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.