© 2009 Lenskold Group. All rights reserved.
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March 12, 2010
44th CMAG Meeting
How to Deliver Insights that Deliver ROI
© 2009 Lenskold Group. All rights reserved.
Lenskold Group Overview
Lenskold Group founded in 1997
“Marketing ROI” book named one of the 5 most influential marketing books of 2004
Marketing profitability management
• ROI Framework
• Measurement & Analysis
• ROI Tools & Dashboards
• Workshops & Training
Global 1000 and emerging corporate clients
Workshops conducted in 9 countries with 1,500+ marketers
Leading marketing ROI innovator
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Partial Client List
© 2009 Lenskold Group. All rights reserved.
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Agenda
© 2009 Lenskold Group. All rights reserved.
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Agenda
© 2009 Lenskold Group. All rights reserved.
Market Intelligence & Research ROI
Why invest in intelligence & research?
Where is the “return” from that investment that delivers and improves ROI?
Should MI be required to generate an ROI?
Insights are critical to guide marketing effectiveness and profitable performance
Insights are applied to improve performance and profitability
Absolutely.
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Net Profit (Gross Margin – Marketing Invt)ROI = -------------------------- = ------------------------------- Marketing Invt Marketing Investment
© 2009 Lenskold Group. All rights reserved.
Challenges & Opportunities for MI-ROI
Challenges
Intelligence and research are delivered to decision-makers who may or may not take action on the insights
Marketing complexity often leads to uncertainly in interpreting insights
Measurement objectives are not well defined by “clients”
Profit drivers critical for ROI are often neglected
Opportunities
Identify and present ROI potential with reliable ROI framework
Align insights to a common customer funnel
Guide decision-makers on defining measurement objectives that are strategic and actionable
Use ROI to build and maintain executive support
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© 2009 Lenskold Group. All rights reserved.
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Goal is Performance & Profitability
Σ Profits – InvestmentROI = ------------------------------ Marketing Investment
Unaware Prospects
Profitable Sales
Unaware Prospects
Profitable Sales
1,000
150
10
2
Base Campaign & Ad Increment Split
0
50
100
150
200
250
300
1 2 3 4 5 6 7 8 9
AdIncrementalImpactBaseCampaignImpactControlMarketBaseline
Enhanced Incremental ImpactBase Campaign ImpactControl
Base Campaign vs. Enhanced Base Campaign & Ad Increment Split
0
50
100
150
200
250
300
1 2 3 4 5 6 7 8 9
AdIncrementalImpactBaseCampaignImpactControlMarketBaseline
Enhanced Incremental ImpactBase Campaign ImpactControl
Base Campaign vs. Enhanced
Baseline
Base Campaign & Ad Increment Split
0
50
100
150
200
250
300
1 2 3 4 5 6 7 8 9
AdIncrementalImpactBaseCampaignImpactControlMarketBaseline
Enhanced Incremental ImpactBase Campaign ImpactControl
Base Campaign vs. Enhanced Base Campaign & Ad Increment Split
0
50
100
150
200
250
300
1 2 3 4 5 6 7 8 9
AdIncrementalImpactBaseCampaignImpactControlMarketBaseline
Enhanced Incremental ImpactBase Campaign ImpactControl
Base Campaign vs. Enhanced
Baseline
Sal
es $
Sal
es $
-
20,000
40,000
60,000
80,000
100,000
120,000
Jan
Mar
May Ju
lSep Nov Ja
nM
arM
ay Jul
Sep Nov
Promotion Periods
-
20,000
40,000
60,000
80,000
100,000
120,000
Jan
Mar
May Ju
lSep Nov Ja
nM
arM
ay Jul
Sep Nov
Promotion Periods
Marketing Strategy & Position
Measurements & Metrics Tracking
FinancialAssessment
Decision &Mgmt Tools
Marketing Performance
Customer & SalesAnalytics
© 2009 Lenskold Group. All rights reserved.
Target Media Offers Message
Revenue Less CGS/Expenses Less Incremental Expenses
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Customer Behavior / Response
Sales Activity
Funnel Progression• Perceptions/Attitudes• Actions/Response
Customer Base/Activity Transaction Volume Transaction Size/Mix
Contact-to-Impact Provides Strategic Insight
Marketing Strategy& Execution
Financial Contribution
Budget
Profit
ROIROI
© 2009 Lenskold Group. All rights reserved.
Traditional Metrics - Incomplete
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Campaign A Campaign B
Marketing Budget Brand Aware 80% 40%
$200,000 Response Rate 8% 4%
Leads 8,000 4,000
Cost Per Lead $25 $50
Target Sales Conversion Rate 25% 40%
100,000 Net Sales 2,000 1,600
Cost Per Sale $100 $125
Profit Per Sale $150 $200
Total Profit $300,000 $320,000
Campaign A Campaign B
Marketing Budget Brand Aware 80% 40%
$200,000 Response Rate 8% 4%
Leads 8,000 4,000
Cost Per Lead $25 $50
Target Sales Conversion Rate 25% 40%
100,000 Net Sales 2,000 1,600
Cost Per Sale $100 $125
Profit Per Sale $150 $200
Total Profit $300,000 $320,000
ROI 50% 60%
© 2009 Lenskold Group. All rights reserved.
Users See Only Two Types of Insights
Marketing ROI is an improvement process, not a pass/fail evaluation
GOOD NEWS
OR BAD NEWS
Intelligence is…
Filtered
Cherry-picked
Sugar-coated
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© 2009 Lenskold Group. All rights reserved.
Insights Drive ROI Improvements
What is not working & why
• A good marketer will take actions to improve strategies
Customer behavior & influence on key profit drivers
• Customer value
• Funnel leakage
Impact of non-controllable factors
• Competitive and market condition influence
Evaluation or assessment of alternatives
• Drive ROI with better marketing effectiveness
• Greater success potential to improve, not replace
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© 2009 Lenskold Group. All rights reserved.
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Agenda
© 2009 Lenskold Group. All rights reserved.
ROI Management Process
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Strategy Tactical Plan
Measurement Plan Measurements
Impact & Contribution
ROI Scenarios
ROI Measurement
Supporting Insights
Test Variations in PlanTest Variations in Plan
Objectives
Best Assumptions
History to guide future campaigns
© 2009 Lenskold Group. All rights reserved.
Quantify ROI Potential & Outcomes
Campaign inputs:
Marketing budget
Cost of marketing staff
Assumed impact on sales
• Option to detail “funnel”
Sales-driven costs (offers, incentives, discounts, etc.)
Target profile
Financial inputs :
Average revenue per sale based on target profile and products
Gross margin %
Outputs:
Incremental sales, revenues, and profit
Return on Investment (ROI)
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Net Profit (Gross Margin – Marketing Invt)ROI = -------------------------- = ------------------------------- Marketing Invt Marketing Investment
“Gross Margin” equals the Discounted Cash Flow (Net Present Value) of incremental profits and costs that result specifically from the corresponding marketing investment
© 2009 Lenskold Group. All rights reserved.
Marketing Expenses (excluding offer costs)Campaign Development $15,000Mass Media Advertising $25,000Direct Mail & Mailing Services $6,000E-mail Marketing $0Events & Trade Shows $0Sponsorships $0Trade Promotion / Channel Marketing $0Social Media $0Other $0Other $0Other $0Marketing Budget $46,000
Know ROI Scenarios to Prioritize Insights
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Marketing Staff ExpenseDaily Rate # of Days
Staff Level 1 $250 10.00Staff Level 2 $450 3.00Staff Level 3 $600 0.50Marketing Staff Expense $4,150
TOTAL MARKETING INVESTMENT $50,150
Marketing Impact % Progression Quantity Target Reached 12,000
Funnel Stage 1 100% 12,000Funnel Stage 2 100% 12,000Funnel Stage 3 100% 12,000Funnel Stage 4 100% 12,000Funnel Stage 5 100% 12,000
Incremental Sales or Customers 0.50% 60
Marketing Impact % Progression Quantity Target Reached 12,000
Register for Event 15.0% 1,800Attend Event 64.0% 1,152Accept Sales Contact 8.0% 92inactive 100.0% 92inactive 100.0% 92
Incremental Sales or Customers 65.0% 60
Average Revenue per Sale or Customer $2,400Incremental Revenue $143,770
Average Gross Margin % 37.5%Profit from Incremental Sales $53,914
INCREMENTAL GROSS MARGIN $53,914
Gross Margin - Marketing Investment = RETURN (i.e., NET PROFIT) $3,764
Return / Marketing Investment = ROI 7.5%
© 2009 Lenskold Group. All rights reserved.
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Align Insights to Customer Buying Funnel
Profitable Sales
1,000
150
10
2
Brand/Awareness
Demand Generation
Sales Conversion
Customer Experience
Retention & Cross-Sell
Revenue Incremental Sales Impact
Profit Contribution & ROI
Funnel Progression
Strategies & TacticsUnaware Prospects
© 2009 Lenskold Group. All rights reserved.
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Understand Funnel Leakage
Adapted from “The Leaky Funnel” by Hugh Macfarlane (www.leakyfunnel.com)
Wrong Target
Not Yet Won
Efficiency Effectiveness Profitable Sales
Unaware Prospects
1,000
150
10
2
© 2009 Lenskold Group. All rights reserved.
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Biggest Wins for ROI Improvement
Initial Prospects
Closed Sales
2. Improve conversion later
in the funnel
Closing sales
Customer retention/growth
© 2009 Lenskold Group. All rights reserved.
Framework Provides Perspective for Insights
ROI scenarios show required outcomes
Customer purchase funnel provides a consistent view of diverse insights
Leakage points and leakage reasons can be quantified financially
Diagnostic measures provide deeper insights
• Funnel perspective
• Segment performance (existing segments or derived from behaviors)
• Gaps in marketing and sales alignment
• Insight into customer behaviors goes beyond data points
• Influence of market conditions provides proper adjustments
• Feedback loop from sales to marketing supports better alignment
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© 2009 Lenskold Group. All rights reserved.
Agenda
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© 2009 Lenskold Group. All rights reserved.
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Base Campaign & Ad Increment Split
0
50
100
150
200
250
300
1 2 3 4 5 6 7 8 9
AdIncrementalImpactBaseCampaignImpactControlMarketBaseline
Enhanced Incremental ImpactBase Campaign ImpactControl
Base Campaign vs. Enhanced Base Campaign & Ad Increment Split
0
50
100
150
200
250
300
1 2 3 4 5 6 7 8 9
AdIncrementalImpactBaseCampaignImpactControlMarketBaseline
Enhanced Incremental ImpactBase Campaign ImpactControl
Base Campaign vs. Enhanced
Baseline
Measure Marketing Effectiveness
1. Incremental Contribution• Modeling• Market Testing• Pre-Post Trending • Quantitative Research
12. Diagnostics• Data Mining• Funnel Analysis • Linkage Analysis• Segmentation Analysis
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3. Predictive (in Long-Term)• Planning Tools • Modeling• Forecasting
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© 2009 Lenskold Group. All rights reserved.
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Average per Week -
Baseline
Average per Week -
Campaign
Projected Baseline
Total
Campaign Total
Total Incremental
Total Revenue $121,043 $137,849 $150,422 $147,828 $159,264 $172,543 $166,020 $149,215 $139,286 $161,761 $557,142 $647,042 $89,900
Sales Volume 151 172 188 185 199 216 208 187 174 202 696 809 112
CampaignPre-Campaign
Pre-Post Analysis – Basic Campaign Example
Track value and behaviors prior to marketing treatment to establish baseline for comparison to campaign period results
High risk of outside influence (non-marketing) on sales levels decreases the validity of results analysis
Sales Revenue
$0
$20,000$40,000
$60,000
$80,000$100,000
$120,000
$140,000
$160,000$180,000
$200,000
Pre Week 1 Pre Week 2 Pre Week 3 Pre Week 4 CampaignWeek 1
CampaignWeek 2
CampaignWeek 3
CampaignWeek 4
Actual Revenue
Campaign Revenue
Projected Baseline
© 2009 Lenskold Group. All rights reserved.
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Tactic 1Offer 1
Sales Channel
Tactic 1Offer 1
Sales Channel
Market Testing – Basic Campaign Example
Experimental design
• “Test” group with marketing treatment compared to control group without treatment
• Isolates impact of selected treatment
• Comparisons can go deeper than sales and revenue lift to include customer value and funnel progression to assess lead quality
Different marketing treatment to comparable portion of target audience
Test Group “Control” Group
Plus Tactic 2
RESULTS Test GroupControl Group
Tactic 2 Incremental
Audience Reached
20,000 20,000 0
Marketing Responses
7,117 6,686 431
New Sales 809 696 112New Revenue $647,042 $557,142 $89,900
© 2009 Lenskold Group. All rights reserved.
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Marketing Mix Modeling
0
50
100
150
200
250
300
350
400
1/1
/1999
1/8
/1999
1/1
5/1
999
1/2
2/1
999
1/2
9/1
999
2/5
/1999
2/1
2/1
999
2/1
9/1
999
2/2
6/1
999
3/5
/1999
3/1
2/1
999
3/1
9/1
999
3/2
6/1
999
4/2
/1999
4/9
/1999
4/1
6/1
999
4/2
3/1
999
4/3
0/1
999
5/7
/1999
5/1
4/1
999
5/2
1/1
999
5/2
8/1
999
6/4
/1999
6/1
1/1
999
6/1
8/1
999
6/2
5/1
999
7/2
/1999
0
50
100
150
200
250
300
350
400
1/1
/1999
1/8
/1999
1/1
5/1
999
1/2
2/1
999
1/2
9/1
999
2/5
/1999
2/1
2/1
999
2/1
9/1
999
2/2
6/1
999
3/5
/1999
3/1
2/1
999
3/1
9/1
999
3/2
6/1
999
4/2
/1999
4/9
/1999
4/1
6/1
999
4/2
3/1
999
4/3
0/1
999
5/7
/1999
5/1
4/1
999
5/2
1/1
999
5/2
8/1
999
6/4
/1999
6/1
1/1
999
6/1
8/1
999
6/2
5/1
999
7/2
/1999
Base/Seasonal AdvertisingTrade Promotion Consumer Promotion
Modeling correlates marketing activity with sales activity
Look for correlations to customer behavior where data is available
© 2009 Lenskold Group. All rights reserved.
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Marketing Mix Model Conclusions
Historical
GRP and Carry-over Effect Index
Total Carry-Over Current
TV Brand
TV Promo
NP GRP
RD GRP0
50
100
150
200
250
300
Wee
k39
Wee
k40
Wee
k41
Wee
k42
Wee
k43
Wee
k44
Wee
k45
Wee
k46
Wee
k47
Wee
k48
Wee
k49
Wee
k50
Wee
k51
Wee
k52
Wee
k1
Wee
k2
Wee
k3
Wee
k4
Wee
k5
Optimized
GRP and Carry-over Effect Index
0
50
100
150
200
250
300
Wee
k39
Wee
k40
Wee
k41
Wee
k42
Wee
k43
Wee
k44
Wee
k45
Wee
k46
Wee
k47
Wee
k48
Wee
k49
Wee
k50
Wee
k51
Wee
k52
Wee
k1
Wee
k2
Wee
k3
Wee
k4
Wee
k5
Total Carry-Over Revised
TV Brand Revised
TV Promo Revised
NP GRP Revised
Same Budget
4.5% lift in Sales
Same Budget
4.5% lift in Sales
Results optimized with broadcast budget held constant
Courtesy of Interlocking Analytics
© 2009 Lenskold Group. All rights reserved.
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The measurement plan must build more and more insight over time
Integrated Measurement Plans
The best measurement plans are:
Intentional measurements planned in advance
Diverse methodologies integrated for maximum insight
Designed to work together to deepen and build knowledge
Prioritized based on profit opportunity, benefit, and cost
Aligned to the ROI framework for consistent interpretation
Measurement Plan (example)
Marketing Mix Modeling
Market Test
Segment-Level Analysis
Customer Value Research
1Qtr 2Qtr 3Qtr 4Qtr
Sales Tracking Sales Tracking Sales Tracking Sales Tracking
© 2009 Lenskold Group. All rights reserved.
What about Brand?
Does brand awareness count?
Is advertising recall important?
What about the contribution to long term brand?
Where does customer experience research fit in?
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© 2009 Lenskold Group. All rights reserved.
Brand & “Intangibles”
1. Influence customers throughout the buying cycle today
• Incremental sales, leads, engagement and/or intentions
• Assess incremental contribution
2. Influence top of the funnel metrics to condition the market for demand generation and sales contacts
• Lift in effectiveness of next tactics
• Assess integrated campaigns
3. Invest in re-positioning of key attributes with high influence on purchase decisions
• Change in competitive position
• Commitment for long-term
• Should have lasting impact (brand promise plus brand experience)
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Perceived Competitive Position
© 2009 Lenskold Group. All rights reserved.
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Brand Attribute PositionB
rand
Influ
en
ce o
n S
ale
s
Perceived Competitive Position
*High Performance*Inventory
Available
*Active Supporter of Community
*Secure
*Responsive Support
* Variety of Models
*Durable
*Price-Value
*Quality Resellers
Example: Equipment Manufacturer
© 2009 Lenskold Group. All rights reserved.
Funnel Perspectives
Company view of the funnel shows how measurements align to marketing decisions and implementation effectiveness.
This view is used to guide measurement objectives and select methodologies.
The buyer’s view of the funnel shows how measurements capture insight into purchase behaviors and leakage points.
This view guides the measurement direction to generate insights tied to behaviors that are valuable for developing new strategies.
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Brand Perceptions
Product Purchase Intention
Brand Awareness & Consideration
Consumer Actions
Retail Experience
Purchase Decisions
Halo Purchases
Company Funnel
No Need
Aware Value Prop
Interest
Consider BRAND
Need to Purchase
Prefer BRAND
Research Options
Prefer BRAND
Identify Solution
Visit Retailer
Purchase
Prefer BRAND
Buyers’ Funnel
© 2009 Lenskold Group. All rights reserved.
Example of Measurement Coverage
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No Need
Aware Value Prop
Interest
Consider BRAND
Need to Purchase
Prefer BRAND
Research Options
Prefer BRAND
Identify Solution
Visit Retailer
Purchase
Prefer BRAND
Buyers’ Funnel
Ad Tracker Survey Web
Visitor Intercept Survey
Store Intercepts
Survey
Market Testing
Sales Tracking
Modeling
Website Tracking
Sales Associate Research
© 2009 Lenskold Group. All rights reserved.
Agenda
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© 2009 Lenskold Group. All rights reserved.
Managing Marketing Insights
Better objectives for marketing decision-makers
• Quantify expected outcomes
• Probe on decisions & options for alternatives
Integrate customer funnel into intelligence initiatives
• Identify leakage points
• Uncover leakage drivers
• Present insight into behaviors
Concentrate on high value and high potential segments
• Better vs. bigger
Quantify ROI scenarios and run ROI analyses to motivate actions
• Profit potential also justifies investment into marketing intelligence
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Calculator for ROI on Insights
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© 2009 Lenskold Group. All rights reserved.
Calculator for ROI on Insights
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© 2009 Lenskold Group. All rights reserved.
Role of Marketing Intelligence Teams
Marketing ROI process
• Based on bringing new insights into strategic and tactical planning
Marketers need clarity in guiding intelligence
• Strategic plans with clear path to end goals
• Measurement objectives should tie to decisions
• Know profit drivers
Align diverse sources of intelligence for consistent and cohesive guidance
Prioritize and integrate measurements
• Maximum influence
• Strategic and tactical support
Present ROI and profit potential with intelligence
Assess and track the actions taken on insight
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© 2009 Lenskold Group. All rights reserved.
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CONTACT INFORMATION
Jim LenskoldLenskold Group2517 Highway 35Building N, Suite 202Manasquan, NJ 08736
Phone: 732-223-8886E-mail: [email protected]
Lenskold Group Advantages
Lenskold Group offers an unsurpassed depth of capabilities in marketing ROI processes and measurements. We deliver practical, actionable solutions that truly generate profit improvements.
We are a best fit for companies that:• Require financial integrity to earn credibility outside of marketing• Want decision tools that leverage insight from multiple measurement sources instead of single-methodology solutions• Have a marketing organization committed to profit improvements• Prefer a customized solution over a one-size-fits-all approach• Need a marketer-friendly approach• Value a transition plan designed specifically to their culture and skills• Want analysis and intelligence that can create a clear competitive advantage