Return On Corona

November 18, 2010 By Rick Shea Leave a Comment

My friend Dan was in town recently.  Our friendship goes back to our university days at McGill, which is another way of saying we’ve known each other for a very long time.  Of course, we’ve both aged quite gracefully.  We get together when we can, and when Dan had to be in town for meetings a couple of weeks ago, we made plans for Saturday night.

Dan and I decided to get caught up while watching a rare live performance of their Paul McCartney tribute called ‘Getting Better’ by my musician friends, The Weber Brothers.  The guys delivered a great performance, as always, with a set list that included ‘Yesterday’, ‘Let It Be’ and ‘Maybe I’m Amazed‘.  I was also thankful that Ryan and Sam Weber chose not to perform ‘Silly Love Songs’.

Whenever we get together, Dan and I usually pass some of our time updating each other on our business endeavours.  I always enjoy hearing Dan’s perspective and he usually asks great questions that help me to focus on the right issues.

As we discussed my marketing measurement work, Dan questioned whether I measure Return On Investment (ROI), which is a natural question and one I’m commonly asked.  My answer went something like this.

As we sat at the bar, I looked down at the clear glass bottle in my right hand.  I said, “Let’s use my Corona as an example.  I don’t remember what marketing program caused me to try it years ago for the first time, I can’t tell you why it’s among the half dozen or so brands that I tend to order, and I don’t know what caused me to order it tonight.”

Corona

Let’s suppose Molson-Coors made $0.50 profit on the sale of my one bottle.  To calculate the ROI on their marketing for this transaction, they’d have to understand which marketing investments influenced my buying decision, and by how much.  Here are some thoughts on their marketing programs that I can recall:

  • I know I like watching their commercials
  • I’m sure I’ve seen several print ads, and the image of their clear glass bottle sparkling in the sun and a wedge of lime lingers in my mind
  • Not too long ago, I noticed a contest to win a bar fridge
  • I remember a great poolside bar promotion while vacationing at an all-inclusive a few years back that likely still influences my purchases.

Those are the ones I can recall, but I’m sure there are others I don’t remember that have influenced me.  Here’s where calculating ROI gets more complicated.

  • I have no idea which of these marketing investments influenced me most, or least, nor how much of the $0.50 profit to attribute to each.
  • I can’t begin to consider how to account for the combined impact of all those marketing investments that somehow accumulate within me over the years to influence my buying decisions.

The key point is, if I can’t do the profit allocation for my own buying decision, even if Molson-Coors could somehow get inside my head and have a good look around (it wouldn’t take long…) they wouldn’t figure it out either. To further complicate things, all their other customers each have their own influences and reasons for buying.

We humans each make our own very complex buying decisions, often influenced by factors outside the marketers’ control, in ways we may not consciously understand.  It’s extremely difficult and costly to isolate all the variables involved to truly and accurately measure financial return on investment of marketing spending. We end up having to make too many assumptions, or guesses at allocations.

However, this doesn’t mean we shouldn’t measure something.  Instead of ROI, I focus on measuring how effective marketing is at meeting objectives, using metrics that involve as few assumptions as possible.  Here are a few thoughts on metrics:

  • Rather than trying to focus on one killer metric, like ROI, select a group of metrics that together give you a balanced view of whether a specific marketing program drove value in your business.
  • Assemble your various metrics in a scorecard that allows you to evaluate each metric against its objectives.
  • Decide which metrics you want to use before you launch your marketing program in case you need to gather data while the program is in market.
  • Just because I’m letting you off the hook on measuring ROI, it doesn’t mean you should ignore financial metrics.  Your scorecard should definitely include financial metrics, such as revenue, and average transaction value, which tends to be a good indicator of profit.

I’m not comfortable making decisions or recommendations supported by numbers that are based on a lot of assumptions or guesses.  Build your marketing measurement process on as many facts and clean data as you can find.

Oh, and one more thought.  My Return On Corona (ROC) a couple of Saturdays ago was exceptional, given my objectives to hang out with a great friend and to be entertained by talented musicians!

Filed Under: Approach, Metrics Tagged With: Effectiveness, marketing, measuring, return on investment, ROI, scorecard

Marketing Measurement and Unarmed Battles

October 21, 2010 By Rick Shea Leave a Comment

This month’s blog post talks about the importance of making sure your marketing measurement process gives you the data you need to compete for money at the budget table.

I don’t know about you but I seem to be in front of my computer screen more often than I’d like.  Unlike my three nephews, who would do almost anything to get more screen time, I’m usually looking for ways to get less.

One way I reduce my screen time is to invite a colleague out for a coffee, or lunch.  I think there’s no substitute for a face to face discussion, and I’m also happy to disconnect electronically for a while, even if the freedom is fleeting.

Over Thanksgiving weekend, when my need to disconnect aligned nicely with a spectacular autumn afternoon, I chose another strategy.  I put on my hiking boots, grabbed my camera and drove off in search of fresh air, nature and autumn colours.

Escarpment Trail - Crawford Lake

I decided to walk in the conservation area around Crawford Lake, a rare meromictic lake atop the Niagara Escarpment.  Some of the hiking trails intersect with the Bruce Trail and while I didn’t take many photos, I enjoyed the hiking and the fresh air.

As I hiked along, taking in the fresh air and fall aromas, aside from wondering what the hell a meromictic lake is, I thought about how the fall can mean different things to different people.  For kids and parents, fall can be about back to school time.  For sports junkies, fall is the time when all the major sports are in full swing.  For many in business, fall is the time for strategic planning and budgeting for the coming year.

Marketers have an important seat at the budget table, as the company looks to marketing (and sales) for revenue projections.  In addition, marketing must also battle for its share of the expense budget in order to run the right programs to help meet those revenue projections.  Everyone at the budget table understands this and will ask marketing “If we give you the money you say you need, what are you going to do with it and what will the company get in return for that expense?”

This is where the discussions get interesting.  The planning and budgeting process is a negotiation over limited funds.  The battles can be won with data, or lost due to a lack thereof. Consider the battle between operations and marketing.

The head of operations might ask for a million dollars to improve operational efficiencies and supports this request with data that shows by what percentage this will reduce operating costs and how quickly  the resulting profit increase will recover the million.  Everyone at the table can easily grasp the concept, do the math and approve that expense.

When marketing gets its turn in the hot seat, fighting for its million, it needs to be able to talk about more than new customer insights or breakthrough marketing programs.  These things help, but marketing needs data.

Marketing measurement is at least part of the answer.  If you don’t already have a marketing measurement process in place, it may be too late to arm yourself with data for this year’s budget meetings.  However, it’s a great time to add creating a measurement process to your strategic plan so you can start collecting data. These are some of the elements you’ll need to consider.

  • Don’t bite off more than you can chew. While it would be great if you could accurately quantity Return On Investment for each marketing program, that very complex and costly undertaking is best left for the most sophisticated marketing driven organizations, with big budgets and tons of data.  Focus instead on creating a measurement process that identifies the most effective ways to market to your customers.
  • Set clear and measurable objectives. In the planning process, hold each marketing program up to a simple test.  Ask “How will we know we have succeeded, and what business outcomes would make us happy?”  If you don’t have good answers to those questions, maybe those programs don’t belong in your strategic plan.
  • Create a measurement process you can execute consistently. I create a standard scorecard to measure every type of marketing program.  A standardized scoring method gives you a way to rate and rank all your marketing programs according to how well they each met their objectives.
  • Involve the right people, get them on side. For your process to really work, it needs to be embraced organizationally, especially by those who sit around the budget table.  If they had a hand in designing your measurement process, selecting metrics or providing data, then it’s more likely that they’ll believe your data when you’re asking for money.
  • The most important thing is to start. Marketing measurement is a journey, but if you don’t get started, you won’t get very far.  You’ll make mistakes along the way, but you will also learn things that help you to make better strategic decisions.

The deep waters of measurement can be murky, much like those of some meromictic lakes, but with a little effort you can get some clarity.  In a world where everyone’s got data to support their position, marketing needs to go to the table with marketing effectiveness data, otherwise it can be like going into battle unarmed.


Filed Under: Approach, Effectiveness

A Belt of Measurement

September 16, 2010 By Rick Shea Leave a Comment

This month’s blog post talks about how the main purpose of measurement is to help you to make better decisions.

I’m looking forward to November.  I know that must seem odd.  I’m looking forward to one of the bleakest and greyest months of the year.  I do have a reason.  Here’s why.

I’ve just scheduled my annual medical check-up for November 29th.  I’m healthy, and for most of my life I’ve been pretty slim, but somewhere along the way I started gaining a pound or two a year.  When I think back to my check-up three years ago, I weighed about 15 pounds more than I do today.  I suppose it was due to some combination of too many business trips, lunches and dinners, and too little exercise.  However it happened, when I walked into my doctor’s office that blustery November morning three years ago, I knew I was in trouble.

After exchanging our usual pleasantries and golfing stories, I stepped onto my doctor’s scale and weighed in at 184, which is a bit heavy for my height of just under 5’10”.  I was actually down a few pounds from my peak earlier in the year, yet that was still a new personal high on my doctor’s charts.  Ordinarily, I like setting new records, but not that time.

I went to my gym that same week and on their scale, I weighed 186.  On my scale at home I registered a more favourable 182.  So, to the question “How much does Rick weigh?”, I had three different answers.

I suppose I could have figured out the right answer by spending a few thousand dollars on an extraordinarily accurate industrial scale.  Then, I would have known my exact weight to the fourth decimal place, but that raises an important question.  Would that extra expense and extra precision about my weight have enabled me to make a better decision?

The decision I made was to seek out a nutritionist and to get to the gym more often.  Knowing that I weighed exactly 183.7428 pounds, or whatever it was, would have made no difference whatsoever to my decision.

The truth is, I knew I was in trouble even before I got on my doctor’s scale.  I had a leading indicator called my belt that had been telling me I was over some imaginary line as I couldn’t tighten my belt as much as I used to.  I already had the measurement tool I needed to make the right decision. I didn’t even need a scale.

There are a few lessons in this that apply nicely to marketing measurement:

  • Think of marketing measurement as something that helps you to make better decisions. Before you overspend on sophisticated measurement tools and techniques, ask yourself if the additional expense and precision is likely to help you to make a better decision.  It’s about the decision, not precision.
  • Look for leading indicators that reliably predict a more important number, like the way notches on your belt can indicate a trend in your weight.  For example, in most retail businesses a great leading indicator of profit is the average dollar value of each customer transaction.  Watching that metric will give you a pretty good feel for whether your marketing efforts are contributing to profits by attracting the right kind of customers and incenting the right kind of buying behaviour.
  • The trend in a metric is more important than the number itself. Knowing my exact weight three years ago, or today, is not nearly as important as knowing that I’m down about 10%.  That change in the number tells me my strategy to eat better and get exercise is working, and that I should stick to my strategy.  That’s what you need to know about your marketing; what works and what doesn’t.  Do more of what works and less of what doesn’t.  Those are good decisions.
  • Pick a scale and measure consistently. My doctor’s scale is probably pretty accurate, but it doesn’t really matter.  What matters is that we use the same scale each year and my check-up is in the morning, after fasting all night.  By measuring consistently, the numbers are meaningful.  We can track the changes and know if I’m making good decisions.

I’m looking forward to November 29th because I think I’ve moved the needle in the right direction since last year, at least that’s what my belt is telling me!

Filed Under: Approach

Compared to What?

August 18, 2010 By Rick Shea Leave a Comment

This month’s blog post talks about the challenges of determining which of a variety of marketing programs were most and least effective.

In 2007, I was asked to be a judge for CAPMA’s (Canadian Agencies Practicing Marketing Activation) Promo! Awards, which honour the year’s best marketing activation programs.  I had been involved with CAPMA and the Promo! Awards in previous years, but I hadn’t yet served as a judge.  I happily accepted.

The judging process was thorough and consistent, with very clear criteria for scoring 155 entries over 16 categories.  When judging or evaluating many different programs, it is critical to apply the same consistent process to judging each program.

As you might have guessed, one of the judging criteria was “Results”.  I remember looking at each entry’s results and noticing how everyone seemed to be using different metrics to prove their program was best.  I also remember feeling unsure about how to score my opinion of each entry’s results.

Not surprisingly, some of the results were excellent, such as:

  • Program delivered a 23% conversion rate
  • Downloads increased 1,590% over the previous campaign

I knew these results were good, but how good?  Compared to what?  A 23% conversion rate seems impressive, but what was the average conversion rate of their other programs?  How good is 23%?  How do I score that?  An increase in downloads of 1,590% seems pretty spectacular, I think, unless the previous campaign was a complete disaster.

What’s a better result, impressive or spectacular?  I’d pick spectacular, but I have no idea how to score it relative to impressive.  I know how to score a disaster, but there weren’t any disastrous entries!

I’m being a bit ridiculous to illustrate a point.  We need a way to rate numerical results, especially when comparing different metrics, and words won’t do. We need a way to score them.

The following splendid results were easier to understand as they were better at addressing the “compared to what?” question.

  • Achieved a +6.2% share swing vs. the main competitor
  • Sales increased 24% vs. declining sales for all other competitive brands.

Which of these two results do you think is better, and how would you score them out of 10?  To assign our scores, we judges had to use our judgment, which CAPMA properly directed us to apply consistently according to the criteria they gave us.

With 65 judges involved over two rounds of judging, differences in judgment here and there didn’t matter, especially if we each applied our own judgment consistently.  The process worked, and the cream rose to the top, but not many businesses have big enough marketing budgets to justify using a complex process and 65 judges to evaluate the effectiveness of their marketing spending.  Can your business afford 40 judges?  Maybe 15?  How about 1?

Whether you’re the only judge, or one of many, here are some guidelines to apply to judging your company’s marketing programs:

  1. Develop your own standard way to rate your programs.
  2. Apply your standard consistently to all your programs so you’ll have a meaningful way to compare them to each other.
  3. To address the “Compared to what?” question, focus on your objectives.  Think about what you want to achieve with each program and what kind of outcomes would make you happy.
  4. With your objectives in mind, pick as few or as many metrics as you think are relevant to each program.
  5. Score your results against your objectives.

For financial metrics, your objective can be what you budgeted for during the period your program should influence your customers.  For non-financial metrics, focus on customer behaviour and other business activity that you know is good for your business and leads down the path to profit.

Measuring marketing effectiveness can be complex and challenging, but try to keep it simple.  Focus your scoring on evaluating how effective each program was at meeting its objectives and driving value for the business. If you consistently apply a scoring system that tells you how well each program did at meeting its objectives, then you’ll have a way to compare them to each other.

The next time you’re wondering if your marketing campaign has delivered good results, start by asking “Compared to What?”.

Filed Under: Approach, Metrics
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