Transcript Slide 1

Marketing spend optimization
Driving marketing value
Marketing Executives Council Meeting
March 17, 2009
Agenda
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Introductions
Today’s marketing landscape
Marketing excellence capabilities model
The Marketing Lifecycle
Case study
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Today’s marketing landscape
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Price pressure and margin erosion
Increased scrutiny and accountability on investments
Increasing regulatory barriers to traditional approaches
Expanding number of possible channels
Marketing effectiveness and productivity in decline
Intelligent competition
Price
Newspaper
Radio
Magazine
TV
Marketing
Channels
Out-of-Home
Sponsorship
Direct Mail
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Digital
Marketing excellence capabilities
take time to evolve
Short-term
activities
(Basic)
Mid-term
activities
(Enhanced)
Long-term
activities
(Leading)
• Increase brand awareness
• Measure surrogate markers
• Optimize the marketing mix
• Utilize inexpensive but
efficient marketing tactics
• Track sales to quantify the
impact of marketing initiatives
• Compare the ROI of marketing channels
• Study the market, customer
and competition
• Utilize market research to
understand customer
behavior
High
• Measure the incremental impact each
marketing initiative has on volume sales
• Copy-test a portion of the marketing budget
in non-traditional/innovative media
High
Organizations must utilize solutions that
increase marketing performance through
the enhancement of spend effectiveness
and channel optimization across all phases
of the process: from initial analyses to the
rigorous execution of tactical plans and
monitoring of results.
Long-term
Mid-term
Low
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Short-term
• Understand marketing effectiveness by
channel, geography and customer segment
Low
The Marketing Lifecycle is a process of
continuous improvement
• How does the changing marketing landscape affect
our marketing efforts and decisions?
• What marketing mix best drives incremental sales and
captures the core customer?
• How does new technology affect
the interpretation of our message?
• How do we best integrate
traditional and new media?
• What does our marketing mix look like? What could it
look like? What should it look like?
• Do we have a flexible planning model that allows us to
take advantage of changes in the performance of
campaigns or tactics?
• How can we integrate the most effective
tools to optimally value our customer?
• Are we looking at the right
metrics to evaluate marketing
performance? Are there different
metrics that could better capture
new tendencies?
Marketing
Lifecycle
• What is the contribution,
effectiveness, cost-efficiency,
and payback of each marketing tactic
and program?
• Which core and incremental initiatives
are driving volume and to what
degree?
• What is working, what is not, and why? How does current
performance compare to the norm (or the industry)?
• How can we use marketing mix analysis to optimize our
marketing strategy and dollars?
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• Are we getting the most bang for
our marketing buck?
• Do we have the ability to evaluate
marketing effectiveness rapidly and
make adjustments accordingly?
• Are we in a position to translate effective
marketing initiatives into opportunities?
• Do we have the data and tools to allocate our marketing
spending and evaluate the value of our marketing with
new metrics?
Case study
Business issue
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Ernst & Young was engaged to assist an automotive manufacturer in reviewing
marketing strategies with respect to Brand A®.
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The success and future growth of this brand may rely heavily on the level and
appropriate allocations of marketing spend to the available channels.
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Ernst & Young was tasked with two primary objectives:
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Calculate the impact marketing performance has on Brand A, for all geographic
markets (where statically significant), across all available marketing channels (TV,
radio, internet, among others).
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Calculate an optimized marketing mix based on the information provided by the
Client and deliver the functional form of the model and its outputs to the Client.
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Case study
Business issue (cont.)
A Marketing Spend Effectiveness and Channel Optimization Analysis helps marketers
answer pressing questions concerning their business. Some of the most popular
questions are:
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How important is base (volume generated in the absence of any marketing
activity) and incremental volume to my overall volume?
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What has driven volume changes year to year?
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What was the relative effectiveness of marketing activity year to year?
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How did specific campaigns contribute?
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Which advertising campaigns are most effective?
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What trade tactics should be pursued for greatest effectiveness?
What marketing spending shifts, if any, should be considered?
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Case study
Scope: This analysis utilized the following parameters:
Brand A
Geographic area
Country X (96 Markets)*
Dealership count
175 (2006-2007), 170 (January–August 2008)
Analysis period
January 2006 – August 2008
Marketing channels
National Open TV, National Paid TV, Local Open TV,
Radio, Newspaper, Magazine, Out of Home, Cinema,
Internet, Alternative Events
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* markets with dealerships
Case study
Findings — incremental volume decomposition
• Marketing activity generated roughly 26% of the incremental volume during the analysis
period.
• Open TV, Paid TV, and Newspaper accounted for the majority of incremental volume.
16.4%
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Base
incremental
volume
Marketing
incremental
volume
74%
26%
National Open TV
2.4%
Newspaper
2.3%
National Paid TV
2.2%
Local Open TV
0.9%
Magazine
0.9%
Radio
0.4%
Out of Home
0.2%
Cinema
Case study
Findings (cont.) — marketing efficiency
Open TV generated the highest ROI for Brand A during the analysis period, followed by
Paid TV and Newspaper.
Incremental $ revenue per $ spent
Average ROI*
$40
$35
$30
$25
$20
$15
$10
$5
$0
National
Open TV
Local
Open TV
National
Paid TV
Newspaper
Magazine
Radio
Cinema
Out of Home
* Revenue generated by each marketing channel is based on average dealer price multiplied by volume sales contributions.
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Case study
Findings (cont.) — optimized marketing mix*
• Based on ROI estimates, additional funds to the marketing budget should be allocated across
marketing channels in the following proportions.
• While marketing channels such as Alternate Events and Internet were insignificant in the
statistical model, Client should allocate budget to these activities to maintain brand awareness
and equity.
Radio
Out of Home
6%
Magazine
12%
Cinema
2%
2%
National Open TV
26%
Local Open TV
15%
Newspaper
18%
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* Based on the most recent 12 months of data
National Paid TV
19%
Case study
Findings (cont.) — annual volume topline
Units Sold
The total units sold peaked at the end of each calendar year, even though the average
price was not at its lowest during this period, and dropped during April/May of each year.
30,000
$30,000
25,000
$25,000
20,000
$20,000
15,000
$15,000
10,000
$10,000
5,000
$5,000
Total Units Sold
Average Selling Price
-
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$-
Average Dealer Price
Case study
Findings (cont.) — price elasticity
Brand A® is not price elastic. Changing price alone does not yield significant changes in
unit volume sales. However, price changes coupled with TV or Newspaper campaigns
could generate significant ROIs.
Price elasticity (sensitivity)
-0.964
Most Elastic Markets
Market A
Market B
-0.931
Market C
-0.78
Market D
-0.76
Market E
-0.719
Least Elastic Markets
Overall National Price Elasticity
= -0.395
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Market V
-0.123
-0.089
Market W
-0.043
Market X
-0.038
Market Y
-0.036
Market Z
Case study
Findings (cont.) — annual topline spending
Marketing investments in Paid and Open TV represented 59% of all marketing investments in
2006, 51% in 2007 and 54% until end of August 2008.
$40
Investment Level (MM)
$35
$30
Alternative
Internet
$25
Cinema
Out of Home
$20
Magazine
Newspaper
$15
Radio
National Paid TV
$10
Open TV
$5
$0
2006
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2007
2008
(January-August)
Case Study
Value Creation
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Allocations across different channels can be adjusted to optimize
overall return on each Brand
Further internal analysis can be performed on each marketing channel
at the geographic or customer class level to optimize overall return
on each channel
Similar modeling for other Brands can be conducted in other key
countries
Learnings can be used as a planning tool (benchmark) for new
launches in similar categories
Learnings can be applied to decision making on marketing channel
activity for other Brands
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Thank you
David Baron
Senior Manager, Advisory Services
Chicago, Illinois
+1 312 879 2764
[email protected]
© 2009 Ernst & Young LLP.
All rights reserved.
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