ARF_Menon_Stephens_LongTermROI_March2008

Mark Stephens Senior Manager, Marketing Effectiveness

Quantifying the Long term Impact of Marketing

Satya MenonVP, MARKETING SCIENCE

Beyond Lip Service

RE:THINK / THE 54TH ARF ANNUAL CONFERENCE + EXPO

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Which Marketing Strategy Will Ultimately Lead to Greater

Sales & Profitability?


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Long term Brand Building Campaign?

» Embed Video: Moto RAZR Brand TV Ad


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Or, Short term Promotions Focused Marketing?

» Newspaper ad


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» Marketers in publicly held companies face the paradox of myopia. They have to manage to short term results (Wall Street, etc.) often to the detriment of long term strategy and success.

» In this regard, the pressure is to rely heavily on short term marketing activities (price promotions, in store media etc.,) that appear to deliver “tangible” success. The paradox is that while these activities may provide a short lived boost to sales, they often cannot and do not contribute to long term brand growth and may be even detrimental to a brand’s health in the long term.

“If brands are built over years, why are they managed over quarters?”

Len Lodish, Wharton School, & Carl F. Mela, Duke University


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» The fact is that long term effects of marketing activities are very real, tangible, and impacting of the bottom line. Companies ignore the long term impact of their action or inaction at their own peril

» While the opportunity costs may seem invisible in the short term, brand building investments (e.g., brand advertising) can pay huge dividends in the longer term. Further, disinvestment in these strategies erodes sales and jeopardize success in the short and long term

“In the long term we are all dead”John Maynard Keynes


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Outline

A Case Study in Assessing Long Term Impact of Advertising» Consequences of Brand Advertising on Brand Health» Identifying Right Levers for Long Term Brand Health» Impact of Brand Health on Current and Future Sales

Brand Health as a Telescope to View Long Term


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» Short term» Variable component

sales

» Long term» Fixed component sales» Portfolio wide

Marketing Influences Sales by Transforming Consumer Brand Perceptions, Driving Short & Long Term Behavior


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gThe Brand Health Concept Encapsulates the Link Between Consumer Brand Perceptions & Brand Behavior

BEHAVIORAL» Consumer actions, behavioral

predisposition toward brand

ATTITUDINAL» Consumer feelings about

brand, rational and emotional motivators of choice

Brand Consumer

Equity

Measurement based upon perceptions of individual consumers and the perceived value they place

on the brand


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0

5

10

15

20

25

30

Brand HealthScore

Sales Share14%16%

13%15%

0

5

10

15

20

25

30

4 4 4 4 4 4 4 4 4 5 5 5 5 5 5 5 5 5 5 5 5 6 6

Brand HealthScore

Sales Share

9%

14%15% 15%

0

5

10

15

20

25

30

35

5 5 5

27%24%

32% 33%

Brand HealthScore

Sales Share

0

5

10

15

20

25

30

Brand HealthScore

Sales Share

26%24%

16%18%

Brand A Brand B

Brand D Brand C

Empirical Evidence Demonstrated that Within the Category, Consumer Brand Perceptions or Brand Health is a Lead Sales Indicator


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gBut in Focusing on Short Term, Marketers are Managing to the Tip of the Ice Berg, Jeopardizing Success

» Incremental brand health reflects the short term cache of the brand

Signifies: “new” news; product innovation, deals, promotions and call to actionReflects propensity to act, to investigate, to shop, to buyAligns more closely with specific unit or deal-driven sales

» Base brand health reflects the long term equity of the brand

Signifies sales attributable to reputation, past experience, quality Reflects propensity to recommend, to repurchase, to be a loyal customerAligns more closely with portfolio wide salesFor mature brands, the Base accounts for a greater portion of brand success

» Base brand health signifies the future momentum of the brand and is an evolving construct

Must be modeled as such


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Highly desirable brands

(e.g. BMW, Mercedes-Benz)

Established brands with high loyalty; less promoted

categories (e.g. Toyota Camry,

Yoplait yogurt)

Variety-seeking or repertoire categories

(e.g. restaurants, hotels)

Brands under threat from new entrants,

high level of innovation in

category (e.g. air fresheners)

Highly seasonal sales

(e.g. cranberry sauce,

digital cameras)

High switching costs, inertia

(e.g. refills, retail supermarkets,

internet services)

Niche brands with narrow appeal

(e.g. Harley Davidson,

Abercrombie & Fitch, V8 Splash)

New variants (e.g. hybrid vehicles, yogurt

smoothies)

Lesser known brand extensions

(e.g. VW Touareg, Sunkist juice,)

Highly competitive promotions

(e.g. Coke vs. Pepsi)

Incremental

Emerging

30%

70%

Defender

40%

60%

Cult

80%

20%

Weak

50%

50%

The Fact is that Healthier Brands are Built on a Reservoir of Base Brand Sales

Base

Olympic

10%

90%


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gMotorola is an Established Brand with a Healthy Cushion of Base Sales

Incremental

7%

93%

Base


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Summary

» Brand health indicators such as Awareness, Imagery & Behavioral predispositions are not abstract metrics

They are integrally linked to salesCompanies ignore them at their own peril

» Brand Health will reflect the consequences of short and long term marketing actions by influencing consumer perceptions differently

Short and long term components of Brand Health will impact sales differently


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To What Extent Does Brand Advertising Impact Changes

in Brand Health?


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TotalAwareness

FamiliarityT2B

FavorabilityT2B

PurchaseIntent

T2B

Total awarenessProduct Favorability (Top 2 Box)Purchase intent (Top 2 Box) Product Familiarity (Top 2 Box)Unaided model awareness

2.5 7.5 12.5 17.52.57.512.517.5

29%

10%

18%

11%

Motorola Marketing has a Demonstrable Impact on Brand Health Metrics, Leading to Successful Product Launches

MOTO PRODUCT A

TIME

Product Purchase Funnel Metrics

Marketing CampaignPRE PRE POSTPOST

PRE PRE POSTPOST

PRE PRE POSTPOST

PRE PRE POSTPOST

Pre-Post Delta


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gMotorola’s Incremental Brand Health Sustained In The Latter Period, Recovering From Historical Ups & Downs

0

5

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Source

Incremental 1*

Incremental 2*

Base

Product A Product B Product C Product D Product E

*Incremental 1 and 2 refer to short term contributions from various media investments

Marketing Contributions to Brand Health


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gDownturns In Brand Health Were Historically Driven By Declining Media SOV

» Not only did Motorola fail to shore up incremental brand health, its base actually softened during this period

Source

Incremental 1

Incremental 2

Base

Moto TV

MotorolaNewspaper

CarrierTV

CarrierNewspaper

Product A Product B

Carrier TV and Newspaper SOV declining entire

period

Brand TV SOV declining;

Promotional Newspaper

increasing, but not driving Brand

Health


Brand Media Share of Voice

Carrier Media Share of Voice


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gMore Recently, Increased Investment in Brand Media Buttressed Brand Health Growth

Product CSource

Incremental 1

Incremental 2

Base


Brand Media Share of Voice

Carrier Media Share of Voice

CarrierTV

CarrierNewspaper

Moto TV

MotoNewspaper

Carrier TV and Carrier

Newspaper SOV increasing entire

period

Moto TV and Moto Newspaper SOV steady majority of

time period


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gTo Build and Sustain Brand Over the Long Term, Consistently Target Key Consumer Demand Drivers that Feed Long Term Brand Health

Source: Path Modeling of Brand Perceptions

Strengthen Ownership of Core Function via

Magazine Ads

Core Function

.22

Brand Magazine .28Strength of Brand

Preference

Brand Health (Base)

.26

.21

.28

Carrier TV

Brand TV

Imagery A

Imagery B

.37

.22.41

.41

Imagery C Imagery DEmotional appeal

.55

.72.28 .83

Motorola has ceded the Imagery A

message to carrier media

Imagery D is Pivotal in Driving Long Term

Brand Health


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Lessons

» Brand Health responds to both short term and long term marketing tactics

» Consistent support with brand building advertising leads to growth in long term Brand Health, …

» But, momentum gained from such brand advertising support is lost when marketing support is withdrawn for extended periods


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Why Has Motorola Pursued A More Consistent Media Investment Strategy Balancing Short & Long Term Goals?


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gPreviously, Media Investment Strategy Was Very Product Focused But This Led To A “Running In Place Phenomenon”

Campaign A Campaign B Campaign C Campaign D Campaign EM

otor

ola

Sha

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ealth


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gBut Analysis Demonstrated that Moto’s Branded Marketing Investments Yielded Double Dividends: Base as Well as Incremental Sales

» While Incremental Brand Health influences sales in the short term, Base Brand Health fuels future sales

Time After Initial Investment

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Sale

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$X MM Brand TV

36 48

136100

133 42

4 Weeks 1 Quarter 2 Quarters 3 Quarters 4Quarters

Sales Impact from Change in Incremental and Base Brand Health

IncrementalBase


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gFurther, Failure To Invest In Branded Marketing Had A Substantial & Quantifiable Opportunity Cost

» While Incremental Brand Health influences sales in the short term, Base Brand Health fuels future sales

» If investments are not made ahead of time, erosion in Base Brand Health can exert a drag on Short term Sales

Time After Initial Investment

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Sale

s (In

dexe

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$X MM Brand TV

36 48

136100

133 42

4 Weeks 1 Quarter 2 Quarters 3 Quarters 4Quarters

Sales Impact from Change in Incremental and Base Brand Health

IncrementalBaseOpportunity loss If no brand advertising in prior periods


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gAnalysis Demonstrated That A More Consistent Brand Investment Strategy Would Be Far More Lucrative

= BRAND TV INVESTMENT

NO NEW INVESTMENT

One Time Consistent

ACCUMULATED SALES

NO NEW INVESTMENT

$Xmm

$0.2Xmm $0.2Xmm $0.2Xmm $0.2Xmm $0.2Xmm

Sales from Brand Health Change/Quarter

Sales from Brand Health Change/Quarter

IncrementalBase


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gWe Quantified the Opportunity Cost of this Quarter Focused Planning: Over 4.2 MM Units Sales Per Year!

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ealth

(pts

)

» For the same budget, with a sustained investment strategy and SOV, Motorola would have achieved higher brand health and greater sales in this period

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($m

)Im

pact

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Bra

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ales

(uni

ts)


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Motorola Marketing Now Endeavors To Pursue A More Consistent Media

Investment Strategy That Balances Both Short & Long Term Goals


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Lessons

» Brand health and sales are highly correlatedStrategies that support one will support the other

» Brand health impacts both short and long term sales» Long term sales gains dwarf the short term sales gains

resulting from brand health changes

» When designing media strategy to achieve sales targets, always consider both the short and long term impact of marketing as this is the most efficient way to achieve targets


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gMarketers Must Move Beyond Quarter to Quarter Planning in Order to Achieve the Most Sales

» Long term consequences of advertising are sizeable

» Opportunity costs of ignoring brand building strategies are huge and quantifiable

ARF_Menon_Stephens_LongTermROI_March2008

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