The Correlation Between Marketing Investment and Results

Posted by Mark Gibson on Sep 27, 2016 11:39:04 AM

If you are like most CMOs, your organization has a myriad of objectives next year, all of which require marketing programs and dollars. And most organizations won’t allocate sufficient marketing resources to effectively accomplish those objectives. How can you escape this conundrum?  

Most organizational leaders don’t really understand how marketing works. They think it’s more voodoo than math. It’s your job to educate them. You need to show them the correlation between marketing investment and results. You need to help them understand how doing marketing the right way adds value to the organization. And finally, you need to share with them the math of what the right marketing spend is for your organization’s particular objectives. 

How Marketing Drives Organizational Value

Building a strong brand that adds value to an organization is a core tenet of the responsibilities of any marketing director or chief marketing officer.   

Millward Brown's BrandZ™ study can help you begin to build the case for your branding efforts with your executives. Over many years, they have been surveying millions of consumers about brand strength using three dimensions: difference, salience, and meaningfulness. What they've found is that, the higher consumers rank a company on those attributes, the stronger a brand is and the better the company performs financially. 

In fact, the 100 brands that rank the highest in brand power have seen their stocks outperform their competitors by nearly 100% over the past decade (see below.)

Building Effective Marketing Into Next Year’s Plan

The programs you include in your marketing plan need to generate demonstrated value. First, your brand needs to deliver on those three critical words: difference, salience, and meaningfulness. Second, your customer’s experience needs to be consistent with your brand promise. Let’s tackle those three words first.

In order for your brand to be perceived as different, you must be viewed as setting category trends or at least different in some meaningful and relevant way. Even if the brand is only marginally different, it can command a price premium over competitors. Whether or not a brand is considered meaningfully different by consumers or businesses relies on the fusion of purpose, delivery, resonance, and difference.

A salient brand is one that comes to mind quickly and easily -- think unaided awareness -- and is therefore selected more often.  A meaningful brand not only meets the functional needs people have, but creates a positive emotional attachment with its customers. 

And last, the customer’s experience must deliver on marketing’s promise if customers and staff are to be satisfied. Nigel Hollis, Chief Global Analyst at Millward Brown, tells us, “If purpose is the difference a brand promises to make in peoples’ lives, then delivery is how well the brand fulfills that purpose.” In other words, customer experience actually delivers the brand to the customer.

Because the brand is the experience, marketing needs to have more influence on the actual experience where customers learn about, purchase, and use the product. That means the brand needs to come to life when customers visit the website, sign on to online banking or bill pay, use the mobile app, ask a question in the branch, or call customer service with a problem. Marketing needs to ensure that all these touch points deliver on the brand promise. Otherwise, you have a disappointed customer on your hands, poor reviews and negative social media comments to deal with, and a weaker, less valuable brand.  

Strong service brands share three critical characteristics: process design, human delivery, and a well orchestrated customer listening process.

Service organizations need to spend time and resources to design processes that create a simple, intuitive, and effortless experience. This design process needs to identify and eliminate pain points before they happen. And if you can’t eliminate them immediately, at least proactively communicate them to customers so you don’t disappoint them, according to John Goodman, ‎Vice Chairman, Customer Care Measurement and Consulting. 

For service businesses, human delivery is the heart of brand experience.  "A company culture built around the brand’s purpose will help ensure consistent high-quality service delivery,” Hollis reminds us. “By effectively handling the human elements of the business, a service brand can set itself apart as something truly special.” 

Third, you should build a “voice of the customer” process that collects information from all over the organization across the full customer experience. Make sure this process integrates the information into a single picture of the customer experience, focusing on areas you know are the most important to them.  And make sure executive management is leading the way. John Goodman’s most recent book, Customer Experience 3.0, has plenty of advice for any organization who wants to improve their VOC process. 

How Do You Calculate (or Justify) Your Marketing Budget? 

How much money does it take to get the word out? This is what I call the math of branding and it’s critically important for any marketing plan.

As you may have read in my previous post, there is an optimal amount of marketing spend for any organization. The following diagram from Tenet Partners, another firm that measures brand power, helps you and your executive team visualize it. Until you invest a certain dollar amount, most of the money (in red) is wasted. When you reach the breakthrough point, you are advertising enough so that people see and remember your brand (in blue). At that point, your incremental revenue more than pays for the dollars spent on marketing, until you reach the point of negative returns.    

Source:  CoreBrand, Tenet Partners. 

How do you calculate this for your organization? First understand who you are targeting and who your major competitors are. Second, you need to estimate what your competitors are doing, and how much they are spending in the space. Finally, what do you need to do to gain the "share of voice" that is equivalent to the market share you desire in that given space, and how much will it cost?  While this approach requires some important assumptions, it is based on data and logic that most senior managers can understand and agree with.

Good luck with your planning this year and let me know how it goes! 

For more detail on any of these topics, see my four previous posts on branding and marketing investment, and register for my upcoming webinar, "Seven Imperatives for Marketing Planning 2017," on Oct. 20 by clicking the button below. 

Register here

Sources:  BRAND Premium: How Smart Brands Make More Money by Nigel Hollis, Palgrave Macmillan, 2013; Customer Experience 3.0, John Goodman, AMACOM, 2014; Tenet Partners/CoreBrand.

Topics: Agency, B2C, Financial Services