By Spencer Ng
MARKETING cost effectiveness has always been at the top of the mind for marketers. Even more so after the likes of P&G and Unilever started tightening their purse strings.
Recently, news broke about P&G‘s FY2019 Q4’s yoy growth in net sales of 4%, while enjoying a 1.4% savings in marketing expenses.
Decreasing marketing spends and disproportionately increasing sales performance sounds like a fairytale for both management and investors. Yet it is a reality that can be achieved with sound marketing measurement and optimisation programmes in place.
Behind the scenes, such marketing measurement and optimisation programmes make every marketing dollar you have work harder – driving sales growth and marketing return on investment (ROI) through a smarter allocation of media budgets and reducing wastage of media dollars.
How do we drive ROI?
The equation for marketing ROI is simple enough. Either you cut costs and maintain the same sales effects from marketing or you maintain costs and drive even higher sales but as conventional wisdom would dictate, the devil is in the details. Here are three Don’ts and one key thing to Do:
1) Don’t mistake effects for efficiency
What helps you drive sales may not necessarily help you drive ROI. Based on GfK Marketing Mix Modelling norms, traditional media deliver the greatest sales effects yet usually offer low ROIs.
On the other hand, digital media ROIs far surpass traditional media, particularly in Asia.
Measuring marketing ROI instead of just sales effects enables marketers to make every dollar count.
2) Don’t assume digital media will solve all problems
In this world of lightning fast decisions at the speed of the internet, we have seen clients swing from having media investments disproportionately weighted in favour of traditional media to the complete reverse in a span of a year. Such seismic shifts may not deliver better results if we ignore the spectre of saturation effects.
Generally we have found that there is greater risk of quickly reaching saturation levels when investing in digital media (as compared to print and TV media). Reaching saturation means that additional investments would not yield incremental sales.
Manage your investments through response curves by considering the trajectory of incremental sales to incremental media investments. Don’t put all your eggs in one basket!
3) Don’t neglect the effect of digital media on offline sales
Are you measuring how much your digital media drives online sales? If so, fantastic. Just make sure you also measure how your digital media drives offline sales so that you can optimise a combined ROI.
Our previous marketing mix modelling studies suggest that the effect of digital media drives an even greater effect on offline sales as compared to traditional media’s ability to drive online sales.
This is not too surprising given that our research also shows that 62% of consumers consult online reviews from other shoppers before making a purchase – be it online or offline. In today’s world, the consumer may transact offline but be influenced online.
What is the one key thing to do?
Measure and optimise before you execute. Analysis paralysis is naturally the last thing we want to avoid in the business of measurement.
Having said that, the possibilities offered by the exponential growth in data sources and the impetus that harnessing data delivers in the form of a competitive advantage is greater now than ever before.
Going beyond just analysis, the simulations that we have seen from our models suggest that clients may enjoy anywhere between 4% and 10% growth in sales simply by optimising the same media budget
Optimising the marketing mix is absolutely key to maximising ROI. However, what we have just spoken about is driving sales effects.
Having said that, marketing campaigns are not just about driving sales. Our clients also have brand key performance indexes (KPIs) to achieve. Recently Adidas announced that it over-invested in digital and performance marketing at the expense of brand building.
The challenge to all marketers is placing a value on brand building when the metrics that measure it may be considered nebulous by management (think brand health trackers).
However, not capturing the value of brand building risks understating the ROI of media.
Our past studies suggest that marketers are understating their ROI by a factor of 2x when they do not incorporate brand KPIs when measuring the effectiveness of their marketing mix. – Jan 11, 2020
Spencer Ng is the marketing analytics lead for APAC, Middle East, Turkey & Africa at GfK, a research and analytics firm that connects data and science and whose innovative research solutions provide answers for key business questions around consumers, markets, brands and media.