Profitable Marketing Communications: A Guide to Marketing Return on Investment

224 Pages·2007·0.74 MB·English

by  Antony Young

i
PROFITABLE
MARKETING
COMMUNICATIONS
A GUIDE TO MARKETING RETURN ON INVESTMENT
ANTONY YOUNG & LUCY AITKEN
London and Philadelphia
ii
To Nancy and Dorian
Publisher’s note
Every possible effort has been made to ensure that the information contained in this book is accurate
at the time of going to press, and the publishers and authors cannot accept responsibility for any
errors or omissions, however caused. No responsibility for loss or damage occasioned to any person
acting, or refraining from action, as a result of the material in this publication can be accepted by the
editor, the publisher or any of the authors.
First published in Great Britain and the United States in 2007 by Kogan Page Limited
Apart from any fair dealing for the purposes of research or private study, or criticism or review, as
permitted under the Copyright, Designs and Patents Act 1988, this publication may only be repro-
duced, stored or transmitted, in any form or by any means, with the prior permission in writing of the
publishers, or in the case of reprographic reproduction in accordance with the terms and licences
issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the
publishers at the undermentioned addresses:
120 Pentonville Road 525 South 4th Street, #241
London N1 9JN Philadelphia PA19147
United Kingdom USA
www.kogan-page.co.uk
© Antony Young, 2007
The right of Antony Young to be identified as the author of this work has been asserted by him in
accordance with the Copyright, Designs and Patents Act 1988.
ISBN-10 0 7494 4942 X
ISBN-13 978 0 7494 4942 1
British Library Cataloguing-in-Publication Data
ACIPrecord for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Young, Antony.
Profitable marketing communications : a guide to marketing return on investment /
Antony Young and Lucy Aitken.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-0-7494-4942-1
ISBN-10: 0-7494-4942-X
1. Marketing--Management. 2. Capital investments--Evaluation. 3. Rate of return.
4. Profit. I. Aitken, Lucy. II. Title.
HF5415.13.Y69 2007
658.8--dc22 2006039729
Typeset by Saxon Graphics Ltd, Derby
Printed and bound in Great Britain by MPGBooks Ltd, Bodmin, Cornwall
iii
Contents
Foreword vii
Preface ix
Acknowledgements xi
1. Aneed for a new marketing model 1
How it used to be… 2
The declining effectiveness of mass advertising 5
The changing consumer 6
Increased pressure on corporate profitability 7
Growing pains 9
The impact of interactivity 10
The implications 12
What this book sets out to do 13
2. Achange in philosophy 15
What is Marketing ROI? 15
Studying the market 20
Why Marketing ROI is difficult to achieve 20
How should marketers respond? 27
3. Our Marketing ROI stars 30
Toyota Motor Corporation: driving in top gear 31
P&G: a soap opera with a happy ending 35
iv ❙ Contents
O2: How a £17.7 billion brand was born 39
British Airways: dealing with turbulence 42
Impossible is nothing… 45
4. Invest, don’t spend 46
The ICE checklist 47
Investing in experimentation 50
Decide whether you need to invest in marketing 51
Marketing – an alternative to acquisition 52
The ladder of insight 53
Our eight investor tips to profitable marketing
communications 53
Use these tools… 60
5. Concentrate on outcomes, not outputs 61
Output obsessions 62
Outputs that drive the wrong marketing 63
What’s the difference between an outcome and an output? 64
Creating a Marketing ROI culture 64
Setting the right metrics 65
Useful metrics 68
Turning metrics into objectives 69
Targeting the rightoutcome 69
How to focus on outcome-led marketing 71
Reassuringly effective 74
6. Forget consumers, target customers 76
The three deadly sins… 77
Profit (Marketing ROI) comes from loyal customers 79
Profit (Marketing ROI) = loyal customers 80
Customer satisfaction = customer retention 80
Customer equity 81
Segmenting by customer profitability 83
Customer retention helps acquisition 88
Consumer packaged goods 92
The power of empathy 93
Bespoke media 93
Use the technology to guide smart investments 94
7. Manage your communication investment portfolio 95
Your marketing communication portfolio 95
Contents ❙ v
Embracing risk 96
Adifferent approach 97
The integration challenge 98
Growth of alternative channels to advertising 103
Payback time 105
Making the right investment decisions 107
Touchpoints ROI Tracker 108
Acentral organizing communication idea 110
Determining the channel mix broadly based on ROI measures 111
Leveraging synergies: development 111
Leveraging synergies: execution 112
Afinal thought… 113
8. Differentiate any way you can 114
Value versus price 116
How to differentiate your brand 118
Avoid commoditization 123
When not to differentiate… 128
Editing consumer choice 128
9. Engagement and experience are the new 30-second ads 130
The magic of mavens 133
Invest in inspiration 133
Experience, not possessions 134
Encouraging consumers to participate 142
‘In the flesh’ appearances 143
Making it personal 143
What’s in a name 143
Revamping a flagging brand 144
10. Apply a ‘focus investing’approach 145
The Buffett style of investing 145
Focus investing applied to marketing 146
How strategy helps focus investing 147
Understanding why marketing campaigns fail 149
New product initiatives 150
Making the right choices 150
Identifying the big bets 151
Making choices about communication 158
Betting on Buffett 159
vi ❙ Contents
11. Establish a measurement culture 160
Setting out the problem 161
Our view… 162
Set metrics at the start 163
It’s not failure; it’s learning 164
Metrics: moving the needle 165
Introducing an ROI system 169
Modelling 170
Owning econometrics 172
Marketing dashboards 173
Market testing 176
Data, not dinner 176
12. Leverage your employee capital 177
Investing in staff… to invest in customers 177
Marketing that motivates 179
Employees are customers too… 181
Our Marketing ROI stars and their employees 189
13. Is your organization Marketing ROI-fit? 191
Why ROI is important 192
Learning from the pitch 198
Relationship management 199
The brief 199
Unification, not integration 200
How does the ad industry need to change? 200
Selling advertising 201
Building value 201
Equipping agencies to deliver a Marketing ROI agenda 202
Anew breed of agencies 202
Summary 204
References 205
Further reading 208
Index 209
vii
Foreword
Creativity and innovation should be at the very heart of any marketing
and communications organization worth its salt. They certainly have
always been at the core of what we do at Publicis Groupe. If we are
doing our jobs right, we must never forget that the work we do… needs
to work. And by working, of course, we mean that our creative ideas
must deliver a payback – with interest – on the investment our clients
make. Our clients demand – quite rightly – that their marketing efforts
not only deliver results, but a real and quantifiable return on invest-
ments. This ever-higher degree of accountability, this focus on ROI, is
changing the face of our entire industry.
That is why this valuable study which treats marketing communica-
tions as an investment is so timely. It adds to the momentum of a debate
about marketing and about marketing’s role as a key facilitator of
business. Any executive from the CEO down who cares deeply about
the success of his or her company should be taking part in this debate.
This book demystifies marketing communications and explains how it
can bring tangible financial results to the bottom line.
There are few people in the industry better equipped than Antony
Young to explain the importance of ROI in marketing communications.
I first came across Antony back in 2001, while he was running
ZenithOptimedia in Hong Kong. He seemed to have a real knack for
running media communication agencies because he instinctively under-
stood that the essential role of the ad business is about getting results for
viii ❙ Foreword
clients. I was happy to see that a lot of clients apparently agreed with
him – and Zenith was able to add assignments for P&G, Coca-Cola,
McDonald’s, Sony and others under Antony’s stewardship in Asia.
Antony helped establish Zenith’s value proposition as ‘the ROI Agency’
– and this later became the mantra for the entire international network.
Delivering business results through marketing communication was a
need marketers all around the world were clearly demanding. He later
applied these principles to UK clients with considerable success and has
now taken his brand of management style to Optimedia US.
Books about ROI and marketing tend to be academic and full to the
brim with the kind of jargon that makes this vital subject matter difficult
to access. By going to the crux of the matter – how marketing communi-
cations can be profitable – Antony and his co-author Lucy Aitken make
this topic incredibly accessible to readers from any background in the
business world.
By examining marketing communications strategies with the
approach of an investor, the authors have come up with a simple but
powerful perspective. The investment and marketing worlds are
furthermore interacting more than ever. Investors and analysts are
increasingly interested in understanding how effective marketing can
add shareholder value, while marketers and the agencies they work
with are beginning to understand the implications of being able to
demonstrate a quantifiable return.
When I agreed to write the foreword to this book, it was not to please
the authors. It was because I have seen with my own eyes how ROI has
worked for our clients. In the fragmented media world that is before us,
with all the difficulties of reaching the right audience at the right time, we
need to have a rigorous approach to media. The lesson of this book is that
there is no single recipe. There are tools, some very specific, and propri-
etary, some less special, which when well used can deliver great results.
And you know what? We have seen this happening day after day.
And our clients have been able to measure it, particularly when they
shifted their business from another shop – wherever it was. The ROI
delivered has always been superior.
Creative minds associated with skilled and rigorous spirits can create
something new, fresh and unparalleled. This book is one such creation.
Maurice Lévy
Chairman and CEO, Publicis Groupe
ix
Preface
As I sit in my living room watching the news, I sense it’s going to be a
rough week on the investment front. The newsreader reports that the
S&P500 is down 51 points in today’s trading. My financial adviser tells
me this isn’t a great time to be seeing clients. ‘We’re at the mercy of the
market’, he says, reaching for a brochure for a Latin American growth
fund. ‘This should be a better bet in the long term.’ I tell him I don’t need
to be told to invest in more or better funds; I need to know whether to
invest at all, and if there are investment vehicles other than funds that
will get me a better return.
Replace the word ‘investment’ with ‘marketing’. Those funds are ads
and media schedules, while those working in the ad industry are the
investment advisers.
Marketers are generally good at recommending strategies to spend
their budget wisely. Yet the big question for companies is: ‘Should I be
marketing at all?’ Their boards’ focus is on growing earnings, so they
seek more meaningful results beyond ad awareness, cost per acquisition
or branding.
Marketing is still seen by many companies as a cost rather than an
investment. It tops the list of types of expenditure most likely to go in
a downturn.
There are two key reasons that explain this predicament. Firstly,
company boards have lost confidence in marketing. Upgrading new
stores, improving distribution logistics, trade incentives and price
x ❙ Preface
promotions are seen as better alternatives to traditional marketing.
Secondly, many marketers have failed to demonstrate a clear line of
sight between marketing and the bottom line.
Companies need to improve their management of marketing commu-
nication portfolios. They need to understand better the potential return
of different channels – ie direct, event, PR, digital, promotions, trade
marketing – in reaching out to customers and the level of risk associated
with strategies. If marketers are able to demonstrate ROI from
marketing, then CFOs won’t cut budgets.
This is the thinking behind Profitable Marketing Communications: Aguide
to marketing return on investment. This book offers a unique perspective to
marketing by introducing investment disciplines and strategies to
marketing practices. It offers insight into how marketers have delivered
outstanding Marketing ROI for their companies. Finally, it provides a
blueprint to maximize returns from marketing communications.
This book will be an invaluable source for marketers to help drive
growth and profitability. In addition, it’s a reference book for non-
marketing executives to improve their knowledge about how to work
with marketing in terms of evaluating, challenging and engaging it to
deliver improved business performance.