Thursday, April 27, 2006

Increase Brand Measurement Frequency for Relevancy

Brand perceptions aren’t static — consumer loyalties can last over a lifetime or end in a few short days. And that often runs counter to a company’s own brand perception, which can remain pointlessly unchanged. Most companies, even many with huge research budgets, don’t carefully monitor the clarity, or lack of clarity, their brand has with customers and prospects at any given point in time. A brand value proposition that made a lot of sense under one set of industry circumstances may degrade to irrelevance and become a commodity position if it stays too long in one place.

Most often, brand attributes are monitored in large-scale tracking studies conducted in waves three, six, or 12 months apart. If your category evolves faster than the frequency of your tracking studies, these periodic reads may provide irrelevant historical information and present a picture that bears little resemblance to today’s reality — especially when you consider that it often takes four to six weeks from the end of survey fielding until the report gets on your desk.

Many organizations are today migrating towards “continuous” brand tracking, with smaller samples fielded each week or month that are then read in the aggregate over a rolling six, eight, or 12 weeks. While a bit more expensive, this approach can repeatedly check the temperature of customers and prospects to ensure you are maintaining a healthy relationship, in addition to potentially measuring the impacts of marketing stimulus programs on brand attributes with greater reliability.

The bottom line is you need to clearly know what your brand is and what it means to the target customer. If you don’t, you are prone to serious over- or underestimations of your brand strength. Without an effective brand scorecard, you might not have an accurate picture of where your brand stands or where it’s headed. With one, you have no excuses not to.

Thursday, April 20, 2006

Market Knowledge: Part 2 - Smarts Alone Don’t Count for Much

In my last entry, I discussed research conducted at Case Western Reserve University and published in the Journal of Marketing that explored how a company’s market knowledge and strategic actions drive its innovation and performance over time. I have one more point to make before we leave this study.

Knowledge is interpreted information — beliefs, understandings, commitments, etc. We create meaning by distinguishing and valuing information.

In the research, decision makers’ knowledge about customer preferences was assessed through a series of questions that they answered immediately after they had made decisions but before they had seen the performance outcomes. They marked the location of various customer segments' ideal points on a perceptual map. The accuracy of their knowledge was judged by the distance between the points they specified on the map and the ideal points for each customer segment, provided by a simulation tool.

The results confirmed that if there is little shared knowledge in a firm, an increase in an individual’s overall market knowledge has no impact on innovation effort. On the flip side, more dynamic shared knowledge environments act as catalysts for higher individual levels of market knowledge, generating significantly greater levels of innovation.

The results also suggest that innovation effort takes shape over time under the influence of opposing forces: market knowledge diffusion, which propels innovation, and a “complacency” with past performance, which hinders it.

For the whole story, check out "Actualizing Innovation Effort: The Impact of Market Knowledge Diffusion in a Dynamic System of Competition" by Detelina Marinova from the July 2004 Journal of Marketing at

Thursday, April 13, 2006

Market Knowledge: Part 1 - Use It or Lose It

Companies act on the basis of market knowledge: the knowledge of customers and competitors as garnered by individual employees. An organization's ability to recognize the value of new information, assimilate it, and use it strategically accounts for its success in performance and innovation.

Research conducted at Case Western Reserve University and published in the Journal of Marketing explored how a company’s market knowledge and strategic actions drive its innovation and performance over time.

Knowledge for Improvement ... and Apathy

Intelligence about the market is necessary to satisfy customers better than the competition can. However, researchers discovered that when decision makers find a useful nugget of knowledge, they tend to rely on it and avoid updating it to accommodate new developments. In many instances, it's counterintuitive, let alone time-consuming, resource-zapping, etc., to update knowledge that works.

Similarly, decision makers may resist reconsidering their individual market knowledge after communicating with others in the organization. This is particularly troublesome when you consider that new and improved products get to market only by swapping information and surfacing new know-how.

They also found that changes in the quantity of market knowledge are likely to intensify the need to adjust marketing and general business strategy. Marketers may say, "Whoa, we don’t have that data anymore? We'd better make some changes." Or they may draw inward: "We have no new data. We'd better stick with our current product line-up and marketing strategy. Anything new would be a shot in the dark, and we certainly don't want to risk whatever good we have going now." Worse yet, they may delight in a data deluge and push to use the new information somehow to a competitive advantage.

More in Part 2 Above

Monday, April 03, 2006

Is ROI Misleadingly Simple?

In a word, perhaps.
The simple formula for calculating ROI is:

ROI = NPV of Incremental Profits (Incremental Revenue – Expenses)
Initial Expenses

Where “NPV” is the net present value of a series of profits realized over a period of time, discounted back to current dollars.

Many marketers and academics have denounced the use of an ROI formula in measuring marketing effectiveness as “too limiting” or possibly “misleading.” I agree. Used in the wrong way or poorly manipulated, ROI calculations can be as imprecise and subject to misinterpretation as any other statistical or financial assessment tool. (Check out Tim Ambler’s opinion on the subject.). And pursuing alternatives that offer the highest ROI can often expose you to significant risks of short-sighted resource allocation.

However, when used properly in the context of driving more profit — not just getting the highest possible ROI score — ROI measurement is a reasonable way to standardize the process of gauging the relative value of one marketing investment against another.

If every marketing investment is held to the standard of ultimately creating some profitable change in customer or market behavior, then we can successfully compare all proposed investments using a standardized assessment process to identify those offering the greatest potential for driving profits. Sure, we might need to make some assumptions, but if we place some significant effort on trying to anticipate the intended behavior changes upfront in the planning stages, we can often identify ways to better structure our investments to help promote reliable measurement of results. This in turn helps us see where our assumptions were accurate, where they were less so, and why. Over time, our assumptions get better and better in planning our investments and achieving maximum return.

A consistent framework for assessing marketing returns allows marketing executives to:
  • identify places where spending is most effective;
  • correlate the individual and collective impact of marketing initiatives on prospect or customer behaviors, then link those behaviors to the financial value drivers;
  • reallocate people or dollar resources towards greater impact — for example, this can include taking an underperforming initiative and retargeting it toward a high-value segment, eliminating unprofitable channel gaps and addressing identified leaks in the funnel progression; and
  • extend campaign-level profitability to customer-level profitability across multiple acquisition, retention, and cross-sell campaigns that will optimize customer value.

Just be careful not to get trapped into believing that the ROI calculation gives you this insight. It's the process of asking the right questions and applying the best measures that generates insight. ROI is only one possible measure. Others are discussed in other posts in this blog.