how to deliver insights that deliver roi

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© 2009 Lenskold Group. All rights reserved. 1 March 12, 2010 44 th CMAG Meeting How to Deliver Insights that Deliver ROI

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March 12, 2010. How to Deliver Insights that Deliver ROI. 44 th CMAG Meeting. 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 - PowerPoint PPT Presentation

TRANSCRIPT

Page 1: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

1

March 12, 2010

44th CMAG Meeting

How to Deliver Insights that Deliver ROI

Page 2: 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

2

Partial Client List

Page 3: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

3

Agenda

Page 4: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

4

Agenda

Page 5: How to Deliver Insights  that Deliver ROI

© 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.

5

Net Profit (Gross Margin – Marketing Invt)ROI = -------------------------- = ------------------------------- Marketing Invt Marketing Investment

Page 6: How to Deliver Insights  that Deliver ROI

© 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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Page 7: How to Deliver Insights  that Deliver ROI

© 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

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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

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200

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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

Page 8: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

Target Media Offers Message

Revenue Less CGS/Expenses Less Incremental Expenses

8

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

Page 9: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

Traditional Metrics - Incomplete

9

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%

Page 10: How to Deliver Insights  that Deliver ROI

© 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

10

Page 11: How to Deliver Insights  that Deliver ROI

© 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

11

Page 12: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

12

Agenda

Page 13: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

ROI Management Process

13

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

Page 14: How to Deliver Insights  that Deliver ROI

© 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)

14

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

Page 15: How to Deliver Insights  that Deliver ROI

© 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%

Page 16: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

16

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

Page 17: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

17

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

Page 18: How to Deliver Insights  that Deliver ROI

© 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

Page 19: How to Deliver Insights  that Deliver ROI

© 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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Page 20: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

Agenda

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Page 21: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

21

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

2

3. Predictive (in Long-Term)• Planning Tools • Modeling• Forecasting

3

Page 22: How to Deliver Insights  that Deliver ROI

© 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

Page 23: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

23

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

Page 24: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

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Marketing Mix Modeling

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/1999

Base/Seasonal AdvertisingTrade Promotion Consumer Promotion

Modeling correlates marketing activity with sales activity

Look for correlations to customer behavior where data is available

Page 25: How to Deliver Insights  that Deliver ROI

© 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

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k39

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k40

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Optimized

GRP and Carry-over Effect Index

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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

Page 26: How to Deliver Insights  that Deliver ROI

© 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

Page 27: How to Deliver Insights  that Deliver ROI

© 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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Page 28: How to Deliver Insights  that Deliver ROI

© 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)

28

Perceived Competitive Position

Page 29: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

29

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

Page 30: How to Deliver Insights  that Deliver ROI

© 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

Page 31: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

Example of Measurement Coverage

31

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

Page 32: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

Agenda

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Page 33: How to Deliver Insights  that Deliver ROI

© 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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Page 34: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

Calculator for ROI on Insights

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Page 35: How to Deliver Insights  that Deliver ROI

© 2009 Lenskold Group. All rights reserved.

Calculator for ROI on Insights

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Page 36: How to Deliver Insights  that Deliver ROI

© 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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Page 37: How to Deliver Insights  that Deliver ROI

© 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