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(originally published by Booz & Company)


Results-Driven Marketing: A Guide to Growth and Profits

We’ve come a long way since the 1950s — and so has our analytical toolkit. But tools get you only so far. Changing the marketing mind-set is much harder. Happily, there is now a growing awareness that analysis has a bigger part to play.

Arun Sinha is chief marketing officer of the $4 billion postal services company Pitney Bowes. One of a new breed of marketer who understands the role of analysis, he has experience that includes helping revitalize Colgate’s oral care brands; launching Ford’s Mercury Sable car; and spending 10 years at Philip Morris. When Mr. Sinha joined Pitney Bowes in 2002, he instigated the first branding exercise in the company’s history.

To rebrand Pitney Bowes, Mr. Sinha began by talking to 2,000 customers in eight countries and then to employees, salespeople, executives, and customers. “It wasn’t about the conventional wisdom of how to rebrand a company but about analysis,” he explained when we interviewed him. “And that’s how marketing has changed. It used to be more downstream — warm and fuzzy — now it is upstream analysis and relationships. Companies that succeed do these things well.”

The fact is that most companies haven’t done a lot of ROI marketing — or haven’t done it rigorously. The firms we talk to are experiencing one of two scenarios: Either the company has good data but it is locked away and not used to make decisions; or the company doesn’t have the data, a situation that is relatively easy to remedy. The good news is that the necessary data exists in almost every industry, or can be generated without too much pain. The less good news is that integrating that data into the decision-making process is hard work.

Those companies that start now will have an advantage. Our research suggests the payoff is worth the pain. In our experience, ROI marketing usually increases profitability by between 15 and 30 percent.

Real ROI
All marketing activities are amenable to ROI measurement and optimization: trade and consumer promotions, pricing, media advertising, product placements, and even product assortment and the content of sales calls. Brand marketing campaigns can be assessed on the basis of returns to the bottom line. We know because we’ve done it.

How do you make ROI marketing a reality? That’s the subject of Results-Driven Marketing: A Guide to Growth and Profits. Think of it as an evolutionary manifesto, if you will, or a scratching post for your brain. Chapter by chapter, it touches each of the eight links of the value chain:

Connecting with Markets
The first touchstone is, naturally, connecting with markets themselves — and today that means markets that are constantly evolving. In their chapter, “The Co-Creation Connection,” C.K. Prahalad, the Harvey C. Fruehauf Professor of Business Administration and professor of corporate strategy and international business at the Ross School of Business, University of Michigan, and coauthor Venkatram Ramaswamy challenge the way we think about value creation.

Companies, they explain, spent the 20th century managing efficiencies to create products and services that they thought consumers wanted. They must spend the 21st century managing consumer experiences. This is because we are moving to a new form of value creation, where value is not created in isolation by the firm and exchanged with customers, but instead is co-created by the consumers and the company acting together.

“Companies have grown used to viewing consumers as passive target markets for what they create,” write Professors Prahalad and Ramaswamy. But markets are not passive; “they are now becoming more like forums…. In the ‘market as a forum,’ consumers actively define value the way they see value — as experiences — and push companies to see it the same way.”

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