strategy+business is published by the global management consulting firm Booz & Company
 
or, sign in with:
strategy and business


Click here to list all strategy+business/Knowledge@Wharton articles.

Published: 12/17/03
Page 1 2 3 4 5 6 7 All
 

When Art Meets Science: The Challenge of ROI Marketing

“The closer you get to the bottom of the funnel, when the consumer is in the showroom, it’s price that gets him or her to buy,” according to Soliman. “But when I say price I mean price in the broadest sense. Taxes are a big issue. We’ve found that consumers value things that reduce the total cost of ownership. Consumers are much less interested in incentives unrelated to the car like a free vacation or a free bicycle. We do detailed tracking at the dealer level. So once you get the right mechanisms in place, it’s a matter of monitoring the impact various marketing campaigns have, and making continuous improvements.”

“The question CEO’s ask is this: ‘What does an extra point of customer satisfaction do for my shareholders?’”
Auto companies are superb candidates for ROI marketing that aims to reduce marketing costs and increase sales because they spend enormous sums on marketing — much more in aggregate than packaged-goods companies or even consumer goods companies. “All of this is very quantifiable,” Soliman explains. “This company can now say, 'Last quarter we had 1,000 people go into showroom X each month. When we ran marketing campaign Y the following quarter, we saw 1,100 people go into the showroom, and those extra 100 people resulted in 20 additional sales.’” ROI marketing has become so ingrained at European Auto that the company eventually plans to use these systems everywhere it does business in Europe.

Evan R. Hirsh, a Cleveland-based Booz Allen vice president who specializes in marketing issues related to the auto industry, agrees that carmakers could benefit greatly from ROI marketing. “The use of marketing metrics is nowhere near the science it should be among car companies, although these companies are moving in the right direction,” Hirsh says. Part of the challenge is complexity, especially in the area of advertising (i.e., measuring vehicle ads compared with ads for diapers and toothpaste). Roughly one-third of every advertising dollar for cars and trucks is spent by the car company itself. The manufacturer has direct control over these ads, which typically exhort consumers to “Buy Brand X.” Approximately another third of the ad budget is spent on local advertising by dealer cooperatives. The manufacturer pays the money for these ads, but the ads tout the dealers: Their focus is “Buy Brand X from your tri-state Brand X dealer now.” Dealers spend the last third on ads that urge people to “Buy Brand X from our dealership today.”

Car manufacturers would like to be better at measuring advertising results. But it is tough for them to exert the kind of control that a savvy consumer goods company like Procter & Gamble does.

Telecom Metrics
Jonathan Harrison, a telecommunications specialist for Booz Allen in Boston, is currently working with a telephone company outside the United States to improve the profitability of its business customer segment. These customers include small- to medium-size businesses with 50 to 200 phone lines. Since Harrison’s client — call it XYZ Telecom — is one of the smaller players in its market, it must seek opportunities to make its profit on every customer as high as possible through personalized, targeted marketing.

Harrison and XYZ are conducting an experiment under which some customers are offered specially designed calling plans with unique pricing arrangements. The goal is to encourage customers to renew their contracts so that XYZ does not have to spend large sums to acquire new customers when existing ones switch to other carriers. To assess the success of the experiment, Booz Allen and XYZ are tracking two metrics – the customer’s “change-in-spend” and the customer’s “churn rate.” Customers participating in the experiment are being compared to a control group of customers that are continuing to use existing calling plans.

Page 1 2 3 4 5 6 7 All