Rationalization Optimizes the Marketing Mix

Rationalization Optimizes the Marketing Mix

With controls in place, the Marketing team can work toward optimizing its mix of programs to produce the best results.

The top performers may be worthy of additional resources. Your short-term metrics will quickly tell if those additional investments are justified.

Oftentimes the more difficult task is to eliminate or rationalize programs that are not producing sufficient return on your investments.

We have seen companies become wedded to programs or themes that have outlived their usefulness. Only by honestly reviewing impartial metrics can Marketing managers guide the decisions that must be made.

Once again, Six Sigma processes provide the necessary tools. Comparing Z scores will quickly identify those that are lagging.

At this point, the first step should be an honest evaluation of whether simply changing tactics could bring them into compliance.

For example, if a program hits the right general demographic but generates low returns mainly because it reaches too few potential consumers, could simply switching to different media channels change the outcome?

Decisions will be based upon many factors in addition to ROI and Z scores.  Other common discriminators include overall cost, long-term commitments, management affinity, segment coverage requirements, goal coverage, and the use of financial tools such as net present value, internal rate of return, and payback period. 

I recommend starting with these five important questions:

1. What business goal(s) does the program seek to affect?
2. What business goal(s) could the program affect (if optimized)?
3. How do you know the goal is being affected – how do you know you are being successful?
4. How do you measure the long term performance of achieving the goal?
5. How do you measure the short term (in-process) achievement of the goal?

Rationalization of this type will reduce waste and increase the return on investment.  This result alone often pays for the investment in the Six Sigma management process.

Set ‘trigger points’ to control your results

Set ‘trigger points’ to control your results

Controlled Investments represent the apex of the Six Sigma Marketing hierarchy.  Once we have rationalized and improved investments to create the ideal marketing mix, we must maintain this new level of return.

Controlling a process means setting up reporting limits to signal when those investments are going “out of control.”   Out of control means a process is yielding results that are not within the expected range. In other words, you’re not getting the results you want and expect.

This is normally a process of management by exception rather than active analysis.  In other words, we don’t necessarily need to know that the process is in control – we expect that.  Instead, we only want to know when the process has crossed the boundaries of acceptable levels.

This information is critical to the management process so that we are clearly alerted to take action to maintain our hard-fought gains when necessary. 

In order to report more completely on a group of activities, we may use a “dashboard.”  Just as a car dashboard gives a driver data on how the car is performing, the marketing “dashboard” reports important data on our marketing programs. 

Create the right mix to achieve Marketing goals

Create the right mix to achieve Marketing goals

Any complex organization such as a corporation will have a correspondingly complex web of goals and objectives. Some of these will be appropriate for Marketing support, some will not.

Therefore, the first task is to identify short and long term Marketing goals, and weight them comparatively to help guide resource allocation.

The next step is to translate goals into action. This is where the creativity starts.

For simplicity, let’s assume that you have identified 10 goals that will be subject to Marketingsupport.

You’ve ranked them in order of importance.  Is it likely one Marketing program, even one of supreme originality and audacity, can contribute to each of these goals? Probably not. If you’re lucky, that single brilliant Marketing program can further the corporate agenda in perhaps 75% of the relevant goals.

Would you be satisfied with a final grade of 75%, even if it earned the accolade of your peers? Would you stop at “good” if “great” is within reach?

Logically, then, some of the Marketing budget should be set aside to promote these lesser objectives, in order to attain the best result.

Each goal should be targeted by using the best Marketing channel available for that specific purpose. Here’s a visual example of how the continuum of goals might be addressed through a variety of channels – Entertainment marketing, sports marketing, not-for-profit affiliation and arts patronage.

Within the sports category, Marketing via professional golf shows potential to “move the needle” on eight of your goals. The rest must be considered through different channels.

Compare your goals, and their relative weights, against the resources and Marketing options available. Over time, enhance your matrix of performance strategically and methodically.

This approach to incremental improvement can yield significant benefits even without requiring additional resources.

At worst, it gives you a powerful decision-making tool for your annual campaign planning.

Using Design of Experiments To Sharpen the Sword

Using Design of Experiments To Sharpen the Sword

Once you have measurements in place and are gathering data on your Marketing programs, you have reached the “Rationalize and Improve” phase of the Six Sigma process.

In other words, it’s time to phase out what cannot meet your expectations, deploy those resources elsewhere, and improve those which show the most potential.

Realistically, every program can be improved. The question is, at what cost? That’s where the tool called “Design of Experiments” or DOEs come into play. DOEs are simply the application of rudimentary scientific inquiry.  Let’s focus on the word “experiment.” 

To experiment is to hold certain elements of a program constant while varying other elements in order to determine the effect of the variation on the overall outcome.  Let’s take a simple, real-life example. 

The process of obtaining data on an individual consumer is a common goal of many Experiential Marketing programs, such as those held in high-traffic venues such as sporting events.  The possibilities for experimenting with the yield of such an operation are numerous.  One could:

-       Set up the sign-up tables in different types of locations, to determine which achieves better yield – is the location near the food stands better than the location near the entrance, or near the bathrooms?

-       Provide different and mutually exclusive offerings – perhaps a tote bag at one and a stuffed animal at another in exchange for consumers’ data – which gifts are more conducive to improving yield?

-       Set up tables outside the stadium – perhaps near the parking to see if yield improves or declines – signaling a potential savings in cost due to lower site or set up fees.  The variations are endless.

The point is that certain portions of the experiment are held constant – the same stadium, the same game, the same credit card offer, etc., while changing other aspects to determine if  the performance can be improved. 

This process is systematically used to improve the outcome of an investment. 

Yes, you really can compare apples and oranges

Yes, you really can compare apples and oranges

Today we move from “Y” to “Z” – as in the Z score of Six Sigma process improvement.

While the terminology may sound daunting, the goal is simple: Compare the efficiency of each marketing investment, so you can make better decisions on how to use scarce resources.

Let’s take an example:  One car gets 30 miles per gallon, the other 15 miles per gallon.  

This doesn’t mean the car with 30 mpg is a better car.  It simply means in the ONE task - efficiency of fuel consumption - the 30 mpg car rates higher. 

That vehicle may accommodate only two people – making it entirely impractical for a large group. 

In evaluating marketing investments we are trying to determine which investment is the most efficient in delivering on the goals we have targeted.

Of critical importance, our application of the Z score is “dimensionless.”  What does this mean? 

Unlike the 30 mpg example above, our marketing efficiency model is not “qualified” ― it is not restricted in its use and comparative function to one metric, such as fuel efficiency.  Miles per gallon cannot be used to compare which car is faster, which hauls more, etc.  

The dimensionless efficiency model, however, allows us to compare different activities trying to achieve widely different objectives. 

So which is better, a smaller efficiency number or a larger?  It’s the same as fuel efficiency – the larger the number the more efficient the process.  

For now, just know that you have a powerful tool at your disposal, allowing you to compare “apples and oranges” to determine which investment among competing offers requiring scarce resources is the most efficient.

Six Sigma puts power in Marketing’s hands

Six Sigma puts power in Marketing’s hands

One of the challenges of instilling the Marketing By Objectives approach is the need to quantify results.

Historic measures such as total reach or share of voice simply don’t provide enough insight – requiring costly one-off analyses to supplement the data, when and if funding is available. Even adding social media metrics provides little depth of understanding – simply more numbers.

That’s why taking a Six Sigma approach is such a game-changer for Marketers.

Instead of starting with the data and trying to make sense of it one piece at a time, you begin with what you know – the mission.

By breaking the mission into its component parts (see the Y Discernment blog), then attaching metrics to each of the key steps, you’re able to confidently set targets then track performance of each program.

More importantly, you can build the programs to allow adjustments on the move, empowering you to direct resources where they will do the most good.

This approach guarantees a superior Return on Investment, while opening up the pathway to Return on Objectives, a key performance indicator in the executive suite.

Among the most powerful tools in the Six Sigma box is the Design of Experiment (DOE), which allows testing prior to launch for a major campaign, and then subsequent testing of possible adjustments once the campaign is under way.

Each aspect of Six Sigma has been developed and de-bugged over more than a decade of field use, so there’s no need to reinvent the wheel.

Importantly, creativity need not be stifled by accountability. In fact, creativity generally increases in the presence of a specific challenge.