Wednesday, November 17, 2010


One of the most popular measures of relative marketing effectiveness continues to be monitoring share-of-voice (SOV) – a metric based on your total marketing/advertising spend as a percentage of the total spend in your category. Some even go a step further and look at an index of SOV to SOM (share of market). The argument for doing so is that if your SOV is less than your SOM, you are at risk of losing share. Presumably, the converse is then also true – that if your SOV is greater than SOM, you should expect to gain share.

For example, if your measured ad spend was $20MM in a category where total measured spend was $200MM, your SOV would be 10%. If your market share was 13%, you might argue that you are underspending on an SOV/SOM basis, and that more funding was required to maintain share. You may be right, but not for the reasons you cite. And even more importantly, more marketing credibility has been squandered on this simple argument than perhaps any other single metric over the past 20 years.

CEOs and CFOs see right through the SOV argument and regularly tear it to shreds in budget meetings. They tend to outright reject the premise that SOV drives SOM absent any clear data to the contrary.

If you understand the mindset of the CEO and CFO, you know they are very able to envision scenarios where spending even less money on marketing than our competitors could be beneficial if A) the existing core value proposition is better than the competitors’ and customers know it; B) the money would be better spent improving the core value proposition than investing in efforts to “sell” the current inadequate version; or C) the shareholders would benefit more by dropping the savings to the bottom line. Although not often stated, these intuitive expectations are almost always fueled by concerns about the relative effectiveness of the current marketing/advertising investments to begin with.

In this environment, the marketer who enters the meeting with an argument to raise spending levels to achieve some SOV target is actually heard to be saying “Johnny has more money so I want more”. And as soon as that impression is created, you might as well polish your resume because your influence over the marketing budget is now far smaller than even your most conservative hopes.

Nevertheless, relative spend pressure in the marketplace can and often is shown to have an impact on how market share migrates. So how do you bridge this gap credibly?

First, understand the difference between SOV and “Effective SOV” (ESOV). ESOV begins with relative spend, but then adjusts it up or down based on relative strength of your core value proposition and/or message execution. Taking our earlier example, if your spend was $20MM in a $200MM spend category, you would index your 10% SOV by looking at the relative stength of your ad copy execution. If copy testing told you your message was at parity with your competitors, your ESOV would equal SOV at 10%. But if your copy was 30% stronger or weaker than competitors, your ESOV could be 7% (10%*(1-.3)) or 13% (10%*(1+.3)). In other words, you may in fact need to spend more money to maintain an effective level of marketing pressure – even more than you originally believed. Alternatively, you may be benefitting from a strong message and providing an effectiveness dividend to shareholders by requiring less ad spend due to your very stong message.

Calculating ESOV by using ad effectiveness is good, but using relative strength of your value proposition, (the perceptions of the appeal of your product/service vs. your competitor’s before
taking ad execution into account), is even more encapsulating of the impact of marketing spend.

CEOs and CFOs see ESOV as a legitimate analyis of relative strengths and weaknesses. Consequently, using ESOV doesn’t cost you any credibility points. But it doesn’t unilaterally gain you any unless you are simultaneously able to explain the impact of ESOV on profitable share shifting. It’s one thing to know what your ESOV is as a starting point, but quite a bit more impressive if you know how a projected change in ESOV would translate into incremental revenue and margin flows.

There are several ways to determine the incremental impact of ESOV on financial outcomes. The first is with classic marketing mix models, which can help you better understand the historical relationship. If the category dynamics are relatively stable, this might be sufficient to project the outcomes into the future.

If you either cannot implement mix models OR are in a very dynamic category where the past is not a good predictor of the future, then you can use a combination of analytical and choice-options research techniques studying both your own and your competitor’s advertising to better understand the relative behavioral impact of each.

Neither method is perfect. But by triangulating on estimates of the relationship between ESOV and share, then consistently measuring it periodically to refine your understanding, you ensure that the next budget meeting will be a much more intelligent and fact-based discussion where both you and your recommendations come out alive and healthy.
Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on measuring and improving the payback on marketing investments, and publishers of MarketingNPV Journal available online free at

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