measuring marketing performance and roi
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© Robert Shaw 2008 1
Robert ShawRobert Shaw
shaw@vbmf.comshaw@vbmf.com
Measuring PerformanceMeasuring Performance
Maximising ROIMaximising ROI
Measuring PerformanceMeasuring Performance
Maximising ROIMaximising ROI
MarketingFinancial
Contribution
maximise
© Robert Shaw 2008 2
Experience and knowledge:
Brands, money and maths
20 years experience as consultants to over 250 brands
Advisory roles: CIM, CIMA, CIPS, DMA, ICAEW, IDM, IPA, ISBA
Publication of over 100 books and articles: latest in HBR May 07
© Robert Shaw 2008 3
Steps in the processSteps in the processSteps in the processSteps in the process
Formulateproblem
AnalyseFinancial
Data
AnalyseNon-Financial
Data
Use theModels
MakeDecisions
Well defined?Explanations?Decisions?Over-complex?Over-simple?
Ample data?Accurate?Complete?Judgement?
Sound?Practical?Useful?
Good design?What-if?Scenarios?Optimisation?Risk analysis?
Buy-in?Understanding?Used in practice?
STEP 1 STEP 2 STEP 3 STEP 4 STEP 5
© Robert Shaw 2008 4
Step 1 Step 1 Formulate the ProblemFormulate the Problem
Step 1 Step 1 Formulate the ProblemFormulate the Problem
and how to maximise its financial contribution?
© Robert Shaw 2008 5
Marketing is widely misunderstoodMarketing is widely misunderstoodMarketing is widely misunderstoodMarketing is widely misunderstood
© Robert Shaw 2008 6
Is marketing just decoration?Is marketing just decoration?Is marketing just decoration?Is marketing just decoration?
© Robert Shaw 2008 7
marketing marketing adds adds valuevalue
marketing marketing adds adds valuevalue
© Robert Shaw 2008 8
Strong Brands Create ValueStrong Brands Create Value
Source: Interbrand/Citibank league table, 2000
StockMarket Value
NetBook Value
Intangibles as %of market cap.
Brandvalue
$142 bn $10 bn $73 bn93%
$69 bn $10 bn $16 bn85%
$81 bn $44 bn $34 bn46%
$194 bn $21 bn $53 bn89%
$217 bn $44 bn $3 bn80%
© Robert Shaw 2008 9
Marketing is the Marketing is the sourcing and sourcing and harvesting of harvesting of
moneymoney
Marketing is the Marketing is the sourcing and sourcing and harvesting of harvesting of
moneymoney
€
© Robert Shaw 2008 10
Past Future
Why?
Where?
How?
Models help decide how to maximise profitsModels help decide how to maximise profitsModels help decide how to maximise profitsModels help decide how to maximise profits
© Robert Shaw 2008 11
Step 2: Step 2: Analyse Financial DataAnalyse Financial Data
Step 2: Step 2: Analyse Financial DataAnalyse Financial Data
© Robert Shaw 2008 12
Maximising the value added byMaximising the value added by4 key marketing decisions4 key marketing decisions
Maximising the value added byMaximising the value added by4 key marketing decisions4 key marketing decisions
PRODUCT PRICE
PLACE PROMOTION
© Robert Shaw 2008 13
Revenue patterns Revenue patterns How fast will new products replace old ones?How fast will new products replace old ones?Revenue patterns Revenue patterns How fast will new products replace old ones?How fast will new products replace old ones?
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
May
-98
Jul-9
8
Sep-9
8
Nov-98
Jan-9
9
Mar
-99
May
-99
Jul-9
9
Sep-9
9
Nov-99
Jan-0
0
Mar
-00
May
-00
Jul-0
0
Sep-0
0
Nov-00
Jan-0
1
Mar
-01
Val
ue
Sal
es (
$)
© Robert Shaw 2008 14
Revenue patterns Revenue patterns How much effect do singles have on albums?How much effect do singles have on albums?Revenue patterns Revenue patterns How much effect do singles have on albums?How much effect do singles have on albums?
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
27
29
31
33
35
37
39
41
43
45
47
49
51
53 2 4 6 8
10
12
14
16
18
20
22
24
26
28
© Robert Shaw 2008 15
Revenue patterns Revenue patterns How much advertisingHow much advertising is too much? is too much?Revenue patterns Revenue patterns How much advertisingHow much advertising is too much? is too much?
0%
5%
10%
15%
20%
25%
49 77 105 133 161 189
Week
Sa
les
up
lift
0
5
10
15
20
25
30
35
40
45
50
Th
ou
san
ds
Salesuplift
Spend
© Robert Shaw 2008 16
Revenue patterns Revenue patterns How much will we sell on promotion?How much will we sell on promotion?Revenue patterns Revenue patterns How much will we sell on promotion?How much will we sell on promotion?
0
10
20
30
40
50
60
70
80
90
100
1 14 27 40 53 66 79 92 105 118 131 144 157 170 183 196
© Robert Shaw 2008 17
Revenue patterns Revenue patterns How much will price rises reduce sales revenues?How much will price rises reduce sales revenues?Revenue patterns Revenue patterns How much will price rises reduce sales revenues?How much will price rises reduce sales revenues?
01,0002,0003,0004,0005,0006,0007,0008,0009,000
10,000
050100150200250300350400450500
Volume
Price
© Robert Shaw 2008 18
Revenue patternsRevenue patternsDo pricing and advertising mutually support?Do pricing and advertising mutually support?Revenue patternsRevenue patternsDo pricing and advertising mutually support?Do pricing and advertising mutually support?
0%
100%
200%
300%
400%
500%
600%
Unadvertised PriceReduction
Ad Feature + PriceReduction
Display + PriceReduction
Ad Feature +Display + Price
Reduction
% S
pik
e ove
r B
efore Synergy
In Store Display
Ad Feature
Unadvertised Price Off
© Robert Shaw 2008 19
Revenue patterns Revenue patterns Is long-term growth slowing down?Is long-term growth slowing down?Revenue patterns Revenue patterns Is long-term growth slowing down?Is long-term growth slowing down?
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
wk 1 wk 27 wk 1 wk 27 wk 1 wk 27 wk 1 wk 27
© Robert Shaw 2008 20
-30%
-20%
-10%
0%
10%
20%
30%
Jan-89
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
-300
-200
-100
0
100
200
300
Beef % change BSE mentions
Revenue patternsRevenue patternsWhat are effects of a health scare?What are effects of a health scare?Revenue patternsRevenue patternsWhat are effects of a health scare?What are effects of a health scare?
© Robert Shaw 2008 21
Step 3Step 3Analyse Non-Financial DataAnalyse Non-Financial Data
Step 3Step 3Analyse Non-Financial DataAnalyse Non-Financial Data
© Robert Shaw 2008 22
What is a Brand?What is a Brand?What is a Brand?What is a Brand?
A promise…
…that the customer can
achieve a desired set of
outcomes
© Robert Shaw 2008 23
Two brand perspectivesTwo brand perspectivesTwo brand perspectivesTwo brand perspectives
Aspirations
Perceptions
YOU CUSTOMERS
© Robert Shaw 2008 24
Model what customers need and wantModel what customers need and wantModel what customers need and wantModel what customers need and want
Observation
Buying
Who Why
How
What
Where When
Interview
Group discussion
Revenue analysis
Staff feedback
PlansActions
Actionable insights come from combining multiple sources of information
CUSTOMER DATA SOURCES
Mystery shopper
© Robert Shaw 2008 25
Involved
Uninvolved
© Robert Shaw 2008 26
© Robert Shaw 2008 27
Sex
Sport
Politics
Religion
Wine
Beer
Soap
© Robert Shaw 2008 28
© Robert Shaw 2008 29
Rational Emotional
© Robert Shaw 2008 30
Blind test 44% 51%
5%
Named test 65% 23%
12%
© Robert Shaw 2008 31
"In the factory, we make
cosmetics;
in the store we sell hope."
Charles Revson
© Robert Shaw 2008 32
Model how customers relate to what you offerModel how customers relate to what you offerModel how customers relate to what you offerModel how customers relate to what you offerHigh Involvement
Negative reduced(pain, thirst)
Positive added(pleasure, esteem)
Low Involvement
B
A
F C
D
G
E
Band aidPizzaPizza
H
I
J
Sports car Life insurance
© Robert Shaw 2008 33
• Paper towels
• Life insurance
• Contact Lens
• Sports car• Auto insurance • Console TV
• Family car• Stereo
component• Expensive watch• 35 mm Camera
• Eye glasses • Wallpaper• Washer/dryer
• Portable TV• Car battery
• Hair colouring• Exterior paint• Battery razor
• Instamatic camera
• Credit card• Complexion/face soap
• Ground coffee • Family/steak restaurant• Motor oil • Headache remedy
• Dry bleach
• Suntan lotion
• Chicken• Insecticide
• Wine for dinner parties
• Inexpensive watch
• Low tar cigarette• Pizza
• Deodorant soap
• Peanut butter• Insect repellent• Fast food restaurant• Frozen
baked goods
• Fruit • Imported beer• Regular
cigarettes
• Regular shampoo
• Donut frozen• Donut shop• Non-disposable
razor• Diet
soft drinks
• Light beer
• Regular beer• Regular
soft drinks
• Disposable razor • Liquid
hand soap• Salty snacks
• Greetings card
• Perfume
• Liquid bleach
• Barbecue sauce
• Women’s magazine
•Toothpaste • Jeans • Wine for self
HIGH INVOLVEMENT
LOW INVOLVEMENT
THINKING FEELING
• Salad oil
• Economy car
© Robert Shaw 2008 34
4. Use the models4. Use the models4. Use the models4. Use the models
© Robert Shaw 2008 35
What’s the market for snow?What’s the market for snow?What’s the market for snow?What’s the market for snow?
Technologist with idea
Analogues
Market research
Business case
Rejected ideas
Rejected ideas
© Robert Shaw 2008 36
Modelling the financial resultsModelling the financial resultsModelling the financial resultsModelling the financial results
Profit / cash flow
Product options
Price
Distrib’n &Advertising
Variable costs
Fixed costs
Demand
Costs
Revenue
NPV & IRR
© Robert Shaw 2008 37
© Robert Shaw 2008 38
© Robert Shaw 2008 39
© Robert Shaw 2008 40
5. Make Decisons5. Make Decisons5. Make Decisons5. Make Decisons
© Robert Shaw 2008 41
How to speak with CEO and CFOHow to speak with CEO and CFOHow to speak with CEO and CFOHow to speak with CEO and CFO
Prepare with:
Financial analysis and
Non-financial analysis
Don’t use jargon and specialist language
Show them the evidence
Set out the options and alternatives
Show predicted results of alternatives
Choose what has the best financial return on marketing
© Robert Shaw 2008 42
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