Packaged-Goods Brands Lose Loyalists in Recession

Brand loyalty appears to have taken a beating in the recession, at least in packaged goods. A study from Catalina Marketing and the CMO Council finds that for the average brand, more than half of consumers (52%) who were highly loyal to certain brands became markedly less so last year.

Churn of brand loyalists has long existed, but the recession appears to mean most brands didn't gain enough new loyalists last year to replace those they lost, said Todd Morris, senior VP of Catalina's Pointer Media Network. "We tend to think as marketers that once you get loyalty, it's carved in stone," Mr. Morris said. "This probably says it's written in sand."

For the purposes of the study, Catalina defined loyalists as those who made 70% or more of their category purchases from a brand.

Biggest winners and losers

Among the big losers of loyalists last year were P&G’s Crest toothpaste, ConAgra Foods' Hunt's canned tomatoes, Clorox Co.'s PineSol cleaners, and J&J's Tylenol, each of which lost more than a third of their highly loyal consumers, according to the study. The study did not indicate whether the brand switchers were migrating to private label or to rival marketers of similar brands.

Brands that fared better were Coca-Cola Classic, J.M. Smuckers' Folgers, and Thomas' English Muffins, a unit of George Weston Bakeries. Each kept more than 60% of their highly loyal consumers from 2007; Coke and Thomas' retained more than three-quarters.

Hunt's was an unusual case, because while it had lost loyalists, it gained even more new ones in 2008, making it one of only three among 12 brands in one portion of the study to increase its number of highly loyal buyers in 2008. The other two were General Mills' Cheerios and Domino Sugar. “Those brands were probably helped by the recession”, Mr. Morris said. “They benefited from more people eating or preparing meals at home.”

Well-supported brands fared better

In general, stronger, better-supported brands held loyalty better than others, for example in laundry, where Tide held onto its loyalists better than Cheer or Wisk, Mr. Morris said. Tide vastly outspends those brands on advertising. But, Mr. Morris said, "Tide is also on deal a lot more than Wisk or Cheer," allowing some of its loyalists to stay loyal even if they're more price-sensitive.

Brands that dominate their categories also tend to do better at holding loyalty, he said, pointing to Kraft's Philadelphia Cream Cheese and McCormick spices, which have relatively little competition from other national brands. "In those categories where there are many viable brands and reasonable substitutes, there's more churn."

Superpremium products also tended to do better, even in categories, such as margarine, seen by many as commodities. Premium and health-focused brands as Olivio, Smart Balance, Land O' Lakes and Brummel & Brown held 66% to 81% of their loyalists year to year. "In those categories where there are many viable brands and reasonable substitutes, there's more churn."

Cost is always high

The cost to brands from defections is high, as even Coke Classic, which held onto its loyalists better than most, saw revenue decline 6% due to the loyalists it did lose, according to the study. P&G's Cheer detergent saw revenue drop 19% from loss of loyalists. Sibling Tide fared far better, down only 5%, and Sun Products' Wisk lost 25% of its sales to the flight by loyalists in the study.

“Past academic research has found that consumers who traded down to store brands in past recessions tend not to come back to the major brands", said Eric Anderson, associate professor of marketing at the Kellogg School of Management at Northwestern, who reviewed the study. But Mr. Morris said the study found that even private labels have seen declines in loyalists, possibly because brands have stepped up price promotions.

Whatever brands do to counter loyalists defection, however, it should be "through non-price mechanisms," Mr. Anderson said, though brands are almost always tempted to use price promotion in hard times. Temporary price reductions are more likely to reduce loyalty and encourage brand switching long term than to combat it, he said.

CMOs Need More Business Acumen

A recent assessment of SEC filings of Fortune 1000 companies conducted by Ernst & Young suggests that the CMO post remains low on the priority list at many organizations and that CMO's authority remains limited.

The study found that 13% to 15% of Fortune 1,000 companies employ some sort of marketing position with a chief or senior-executive-level title, and only 70, or 7% of those firms, list the head marketer in financial filings. Being listed in those public filings means an individual is among the highest compensated executives at the company and sits on the operating board.

The absence of a head marketer in public filings is evidence of their potential lack of say within organizations, said Ed See, a consultant in E&Y's advisory services practice and former president of Marketing Management Analytics. Mr. See went on to say "within a corporation, you are either part of the core decision-making process or you're submitting your budget to be approved. If you're not listed as one of the top executives, chances are you're submitting your budget."

The type of company publicly listing a head marketer as a top executive varied wildly. Classic CPG companies such as Procter & Gamble, Coca-Cola and Del Monte Foods list the title, but consumer-finance companies such as American Express, restaurants such as Burger King and retailers including Target and Sears Holdings also indicate marketers are among the top-compensated executives.

Of the 70 marketers that are publicly listed as top executives, about half have a background in marketing, communications or advertising, while the other half have a background that includes product development, brand management or other operational roles - a sign that financial acumen is, indeed, becoming a necessity for CMOs seeking influence within organizations. “What's being asked of CMOs today is to add a set of financial skills that are skills that have not traditionally been there."

The recession is hastening that shift. As companies slash marketing budgets and monitor every dollar going out the door, marketers are being asked to make an even stronger case for advertising and its returns. In this type of environment, Mr. See said, the four Ps of marketing are being balanced against the three Ps of finance and operation: payroll, production and profit.

The Marketing Response to Recession

(summary of a recent paper by Booz & Co.)

The most common corporate responses to this recession are very clear: quickly cut costs and cancel or defer all but the most essential investments. But in marketing, these actions can negatively affect future revenue, share, and customer relationships —three assets that must be supported and strengthened if companies are to survive the recession and position themselves for recovery.

Accordingly, CMOs need to adopt a more measured approach to quickly and accurately identify and eliminate inefficient marketing, reallocate that spending to build profitable volume in the short term and strengthen brands in the long term, and, whenever possible, return savings to the company.

To make the most of tight budgets and maintain revenue, share, and customer relationships in this environment, CMOs face three significant challenges:

• Realign their marketing efforts to major changes in customer psyches, behaviors, and buying patterns
• Respond to the changes in their distribution channels and geographic markets, and
• Change their marketing mix to improve ROI

Get on the customer’s side

Custom­ers, whether consumers or businesses, in developed or emerging nations, are cash-strapped and worried about the future. Consumers are buying less and want brands that empathize with their plights and remain relevant in changed circumstances. That means offering visible savings and added value and adapting the tone and con­tent of marketing messages. CMOs must show how their brands and products address recession-driven needs and concerns and they should also make sure their brand promises speak to value and some element of reassurance.

Respond to shifts in markets and distribution channels.

CMOs must rethink their spending across different geographies. For some companies this means refocusing their attention on established markets. For others, it may mean additional investment in emerging markets. Distribution channels are also morphing in ways that will likely endure over a relatively long period. Consumers abandon high-priced, premium sellers for aggressive discounters; exurban malls collapse along with real estate development; and all retailers take a hard look at their working capital and make their most focused effort in years to ensure that all products carry their cost.

As a result, CMOs need to manage reduced “shelf space” and this will require that product portfolios continue to cover all price segments but be leaner and more efficient than in the recent past.

Make your marketing dollars work harder (ROMI)

CMOs must direct their spending to the most ef­fective paid media and below-the-line platforms. This means cutting back, at least temporarily, on programs with poor or indeterminate returns, and pushing hard against those elements of their mix that can deliver a mea­surable return on specific objectives. Digital media, which can be sharply targeted, cost-effective, and measurable, are benefiting the most from marketers’ desire to increase their ROMI.

CMOs who are open, permeable, and prepared to follow their customers may discover that this is the best chance in a generation to attract new customers to their brands and build market share.

The original paper can be found at http://www.booz.com/media/uploads/Booz_Memo_to_CMO.pdf

Passion For 'Digital' Pumps P&G's Spending

The first quarter of 2009 may mark a turning point when the world's biggest marketer and its broader industry finally got serious about digital media. Even as P&G cut measured U.S. media spending 18% overall last quarter, it more than doubled spending on internet display ads, according to data from TNS Media Intelligence.

Where P&G has been spending its money

Digital has been a focus area for Marc Pritchard since he became global CMO last year and as he prepares to assume broader duties over design and PR as global brand-building officer. "It really is such an incredible way to connect with consumers and to really have much deeper ongoing relationships with them”, Mr. Pritchard said. “Our media strategy is pretty simple: follow the consumer. And the consumer is becoming more and more engaged in the digital world."

Of course, the jump is relative. P&G's big spike in internet spending, coupled with such factors as a whopping 44% decline in network-TV spending, still only brought online display to 4% of P&G's $672 million quarterly measured outlay. And because measured-media data don't capture many of the fastest-growing digital-spending buckets, such as online-video ads, behaviorally targeted ads, mobile or search, P&G's digital outlay as a whole probably exceeded 5% of its media spending last quarter.

P&G isn't the only CPG titan suddenly spending bigger online -- just the biggest. Rival Johnson & Johnson hiked its measured spending overall last quarter 28%, but it nearly doubled its internet-display spending to $15.5 million. That brought J&J, like P&G, to 4% of its $397 million outlay.

Time to model

Once a brand spends about 5% of its media on digital or any medium, it's usually possible to apply the CPG industry's ROI measurement of choice: marketing-mix modeling, said Gregg Ambach, managing director of the Cincinnati office of Analytic Partners, which handles such modeling for P&G and others. "The general trend is that internet is becoming a bigger part of the advertising budget," said Mr. Ambach. "And we're definitely measuring more and more of it."

Better data ultimately will be what it takes to get CPG brands to spend more on digital. Gian Fulgoni, chairman of ComScore and former CEO of IRI, makes the analogy to the advent of scanner data in the 1970s. When CPG marketers suddenly could see the full impact of trade promotion, they started spending more on it, he said.

Mixed results

Several brands stood out as making digital a particularly large part of their mix last quarter. Those include CoverGirl, P&G's biggest internet spender, with about 10% of its $50 million media outlay going there via work from WPP Group's G2i, primarily for Outlast lip stain. Bounce's $2.4 million outlay on internet display last quarter from Publicis Groupe's Digitas made up 35% of its media spending. Vicks put 45% of its $8.7 million quarterly spending on the internet via WPP's Bridge Worldwide, while bigger-spending Head & Shoulders put 18% of its $19.7 million outlay into internet display from Digitas.

The results appear mixed. CoverGirl continued its run as one of P&G's best-performing brands of late. And it gained the most share where it focused its digital spending: in lipstick, up two points last quarter, according to IRI data from Deutsche Bank. But Bounce, faced with rising sales of value and private-label brands, lost 2.4 share points. P&G also lost share in cough and cold, but Head & Shoulders appeared to continue a strong run in share growth. These numbers don't account for impact of promotional activity by P&G or its competitors or competitive spending and pricing -- factors marketing-mix models take into account.

Mr. Pritchard said P&G wants to increase its media weight - not necessarily spending - and is using marketing-mix modeling to do so more productively. "We like innovation as well", he said. "Obviously digital has a lot of opportunity for that. But we've been looking for that from our print and TV partners as well."

Global Recession Helping P&G Get More Media For Less Money

The company benefited from declining media rates and its negotiating power as the biggest buyer in many markets.

(from AdAge.com) -- Procter & Gamble Co. cut marketing spending more than $440 million globally last quarter, yet still increased media weight or impressions 5%, executives said today, and the company is eyeing more cost concessions from media as the TV upfront nears.

In all, marketing-spending cuts by the world's largest advertiser, including traditional advertising and shopper marketing, amounted to 2.4% of sales, a P&G spokesman said. Yet because of sharply falling media rates around the world, the company actually increased media weight about 5%, P&G CFO Jon Moeller said on an earnings conference call today.

It's unclear how much of those cost efficiencies came from P&G's biggest medium, TV, in its biggest market, the U.S. But Chairman-CEO A.G. Lafley said it is looking to get even deeper cuts in upfront negotiations, when TV networks look to sell up to 80% of their ad inventory for the year, starting next month.

“In the near-term, the media world could be even a bit more of a buyer's market, and not just in the U.S.”, Lafley said. “So what we've tried to do is take our market-mix modeling and our market ROI analysis and figure out how to spend a little less money and get a lot more delivery."

Buying leverage as the biggest advertiser in most markets helps, he said. "We don't look at it on a month-to-month, quarter-to-quarter basis necessarily, but our goal over time is to strengthen our brand equities, and part of that is delivering a consistent share of media voice."

Blogs, Social Networks the Next Hot Spot For Brands

CPG and retail marketers looking to connect their brands to consumers online will increase their chances of success if they focus on blogs and social network sites like Facebook, MySpace and Twitter.

According to the new Nielsen Global Faces and Networked Places report on social networking's new global footprint, two-thirds (66.8%) of the global online population visit 'member communities' (blogs and social networks) a lot, and they are now the fourth-most popular online activity -ahead of personal e-mail (65.1%). “Member communities have taken a foothold in every major market, from 51% of the online population in Switzerland and Germany to 80% in Brazil," the report said.

The three most popular sectors are: search (85.9%), general interest portals and communities (85.2%), and software manufacturers (73.4%). But by far the fastest-growing sector is member communities, growing at twice the rate of e-mail and roughly triple the rate of the other top sectors.

"Social networking will continue to alter not just the global online landscape, but the consumer experience at large.", says John Burbank, CEO of Nielsen Online. Brand image in this online realm could quickly affect how consumers relate and buy -or not buy- specific brands in the offline or online worlds. Some brands, like Skittles, Pepsi, and Whole Foods, have ventured into 'member communities' space with varying degrees of success. Most CPG brands have yet to follow. (See SupermarketGuru.com, March 16, 2009 posting, "Will food brands find success recipe in social media?")

Some other key findings include:

• Mobile is increasingly important. Nearly 1 in 5 (19% or 10.6 million) of mobile users in the United States visited a social network through their handset, up 156% over a year ago.
• Facebook, the world's most popular social network, is visited monthly by three in every 10 people across markets involved in the study -Brazil, Spain, Italy, Japan, UK, USA, France, Australia, Germany and Switzerland.
• Orkut in Brazil has the largest domestic online reach (70%) of any social network in these markets.

Compelling new functionality is helping to drive the broader engagement, observes Alex Burmaster, the study's author and communications director across EMEA for Nielsen Online. Brands need to intersect consumers where they dwell and participate online to win mind share, build their relevancy, and strengthen their case for purchase at the shelf.

Reckitt-Benckiser Moving TV Dollars Online

Per a recent article in Ad Age, Reckitt-Benckiser plans to shift an estimated $20 million in TV ad dollars to the web for more than 15 of its brands, including Lysol, Air Wick, Mucinex, Finish and Clearasil.

The strategic shift is significant for the company, which has traditionally spent upward of 90% of its $475 million measured-media budget on TV, and less than $1 million in measured spending on the web in 2008, according to TNS Media Intelligence.

Marc Fonzetti, Reckitt-Benckiser's media manager and internet specialist, said "we've seen a fundamental shift in consumer consumption and media habits migrating over to digital video. Obviously YouTube started it, but we want to align with professional content," he said. "with broadband getting to the scale that it has, the shift has happened. The integration of traditional and digital media is here now."

The effort goes into effect April 1 and will include partnerships with over a dozen video ad networks such as Glam, Tidal TV, YuMe and BrightRoll. The company opted for ad-serving networks over TV network sites such as Hulu, ABC.com, CBS.com and NBC.com, as the latter often charge significantly higher CPMs than ad networks.

Reckitt-Benckiser's spending shift from TV to online has was accelerated by a need to find CPMs more efficient than TV’s and to deliver the impressions more efficiently than TV does by reaching a more targeted audience. Mr. Fonzetti said the campaign will be measured using a method that combines TV's gross rating points with the web, with additional interactive layers such as online coupons and click-throughs driving traffic to each brand's microsite. Each brand's audience metrics will then be paired with data from Nielsen's Homescan panel, a shopper product that uses ad exposure on TV and the web to determine in-store purchasing behavior.

"Everything is ROI-focused and needs to be accountable," Mr. Fonzetti said. "That's why this program has taken us so long to develop. We want to make sure everybody is comfortable behind this."

Marketing Spend Allocated Mostly Based on Historical Patterns And Rules Of Thumb

A January 2009 global McKinsey survey among C-level executives found the process for measuring the performance of marketing spend is much less formal than might be expected in most companies.

Companies tend to allocate spending based on historical allocations and rules of thumb far more than quantitative measures. Only a small proportion of companies use anything more complex than basic quantitative techniques.

In the survey, nearly a third of the companies say they rely mostly on qualitative measures, about one fourth say they also consider some basic quantitative measurement, 23% base decisions on the previous year's performance -not tied to any specific business objectives, and only 14% follow a comprehensive set of quantified marketing priorities.

Marketing Execs Emphasize Measuring Spend, Better Identification of Customer Preferences and Needs

A recent survey of marketing professionals at North American companies by Frost & Sullivan sought to better understand the business environment factors and the key issues facing marketing executives in 2009.

According to the survey, the primary business environment factors challenging the success of marketing initiatives were the global economic downturn (54%) and the increasing need for product/service innovation (10%). Secondary business environment factors identified by marketing executives were decreasing customer demand (20%) and intensifying competition (17%).

The top five key issues identified by survey participants focused on monitoring and justifying expenditures or creating new sources of revenue. Given the economic downturn, there is increased emphasis on measuring spend (30%) and on the better identification of customer preferences and needs (30%).

The data highlights that although budgets are being scrutinized, Marketing continues to be charged with catalyzing growth through identifying unmet customer needs, or speeding up innovation.

Marketing is Today's Most Complex and Challenged Function

Current marketing operational models are becoming increasingly complex and more crucial to the strategic success of global businesses, but are facing significant challenges from entrenched corporate cultures, inter-departmental politics, and a lack of adequate data and information systems, according to a new research by the CMO Council.

The study underscores the critical need for marketing to drive operational effectiveness and optimally structure, resource, and run today's digitally driven, customer-centric, and globally distributed marketing organizations. Major internal challenges subverting the marketing operational process are:

• change-resistant corporate cultures
• conflicts and competition between internal constituencies
• siloed data and limited cross-functional feedback
• lack of ownership of critical aspects of the marketing budget
• a struggle for divisional control and independence

The study also revealed a disturbing trend: companies are not spending nearly as much time, energy and budgetary resources as necessary on marketing operational improvement to heighten their competitiveness and bolster their top and bottom lines.

Marketing operations directly affect a company's go-to-market strategies and other strategic growth initiatives. Many of the top operational improvements targeted by marketers revolve around optimizing customer engagement, including improving go-to-market strategies and efficiency and delivering a unified and consistent message.

Businesses Use Social Media as Marketing Tools

Social Media is rapidly becoming a fast, efficient, and relatively low-cost way to get your message directly to an audience. Over 100 million-plus videos are downloaded from YouTube each day. There are millions of blogs and millions of profiles on social networking sites such as MySpace, Facebook, and Twitter. These new tools - blogs, wikis, podcasts, rss feeds, online video and social networks - all present intriguing opportunities for customer engagement, but can be intimidating.

Web tools, once thought to be the domain of teens and young adults, are becoming part of businesses’ marketing strategies. Many businesses are just beginning to experiment with the tools, but marketing gurus are preaching the need for businesses to get on the online networking bandwagon.

According to the Pew Internet and American Life Project, survey conducted among adults in May 2008:

• 70% of adults in the United States use the Internet daily
• 29% say they have used a networking site
• 13% use an online social networking site daily
• 33% say they have read a blog
• 11% of adults read a blog on a daily basis

Reach customers at the places where they are already going

People spend hours on Facebook at night. Many people are more attentive to Facebook than to their own e-mail at this point. Reaching out to customers through Facebook allows businesses to catch their attention in a new way. Maintaining a group page on the site with news, specials and events is a sure and possibly more effective way to keep your customers up-to-date and engaged. Advertising on the site may also be worth considering as it allows businesses to target his ads to specific types of people who might be clients on the basis of demographics, locations, interests or preferences.

Select the right channel

If you’re a really niche B2B business, maybe you should create a network on Ning. Ning.com is a web site that allows anyone to create an open network to discuss an industry or topic, comparable to an ongoing version of an annual industry convention.

Keep on top of what customers are saying about you

Companies are now feeling the need to dispel rumors or problems right away. It’s an opportunity for both feedback and to address a complaint directly. Previously, unhappy customers complained to their neighbor about a business. Now they complain online, including complaining to Twitter users. Twitter is a micro-blogging site that allows users to update friends with brief notes on their thoughts or activities.

Keeping up with messages and content

One of the challenges of Web 2.0 - Though it’s free to sign up for most of the applications, keeping up with them takes time. A blog with no posts is no different from a web site, and maybe worse. Marketing professionals and others who have found success with Web 2.0 applications say they demand daily attention.

Web 2.0 applications, done correctly, can actually save businesses time. If you are more effectively reaching your core customer, you are more effectively, in theory, selling your product.

Events - I came across this event (worth taking a look) : Social media marketing for businesses - Feb 25, 2009 - http://www.gravitysummit.com/2008/12/social-media-marketing-for-business-event-feb-25-2009/

Economy Weighs Heavily on Marketing Execs for 2009

In a recent study by Anderson Analytics for the Marketing Executives Networking Group (MENG), it's no surprise that the economy is weighing heavily on marketers looking toward 2009. Marketing executives are going back to basics and are struggling with digital concepts. More than half of the marketers surveyed said their budgets will be cut in the coming year, and another 44% said they'll cut or freeze hiring.

Back to basics

Marketers are more concerned now about credit availability, housing markets, alternative energy and the trade deficit. The overall trend result is a back-to-basics strategy by marketers. When asked what marketing concepts are "most important," they ranked as the top four customer satisfaction (79%), customer retention (76%), marketing ROI (65%) and brand loyalty (61%).

Buzzword fatigue

Digital ideas such as “Web 2.0”, “social networking”, “social media”, “blog” and “viral marketing” ranked as a bit more important this year, yet buzzword fatigue has also set in more firmly as more marketers were tired of hearing it.

Talking about generations

Baby boomers remained the most important demographic group, according to 78% of these senior-level marketers. However, the Gen Y and Gen X each jumped by more than 10 percentage points in importance. Overall, marketers seem to be casting a wider net, reflecting that in a down economy you can't only target who you did last year.

Pockets of optimism

The surprise is that there are still pockets of optimism. For instance, almost three-fourths said they think spending on research and development, along with innovation initiatives, will stay the same or even increase (21% in the latter category). Spending on market research is also expected to stay the same or increase, according to two-thirds of the marketers surveyed. Marketers believe that in this economy they have to know their current customer well and keep them happy. They also acknowledge the use of things like competitive intelligence and data mining as important concepts.

The favorites

Author Seth Godin remained the No. 1-ranked marketing/business guru and "Good to Great" was the top book. Apple CEO Steve Jobs, the No. 2 most-named guru last year, dropped to No. 4. Perhaps reflecting the economy, financier Warren Buffett took his spot (up from No. 4 last year). Author Malcolm Gladwell jumped to No. 3 (up from No. 8 last year).

Marketing Audits

With the internal and external environments evolving at the speed of Internet, "copying and pasting" marketing plans from one year to the next will not work. Very often, because companies feel they are doing marketing "stuff", they assume it is the correct thing to do. There is a high probability that ROMI is far from being optimized and companies are losing a competitive edge.

On the other hand, cutting drastically your company marketing budget due to the recession without a real and full marketing audit is a great method to accelerate the chances of business failure.

With the challenges ahead, companies should be proactive by doing smart marketing, not just any marketing. And they create smart marketing by evaluating all their opportunities, not just what they have been doing year in and year out. This is so much more important in today's economy than when the economy is at its best.

The real marketing audit should start with a strategy audit and then move to how marketing operations can better support the strategic initiatives. That's how you get to real ROI and how marketing becomes a revenue and not a cost center. The benefits of a marketing audit are threefold – a reduced spend on wasteful tactics, a positive ROI on marketing that actually works, and a better credibility of the marketing function across the organization.

Every company should implement a marketing audit at least once every 2-3 years, or whenever the business environment changes substantially. The marketing audit should be led by the highest executive level in the organization, typically the CEO or COO, and specific accountabilities should be placed on the CMO and CFO for its execution and actionability. If there is a lack of confidence in the objectiveness of the internal staff, then the recommendation is to hire an external consultant.

Maximizing the Efficiency of Marketing in a Recession

Marketing budgets, often among the early casualties of a recession, are declining faster than at any time since 11 September 2001, according to the IPA's most recent Bellwether Report.

Yet, as Hugh Davidson, author of Offensive Marketing, points out: 'Studies show that brands that maintain or increase marketing spend in a recession tend to do better than their rivals in the long run.' However, to escape hatchet-wielding finance directors, marketers must take steps to make their spend more efficient in ways that don't harm demand.

Top Recession-proof Marketing tips by the experts:

• Do the maths - 'Most companies have a portfolio of brands, and if they know how big they are, their profit margins and so on, they can quickly get a rough idea of which ones are worth supporting and which aren't,' says Les Binet, European director of DDB Matrix and author of Marketing in the Era of Accountability. 'If more marketers did those sums, they would realize how much of what they do is uneconomic.'

• Worship your Customer - Make sure you have good enriched customer data so you can segment your customers by multiple criteria. The more targeted you get, the more effective your marketing dollars. Engage with the customer base more frequently and deeply than ever before - In times of economic uncertainty, when budgets are getting cut back, people buy from who they know.

• Creativity and emotion are powerful - Data2Decisions research shows that creative execution is the second-biggest determinant of an ad's profitability, after market size. Also, the financial payback from emotionally led ads is greater than that from more rational ones. People are motivated by how they feel, rather than what you tell them.

• Harness the power of integration - Integrated campaigns can increase efficiency by up to 100% because of interaction between different channels, claims Binet. 'Similarly, using one-stop shops for all your communications will presumably result in significant cost-savings, too,'

• Preferred internet marketing tactics - TopRanked Online Marketing recently ran a poll with the question “What three internet marketing tactics will you emphasize in the next 6 months? Here are the results: SEO (36%), Blogging (33%), PPC (26%), Email marketing (22%), Social networking (Facebook, LinkedIn) (21%), Blogger relations/blog PR (14%), Microblogging (Twitter, Plurk, Jaiku) (11%), Affiliate marketing (11%), Advertorial (NewsForce, AdFusion) (10%), Video marketing (7%).

• Streamline your processes – “Research shows that most companies can make 10%-20% efficiency gains or more without harming demand, by overhauling inefficient systems & processes,' says Robert Shaw, professor of marketing metrics at Cass Business School.

• Manage agencies more tightly - Clients should push media agencies to justify their choice of media in financial terms, says Shaw. 'It's amazing how many brands still target difficult-to-reach markets through ad spots in Coronation Street, for example,' he says.

• Manage headcount - Don't cut marketing staff only to re-employ people on inflated salaries as 'consultants'. By creating more clarity about what people do and relating it to clearer marketing goals, with focus on target markets, you will find you need fewer people.

• Understand and practice ROMI, engage with your Finance director - Reduce your total marketing cost , improve the ROI for your solutions, and quantify these. Measure everything, know what works, what doesn’t, and stop what doesn’t. The finance director runs a business, so being able to engage with them is vital. 'You do that by talking in terms of investment, rather than spend,' says Andrew Challier, managing partner of media analytics specialist Billetts.

• Learn from what you do - Evaluate everything in business terms to identify what works, advises Binet. If you want to learn and improve, you have to recognize and admit to failure, rather than brushing mistakes under the carpet,' he says.

Marketers to Up Spending in Cable, Online, Mobile in Next 6 Months

Total Ad spending is expected to be down over the next six months, and online, cable TV and mobile are likely to attract more of marketers' money at the expense of media such as broadcast TV, national newspapers and magazines, per the new Advertiser Optimism Report by Advertiser Perceptions.

"We're seeing less slowing in media that's more accountable and targetable," said Randy Cohen, principal at Advertiser Perceptions. "We still see less optimism for online and for cable TV, but it's more severe in the media that tends to be less accountable."

However, the number of media brands considered by ad category increased for all except the categories home and appliance, technology and telecommunications. And the number of media brands that advertisers and their agencies have committed to over the next six months in the online and print spaces are both up as well, which indicates that less money is being spread across more media brands. The number of TV brands remained constant over the last six months.

The report also reinforces that it is the results that are most significant to marketers and agencies, even more so than cost, whether it's an online, TV or print media buy.

Looking ahead at the next six months, the Advertiser Optimism Report projects advertiser optimism will continue to slow, taking ad spending along with it and thus creating a much more competitive media marketplace.

Kellogg Bolsters Digital ROI as Online Push Continues

Kellogg Co. has hired Pure Visibility, an internet marketing firm out of Ann Arbor, Mich., to apply Google Analytics to its websites. The package-food company has emphasized that digital will be a bigger piece of its advertising strategy in 2009. The size of the account wasn't immediately available.

If for the marketer 2008 was the year of increased ad spending, Kellogg has said that 2009 will be the year of ROI. The company continually rose spending by double digits in 2008, but that's going to slow in 2009. Instead, CEO David MacKay has said Kellogg will be slashing its broadcast budget and diverting the money online, where it's found greater returns.

In September, Kellogg CMO Mark Baynes said digital ROI for a Special K program had exceeded returns on broadcast by a "factor of well over two," and that Kellogg, which spends more than $1 billion on advertising alone, would reduce commercial filming in 2009, and focus on ways of driving efficiency.

"Pure Visibility extends the reach of Kellogg brands' online presence and helps to align our marketing efforts with return on investment," Paul Iagnocco, director of E-business at Kellogg, said in a statement. "The detailed reporting provided by Pure Visibility, combined with its strategic approach to online advertising and search-engine optimization, is a comprehensive and smart way for Kellogg Company to leverage the web to attract and retain new consumers."

"To complete this complex, significant project, Pure Visibility will work with the Kellogg Co. to create comprehensive strategic reporting across multiple websites to deliver a complete view of e-business efforts," said Linda Girard, co-founder of Pure Visibility. "Ultimately, Pure Visibility's work with Kellogg Co. will help their brand managers and advertising agencies leverage efficiencies related to analysis and reporting."

Multicultural Marketing Lacks Funding, Internal Support

After years of marketing to ethnic minorities, marketers are not so happy with their own company's efforts.

In a new survey the Association of National Advertisers conducted for its annual Nov. 16-18 multicultural conference, less than half of respondents said they are satisfied with the results of their companies' multicultural initiatives, and about a quarter said they are somewhat or very dissatisfied. And only about three-quarters of marketers, do multicultural marketing at all, although 66% said their company's efforts have grown in the past few years.

Funds don't go far enough

Lack of multicultural marketing dollars was the biggest source of frustration for marketers surveyed, a problem that is only likely to get worse as recession-hit companies slash spending. More than half of respondents (56%) cited lack of funding as one of their barriers, followed by lack of metrics to measure performance (45%). One of the biggest problems multicultural marketing execs complain about is the lack of support from within their own companies, where success depends on having a champion in the C-suite. Almost half (45%) of the marketers surveyed said they don't get enough internal support, and 34% said support from top management is inconsistent. Respondents were also critical of their companies' ability to integrate multicultural marketing into the overall marketing mix. At many companies, multicultural marketing is synonymous with targeting Hispanics and African-Americans. 95% of respondents said they target Hispanics, up from 86% in a previous survey in 2003. 76% of respondents market to African-Americans, up from 60% in 2003. There has been little progress for Asian-Americans, targeted by just 38% of respondents, a small increase from 35% in 2003.

Multicultural Agencies score higher

55% of marketers surveyed said they preferred to use a specialized multicultural agency for creative work. Satisfaction scores indicated that they are much happier with their agencies than the one-quarter of respondents who rely on their general-market agency of record for multicultural work. The best creative and strategy usually comes from agencies that specialize in Hispanic or African-American advertising, although more general-market agencies are rushing to try to develop Hispanic expertise to cash in on that growing market. Marketers like Wal-Mart Stores and Bank of America have found that Hispanics represent a big chunk of their growth, so they try not to slash those budgets. DraftFCB, for instance, does multicultural work for four of its general-market clients and in October hired Simon El Hage, the longtime director of strategic marketing services at the No. 4 Hispanic agency Lopez Negrete Communications, as DraftFCB's first VP, group management director, multicultural marketing.

Measuring Success of PR Campaigns

PR campaigns are usually those that affect in the long run. Measuring the effects of PR campaigns - both online and offline - is an issue for all PR and Marketing professionals. While you can measure tactical benchmarks (i.e. number of articles, analyst briefings, etc.), and even more strategic issues - such as share of voice -, the truth is that the PR ROI is inherently fuzzy.

First and foremost, it is very important to determine what is the expected "success" of the PR campaign from a measurable perspective. The success of PR campaigns can be measured by looking at:

• the amount of traffic increase on the website (e.g. has it increased by 10% within the 2 weeks after the article was printed/ syndicated.)

• the number of mentions in the media (online) of your company/ product/ service since you launched the PR campaign. Back links and news clipping services (e.g. like Google, Yahoo or even fee-based services) can help with this.

• web rankings - rankings are critical (when in conjunction with the bigger picture) to see if the search engines are flagging for traffic spikes, or higher interest in the pages that have been produced, or more recent searches for a key phrase, etc. (SEO in PR is easily obtainable with resources like PRWire providing such services)

• web traffic reports for referral links. (when possible use custom links to track back to the referring source)

• acquisitions/ conversions, when possible (e.g. if the website includes a shopping cart or ecommerce solution).

To gain a broader perspective, it is also advisable to look at:

• brand evaluation (before / after measurement)
• customer response to products / services through surveys - what they perceive
• blogs/ comments/ editorials in media
• product/ services sales - before and after the campaigns (measureable using analytics techniques)
• searches/ clicks/ responses in the online, offline media

Digital ROI Surpassing that of TV?

As recently published in Ad Age, the digital divide seems to be narrowing for Kellogg Co., which said its return on online investment for the Special K brand has surpassed that of broadcast TV over the past 18 months. Kellogg’s CMO described the company's findings as "obviously very encouraging," and predicted they would help "drive stronger adoption across the business."

Over the past year, Kellogg has been praised for sticking with its advertising spending despite the recession. The company has credited its brand-building efforts with its ability to pass some of the heavy commodity-cost increases onto the consumer. Kellogg crossed the $1 billion benchmark on ad spending during 2007, and its outlay is set to increase this year.

A Special K website offers customized plans for consumers, sign-ups for a Yahoo e-mail group, tips from a trainer and nutritionist and a point-of-purchase link to Amazon.com. The company has added a number of products to the Special K platform in recent years, including cereal bars, flavored waters and waffles.

"For the right opportunity, the online space offers fresh ways to commercialize new and existing brands, target specific audiences on needs more cost effectively," Kellogg’s CMO said. The initiative has not only resonated with consumers, but also boosted cereal consumption outside of breakfast.

The investment may continue to pay off, given the economic environment. UBS analysts anticipate cereal consumption to grow during the fourth quarter, not only because of food costs, but higher rates of unemployment. More people will be eating breakfast at home because they don't have anywhere else to go.

Marketing Accountability Programs

In today's demanding business environment, companies must know the impact of their marketing investments. The Association of National Advertisers has launched a major initiative to significantly elevate the efficiency and effectiveness of marketing programs by codifying the best accountability practices. These insights are being drawn from member case studies as well as from ongoing ANA surveys of senior-level marketers, which have been conducted since 2004.

Accountability programs must increase the productivity of the entire marketing supply chain, nurturing what's working and improving what isn't. So how can a company put the foundation of an effective accountability program in place?

The first step is to create a "culture of accountability." That starts with the appointment of an internal accountability champion - someone who can drive multiple business proficiencies, both analytical and financial, toward the common goal of better marketing performance. This is typically the CMO or senior VP-marketing.

Second, Marketers must ensure that clear, measurable goals are set, closely aligned with corporate goals and understood by all functions.

Third, Marketers need to work closely with Finance, especially in establishing metrics and methodologies for measuring marketing ROI. Also, there is a more widespread belief that marketing and finance should "speak with one voice" and "share common metrics."

Effective marketing measurement is a powerful tool when properly structured, but a severe hindrance when based on unclear goals or incomplete, inaccurate or outdated information. In determining marketing metrics and then using them to establish budgets, marketers should look at different factors and adopt the latest technology. Marketing's impact on sales is obviously the most useful measurement in establishing marketing budgets. Soft metrics of yesterday which were commonly used as benchmarks for accountability, such as consumer attitudes, are being replaced by precise performance indicators that help marketers track - in real time - how consumers interact with their campaigns and media.

Last but not least, Marketers need to be disciplined. Effective marketing accountability programs must include efficient and sustainable internal processes, determining who needs to be involved at each stage of planning and execution, and following up on the metrics that accurately track the effectiveness of marketing-program components.

There is an urgent need for marketers to push the accountability ground. By appointing an accountability champion, by creating and strengthening partnerships with finance and other analytics functions and by advocating for needed measurement quality and transparency standards, marketers will be increasingly effective in improving the productivity of their marketing supply chain and driving brand and business growth.

One challenge that remains - The industry needs an ever-improving effort across the digital landscape to adopt standardized, accurate and transparent measurement protocols.

Methods for Better Allocation of Marketing Resources

U.S.-based companies spent nearly US$ 300B on marketing and advertising in 2007 (Advertising Age), but few have figured out how to optimize marketing spending for profitability and revenue growth. Deciding how to allocate marketing resources is particularly difficult because decisions need to be made at many different levels—across countries, products, marketing mix elements, and different vehicles within elements of the mix (e.g., TV vs. the Internet for advertising). The emergence of new media such as online search and display advertising, video games, virtual worlds, social networking, online user-generated content, and word of mouth marketing is creating both new opportunities and challenges for companies.

Many marketers continue to rely on common methods for resource allocation. Examples are the use the “percentage-of-sales” rule for allocating their advertising budget, and in the sales force arena, companies typically constrain the ratio of their sales-force cost as a percentage of total sales. Another common approach is to arrive at the marketing budget based on a “bottom-up” method. A marketer may arrive at the advertising budget based on the desired level of brand awareness and the cost of various media vehicles to achieve this awareness. Similarly, in the pharmaceutical industry a firm may decide how many physicians it wants to reach and how frequently they should be contacted. This combination of reach and frequency determines the required size of the sales force.

While such allocation methods are reasonable, they also have limitations. For example, competitive parity (e.g., A/S ratios) is useful only if competitors are equal in strength, have similar objectives and are acting optimally. Further, the methods mentioned above are incomplete since they do not account for how markets respond to marketing actions.

A recent paper by HBS professors Sunil Gupta and Thomas J. Steenburgh highlights a two-stage process for marketing resource allocation. In stage one, a model of demand is estimated. This model empirically assesses the impact of marketing actions on consumer demand of a company's product. In stage two, estimates from the demand model are used as input in an optimization model that attempts to maximize profits. This stage takes into account costs as well as the firm’s objectives and constraints (e.g., minimum market share requirement).

Over the last several decades, marketing researchers and practitioners have adopted various methods and approaches that explicitly or implicitly follow these two stages. The authors categorized these approaches into a 3x3 matrix, which suggests three different approaches for stage-one demand estimation (econometric methods, experiments and decision calculus), and three different methods for stage-two economic impact analysis (descriptive, what-if and formal optimization approach). They then discuss pros and cons of these approaches and illustrate them through applications and case studies.

(Click here for the link to the full working paper text http://www.hbs.edu/research/pdf/08-069.pdf.)

This paper helps answer and provide a fresher perspective on long-standing questions like:

• How to allocate advertising dollars between new and existing products?
• How to allocate resources between advertising and trade or consumer promotions?
• What is the effectiveness of word-of-mouth communication (WOM)? How effective is WOM in generating sales? Who are better disseminators of WOM?
• How a salesperson should allocate effort across customers?
• How to allocate promotional dollars between new and existing customers?
• Which customers to acquire? Which existing customers to target?
• How to allocate marketing resources across all elements of the marketing mix?

What has been the impact of the proposed process for marketing resource allocation? The following are important and powerful conclusions that are not based on a single study or a single product category, but instead are generalizable results based on several studies, products and industries:

• The average advertising elasticity is almost twice as much for new products.
• TV advertising is more likely to work when there are accompanying changes in ad creative and media strategy.
• Frequent promotion of brands made it unnecessary for consumers to switch brands and made them more likely to stockpile when their favorite brand was on promotion.
• Increasing promotion depth or frequency decrease total brand profits.
• Increasing advertising had mixed effects on brand profitability.
• Very often, increasing the advertising or promotional spending bring about a less-than-proportional effect on profits, suggesting that the market is operating efficiently and that marketers in this product category are making decisions that are close to optimal.
• The impact of WOM created by non-customers had a much greater impact on sales than the WOM created by the firm’s loyal customers, suggesting that customers unconnected with the firm are likely to be less biased and more believable and therefore should be weighed more heavily in terms of their impact on WOM.
• An optimized sales calling system is better suited to repetitive sales situations vis-à-vis one-time sales occurrences. Salespersons should follow a calling pattern that maximizes some objective, yet at the same time any system should incorporate the salesperson’s knowledge and experience. This makes the salesperson think about tradeoffs that had not been previously considered, and fosters a clearer and more consistent thinking about the customer and a better communication between salespeople and their managers.
• An optimized customer acquisition and targeting system provides a better ordering of the prospects based on their estimated probability of acquisition, helping determine which prospects to target and their priority. Also, it suggests the optimal policy of focusing all on-going marketing and sales efforts on a few customers rather than on the entirety of the customer database.

Calculating the Marketing ROI for each marketing instrument is one way to take the emotion out of the budgeting process and help the firm allocate its marketing dollars more effectively. Marketing ROI calculations are interpreted as the estimated increase in revenue for a $1 increase in spending on a marketing instrument. Therefore, an ROI with a value less than one suggests that the incremental marketing spending would not pay for itself through increased sales.

These numbers should not be interpreted as one marketing instrument being more effective than another, per se, as the ROI values are also influenced by the amount of money being spent on the instrument. While ROI numbers do not tell us what the optimal spending levels are for each marketing instrument, firms are expected to shift their spending away from instruments that produce low ROI and toward investments that produce high ROI, keeping other organizational goals or strategic interests in mind.

Marketing has been, and continues to be, a combination of art and science. With the increasing availability of data and sophistication in methods, it is now possible to more judiciously allocate marketing resources.

Cause Marketing Should have a strong ROI

Many experts and business leaders agree – cause marketing not only should have a positive ROI, it should actually generate a better return than other marketing expenditures.

As a matter of fact, cause programs may pay off considerably better than most ad campaigns and promotion efforts, the theory behind it being that consumers' emotional connections in equating a cause with a brand may be stronger than the connections forged through brandsell advertising and promotional activity. When cause marketing is done the right way, with the right authenticity and the right tone, consumers reward it.

But, as with many cases, the impact of cause marketing often gets measured only in fuzzy terms, such as goodwill generated or millions of people helped, rather than the hard dollars returned for dollars spent that data marketers increasingly try to generate for other programs.

Cause marketing programs should be measured in both “hard” and “soft” results, quantitatively and qualitatively:

• increase baseline sales volume
• number of media impressions generated
• number of product donations and trial/conversion generated through it
• increase brand and program awareness
• drive favorable consumer attitude towards the brand and the causes associated with it.
• enhance brand and corporate image
• boost morale of employees and participating customers - feeling they are making a difference

Last but not least, beyond the goodwill generated in the U.S., product donations are developing markets for brands in countries where none existed before, and even helping break down trade barriers.

Examples of successful brand cause marketing programs are Campbell’s Labels for Education, General Mill’s Tops for Education and Crest’s Health Smiles 2010. Some examples of successful corporate cause marketing initiatives are Ronald McDonald House Charities - providing housing and care for sick children, P&Gs commitment to the Special Olympics, Häagen Dazs' support for efforts to curb the declining honeybee population, Sears’ Heroes at Home - refurbishing and remodeling army-family homes, and The Lexus Environmental Challenge - asking teens to create environmental programs.

Model to Measure Blogging ROI

In 2007 Forrester released a new research that offers a roadmap for measuring the risks vs. the potential return for starting a corporate weblog. The most frequently mentioned benefits of corporate blogging were: greater brand visibility in mainstream media on the Web, word of mouth, improved brand perception, instantaneous consumer feedback, increased sales efficiency and fewer "customer service-driven PR blowups."

When measuring impact, they advise using metrics that everyone is familiar with and then to associate each with a dollar value that quantifies the benefit. One idea that they outline is to estimate how much the company would have to pay to achieve a similar outcome.

How to quantify and assign value to the key benefits of blogging:

Benefit	Metric	Value (Cost of alternative)
Blog traffic	# of unique visitors, # of page views	cost of ad in similar content channel
Press mentions	# of blog-driven stories by offline press, web media or high-profile bloggers	cost of ads in same publication
Search engine positioning	% of search results in first three pages driven by blog	cost of SEO to improve ranking
Word of mouth	# of blog posts in a Technorati blog search, # of people commenting on blog.	cost of hiring a buzz agents
Savings on customer insight	# of useful business insights provided in blog comments	cost of focus group or other market research program
Reduced impact from negative user-generated content (UGC)	# of press stories mentioning UGC, change in NetPromoter score or other attitude metric post-UGC	historical change in sales associated with change in NetPromoter - type metric
Increased sales efficiency	# of clients/prospects who read the blog, # of salespeople who read blog	decrease in the cost of sales

The research firm also put together a model for assessing blog risk: a) identify the three things that could happen, b) model the scenario, and c) estimate its probability. This is very similar to preparing for a crisis in PR and good advice when venturing into a blog program.