribution, limitedhours of operation, or other factors.

E*TRADE, for instance, demonstrates the importance of a powerful call to action.While E*TRADE’s low price positioning was enticing, it may not have been enough forconsumers to go through the work of switching account information and funds from oneonline broker to another. Taking the offer just a bit further did, however, push consumersto trial; using the call to action of “Up to 25 trades on us!”, an extraordinary number ofonline traders went from consideration 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 havenot decided which brand they will buy before they are in the store.


Loyalty. Cementing loyalty is often critical to brand profitability, as loyal consumers typically spend more and purchase more frequently. Inspiring loyalty requires a powerfulconsumer experience, reinforcement of the reason for purchase, a consumer-friendlyrepurchase cycle, and increasingly, some form of emotional affinity between the brandand the consumer. In most categories, consumers fall into loyalty segments ranging from“dissatisfied defectors,” who will abandon your brand at the next opportunity, to “emotive loyalists,” who develop deep bonds with brands and are unlikely to switch (see Table 3). Identifying loyalty bottlenecks begins 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.

In financial services, loyalty bottleneckshave many incumbent bank brands strug-gling with retention in the face of strongspecialist competitors (e.g., MBNA [creditcards], Countrywide [mortgages], andCharles Schwab [asset management]). Oneincumbent bank faced flat to decliningshare among both its affluent and massmarket consumer segments – accompaniedby marked drops in key image attributes.On digging deeper, the bank found sharpdeclines in customer satisfaction scoresdriven by two factors. First, while con-sumers had been educated throughcompetitor advertising and word of mouthto demand a higher level of service inbanking, they were increasingly disap-pointed by their actual experiences:mistakes on statements, high service fees,bank branch closures, etc. Second – and

worse in the minds of consumers – was theperceived lack of responsiveness on thepart of the bank in resolving problems thatdid arise. These problems with the con-sumer experience were the root cause ofthe share decline. Customers were defect-ing from the bank, and as negative word ofmouth lowered consideration, new cus-tomer acquisitions were also falling off. Inresponse, the company has refocused near-ly all of its budget away from advertisingand promotion toward improving the cus-tomer experience at critical points toimprove its eroding loyalty. For example, ithas launched an effort to upgrade its infor-mation technology (concentrating ondatabase and statement integrity), and isoverhauling training and incentives forbank employees to improve service.


Tips for Getting Started■ Map how a consumer in each of your segments typically moves from awareness of

your brand to consideration, to experience, and to loyalty.

■ Measure leading indicators, drivers, and results at each stage. For example, a softdrink manufacturer measures consideration, but also its relative scores on the rationaland emotional image attributes that contribute to that consideration (“refreshing,”“cool,” etc.).

■ Use proxies where the best metric isn’t available – one packaged goods companyuses grocery 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 on maintainingconsideration and sustaining scores in experience, while a new brand may need tofocus on awareness and consideration;

– The consumer segment in question – mortgage loyalty should be higher amongthe affluent 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 catalog company found that although trial and usage were high compared tocompeting brands, both were declining rapidly, signaling issues with the appeal ofthe brand 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 drovethe initial complaint.

■ Set up a scorecard for ongoing performance tracking to provide early warning offuture bottlenecks.


Lifeinsurance

Autoinsurance

Softdrinks

Laundrydetergents

Homeequity

ApparelGrocerystores

100%

Downward migrators

Loyalists

15% 7% 29% 30% 40% 23% 28%Emotive loyalists

58% 69%45% 37%

29% 53%

38%Deliberative loyalists

12% 10% 14% 22% 21%16% 32%

Inertial loyalists

1% 3% 3% 4% 4% 1% 0%

Lifestyle adapters

12% 10% 4% 7% 5% 4% 1%Deliberative

switchers

Dissatisfied defectors 2% 1% 5% 0% 1% 3% 1%

Table 3 Loyalty Behavior Profiles Differ Across Industries

Share of consumers by segment

2. Use a more relevant and diverse set of presence-building vehicles

Armed with an informed view of a brand’s bottlenecks, the marketer must then craft programs that employ the most appropriate set of traditional and new presence-buildingvehicles and tactics.

It is deceptively easy to simply base this year’s programs on last year’s, or to fall into sec-tor “group-think.” Why should GM and DaimlerChrysler, for example, employ nearlyidentical marketing spending, when they likely are experiencing bottlenecks that areunique to each of their brands? (See Table 4.) Moreover, while traditional vehicles suchas mass advertising will continue to be an important part of many marketing programs, itis important to consider a broader set of marketing vehicles – especially those that shape a consumer’s brand experience and spark positive word of mouth – which may moreeffectively and efficiently achieve marketing objectives.


The right tool for the job. The key to presence building is not necessarily the use ofmore vehicles or to blanket all the touchpoints. The key is to select the right vehicles atthe right time to address specific bottlenecks in the consumer decision process. Leadingmarketers often find it helpful to assemble internal and external “rules of thumb” aboutthe role of different marketing vehicles in moving consumers through their decisionprocess for a particular product category (see Table 5). By recording the impact a brandhas with its presence activities, and by constantly experimenting with new vehicles,these rules of thumb become more powerful and prescriptive over time.

30.3

DaimlerChryslerGeneral Motors

67.2

30.8

66.6

2,121 1,411

Television advertising

Print

Radio

Outdoor

1.6

1.1

1.4

1.1

Table 4 Marketing Spending “Group-Think” in the Automotive Industry?

Advertising spending mix*Percent

What do General Motorsand DaimlerChryslerhave in common?...

...the same advertising spending mix


Break through the clutter. There are no limits to the creativity that can be brought tothe challenge of creating and employing new marketing tactics. In fact, the more inno-vative and fresh the approach, the more likely it is to break through the awarenessclutter. State Farm, for example, garnered free PR to spark positive word of mouththrough its “Dangerous Intersections” program, addressing awareness and considerationbottlenecks head-on. The company reached into its proprietary database to supply themedia with a list of the most dangerous intersections across several major cities. Themedia – hungrier than ever for content, due to the growth of media outlets and the

Table 5 Examples of Marketing Vehicle Fit “Rules of Thumb”


Effective reach

Delivers personality

Trial offer messages

Reinforces brandimage

TV

Augments reachand frequency

Reinforces keymessage

Trial offer messages

No significantrole

Radio

More targeted reach

Explains benefits Trial offer messages

No significantrole

Print

Brand/offerrecognition

Conveys limitedcontent

No significantrole

No significantrole

Outdoor

Highly targetedreach

Detailed targetedmessages

May includeinducements

Penetrates needsfurther

Direct mail

Brand recognition Event may support image

On-site trial/sampling

Reinforces brandimage

Sponsorship

Targeted butlimited reach

Site offers richinfo/experience

Can overcomefinal barriers

Ongoing sourceof affinity

Internet

Prospectingactivities

Can sell features Targeted inducements

Customer serviceCall centers

Awareness nearpoint of sale

Offer may support equity

Trialinducements

No significantrole

Promotion

Prospectingactivities

Focused depthof sales

Can overcomespecific barriers

May offer one-on-one relationship

Sales force

Weak fitStrong fit


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 StateFarm. Citizens wrote to their local papers and politicians demanding that something bedone about the problem. As a result, State Farm strengthened its image with millions ofconsumers as a concerned, caring institution (one survey showed 50 percent of adultswere aware of the campaign) and delivered real benefits, in the form of information, at a fraction of the cost of a major media campaign.

Equally creative is the art of turning “vanguard” consumer segments, which help estab-lish new trends, into powerful product ambassadors. Abercrombie & Fitch becamelegendary for hiring the “cool kids on campus” to work at their stores, offering attractivediscounts and very flexible hours as inducements. These kids in turn use their discountsto build their wardrobes and become very influential walking billboards for the brand attheir schools. For a company whose challenge is to get key segments to consider its products, the ambassador vehicle is extremely powerful.

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 developmentstays ahead of individual product lifecycles.

The power of experience. As the portfolio of brand building vehicles grows, so too doesthe challenge of maintaining a consistent customer experience across all touchpoints.Recognizing the importance of this consistency, Victoria’s Secret trains its call center staffto perpetuate the romance of the brand in the way they discuss the product; to cross-sellproduct and suggest alternatives when desired items are out of stock; and to help callerswith sizing and other questions. This is in sharp contrast to many other companies whofocus telesales staff primarily on efficiency objectives such as number of calls, time per call,and dollars per hour.

In the search for new and innovative brand-building vehicles, marketers must not forgetthe potential of their existing resources. Retailers, for example, can use merchandisingand service to create an in-store experience that becomes their most powerful loyalty-building tool. Our work has shown that adjusting store operations – including sales staffbehaviors, back-room practices, and visual merchandising – to better reflect brand objec-tives can result in sustained 10 to 20 percent sales increases versus comparable stores.Aveda, specializing in premium personal care products, does not do a great deal of adver-tising but has built and sustained its brand through its multisensory store experience: adistinctive aroma; soothing new age music; trendily coiffed and made-up store personneland minimalist décor. Starbucks, GAP, and Disney are all legendary for driving brandgrowth through the in-store experience they provide for consumers.

Equally creative isthe art of turning“vanguard” con-sumer segments,

which help establishnew trends, into

powerful productambassadors


Getting intermediaries involved. Marketers working in channels with strong interme-diaries can employ combinations of consumer 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 this approach recently by marketing to an unconventional intermediary – the hairdresser.

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

Tips for Getting Started■ Question old assumptions about your brand’s spending mix – the fact that a vehicle

has always been used may not make it appropriate for current bottlenecks.

■ Don’t let traditional organizational boundaries between marketing and other func-tions limit your presence-building options – include the full suite of activities thataffect a brand’s health (e.g., sales initiatives, public relations events, the Internet),regardless of which department manages them.

■ Evaluate the performance of existing vehicles against each stage in the consumer deci-sion 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 inremoving 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 integratedway. Each part of the marketing program (advertising, sales events, promotions, call cen-ters, etc.) should contribute to a common goal – removing brand bottlenecks. When thisis done well, the brand’s marketing “system” can take on a life of its own, and create avirtuous cycle of brand building. These brand-building dynamics create value which ismore than the sum of their parts. Studies on the combined impact of advertising andpromotion among packaged goods brands suggests that the combination of these activi-ties drive volume gains far in excess of the total gain achieved by advertising andpromotion conducted independently.

Victoria’s Secret, for example, exploited a powerful dynamic with its brand. To enticemore male customers, Victoria’s Secret took the non-traditional step of advertising anInternet fashion show for lingerie during the Super Bowl. The Victoria’s Secret’s SuperBowl ad was not a means to an end, but rather an opportunity to advance male con-sumers beyond awareness to consideration by bringing them to the Web for a deeperbrand sell. Victoria’s Secret Internet fashion show attracted over 1.5 million viewers,shattering all previous records, and creating overwhelming media buzz and word ofmouth. Importantly, the show brought new male customers into Victoria’s Secret stores,where they could have a rich first experience with the brand.

Sometimes building quantitative dynamic models can yield essential insights, especiallyin complex situations where second-order effects, feedback loops, and non-linear relationships can create counterintuitive results. A spirits company generated such counterintuitive insights when it quantitatively modeled the dynamic interrelationshipsbetween its marketing actions and consumers’ responses across three major markets. Themodel clearly indicated the impact of investments in marketing levers – individually andin combination – on total brand net present value. Because of the dynamics at play, theoptimal combination of levers was sometimes different from hypotheses developed beforethe modeling exercise. Ultimately, the model suggested very different strategies for eachof the three markets – resulting in a 30 percent increase in brand net present value. (See Table 6.)


Marketers can launch a virtuous cycle of brand-building by using their consumers as anactive part of the brand-building system. Most of us are familiar with the shampoo com-mercial that says, “I told two friends, and they told two friends, and so on ….” The powerof positive word of mouth within a presence-building system is that it generates expo-nential growth, where each new consumer becomes the brand’s ambassador for the next.The trick is to build a catalyst for this word-of-mouth cycle around your brand. The pro-ducers of the Blair Witch Project kick-started that movie’s ubiquitous word of mouth byseeding buzz on Internet chat rooms frequented by college students. To sustain this wordof mouth, the movie’s producers promoted a content-rich Internet site that made visitors

Table 6 Insights Gained From Quantitatively Modeling Brand Dynamics

29

-1

68

384112

146

-3-14-18

129

90100

138

65

100

32

246

100

Context

A struggling spiritsbrand faced verydifferent challengesin contiguousregions

A dynamic comput-er model helpeddiagnose the mar-keting spendingstrategy that wouldmaximize value ineach region

Value of investment in each marketing lever vs. optimal combinationNPV change vs. current; percent

Value of new vs. current strategiesNPV change vs. current; percent

Advertising+50%

Brand -buildingevents+50%

Retail promotions+50%

Current Milk InvestOptimalallocations

Strong regions

Mediumregions

Weak regions

feel like they were part of a private club – showing scenes not included in the movie, anddetailing the mythology surrounding the Blair Witch. Only when the word of mouthreached its apex did the producers introduce traditional mass advertising to sustain themovie’s momentum (see Table 7).

An important cautionary note: a dynamic system can turn against a brand if marketersfail to think through and avoid unintended outcomes. Many packaged goods marketershave landed in this territory by launching promotional discounts that merely drovepantry loading rather than build the brand’s consumer franchise.


Film with some points of distinctiveness (e.g.; low budget, shot on video and 16mm)

Ubiquity

College bars and Internet chat rooms are seeded with positive "buzz" about the movie to generate word of mouth

The Blair Witch Web site makes visitors feel like part of a club, with its additional movie footage and story mythology

Limited initial distribution builds anticipation for the film as it is slowly rolled out across the country

Only when word of mouth has reached its apex, is traditional mass market advertising brought in to sustain the movie's momentum

TM

“” “

”

Table 7 The Blair Witch Project Demonstrates How Positive Dynamics Can Be Created Between Marketing Levers


Tips for Getting Started■ To get started, draw on your management team’s experience to map the current inter-

relationships 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 –and then fine-tune the marketing program accordingly. In some situations, this needsto be done quantitatively. In others, it can be done qualitatively – visually mappingout the likely causal links among the initiatives, consumer reactions, and brandperformance.

■ Explore the use of quantitative systems models to understand the impact of usingdifferent combinations and sequencing of marketing vehicles.


4. Invest in the “zone” to accelerate the pace of brand building

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 – theoptimal brand-building investment above minimum critical mass and below diminishingreturns. 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 advertisingto effectively manage marketing investment across its portfolio of brands (see Table 8).The company determined that some of its smaller brands could not support significantbroadcast advertising, and what was being spent was too small to break through the clut-ter of the category. The company stopped national advertising for these brands, andinstead invested in building awareness and trial for the brands within leading retail out-lets – again, achieving a better match between bottlenecks and marketing vehicles. Thisalso allowed them to focus their internal and agency talents on building powerful adver-tising for their major brands. After this move, the small brands grew due to moreconcentrated investment at retail, and the larger brands experienced image and sharegains from more effective advertising copy.

35302520155 100

50

40

30

20

10

0

Media spending ($ millions)

Un

aid

ed b

ran

d a

war

enes

s in

dex

Brand A is not investing enough to break throughthe clutter

Year 1 Year 2 Year 3 Effective zone

Brand B is consistently inthe sweet spot

Brand C's copy may be weakening, as it isseeing less return from increased spending

"Sweet spot"

Table 8 Uncovering the Effective Spending Zone for a Portfolio of Beverage Brands


Rules of thumb can be established to find the zone in other market vehicles. For exam-ple, a chain of donut shops found a “sweet spot” market penetration level by comparingthe number of stores for a given population with the sales in each store. Below a criticalmass of stores, consumers would not encounter the chain frequently enough for it tobecome part of their routine. Likewise, by examining the same data they determined the point at which stores began to compete with one another and store sales declined.This information is now used to plan the development of new markets to achieve maxi-mum profitability.

Similarly, a gasoline retailer found an effectiveness zone for the pace of capital improve-ments to its station network. By comparing the time horizon over which site improvementswere made with market share movements, the company found that the most significantshare gains were achieved when they blitzed a local market and upgraded all their facilitieswithin a 6-month period. While the total spending was the same as when they phased theseimprovements in over several years, with a blitz they reached a rapid critical mass of con-sumer awareness and experience of the new store concept.

Tips for Getting Started■ Select the most relevant metrics for the intensity of the marketing activity and the

related consumer response (e.g., advertising reach and consumer’s strategic messagerecall).

■ 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 the mar-keting activity. For example, there are too many variables at play to relate advertisingdirectly to sales or share growth, but advertising can be related to changes in consumerattitudes 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 multiple mar-kets, publicly available data, data from partners such as ad agencies or research firms.

■ 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 willshift effective zones over time; as a result, the effective spending zone will also change.


Keeping Score

Once you’ve retooled your marketing pro-gram, track your progress with a scorecard.With the pace of change in today’s dynamicmarketplace, a brand scorecard is needed tomonitor program results and make coursecorrections. Relying on gut feel or broadoutcome measures (such as sales) can leadmarketers to make wrong moves.

An effective brand scorecard tracks themost important metrics along the consumerdecision process and reports changes as frequently as every month. For an impulsepurchase such as soft drinks, a scorecard

might track changes in top-of-mind aware-ness and ease of access. Additionally, thescorecard could monitor the hierarchy ofkey functional performance needs (e.g.,“most refreshing,” “taste I like”) and keyconsumer attitudes and emotional needs(e.g., “the brand for cool people,” “I like what the brand says about me”).

Scorecards can also become effective toolsfor the integration of functional silosinvolved in marketing decisions – addinga strong objective dimension to cross-functional decision making (see Table 9).

• Are you aware of thecompany or brandand familiar with itsvalue proposition?

• Aided awarenessof the brand (e.g.,have you heard ofbrand x?)

• Unaided, or top-of-mind, awarenessof the brand

• Familiarity with thestrategic positioningof the brand (e.g.,recall of key elementsof distinctiveness)

• Does the brandenter your choice setfor consideration?

• Perceived emotionalattributes/benefitsof the brand, e.g.,– “Reliable”– “Friendly”– “Cool”

• Perceived rationalattributes/benefitsof the brand, e.g.,– Functional– Process– Relationship

• Have you evertried the brand?

• Do you currentlyuse the brand?

• Access– Availability

(e.g., points ofdistribution)

– Convenience (e.g.,“easy to get to”)

• Trial– Past 3-month trial– Ever tried

• Usage– Currently use– Cross utilization

of brands

• How frequentlydo you purchasethe brand?

• How much of yourrequirements doesit fulfill?

• Satisfaction– Overall– With key elements

of proposition

• Likelihood ofswitching– “Will switch at

next purchaseoccasion”

– “Would switchwith incentive”(e.g., 10% savings)

• Affinity– “The brand for

people like me”

Results

Leading indicators

Table 9 Typical Brand Health Metrics Along the Consumer Decision Process*


* Tracked for each key consumer segment

Putting It All Together – Two ExamplesTwo real examples from two very different industries show how the application of these steps can dramatically improve marketing spending effectiveness.

The renewal of Rolling Rock

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

Rolling Rock – a leading U.S. domestic specialty beer brand – stalled in early 2000s when the import and microbrew segments took off. After 10 years of steady growth, the brand languished. Margins also fell as a result of price promotions that tried – but failed – to stimulate consumption. Labatt USA (LUSA), the brewer and distributor of the brand, began to worry that it had hit the end of its lifecycle and could no longer compete.

Instead of launching into the usual round of marketing actions – changing agencies, shooting some new creative, initiating a national promotion – LUSA marketing man-agers rolled up their sleeves and rebuilt the marketing program from the ground up.

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

The team initially hypothesized that brand image was creating a bottleneck for Rolling Rock at the crucial consideration stage. As sexier imports and microbrews like Corona and Pete’s Wicked Ale flooded the market, consumers likely found Rolling Rock to be a bit tired. The team thought 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 micros had likely shifted the consumer palate toward darker, more bitter tastes. The micros brewing industry has explored and so has micor-roasting for coffee.

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


The right marketing vehicles. Given the nature of the bottlenecks, money focused onlarge media buys and consumer promotions would have been wasted. Instead, the compa-ny engineered a dramatic (and low-cost) turnaround of the brand by addressing thebottleneck of consideration and loyalty in its wholesaler network, supplemented by somecreative changes to the brand to renew interest among retailers and consumers.LUSA began by reminding wholesalers of the disproportionate margins available tothem on Rolling Rock versus other brands on a per unit basis. They then announced arejuvenated marketing program for Rolling Rock. First, they overhauled the packaging –returning to the painted label, long-neck bottle – to give wholesalers a talking pointwith retailers and “on-premise” customers (as well as make the bottle stand out more atpoint of purchase). Second, they updated and committed to a promotion called “Bucketof Rocks” – designed to create on-premise trade excitement around the brand and shifton-premise preference from draft (especially microbrews) to bottles. Third, they creatednew advertising – not to shift the image of the brand, but to reinforce traditional equities(e.g., heritage, quality).

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

They were successful. As the wholesalers got excited about the brand again, they became more vocal proponents of it with on- and off-premise players. As retailers dis-played the brand prominently and the bars promoted it with the “Bucket of Rocks”campaign, incremental consumption grew. The new packaging and the trade prominencesparked word of mouth, which accelerated usage. As consumption grew, Rolling Rock’scontribution to trade profitability increased. As a result, the trade pushed the brand evenmore, further accelerating consumption.

The Rolling Rock zone. Because LUSA focused its efforts on vehicles that addressed itsspecific bottlenecks, and because it was able to kick-start positive brand dynamics, it wasable to spend significantly less than it might have to renew Rolling Rock. For example,with respect to advertising, Rolling Rock as a specialty brand could never justify the mediabuy that a mainstream brand such as Budweiser would make. Yet the LUSA team chose toinvest enough in advertising to convince the wholesalers that it was committed to thebrand – and to reinforce the messages it was giving consumers at the point of purchasethrough 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 hasemerged from the microbrew/import discontinuity stronger than ever. Over the past 3years, revenue has increased an average of 7 percent per year.



The launch of an e-tail business

The holiday marketing program of a major “clicks and mortar” retailer – with a largestore network and an emerging Internet channel – illustrates how these marketingspending rules apply equally to Internet businesses. In the last 6 months of 1999, thecompany was struggling to make its Internet business viable. To meet aggressive financialgoals for its Web site, fundamental changes to their marketing spending program wereneeded in time for the critical Christmas buying season. This retailer successfullyemployed the approach we describe, proving its value online and offline.

Effectiveness online

Improving marketing spending effective-ness in the online world is particularly important, given the incredible marketing investments being made to build Internet brands. While e-tailers have spent hun-dreds of millions of dollars over the past year in advertising, recent analysis shows that in most cases large advertising budgets

are destroying shareholder value. With thestakes so high on the Internet, both newdot-coms and “clicks and mortar” compa-nies are struggling to find a marketingspending model for the e-space. The goodnews is that a model does exist, and it’s thesame approach that works effectively foroffline marketers.

Experience and loyalty bottlenecks. The company had been focusing almost exclusivelyon building awareness for its site among Internet users. While this approach was attractinga respectable number of visitors to its site, “look-to-buy” ratios ranged from 1.0 to 1.5 per-cent – well below best practice players, and repurchase was similarly weak. To make thesite a financial success, the presence-building focus needed to break the experience andloyalty bottlenecks by converting existing site visitors into customers, and then ensuringthat those customers returned.

New vehicles drive conversion. Despite spending over 90 percent of its marketingbudget on online advertising, only 15 percent of site traffic could be traced back to thisvehicle. Clearly these funds could be better applied to vehicles which would remove thesite’s experience and loyalty bottlenecks among existing visitors.

To drive first purchase, the company employed a diverse set of online and offline tools.Trial discount coupons were included with targeted credit card statements, with the agreement that insertion costs would be based on the redemption that was achieved. A 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. In lieu of significant online advertising, e-mails with promotional offers weretargeted at site visitors. To promote online trial activities, the company found synergieswith the broadcast advertising of its brick and mortar business. To ensure that the


company was not luring customers to a fundamentally poor site, efforts were made toimprove the functionality of the site and make the assortment more relevant to Internetcustomers.

Building the loyalty dynamic. The company knew that if they could encourage rapidrepurchase, they would capture an ever-expanding share of their customers’ wallet, andthat the growing loyalty of these customers would generate new site traffic through posi-tive word of mouth. To drive repeat purchase, the company focused on ensuring apositive first-purchase experience and on inducing a quick second purchase. To create apositive first-purchase experience, the company marshalled its organizational resourcesto ensure that all orders were shipped within 24 hours, and that service recovery waspromptly initiated if that standard could not be met. To induce a shorter cycle time onsecond orders, discount certificates were mailed out immediately after a customer’s firstpurchase was made.

Always in the zone. To make the most of a limited marketing budget, the companyexamined its previous marketing spending activities to understand where sweet spots exist-ed. While the focus was shifted away from Internet advertising, there remained some siteswhere a limited presence was needed to sustain current traffic growth on the company’ssite. Beyond this handful of related sites, the law of diminishing returns was clearly in evidence. The company even found a sweet spot in the size of prizes needed for its promo-tional activities, with previous promotional data showing that prizes below a milliondollars would not induce trial. While building new awareness was not a primary focus, thecompany ensured that the site remained top of mind with consumers by piggybacking theURL on the company’s offline assets (advertising, store counters, shopping bags, etc.).Through these activities, they generated a staggering one billion incremental impressionsfor a cost 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, andmost importantly, conversion increased by over 50 percent. By the end of 1999 the company had doubled its original sales projections.

Where to Begin As has been illustrated in each example, the four-step approach to improving marketingspending effectiveness is most powerful when marketers challenge their traditionalassumptions about the brands they manage. A great deal of discipline and creativity isrequired to question long-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 Getting Started” should help.

From our experience we recommend keeping the scope of a new marketing spendingeffectiveness effort manageable. For example, select one brand from the portfolio orfocus on one market for a national product. By overhauling one brand or one market,you have the opportunity 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 strug-gling brands through improved marketing spending effectiveness, there is no reason tolimit this approach to problem solving. Even strong brands can be made stronger andwill require equally creative approaches to keep them vital. Further, strong brands canlose their momentum if left to coast. The four-step approach can help to keep even thestrongest brands from stalling out.

The rules of brand building have changed because the fundamental dynamics of how marketers connect with consumers, and stay connected to build loyalty, have changed. Marketers who master these rules, and manage their spending based on a deeper under-standing of the bottlenecks, the vehicles, the brand dynamics, and the “zone,” will be the winners. This applies for all businesses, from startups, small businesses, enterprise.

Matrix Marketing Group | Marketing Practice

For additional information or copies, please call (303) 725 - 57590 or e-mail [email protected]

05/2018

www.matrixmarketinggroup.com

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