IS YOUR MARKETING
INVESTMENT DELIVERING
EXPECTED RETURNS?
October 2009
Is your marketing Marketing ROI …
investment delivering - is the measurement of the impact of marketing
expected returns? activity on sales
- allows for the ability to estimate expected
Just ask Nielsen sales returns based on the size of investment
by Chang Park, Executive Director, Nielsen Analytic Consulting, - is fundamental to clearly understand where to
Greater China increase or decrease advertising investment
- provides the ability to produce either greater
With consumers increasingly price conscious and sales at same cost or maintain parity sales at
competition heating up, marketers would be wise lesser cost.
to ensure they are maximizing the return on their
advertising spend. Marketing ROI is, on average, about 1.09
Nielsen Analytic Consulting has found through conducting
Marketing return on investment (ROI) is the amount of sales numerous studies worldwide that the average short-term
achieved for every dollar spent on marketing. Measuring this return on marketing investment (sales return within three
return is important so that investment can be allocated to months of media execution) is 1.09. Of note, the ROI for
those marketing activities that maximize sales. With store different marketing tactics varies based on the efficiency that
shelves bulging with brands vying for shoppers’ attention and tactic provides.
markets slowing globally, understanding how to get the most
bang for your advertising buck has never been so vital.
Global Marketing Return on Investment
How to achieve the biggest ‘bang’ will differ across a brand’s Return on Investment (ROI) - Incremental Revenue per $ Spent
portfolio; in other words, the marketing strategy that works for Short Term ROI Longer Term ROI
Product A may not be the most efficient strategy for Product
B. Each brand and product has a personality and target group $0.45
$0.85 $1.22
that requires a tailored strategy that evolves over the product’s
$2.18
$1.74
$1.09 $1.19 $1.12 $1.05
$0.94
life cycle and in reaction to competitive behavior. Measuring
$0.84
$0.34 $0.24
Total On-line Ads Co-op Promotions Magazines PR TV In-store Outdoor Newspapers
marketing performance at brand level will ensure that good Marketing Program Advertising Programs Ads
ROI
advertising spend isn’t thrown behind underperforming * Short Term
Only
marketing tactics.
*Global benchmark based on studies conducted by Nielsen
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Size does matters when it comes to achieving a good ROI. Generally when advertising in media, marketers can expect
China has a stronger ROI than other more developed markets around 1.5 times higher long-term ROI compared to the short-
such as Europe and the U.S. due to sheer population size. term return. Product discounting or promotions may have no
For each dollar spent on marketing, even if spent just within long-term return or a negative return if the promotion incents
one province, the number of people reached and potentially ‘pantry loading’, impacting future sales.
influenced is huge.
2. Choosing the right portals and campaigns is
Opportunity to increase advertising key to online success
effectiveness by 30 to 40 percent
The number of Internet users worldwide is now over 1.3 billion,
When looking at the overall efficiency of marketing strategies representing a pool of borderless tech savvy consumers capable
in achieving that nine percent return, Nielsen discovered of accessing information and buying products with the click of
that there is room for improvement. Research found that, a mouse. Although there is now a dizzying number of websites
on average, advertising effectiveness could be increased by vying for their attention, a few global Internet giants that
an estimated 30 to 40 percent, with the only investment are accessed by millions of online users have sprung up that
necessary to achieve this increase being for marketers to take provide a vast doorway through which marketers can reach
a closer look at how well each media and promotion type their consumer. Large industry and media organizations with
worked for each brand. online presence also provide marketers ample opportunities to
reach their target market regardless of geography.
Although the right marketing mix used will differ
from business to business and with product, This reach, which is far greater than any other media, is behind
what we have already seen is an extremely good short-term
seasonality and competitive environment, Nielsen
return on advertising spend. Nonetheless, despite online
has developed some general guiding principles that
advertising spend doubling in the past three years, it remains
can help marketers in their quest to maximize their only a small percentage of total advertising expenditure. This
marketing return on investment. allows for interesting advertising opportunities for brands with
a target group that regularly access the ‘net.
1. Both the short and long-term sales
impact of marketing should be taken into To fully capitalize on this opportunity, marketers need to
consideration understand the percentage of their target market using the
web, how they use it (for example do they visit more social
How effective an advertising campaign is in building sales networking or news sites) and for how long. Marketers can
and brand equity over time depends on the marketing tactic then tailor their online campaign accordingly.
employed. Online campaigns and co-op programs1 are very
effective at boosting short-term sales, while television and PR
remain key to ensuring long-term brand loyalty.
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Co-op programs are joint advertising initiatives, eg link joining businesses online or
advertising within a retailer’s / manufacturer’s own magazine
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World Internet Users by World Regions Four Main Ways to Increase Halo:
1. Complementary nature of products of the
Asia
portfolio
10.5% 3.9%
2. Consistent messaging between the segments
15.1%
Europe
2.9% 1.2%
North America
24.1%
Latin America / Caribbean of the portfolio
Africa
Middle East
3. More focus on the brand and less on the
42.2%
Oceania / Australia specific benefits of each segment
4. In-store packaging is consistent across the
Source: Internet World Stats - www.internetworldstats.com/stats.htm
portfolio and visually linked to messaging.
1,668,870,408 Internet users for June 30, 2009
Copyright © 2009, Miniwatts Marketing Group
5. TV advertising remains the most effective
3. Magazine advertising is more effective than
driver of brand loyalty
newspapers at influencing target groups
The equity of a brand is the level of awareness and loyalty
Though the Internet is dramatically changing how we access
(expressed through sales and/or recommendations) it achieves
information, for a significant number of people, newspapers
among its target market. Fostering equity is a long-term
and magazines remain an important source of information.
strategy tapping into both the emotional and practical needs
However, unlike daily newspapers that have a broad reader
of the consumer. TV advertising remains the most valuable
base, magazines have a clearly segmented target group that
driver of brand equity due to its effectiveness at building brand
marketers can tap into through advertising. Newspapers
awareness and subsequently sales. Despite TV advertising’s
are also, for the most part, considered disposable whereas
short-term ROI being less than the initial investment due to
magazines can be held onto and referred to well past their
the relatively high cost of advertising on TV, the residual effect
published date.
on stimulating sales is greater than any other media.
4. Marketing investment should focus on
6. Synergies across media can cause
campaigns that create the greatest halo effect
additional uplift
The halo effect is the extent to which one brand’s marketing
Media today is highly interconnected with consumers accessing
activity positively influences sales of other brands in the
and interacting with a wide range of information sources daily.
portfolio. Marketing initiatives that positively impact the
Marketers can best leverage this by ensuring that, regardless
sales of the advertised brand and other brands in the portfolio
of the media being consumed, a constant brand message is
should be invested in further.
conveyed tailored to how the consumer interacts with that
specific media. For example, are they passively receiving the
information through a billboard or TV advertising or have they
actively searched out product information online?
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TV, Magazine, PR and Internet are particularly sensitive to Increase advertising dollars and sense by
synergizing with other marketing tactics. measuring marketing ROI
7. Creating brand awareness through in-store With an opportunity to optimize advertising effectiveness by
advertisements (eg displays, features) is more up to 40 percent it makes business sense to measure marketing
effective than excessive price discounting ROI. The insights gained through understanding the impact of
different marketing tactics on sales help marketers estimate
When looking at promoting in-store the focus should be on expected sales, where to increase or decrease advertising
achieving incremental sales within an optimal number of investment and produce greater sales at the same cost.
stores.
Excessive discounting and promotion erodes the brand’s equity
through training shoppers to purchase the brand only when
on promotion, effectively lessening it’s perceived intrinsic
value. By comparison, promoting mainly through in-store
advertising such as displays is more useful at building long-
term incremental sales due to its emphasis on building brand
awareness and value.
With a concentrated focus on brand building and incremental
sales, marketers are less likely to cannibalize share from other
brands in their portfolio due to switching, erode their brand
equity due to excessive discounting and better protect their
brand from competitor promotional activity.
Promotion related ROI rarely fluctuates greatly.
Media advertising generally has a specific fixed
cost that can be overcome, whereas promotions,
by nature, scale with the number of units sold.
8. Investing in consumers with premium gift
packs can cause them to invest in you
As we all know, not all gifts are created equal. Consumers are
savvy at perceiving value and though a more expensive gift
item is a greater short-term cost incurred against the brand,
it has the potential to deliver better volume sales due to its
greater attractiveness to shoppers.
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About The Nielsen Company
The Nielsen Company is a leading global information and media company providing essential integrated marketing and media
measurement information and analytics and industry expertise to clients across the world. Nielsen maintains leading market
positions in marketing and consumer information; television, online, mobile and other media intelligence; and trade shows and
business publications (Billboard, The Hollywood Reporter, Adweek). Nielsen is a privately held company and is active in more than
100 countries, with headquarters in New York, USA. For more information, please visit, www.nielsen.com.
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