Tuesday, February 15, 2011

A Simple Formula for Success

A reporter recently asked me what I’d learned across several hundred marketing measurement projects in the past 10 years. Rather than spew out the usual rash of BS, I asked if I could call her back with a thoughtful answer. Here’s what I came up with:
For those of you not into algebra, the meaning is simple:

Success is the sum of all your experience finding insights, transforming them into action, and trying to create more value than the resources you consume in the process. And then all this is raised to the power of perception.

It’s not all too difficult to find new insights in the search for improved marketing effectiveness and efficiency. There is still quite a bit of wasteful spending going on, and the dynamic marketplace tends to ensure the continuation of that opportunity. The hard part though is translating those insight opportunities into actions that companies (read: people) can actually implement. Tricky.

And if that wasn’t difficult enough, we’re all often challenged to do it with toothpicks, a roll-on anti-perspirant, and a pack of bubble gum. Who am I, MacGyver? Seriously, you’re going to spend all that money on advertising and trade shows and then want to measure it for .000000000005% of total spend? Not gonna happen. But if we’re smart, we can demonstrate the potential returns associated with effective measurement, and build the data streams over time that break the cycle of insanity. Ironic though that companies building competitive advantage on deployment of strategic resources so often see performance measurement and continuous improvement as an expense. Fortunately, done well, the value of measurement always exceeds cost.

And finally, the power of perception. The quality of our measurement matters little compared to the perception of the quality. We can inspire an organization to action with bad measurement if we package it well enough. Obviously, that’s not our goal. But the inverse trips up more measurement projects than I can begin to remember – even GREAT measurement technique is worthless unless we get people bought into the process long BEFORE the numbers hit the charts. There is NO report pretty enough and there are NO facts compelling enough to move a seasoned executive off their experientially-derived position IF they don’t WANT to be moved. Our job in measurement is to lay the groundwork for them to be willing to move. Otherwise, we’re teaching pigs to sing - which just wastes our time and tends to annoy the pigs.

So taken together, this experience can be described in this simple formula. Plug in your numbers and see how well positioned you are to succeed.
Pat LaPointe is Managing Editor at MarketingNPV – specialists in measuring the payback on marketing investments, and publishers of MarketingNPV Journal.

Tuesday, February 01, 2011

Measuring Corporate Reputation Without Putting your Head on the Chopping Block

Like brand equity, corporate reputation is an intangible asset that has some very tangible ramifications. It has the power to affect every aspect of the business, including enhancing or destroying shareholder value. But when it comes to tracking and measuring the value of investments we make in enhancing reputation, it seems surveys of investor and analyst attitudes are all that makes it onto our Marketing Dashboard (since many have found promising their CEO that stock prices will rise in response to a proposed investment in corporate reputation to be a career-limiting move).

So how do you measure the payback on the next investment you might make in seeking to enhance that reputation? Start by developing clear ideas of who you’re trying to influence and what you’re specifically trying to accomplish before you begin.

Here’s an example…

Retail investments giant Company A invests $2 million in a public relations campaign in a mid-sized market centered around a donation to revitalize youth sports facilities, receiving in return naming rights on a prominent little league complex. Its rationale for making this gesture is to enhance the image of the company as a community minded, local organization, and to associate its brand with the youth and vitality of sports.

Company A measures the effectiveness of its investment in terms of the change in attitudes amongst the local customer, prospect, employee, agent, legislator, and vendor constituent groups. It develops elaborate surveys and measures the pre-post differential in the affected market versus nearby control markets where there are no such sponsorships. It also measures the number and nature of media “hits” received in the local press and calculates the value of that exposure if it were paid at rate card for each media.

So when all these indicators respond positively, Company A tells the CEO that “The campaign was a huge success! The attitudinal shifts are through the roof. And we generated over $2.5 million in free media exposure, giving us an ROI of 25% on the media value alone!”

Competitor Company B makes a similar investment in a different market, but does so against the stated goals of
  • increasing the number of “power agents” (those doing more than $10 million annually in sales) from 38 to 54;
  • improving employee retention in their local call centers from 70% to 85%; and
  • getting a local ballot initiative on the legislative calendar to create greater flexibility for the introduction of new products.

Company B’s strategy is to achieve the objectives above by influencing the agents to carry more of its products, giving employees more reasons to feel pride in their association with the company, and providing legislators with a basis for supporting legislation that some may consider controversial.

Company B measures shifts in key brand attributes amongst the key audiences. And it measures the amount and nature of media coverage it receives in the local press. But the firm also measures the number of agent-to-power-agent migrations, employee retention rates, and the week-by-week progress of its target legislation. So when it comes time to report back to the Board on the campaign effectiveness, they can report that:

  1. The firm increased the number of Power Agents to 57, which has a forecasted net present value of $1.4 million;
  2. Employee retention fell slightly short of the 85% goal at 82%, but the expected savings in recruiting and re-training are still worth $1.8 million NPV based on employee tenure and productivity; and
  3. The ballot initiative is in the right committee of the state assembly and a straw poll of legislators suggests a 65% likelihood of passage within the next six months, which would translate into a probability adjusted $4.2 million in incremental net profits from new-product sales.

Bottom line: the managers in Company B can report to shareholders that not only have they improved the attitudes among key audiences, but the investment they made in enhancing the company’s reputation has achieved short-term payback of $3.2 million, for an ROI of 60%, plus the prospect of a longer-term payback of an additional $4.2 million. And that’s before the value of any incremental media exposure is taken into account – which the sophisticated investors know is not really worth the rate-card value of the exposure, unless the company had intentionally planned to forego other advertising or communications expenses in achieving it.

So what did Company B do differently than Company A? It set expectations for the investment it was making in more financial, tangible terms, and then developed the framework for measurement in terms of the expected economic behaviors it intended to create. Sure, it included the attitudinal shift surveys to diagnose the effectiveness and consistency of its message. It just didn’t stop there.

The learnings: push past attitudes to measure the real value of corporate reputation in terms that CEOs can understand.
Pat LaPointe is Managing Partner at MarketingNPV – specialists in measuring the payback on marketing investments, and publishers of MarketingNPV Journal.