The Key To Scaling Marketing Returns 30 X K. Chettayar

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THE KEY TO SCALING MARKETING
RETURNS 30X:
A SPECIAL REPORT FOR RETAIL AND CONSUMER GOODS
MARKETERS – A LESSON FOR ALL

By Krishna Chettayar © All Rights Reserved

About the Author
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Krishna Chettayar is currently Industry Solutions Executive for Acxiom Corporation and has over 12 years of
experience in marketing and product development in the marketing services space. Prior to Acxiom,
Chettayar held executive level positions at Information Resources Inc, (IRI), D&B, GE Partnership Marketing
Group, and small start ups serving companies across such industry verticals as business services, information
solutions, high-tech, financial services, retail and consumer goods.

Chettayar was named one of the “Top 100 Marketers” by B-to-B Magazine in 2004 and is a frequent
contributor to publications such as DM Review, DM News, DestinationCRM, and B-to-B Magazine.

Chettayar holds a Master of Marketing from Northwestern University, a Master of Product Development
from Northwestern University, a Bachelor of Arts in Marketing from California State University, Fullerton,
and he is a graduate of the Executive Program at MIT for Marketing Information Technology.

Krishna Chettayar ©

Research into marketers needs
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Identify new solution opportunities, re-organize our solutions around core process, identify GAPS, determine what high performers
do that low performers do not, share findings, collaborate with customers and prospects on findings.

Define Core Budgets and Use of Values and Factors of
Process Returns Process Needs Performance

•Define marketing •Analyze the •Examine how high •Assess key values •Determine factors
process for companies marketing budget and performing marketers and needs of that explain the
in retail and consumer returns of companies allocate their marketers and performance
goods in retail and consumer resources versus low determine how this differential among
goods performers differs by industry as high performers vs.
•Structure marketing well as marketing low performers
process in terms of •Segment marketers •Identify differences in expertise
activities, process, based on return on allocation and •Share findings with
tasks and steps marketing investment determine the role of •Identify new solution key customers to assist
multiple the difference in development areas in driving better
performance returns


Retail & Consumer Markets needs, value & spend survey:
Completed in January of 2010, it is the second year of research.

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 RCM Needs & Spend Survey 2010
 Budget growth expectations
 Size of budget
RCM Industry Segments
 Budget allocation
 Needs and values
Retail
 Target industries: 64.2%
 Retail
 CPG
 Restaurant

 Annual sales Restaurant
 Greater than $100 million 14.2%
 Title and level CPG
 Manager or better 21.7%
 120 survey responders
 Retail – 77
 CPG – 26
 Restaurant – 17

ROMI performance by industry:
Little variance in ROMI performance across industries.

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Industry ROMI Performance

$9

Consumer Package Goods $12

$17

Restaurant $17

$15
Retail
$16

$- $2 $4 $6 $8 $10 $12 $14 $16 $18

Dollars Generated for Every Dollar Spent On Marketing

DMA 2YR Average Third-Party Survey Est. 2YR Average


ROMI performance by company size:
Relatively small ROMI variance across company size.

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Company Size ROMI Performance

Small Company ( < $400M $10
and ≥ $100M)

Midsize Company (< $2 bn $16
and ≥ $400M)

$14
Large Company (≥ $2 bn)

$- $2 $4 $6 $8 $10 $12 $14 $16

2009


ROMI segmentation by performance:
High Performers outperform Low Performers by 11:1.

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ROMI Performance Segmentation (2010 for 2009)

Retail
High Performer $ 32.08
$32
High Performer Average Performer $ 8.09
Low Performer $ 3.25

$8 Restaurant
Average Performer
High Performer $ 34.75
Average Performer $ 8.43
$3
Low Performer

CPG

$- $5 $10 $15 $20 $25 $30 $35 High Performer $ 30.71

Dollars Generated for Every Dollar Spent On Marketing Average Performer $ 8.17

Note: employee size, annual sales, and industry were all equally represented across segments.


ROMI segments:
Most segments performed worse in 2009 versus 2008 but High Performers suffered the greatest decline in return.

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ROMI Performance Segmentation

$42

High Performer $32

$10

Average Performer $8

$3

Low Performer $3

$- $5 $10 $15 $20 $25 $30 $35 $40 $45


2009 2008

ROMI segment 3YR average financial performance:
High Performers have greater sales and earnings growth.

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ROMI Performance Segmentation - Sales & Earnings Growth Comparison

25.0% 23.0%

21.0%
19.0%
3YR Average Annual % Growth

20.0%
17.0%

15.0%

8.0%
10.0%

6.0%

5.0%

0.0%
Low Performer 3 YR
Average Performer High Performer 3 YR Average
Average Annual
Annual Earnings
Sales Grow th
Grow th


Sales performance of ROMI segments:
Sales trend declined for all ROMI segments but High Performers suffered less decline than other segments.

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ROMI Performance Segmentation - YOY Sales Growth Comparison

25.0% 23.0%

19.0% 21.0%
18.0%
20.0%
17.0%

15.0%
3YR Average
Annual % Sales
Growth
10.0%

6.0%

5.0%

0.0%
Low Performer 2008
Average Performer High Performer 2009

Low Performer Average Performer High Performer
2009 6.0% 17.0% 21.0%
2008 18.0% 19.0% 23.0%


Earnings performance of ROMI segments:
Sales and earnings trend also declined for most ROMI segments but Low Performers suffered the biggest declines.

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ROMI Performance Segmentation - YOY Earnings Growth Comparison

24.0%
25.0%
23.0%

19.0%
20.0% 19.0%

15.0%

15.0%
3YR Average Annual
% Earnings Growth
10.0% 8.0%

5.0%

0.0%
Low Performer 2008
Average Performer High Performer 2009

2009 8.0% 19.0% 23.0%
2008 15.0% 19.0% 24.0%


Size of marketing budgets:
High Performer’s budget remained flat during 2009 while all other segments suffered small to substantial declines.

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Size of Budget as a % of Sales

2.96%
High Performers 2.97%

2.14%
Average Performers 2.10%

1.93%
Low Performers 1.68%

1.50% 1.70% 1.90% 2.10% 2.30% 2.50% 2.70% 2.90% 3.10%
Percent of Annual Sales Spent on Marketing

2009 2008


Marketing budget growth expectations:
High Performers more likely to see increases in their budget for CY 2010.

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ROMI Performance Segmentation - Budget Growth Expectations

69%
70%

60%
54%
Expected Marketing Budget Change

60%

50%

40%
Stay the Same
31%
Decrease
30% Increase
23% 23% 22%

20%

9% 8%
10%

0%

Expected growth in marketing budget in 2010:
Low performers will likely experience a small decline while High Performers will likely see modest increase in budget.

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ROMI Performance Segmentation - % Budget Growth Expectations

6.4%
High Performer

2.6%
Average Performer

-0.5%
Low Performer

-1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%
Weighted Growth Expectations for the Marketing Budget


Resource allocation to core marketing process varies:
High Performers invest their budget and resources differently compared to others.

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Marketing Activities

Prospect Acquire Retain Grow

Marketing Process

Market & Market Strategy Campaign Marketing Tracking &
Shopper Insights & Planning Development Communications Measurement

integrate data define objectives form action plan select target market universe track program performance

segment customers set budget create program brief buy media channel analyze campaign results

conduct market research develop strategy develop budget & timeline final creative approval conduct post mortem

predict behavior define segment objectives develop contact plan produce campaign integrate learnings

pinpoint top opportunities define segment strategy design in-store displays set up personalization system determine next steps

build database align timeline with mfg message, offer and creative set up loyalty system

create sales forecast w/ROI design test & control execute test & control

present, review & approve present, review & approve launch campaign

Krishna Chettayar © manage response

Budget allocation to marketing activities:
High Performers spend more money on prospecting / acquisition and service than other segments; increased from 2008.

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Marketing Budget Allocation to Activities

30% 23% 24% 23%
High Performer

Prospecting / Acquisition
25% 19% 28% 29%
Average Performer Service
Retention / Loyalty
Growth / Cross-sell

22% 19% 33% 26%
Low Performer

0% 20% 40% 60% 80% 100% 120%

% of Marketing Budget


Budget allocation to marketing process:
High Performers spend more of their budget on forming Market Strategy and Planning and Tracking and Measurement. Low
Performers spend more on campaign development and marketing communications.

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Market Budget Allocation to Process

16% 19% 20% 29% 16%
High Performer

Market and Shopper Insights
18% 16% 22% 30% 15% Market Strategy and Planning
Average Performer
Campaign Development
Marketing Communications
Tracking and Measurement

15% 13% 25% 37% 10%
Low Performer

0% 20% 40% 60% 80% 100% 120%



Market and Shopper Insights:
High Performers spent more resources integrating data, identifying top opportunities and building database; departure.

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Marketing Budget - Market and Shopper Insights - Task Allocation

24%
Key Points
22%
High Performers
% of Market and Shopper Insights Budget

20%  Use their existing assets (data) to drive
returns.
18%
 Suggests an understanding of the valuation
16% and return of using customer data.
 Previous study they invested more heavily in
14%
segmenting and predicting behavior; suggests
they are leveraging that investment.
12%

10%
Integrate Data Segment Conduct Market Predict Identify Top Build Database Low Performers
Customers Research Behavior Opportunities

 Played catch up by investing in segmentation
and predicting behavior.

Market Strategy and Planning:
High Performers more focused on set their budget and creating sales forecast during the 2009 meltdown.

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Marketing Budget - Market Strategy and Planning - Task Allocation
Key Points
28%

26%
High Performers
% of Market Strategy and Planning Budget

24%
 Focus on protecting and allocating
22% resources to drive return.
20%  Think like financial managers, which is a
consistent theme from past year’s study.
18%

 Flexible and adaptable in utilization of
16%
resources and strategy to meet objectives.
14%

12%
Low Performers
10%
Define Set Budget Develop Define Align Create Sales Present,  Heavy focus on re-thinking or adjusting
Objectives Marketing
Strategy
Segment
Objectives
Timeline
w/Partner
Forecast Review and
Approve
their strategy.
Low Performer Average Performer High Performer  Shift (you can almost see it) to a direct-to-
customer orientation.


Campaign Development:
High Performers continue to focus on contact optimization, test and control, and campaign planning while Low Performers focus on
message, offer and creative.

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Marketing Budget - Campaign Development - Task Allocation

30% Key Points
% of Campaign Development Budget

25%
High Performers
 Careful to plan out an efficient contact
20%
plan – direct-to consumer.
 Will emphasize a test and control
15%
approach to marketing efforts.
 Review the elements of their plan and get
10%
the necessary buy off.

5%

Low Performers
Form Create Develop Develop Desing In- Message, Design Review
Action Plan Program Budget and Contact store Offer and Test and Campaign
Brief Timeline Plan Displays Create Control and
Approve
 It’s all about the message, offer and
Low Performer Average Performer High Performer creative – very tactical.


Marketing Communications:
High Performers continue to seek scale for their efforts by being selective in the audience, using loyalty systems, and using test and
control strategies to learn. Low Performers primarily focused on media buys, campaign production and execution.

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Marketing Budget - Marketing Communications - Task Allocation
Key Points
25%
% of Marketing Communications

High Performers
20%
 Selective with who they target their
marketing efforts to.
15%
Budget

 Leverage systems and technology to build
10%
engagement and retention.
 Buy media but target their buys as
5% narrowly as possible.

0%
Low Performers
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KrishnaPerformer Average Performer
Low Chettayar © High Performer

Tracking and Measurement:
Low Performers more likely to focus on tracking and analysis while High Performers focus more on interpreting results.

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Marketing Budget - Tracking and Measurement - Task Allocation Key Points
30%

High Performers
% of Tracking and Measurement Budget

25%
 Spend more on tracking and
20%
measurement.
 Balance their analysis across all of the
15% critical tasks.
 Spend the time to determine what worked
10%
and what didn’t work and what to do
next.
5%

0% Low Performers
Track Program Analyze Campaign Conduct Post Integrate Determine Next
Performance Results Mortem Learnings Steps
 Much more time on tracking and
Low Performer Average Performer High Performer analyzing campaigns but they don’t
appear to use the insights as much.


Media Mix:
High Performers spend more of their marketing dollars going direct-to consumer whereas Low Performers spend the majority of
their marketing dollars in mass marketing or in-store efforts.

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Budget Allocation By Channel Budget Allocation By Channel Budget Allocation By Channel

In-store TV / Cable In-store
TV / Cable In-store TV / Cable 8%
16% 17%
11% 19%
13% Other Other
Radio 5% Radio 3%
6% Other Radio 5%
2% 4%
Print
14%
Print
Print 18% Direct
Direct Direct
25% 30% 39%
30%
Digital
Digital Digital Advertising
Advertising Advertising 14%
7% 15%


The key factors that drive results of High Performers:
Leveraged data reduction, factor analysis, to churn through responses to identify the top factors of high performers.

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Rotated Component Matrix
No. Marketing Tasks Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6 Factor 7 Factor 8 Factor 9 Factor 10
1 Select Target Universe -0.891
2 Present, Review & Approve -0.834
3 Analyze Campaign Results -0.785
4 Create Sales Forecast w/ROI -0.783 Example: Avoid over analyzing and planning
5 Design Test & Control Groups -0.75
6 Review Campaign, Approve & Set Timeline -0.557
7 Develop Contact Optimization Plan 0.874
8 Predict Behavior 0.835
9 Set-up Loyalty System 0.813
10 Executve Test & Control 0.797
11 Define Marketing Objectives 0.752
12 Produce Campaign -0.536
13 Create Program Brief 0.512
14 Develop Budget & Timeline 0.463
15 Launch Campaign -0.454
16 Final Creative & Offer Approval 0.881
17 Integrate Customer Data 0.632
18 Buy Media -0.547
19 Determine Next Steps 0.500
20 Set Budget & Co-ordinate w/Dept 0.748
21 Develop Marketing Strategy -0.708
22 Track Program Performance 0.594
23 Manage Response 0.864
24 Set-up Personalization System 0.594
25 Conduct Market Research -0.879
26 Build Database 0.583
27 Design Message, Offer & Creative -0.501
28 Identify Top Opportunities 0.874
29 Define Segment Objectives 0.497
30 Form Action Plan to Support Dept. 0.834
31 Conduct Post Mortem -0.444
32 Segment Customers 0.877
33 Align Timeline w/MFG
34 Archive Results
35 Design In-store Displays


The key factors that drive results of High Performers:
Leveraged data reduction, factor analysis, to churn through responses to identify the top factors of high performers.

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1. Avoid over analyzing and planning
2. Seek scale
3. Set objectives and measure
4. Personalize marketing messages
5. Manage budgets like investments
6. Focus on effectively managing customer interactions
7. Trust behavior from transaction experience, less so on the research
8. Target individuals
9. Define plans to provide support to partner functions
10. Segment customers


Employ the key factors of High Performers
Help your people change. Use the 10 factors as new principles for managing the marketing efforts of your company.

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1. Avoid over analyzing and planning
2. Seek scale
3. Set objectives and measure
4. Personalize marketing messages
5. Manage budgets like investments
6. Focus on effectively managing customer interactions
7. Trust behavior from transaction experience, less so on the research
8. Target individuals
9. Define plans to provide support to partner functions
10. Segment customers


Manage the customer life-cycle:
Don’t under prospect and over retain or vice versa.

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Marketing Budget Allocation to Activities

Average marketing $ spent for each $
generated per customer segment

30% 23% 24% 23%
High Performer

ROMI Scale Average Performer
25% 19% 28% 29%
$£¥€

22% 19% 33% 26%
Low Performer
Cumulative sales $ per
customer segment
0% 20% 40% 60% 80% 100% 120%

Prospect Acquire Retain Grow
Prospecting / Acquisition Service Retention / Loyalty Growth / Cross-sell


Define and manage your marketing process:
Think Six Sigma Marketing; leverage process to produce outcomes.

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Market Budget Allocation to Process

Key Points
High Performer
16% 19% 20% 29% 16% • Think of marketing as a process that
can be designed to produce superior
outcomes.
18% 16% 22% 30% 15%
• Define and balance your marketing
Average Performer
process like High Performers.
• Develop a strategy with defined
metrics and track results.
15% 13% 25% 37% 10%
Low Performer • Avoid the tendency to jump straight to
campaign development and execution.
0% 20% 40% 60% 80% 100% 120%

Market and Shopper Insights Market Strategy and Planning Campaign Development

Marketing Communications Tracking and Measurement


Seek scale in your marketing tasks:
Focus on things that will drive higher ROMI multiples. Avoid unnecessary strategy and planning; opt for more test and learn.

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High Performers Task Allocation

Key Points
• Not all marketing tasks yield the same
kind of return for the time and resource
investment.
• Focus your time, resource and attention
on tasks that lead to higher scale in
returns (e.g. build a database, develop
an efficient contact plan).
• Be careful of marketing tasks that have
the potential to be counter productive if
done in excess.


Re-balance media to direct, addressable options:
Greater returns, more predictable cause and effect.

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High Performer Media Mix Key Points

Other
• High Performers are more likely to
In-store
8% 3% channel their media mix to direct,
TV / Cable Direct addressable channels.
17% 39%
• Direct, addressable channels can
demonstrate a return and that attracts
Radio the High Performer.
5%
Print
• Do not abandon mass media but rather
Digital Advertising
14%
14% narrowcast your message as much as
possible.


Beware of the Detrimental Marketing Archetypes:
As we analyzed Low Performers we started to see hints of detrimental marketing archetypes lurking, some of which you may have
run into in your career. These archetypes are things to avoid.

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The Gambler The Campaigner The Big Idea Guy The Adman The Artist

“I’ll bet they buy more “People, let’s get one “I’ve got a great idea. “We need more “I can’t be bothered with
If we give this stuff more campaign out the Let’s use a MONKEY in advertising. Let’s use results. I’m trying to
away for free.” door – let’s win one for the our promotion! Guys love stupid pet tricks change the world here…
Gipper - that’ll fix it.” animal humor. I know I do.” to get people to LAUGH. Duh!”
That will drive sales.”


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