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Published: 12/17/03
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When Art Meets Science: The Challenge of ROI Marketing

“To truly measure marketing effectiveness, companies must engage in a new way of thinking,” says Sharat K. Mathur, a principal in Booz Allen’s Chicago office, who specializes in customer and business strategy, pricing and trade promotions as well as marketing effectiveness. “The ones that are most successful are those that accept the need for a comprehensive transformation of the way they go to market.” This involves not only more sophisticated analytics and systems, but also aligning marketing and promotion processes (e.g., planning and executing promotions, post-promotion analysis, target setting and funding, etc.) around the idea of ROI marketing. Finally, the organization’s tasks and incentives need to be aligned around the idea of  “planning for profit”.

Mathur emphasizes that companies can’t overhaul themselves overnight. ROI Marketing is a major change program, and it takes time. “It is important that this program is driven by senior management, and there is a commitment to making it happen at every level in the organization,” he says.

It is also important to keep in mind that ROI marketing does not attempt to wring the art out of marketing; that would be both unfair and counterproductive, since creativity is essential to effective marketing. Rather, its goal is to bring measurable data to bear on areas that in the past were rarely measured. Within the marketing discipline ROI marketing can be applied across the entire spectrum of marketing techniques — trade and consumer promotions, advertising, pricing and product placements.

“A lot of data have been available to marketing people for a long time, but today more data are available than ever before and we have better computing horsepower,” says Leslie H. Moeller, a vice president in Booz Allen’s Cleveland office, who advises corporations on growth strategy, in particular consumer-packaged goods and retailing companies. “You put those factors together and the result empowers a much fuller understanding of marketing capabilities.”

What follows are examples of ROI marketing applications in the automotive, telecommunications, consumer-packaged goods, electronics retailing, and travel and entertainment industries. Collectively these examples illustrate the broad applicability of ROI marketing across industries, how it can overturn common marketing assumptions, and how it provides new insights into which marketing efforts are most beneficial.

The Auto Industry
A Booz Allen team in the automotive area — Peter Soliman, a partner in Booz Allen’s Düsseldorf office, along with New York based partner Scott Corwin and Paris-based senior associate Rich Parkin — are helping a major automobile manufacturer pinpoint the specific marketing tactics that will bring customers into showrooms and give them strong incentives to buy cars. Soliman says an ROI approach to marketing has allowed this manufacturer to tailor its efforts to specific objectives and correct weaknesses in the marketing process at different points in what he calls the “purchase funnel” — which opens with the consumer’s awareness of the product, followed by consideration of the product, the intent to purchase the product and, finally, the actual transaction. This particular manufacturer, call it European Auto, looks at all its marketing campaigns at the end of each quarter using the “funnel” perspective to discern what has worked, and what could work better. If consumers are aware of a car but are not considering buying it, European Auto can make adjustments to a campaign to strengthen its influence on purchasing. If a given campaign works in Germany, the company can share that experience with its units in other countries, who will then try the same initiatives and pass along their experience to other parts of the corporation.

Once customers get into a showroom, they are more apt to buy a car if the dealer is willing to give them incentives that help them defray the cost of owning the vehicle. “The deal-closer,” says Soliman, “might be two years’ worth of free gasoline, an offer by the dealer to pay the valued-added tax (VAT) or registration tax, or an offer of free auto insurance for a period of time. In one instance, dealers offered to pay the VAT by using the slogan, ‘get back at your government.’

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