the key to scaling marketing returns 30 x k. chettayar

THE KEY TO SCALING MARKETING RETURNS 30X:

A SPECIAL REPORT FOR RETAIL AND CONSUMER GOODS MARKETERS – A LESSON FOR ALL

By Krishna Chettayar © All Rights Reserved

1

About the Author

Krishna Chettayar is currently Industry Solutions Executive for Acxiom Corporation and has over 12 years of experience in marketing and product development in the marketing services space. Prior to Acxiom, Chettayar held executive level positions at Information Resources Inc, (IRI), D&B, GE Partnership Marketing Group, and small start ups serving companies across such industry verticals as business services, information solutions, high-tech, financial services, retail and consumer goods. Chettayar was named one of the “Top 100 Marketers” by B-to-B Magazine in 2004 and is a frequent contributor to publications such as DM Review, DM News, DestinationCRM, and B-to-B Magazine. Chettayar holds a Master of Marketing from Northwestern University, a Master of Product Development from Northwestern University, a Bachelor of Arts in Marketing from California State University, Fullerton, and he is a graduate of the Executive Program at MIT for Marketing Information Technology.

2

Krishna Chettayar ©

Research into marketers needs

3

Values and Needs

Define Core Process

Budgets and Returns

Use of Process

Factors of Performance

•Define marketing process for companies in retail and consumer goods •Structure marketing process in terms of activities, process, tasks and steps

•Analyze the marketing budget and returns of companies in retail and consumer goods •Segment marketers based on return on marketing investment multiple

•Examine how high performing marketers allocate their resources versus low performers •Identify differences in allocation and determine the role of the difference in performance

Identify new solution opportunities, re-organize our solutions around core process, identify GAPS, determine what high performers do that low performers do not, share findings, collaborate with customers and prospects on findings.

•Assess key values and needs of marketers and determine how this differs by industry as well as marketing expertise •Identify new solution development areas

•Determine factors that explain the performance differential among high performers vs. low performers •Share findings with key customers to assist in driving better returns


Retail & Consumer Markets needs, value & spend survey: Completed in January of 2010, it is the second year of research.

4

RCM Needs & Spend Survey 2010 Budget growth expectations

Size of budget

Budget allocation

Needs and values

Target industries: Retail

CPG

Restaurant

Annual sales Greater than $100 million

Title and level Manager or better

120 survey responders Retail – 77

CPG – 26

Restaurant – 17

CPG21.7%

Restaurant 14.2%

Retail64.2%

RCM Industry Segments


FINDINGS

5

ROMI performance by industry: Little variance in ROMI performance across industries.

$- $2 $4 $6 $8 $10 $12 $14 $16 $18

Retail

Restaurant

Consumer Package Goods

$16

$17

$12

$15

$17

$9

Dollars Generated for Every Dollar Spent On Marketing

Industry ROMI Performance

DMA 2YR Average Third-Party Survey Est. 2YR Average

6


ROMI performance by company size: Relatively small ROMI variance across company size.

$14

$16

$10

$- $2 $4 $6 $8 $10 $12 $14 $16


Large Company (≥ $2 bn)

Midsize Company (< $2 bnand ≥ $400M)

Small Company ( < $400Mand ≥ $100M)

Company Size ROMI Performance

2009

7


ROMI segmentation by performance: High Performers outperform Low Performers by 11:1.

$3

$8

$32

$- $5 $10 $15 $20 $25 $30 $35


Low Performer

Average Performer

High Performer

ROMI Performance Segmentation (2010 for 2009)

Retail

High Performer $ 32.08

Average Performer $ 8.09

Low Performer $ 3.25

Restaurant




CPG




Note: employee size, annual sales, and industry were all equally represented across segments.

8


ROMI segments: Most segments performed worse in 2009 versus 2008 but High Performers suffered the greatest decline in return.

$3

$3

$8

$10

$32

$42

$- $5 $10 $15 $20 $25 $30 $35 $40 $45


Low Performer

Average Performer

High Performer

ROMI Performance Segmentation

2009 2008

9


ROMI segment 3YR average financial performance: High Performers have greater sales and earnings growth.

Low Performer Average Performer High Performer 3 YRAverageAnnualSales

Grow th

3 YRAverageAnnual

EarningsGrow th

8.0%

19.0%

23.0%

6.0%

17.0%

21.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

3YR

Aver

age

Annu

al %

Gro

wth

ROMI Performance Segmentation - Sales & Earnings Growth Comparison

10


Sales performance of ROMI segments: Sales trend declined for all ROMI segments but High Performers suffered less decline than other segments.

Low Performer Average Performer High Performer 20092008

18.0%19.0%

23.0%

6.0%

17.0%

21.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

3YR Average Annual % Sales

Growth

ROMI Performance Segmentation - YOY Sales Growth Comparison

2009 6.0% 17.0% 21.0%2008 18.0% 19.0% 23.0%

Low Performer Average Performer High Performer

11


Earnings performance of ROMI segments: Sales and earnings trend also declined for most ROMI segments but Low Performers suffered the biggest declines.

Low Performer Average Performer High Performer 20092008

15.0%

19.0%

24.0%

8.0%

19.0%

23.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

3YR Average Annual % Earnings Growth

ROMI Performance Segmentation - YOY Earnings Growth Comparison

2009 8.0% 19.0% 23.0%2008 15.0% 19.0% 24.0%


12


Size of marketing budgets: High Performer’s budget remained flat during 2009 while all other segments suffered small to substantial declines.

1.68%

1.93%

2.10%

2.14%

2.97%

2.96%

1.50% 1.70% 1.90% 2.10% 2.30% 2.50% 2.70% 2.90% 3.10%

Percent of Annual Sales Spent on Marketing

Low Performers

Average Performers

High Performers

Size of Budget as a % of Sales

2009 2008

13


54%

23% 23%

31%

9%

60%

22%

8%

69%

0%

10%

20%

30%

40%

50%

60%

70%

Expe

cted

Mar

ketin

g B

udge

t Cha

nge


ROMI Performance Segmentation - Budget Growth Expectations

Stay the SameDecreaseIncrease

Marketing budget growth expectations: High Performers more likely to see increases in their budget for CY 2010.

14


Expected growth in marketing budget in 2010: Low performers will likely experience a small decline while High Performers will likely see modest increase in budget.

-0.5%

2.6%

6.4%

-1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%

Weighted Growth Expectations for the Marketing Budget

Low Performer

Average Performer

High Performer

ROMI Performance Segmentation - % Budget Growth Expectations

15


final creative approval

set up loyalty system

buy media channel

set up personalization system

select target market universe

produce campaign

manage response

launch campaign

execute test & control

Marketing Activities

Prospect Acquire Retain Grow

Marketing Process

Tracking & Measurement

Market Strategy & Planning

Market & Shopper Insights

Campaign Development

Marketing Communications

conduct market research

build database

segment customers

pinpoint top opportunities

integrate data

predict behavior

develop strategy

align timeline with mfg

set budget

define segment strategy

define objectives

define segment objectives

present, review & approve

create sales forecast w/ROI

develop budget & timeline

message, offer and creative

create program brief

design in-store displays

form action plan

develop contact plan

present, review & approve

design test & control

conduct post mortem

analyze campaign results

determine next steps

track program performance

integrate learnings

Resource allocation to core marketing process varies: High Performers invest their budget and resources differently compared to others.

16


Budget allocation to marketing activities: High Performers spend more money on prospecting / acquisition and service than other segments; increased from 2008.

22% 19% 33% 26%

25% 19% 28% 29%

30% 23% 24% 23%

0% 20% 40% 60% 80% 100% 120%

% of Marketing Budget

Low Performer

Average Performer

High Performer

Marketing Budget Allocation to Activities

Prospecting / AcquisitionServiceRetention / LoyaltyGrowth / Cross-sell

17


Budget allocation to marketing process: High Performers spend more of their budget on forming Market Strategy and Planning and Tracking and Measurement. Low Performers spend more on campaign development and marketing communications.

18

15% 13% 25% 37% 10%

18% 16% 22% 30% 15%

16% 19% 20% 29% 16%

0% 20% 40% 60% 80% 100% 120%


Low Performer

Average Performer

High Performer

Market Budget Allocation to Process

Market and Shopper InsightsMarket Strategy and PlanningCampaign DevelopmentMarketing CommunicationsTracking and Measurement


Market and Shopper Insights: High Performers spent more resources integrating data, identifying top opportunities and building database; departure.

Key Points

High Performers

Use their existing assets (data) to drive returns.

Suggests an understanding of the valuation and return of using customer data.

Previous study they invested more heavily in segmenting and predicting behavior; suggests they are leveraging that investment.

Low Performers

Played catch up by investing in segmentation and predicting behavior.

10%

12%

14%

16%

18%

20%

22%

24%

% o

f Mar

ket a

nd S

hopp

er In

sigh

ts B

udge

t

Integrate Data SegmentCustomers

Conduct MarketResearch

PredictBehavior

Identify TopOpportunities

Build Database

Marketing Budget - Market and Shopper Insights - Task Allocation


19

Market Strategy and Planning: High Performers more focused on set their budget and creating sales forecast during the 2009 meltdown.

10%

12%

14%

16%

18%

20%

22%

24%

26%

28%

% o

f Mar

ket S

trate

gy a

nd P

lann

ing

Bud

get

DefineObjectives

Set Budget DevelopMarketingStrategy

DefineSegment

Objectives

AlignTimelinew/Partner

Create SalesForecast

Present,Review and

Approve

Marketing Budget - Market Strategy and Planning - Task Allocation


Key Points

High Performers

Focus on protecting and allocating resources to drive return.

Think like financial managers, which is a consistent theme from past year’s study.

Flexible and adaptable in utilization of resources and strategy to meet objectives.

Low Performers

Heavy focus on re-thinking or adjusting their strategy.

Shift (you can almost see it) to a direct-to-customer orientation.

20


Campaign Development: High Performers continue to focus on contact optimization, test and control, and campaign planning while Low Performers focus on message, offer and creative.

21

Key Points

High Performers

Careful to plan out an efficient contact plan – direct-to consumer.

Will emphasize a test and control approach to marketing efforts.

Review the elements of their plan and get the necessary buy off.

Low Performers

It’s all about the message, offer and creative – very tactical.

5%

10%

15%

20%

25%

30%

% o

f Cam

paig

n D

evel

opm

ent B

udge

t

FormAction Plan

CreateProgram

Brief

DevelopBudget and

Timeline

DevelopContact

Plan

Desing In-store

Displays

Message,Offer and

Create

DesignTest andControl

ReviewCampaign

andApprove

Marketing Budget - Campaign Development - Task Allocation



Marketing Communications: High Performers continue to seek scale for their efforts by being selective in the audience, using loyalty systems, and using test and control strategies to learn. Low Performers primarily focused on media buys, campaign production and execution.

22

0%

5%

10%

15%

20%

25%

% o

f Mar

ketin

g C

omm

unic

atio

ns

Bud

get

Select

Target

Universe

Buy M

edia

Final C

reati

ve A

ppro

val

Produc

e Cam

paign

Set-up

Perso

naliza

tion S

ystem

Set-up

Loyalty

Sys

tem

Execu

te Tes

t and

Con

trol

Laun

ch C

ampa

ign

Manag

e resp

onse

Marketing Budget - Marketing Communications - Task Allocation


Key Points High Performers

Selective with who they target their marketing efforts to.

Leverage systems and technology to build engagement and retention.

Buy media but target their buys as narrowly as possible.

Low Performers

Focus is on media buys, campaign production and launch – “got to be doing something.”


Tracking and Measurement: Low Performers more likely to focus on tracking and analysis while High Performers focus more on interpreting results.

0%

5%

10%

15%

20%

25%

30%

% o

f Tra

ckin

g an

d M

easu

rem

ent B

udge

t

Track ProgramPerformance

Analyze CampaignResults

Conduct PostMortem

IntegrateLearnings

Determine NextSteps

Marketing Budget - Tracking and Measurement - Task Allocation


Key Points

High Performers

Spend more on tracking and measurement.

Balance their analysis across all of the critical tasks.

Spend the time to determine what worked and what didn’t work and what to do next.

Low Performers

Much more time on tracking and analyzing campaigns but they don’t appear to use the insights as much.

23


Media Mix: High Performers spend more of their marketing dollars going direct-to consumer whereas Low Performers spend the majority of their marketing dollars in mass marketing or in-store efforts.

24

Direct30%

Digital Advertising

7%

Print25%

Radio6%

TV / Cable11%

In-store19%

Other2%

Direct30%

Digital Advertising

15%

Print18%

Radio4%

TV / Cable13%

In-store16%

Other5%

Direct39%

Digital Advertising

14%

Print14%

Radio5%

In-store8%

Other3%

TV / Cable 17%

Low Performer Budget Allocation By Channel

Average Performer Budget Allocation By Channel

High Performer Budget Allocation By Channel


No. Marketing Tasks Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6 Factor 7 Factor 8 Factor 9 Factor 101 Select Target Universe -0.8912 Present, Review & Approve -0.8343 Analyze Campaign Results -0.7854 Create Sales Forecast w/ROI -0.7835 Design Test & Control Groups -0.756 Review Campaign, Approve & Set Timeline -0.5577 Develop Contact Optimization Plan 0.8748 Predict Behavior 0.8359 Set-up Loyalty System 0.81310 Executve Test & Control 0.79711 Define Marketing Objectives 0.75212 Produce Campaign -0.53613 Create Program Brief 0.51214 Develop Budget & Timeline 0.46315 Launch Campaign -0.45416 Final Creative & Offer Approval 0.88117 Integrate Customer Data 0.63218 Buy Media -0.54719 Determine Next Steps 0.50020 Set Budget & Co-ordinate w/Dept 0.74821 Develop Marketing Strategy -0.70822 Track Program Performance 0.59423 Manage Response 0.86424 Set-up Personalization System 0.59425 Conduct Market Research -0.87926 Build Database 0.58327 Design Message, Offer & Creative -0.50128 Identify Top Opportunities 0.87429 Define Segment Objectives 0.49730 Form Action Plan to Support Dept. 0.83431 Conduct Post Mortem -0.44432 Segment Customers 0.87733 Align Timeline w/MFG34 Archive Results35 Design In-store Displays

Rotated Component Matrix

The key factors that drive results of High Performers: Leveraged data reduction, factor analysis, to churn through responses to identify the top factors of high performers.

Example: Avoid over analyzing and planning

25


The key factors that drive results of High Performers: Leveraged data reduction, factor analysis, to churn through responses to identify the top factors of high performers.

1. Avoid over analyzing and planning

2. Seek scale

3. Set objectives and measure

4. Personalize marketing messages

5. Manage budgets like investments

6. Focus on effectively managing customer interactions

7. Trust behavior from transaction experience, less so on the research

8. Target individuals

9. Define plans to provide support to partner functions

10. Segment customers

26


RECOMMENDATIONS

27

Employ the key factors of High Performers Help your people change. Use the 10 factors as new principles for managing the marketing efforts of your company.

1. Avoid over analyzing and planning

2. Seek scale

3. Set objectives and measure

4. Personalize marketing messages

5. Manage budgets like investments

6. Focus on effectively managing customer interactions

7. Trust behavior from transaction experience, less so on the research

8. Target individuals

9. Define plans to provide support to partner functions

10. Segment customers

28


Manage the customer life-cycle: Don’t under prospect and over retain or vice versa.

Prospect Acquire Retain Grow

ROMI Scale

Cumulative sales $ per customer segment

Average marketing $ spent for each $ generated per customer segment

$ £

¥ €

22% 19% 33% 26%

25% 19% 28% 29%

30% 23% 24% 23%

0% 20% 40% 60% 80% 100% 120%


Low Performer

Average Performer

High Performer

Marketing Budget Allocation to Activities

Prospecting / Acquisition Service Retention / Loyalty Growth / Cross-sell

29


Define and manage your marketing process: Think Six Sigma Marketing; leverage process to produce outcomes.

15% 13% 25% 37% 10%

18% 16% 22% 30% 15%

16% 19% 20% 29% 16%

0% 20% 40% 60% 80% 100% 120%


Low Performer

Average Performer

High Performer

Market Budget Allocation to Process

Market and Shopper Insights Market Strategy and Planning Campaign Development

Marketing Communications Tracking and Measurement

Key Points

• Think of marketing as a process that can be designed to produce superior outcomes.

• Define and balance your marketing process like High Performers.

• Develop a strategy with defined metrics and track results.

• Avoid the tendency to jump straight to campaign development and execution.

30


Seek scale in your marketing tasks: Focus on things that will drive higher ROMI multiples. Avoid unnecessary strategy and planning; opt for more test and learn.

High Performers Task Allocation

Key Points

• Not all marketing tasks yield the same kind of return for the time and resource investment.

• Focus your time, resource and attention on tasks that lead to higher scale in returns (e.g. build a database, develop an efficient contact plan).

• Be careful of marketing tasks that have the potential to be counter productive if done in excess.

31


Re-balance media to direct, addressable options: Greater returns, more predictable cause and effect.

Direct39%

Digital Advertising14%

Print14%

Radio5%

TV / Cable17%

In-store8%

Other3%

High Performer Media Mix Key Points

• High Performers are more likely to channel their media mix to direct, addressable channels.

• Direct, addressable channels can demonstrate a return and that attracts the High Performer.

• Do not abandon mass media but rather narrowcast your message as much as possible.

32


Beware of the Detrimental Marketing Archetypes: As we analyzed Low Performers we started to see hints of detrimental marketing archetypes lurking, some of which you may have run into in your career. These archetypes are things to avoid.

33

The Campaigner

“People, let’s get one more campaign out the door – let’s win one for the Gipper - that’ll fix it.”

The Gambler

“I’ll bet they buy more If we give this stuff away for free.”

The Big Idea Guy

“I’ve got a great idea. Let’s use a MONKEY in our promotion! Guys love animal humor. I know I do.”

The Artist

“I can’t be bothered with results. I’m trying to change the world here… Duh!”

The Adman

“We need more advertising. Let’s use stupid pet tricks to get people to LAUGH. That will drive sales.”


the key to scaling marketing returns 30 x k. chettayar

Documents