Is your Marketing Delivering Expected Returns by Weblaunches

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Is your Marketing Delivering Expected Returns

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									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.




1
 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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