Monday, November 15, 2015
MARKETING MATH MATTERS
AMP (BO 1 + BO 2 + BO 3 +….) = AVP
Maybe you’ve heard some professors describe marketing as a combination of both “art and science.” We buy that—as a simple way to make clear that marketing is neither pure creativity, nor pure analysis, but rather a balanced blend of both. Said another way, marketing definitely values ideas, ideas, ideas…but only those ideas that add value to the brand, to the business, to the Company. To this end, it’s simply not enough, then, to demand “Management By Objective” (the famous “MBO”); we must demand “Marketing By Objective” as well.
Demanding Marketing By Objective from the Company’s marketing function assumes a couple of basic givens: (1) for every action that the marketer proposes and executes, there is a pre-determined customer/consumer behavior that is expected to result from that action; and (2) that pre-determined behavior is calculable, as in mathematically measurable…for determining its return on investment.
You would think that, as basic as these two givens are (didn’t we learn them in our Marketing 101 courses?), Marketing By Objective would be pervasive among marketing departments. But it’s not. Not even close. In fact, what’s more the norm across many client industries and companies with whom we’ve worked, are the following:
1) Fielding marketing actions in pursuit of non-behaviors;
2) Linking tactical initiatives to business objectives (like Volume,
Profit, and Market Share)—without the essential computation of behaviors in-between the two;
3) Being resigned to the belief that funds and methods are simply
not available to measure marketing-action ROI anyway.
Such a “norm” belies the notion that “marketing math matters.” But it sure does—a lot. So, forgive us for going back yet again to our earliest marketing days to review the fundamental matters of marketing math.
1. What is and is not a customer/consumer behavior. For the one-millionth time, awareness is not a behavior; it’s state or condition of mind. Yet it continues to rank among the most commonly cited outcomes for marketing spending. Generating a certain level of brand awareness may be helpful, even necessary, to get a target customer or consumer to act. But by itself—unlinked to a specific behavior such as adoption, switching, increasing frequency, trading up, or sustaining a level of loyalty—it cannot be expected to deliver a single sale. Marketing By Objective, then, demands that each “marketing mix” element the brand will spend behind (promotion, merchandising, advertising, social media, and so on) is designed to incite one of these kinds of behaviors.
2. Well-crafted Annual Marketing Plans are all about optimizing the marketing mix: setting the right behaviors with the right elements. No brand’s marketing plan that we’ve ever seen has required only a single behavior—like switching from competitors’ brands—for every one of the brand’s marketing mix elements. Rather, what’s commonly seen is that a brand will aim for switching with, say, its advertising; aim for increased frequency with its promotion and merchandising; and aim for adoption (bringing in new category users) with its innovation via line extensions or packaging formats. Again, Marketing By Objective means spelling each of these behaviors out, including the amount or degree of behavior change expected from each.
3. What matters most is discerning the right behavior. A marketer may be looking to open a new category--with a totally new kind of beverage, for example. The first of its kind, so to speak. Wanting to succeed with Marketing By Objective, the marketer sets a certain level of adoption as his behavior for this innovation…after all, he needs to bring in new users to a new category. He wants his communications to “educate” potential new users to gain this adoption. But wait. Is the new beverage to be additive or adjunctive to the target consumer’s current beverage set; or is it more likely to be drunk in lieu of one or more of the consumer’s current beverage set? The distinction matters: if virtually all the new beverage volume will be added to what the consumer is currently drinking, education-messaging is needed; but if the volume will come largely from other beverages that the consumer will, at least partially give up, then switching-messaging is needed. And these two kinds of messages do not go well together.
4. What also matters most is getting to the end behavior. Marketers will often make the case for Trial. They stipulate that achieving a certain level of trial is a worthwhile behavior for their promotion, merchandising, or advertising actions. But trial is at best a one-time act. What do we expect or need to have happen after that trial? Presumably, an effective, quality trial leads to some level of on-going usage—usually either via adoption (of a totally additive product) or via switching from some other product. It’s similar to the awareness dilemma: getting a consumer or customer to try something one time is of virtually no value without the end, on-going behavior (the volume!) that follows it.
5. The mathematical composite of all the brand’s behaviors adds to the brand’s annual volume forecast. Now we get to the real math that matters. There’s no simpler way to say it: any Annual Marketing Plan worth considering and approving has got to “do the math.” The plan has to show (a) what marketing mix elements are to be used; (b) what specific behavior each element aims to incite; (c) the degree or amount of that behavior to be delivered; (d) what that degree translates to in actual “cases” of product or sales volume; and (e) that the sum of all of these marketing mix element behavior “cases” equals the Annual Volume Forecast. Or, as we short-handed in the math equation up-front:
AMP (BO 1 + BO 2 + BO 3…) = AVF
Annual Marketing Plan (Behavior Objective 1 + 2 + 3 etc.) =
Annual Volume Forecast
If your Marketing Organization is already “making marketing matter” by consistently doing the math for marketing actions, congratulations! And, kudos to your Senior Management, who obviously insist upon inspecting what they expect from marketing resources. But if your organization is not yet there, contact us. We conduct “Marketing By Objective” interactive workshops for a number of our clients, and we would be proud to customize such a program for your team.
Richard Czerniawski & Mike Maloney
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