Intangible Values Must Be Measured, Too

Intangible Values Must Be Measured, Too

Marketing programs typically include multiple elements – some with obvious values but others rely heavy on what we call “intangible value.”

For example, the program may include mass media advertising, direct mail, premium incentives, rebates and more. From a cost-based perspective, these elements are worth what you paid for them – essentially their market value.

But consider something like playoff tickets to a New York Yankees game. This will typically sell for more than the retail or “face value” of the ticket. Why? Because they are highly desirable, hard to get, and carry the “intangible value” of attending a Yankees playoff game.

Using a cost basis, you could simply assign the market value – what you paid for the tickets.

But this approach may be unsatisfactory on several fronts. First, you may be in a unique position to purchase the tickets, whereas someone on the “open market” may be shut out entirely. In this case, the purchase price doesn’t reflect the full value.

Secondly, the true intangible value will be much higher if the actual user of your ticket – perhaps a valued client – is an enthusiastic Yankees fan.

And finally, it is useful to be able to understand the comparative value of several options before you make the purchase.

Therefore, Hyperion Marketing Returns uses an algorithm that takes into account the ten most common intangible qualities that add value to a marketing opportunity.

By critically grading the opportunity on its ability to deliver against each of these qualities, we generate a predictive value that enables more sophisticated decision-making.

Break your decisions down using this type of critical thinking, and you’ll become a more sophisticated marketer.

Define Marketing Objectives To Set Your Course

Define Marketing Objectives To Set Your Course

In order to achieve your company’s Marketing objectives, it’s obviously necessary to first clearly define what is important and what is not important. Only then can you work to achieve those goals in a cost-effective manner.

Six Sigma has provided us with a useful map to guide this journey. We need only adapt it to a 

Marketing perspective.

In this case, our primary corporate Marketing objectives will be called the “Big Ys.” This relates to a simple algebraic equation, Y = f(X). Put more simply, what you get (Y) is a function (f) of what you do (X).

We call them “Big” because you need to focus on the few that are both vitally important to the company, and at least appear to be able to be impacted by Marketing. Then, again following Six Sigma precepts, we look at the components that affect each Y, which we term the “Critical Xs,” and ask how Marketing can improve performance on each of these.

For example, if a product sale is a Big Y, then the Critical Xs might include making consumers aware of the product, educating consumers on the value proposition, and exposing consumers to the actual product in positive context.

Marketing programs can certainly impact awareness and knowledge of the product features, and Marketing also can place products in an advantageous context, whether through ad themes, product placement in entertainment, sponsorship, celebrity endorsement or other tactics.

There are likely to be Critical Xs that are not conducive to Marketing efforts, or perhaps would take an inordinate amount of resources for very little impact. Those should be set aside in favor of the Critical Xs that show the most promise, for the most efficient use of resources.

Incremental improvement in each of these Critical Xs typically leads to massive impact on the Big Y.

Marketing By Objectives – The Next Evolution

Marketing By Objectives – The Next Evolution

Marketing By Objectives is the phrase we use to describe a Marketing program that is driven by accountability to a finite set of goals and objectives that advance the overall corporate strategy in a meaningful way.

Let’s break that down a bit. Accountability means identifying desired outcomes, setting specific achievable targets, tracking performance against relevant metrics, and honestly evaluating the relative success.

Without this degree of specificity, any program will lack the essential ingredient of accountability. It won’t be replicable, and worse, corporate decision-makers won’t trust the outcome.

Each Marketing program’s goals and objectives should be derived from those of the corporation as a whole, in a Marketing context. For each broad goal, such as Revenue, there are many possible sub-goals, such as customer acquisition or retention, that may contribute to success. The Marketer must identify those that are important to the mission, and set the program sights accordingly.

Each goal must of course have an objective set of measures that can be used for evaluation. The measures should have a degree of consistency over time, in order to evaluate whether you’re doing “better” or “worse” than before. But don’t remain wedded to outdated goals.

Identifying the measures you will use beforehand not only saves time and trouble later, it can help the entire Marketing team to focus on desired outcomes.

In addition, those outside the Marketing department will more easily recognize whether their initiatives could help – or may indeed hinder – what you’re trying to accomplish.

The result is a more productive, integrated team effort that recognizes the value and contributions of your programs – Marketing By Objectives.

Enlightened Marketing: A Strategic Advantage

Enlightened Marketing: A Strategic Advantage

True enlightenment lies in bringing the same rigor and vigilance exercised over all other business decisions to your Marketing investments, in order to identify and understand the returns.

The key to unlocking these mysteries lies in the rigorous Six Sigma methodology, originally developed to improve manufacturing processes. Applied to Marketing, it allows us to very clearly define what is important and what is not important in the entire process, based on companies’ individual business goals, and help them achieve those goals in a cost-effective manner.

Enlightenment resides at the end of a rainbow, or continuum, that begins with Basic Involvement – simply participating in the Marketing process. From there, the first task critical task is to understand gross spending.

But the real benefits begin when Marketers identify and quantify corporate goals, or “Critical Ys” in Six Sigma parlance, against which they will deliver.

With an understanding of spending and goals, Marketers can then compute the relative Return on Investment for various programs and initiatives. Six Sigma then guides analysis of comparative efficiency – “Z scores.”

Carrying out the analysis, improvement loop brings us one step closer to true enlightenment, which comes when we add in rigorous controls to drive continuous improvement.

The company that follows this methodology as rigorously in Marketing as in manufacturing gains a significant strategic advantage in the marketplace.

Beware these common Marketing mistakes

Hyperion Marketing Returns has identified a pattern of what we’ll call “marketing pitfalls” – traps into which even savvy marketers fall.

The first of these is the attempt to directly attribute sales. This goal is ineffective unless the product is actually available for purchase at the point of messaging.  In any other approach, what statisticians call “noise in the process” overwhelms the cause-effect relationship.

Here are some other pitfalls:

·      Pursuing “Opportunities” instead of Business Goals.  Normally rational business people can be lured into “opportunities.” Business goals are then redefined to fit the opportunities.

·      The Lag Time Problem.  Impact only becomes evident after the campaign is over. 

There is a means of subjecting marketing to a rational process that measures its performance against real business goals.  This method is based on the principles of the management tool known as Six Sigma. 

Marketing ROI Restarted!!

We are relaunching the Marketing ROI blog this coming week!  Stay tuned for weekly postings on the subject of Return on Investment in all sorts of marketing, sales and media channels.

Marketing and ROI/ROO Article from Sports Business Journal

The ability to navigate large organizations is often the single most important key to success in a professional manager’s performance. Why is this general management skill even more difficult within the area of marketing? There are two key barriers of which the informed champion of marketing investments must be aware.

The first barrier is a general lack of understanding about how marketing works. There’s a old adage from John Wanamaker: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” 

Many organizations consider marketing to be a necessary evil. Those outside of the marketing department are not sure what they actually get from a marketing investment, even though they understand it is a vital function in every successful company. Why is this? In general, I believe it is due to a misunderstanding about the return on investment in marketing spending when compared with a company’s other investments.  ROI and ROO can, and must be, calculated for marketing investments. Without them, navigating the large and diverse organization is all the more challenging. 

Secondly, many large organizations have ceded much control over regional and business-level marketing spending to lower level managers. There are many reasons for this. Managers often quip, “You don’t understand my territory/product/service. I need to spend marketing dollars this way.” While these differences are very real, this behavior creates massive inefficiencies in spending, as well as possible resentments and misunderstandings. 

This loss of control to territory/product/service levels of management creates three problems: significant communication issues both within and without the company, inefficiencies in spending and dilutive brand messaging — all of which potentially create a cancerous division among the various company units. 

So how does a manager overcome these obstacles?

1. An investment must start with a goal in mind. This may sound incredulous, but I have seen many investments in marketing at very large organizations that happen because no one has ever asked why they are spending what they are spending. The budget process in very large organizations (at least those that are not under massive and life-threatening pressures) can be an alarmingly simple process. You take last year’s budget and see what needs to be modified. Thus, if we spent “X” dollars on print media last year, we could reasonably expect to spend “X” dollars again. Internal budget negotiations rarely address the question of the efficacy of the spending. There is little way to judge success when the investment was not specifically designed to return a defined set of results. 

Managers may muse that since market share went up, the print campaign must have worked. The print campaign might never have been designed to go after market share — it might have been to build the brand and create sales. To our earlier discussion on ROI and ROO, a company must align and design marketing processes to deliver on measurable and defined and agreed upon results. 

2. Along with designing marketing investments for measurement using tools such as ROI and ROO, there must be a clear delineation and understanding of efficiencies. While the argument for simple return can be clear, it must also be clear how this will save money in the overall business. By focusing on the core brand positioning, the message can enjoy greater reach and frequency. 

One great example of this strategy would be GE’s investment in the Olympics. It made a conscious decision to enter into only one major sponsorship relationship, and that one sponsorship delivers against no less than 13 of its major divisions. By combining all efforts on one significant, global-reaching sponsorship, it has maintained unity of message while aligning the iconic GE brand with the iconic Olympic rings. 

In the same manner, by concentrating a company’s sponsorship marketing resources on one sport — or one league or team — a company can deepen the message by exiting relationships that do not directly support the stated goals. This approach makes saying “no” to the hundreds of requests for sponsorships easier and less damaging, even when the requests are made by consumers and clients. Saying “no” correctly is very important in order to maintain customer and client good will. The rejection is no longer perceived as unsympathetic — it’s just that the company is focused on this one sport or art or entertainment segment. Meanwhile, an overall cost savings can be built into the new strategy.

3. An investment must be positioned as a unifying force. You cannot retain regional/product/service disparities and expect any sort of unifying results. Good managers seek harmony in the total organization. Marketing investments done in the correct manner can help accomplish that result. These highly visible market statements powerfully communicate to the public, investors, and employees what the company stands for. DuPont achieved this unity by focusing nearly all of its sponsorship spend on NASCAR and one driver in particular, Jeff Gordon. While this arrangement was initially considered as a business expansion and unifying strategy for the paint division (a terrific alignment with Rick Hendrick who was a major customer of that division and the owner of Hendrick Motorsports, for whom Jeff drove) it quickly became the “team spirit” of the entire company, loved and backed by all division employees as the highly visible and successful investment that it was.

Newly acquired companies or divisions have different cultures. A marketing investment positioned correctly can provide the unifying, flag-raising theme to rally the troops.

This effort is normally led by the CEO/COO. But that’s not who you are, I am guessing. So you need a champion. This is a senior manager with influence at the top levels of the organization who can help position the new strategy as better defined, more measurable, creating greater cost savings through efficiencies of scale, all the while providing a unifying force within the company. While this may sound blindingly obvious, it is often more difficult in practice because we fail to provide the champion with the ammunition to make them want to put their social and political capital into the project. 

By following the three critical steps above, you will give your champion the fuel to drive the project home.

Raymond Bednar (raymondbednar@hyperion-marketing.com) specializes in advising and implementing optimization strategies for investments in marketing channels at Hyperion Marketing Returns Rockefeller Consulting in New York City.