How to Spend the Minimal Effective Amount on Marketing

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As a CFO, how many times have you gone to your company’s head of marketing and asked for dollars back in order to make up a shortfall in quarterly or year-end EPS? How many times have you wished for greater visibility into the effectiveness of marketing spending? If you're like many public-company CFOs, it's not an unusual occurrence.

But you can change this dynamic and gain great new insights into marketing effectiveness by leveraging a new approach to consumer analytics -- an approach that mines social media and other customer "conversations." Advanced techniques and capabilities that are available now can help you capture the pulse of the marketplace as never before. Armed with this information, CFOs and chief marketing officers can identify the minimal effective amount of spending needed to drive the greatest market awareness. Read our new white paper to learn how this innovative form of "marketing intelligence" can dramatically reduce wasted spending and position marketing to contribute even more effectively to earnings per share.

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How to Spend the Minimal Effective Amount on Marketing

  1. 1. CFOs:How to Spend theMinimal EffectiveAmount on MarketingCFOs have access to rich data and reliable metrics formanaging business performance in real or near-real time.Inventory turns. Cycle times. Days sales outstanding. In fact,business intelligence capabilities give today’s finance execu-tives a good grasp of virtually every aspect of operations.But then there’s marketing. Sure, CFOs ultimately decidewhat financial resources are allocated to marketing basedon revenue expectations and marketing’s correspondingresponsibility to extend the reach of the brand and buildboth customer awareness and market share. But in reality, 30 - 80%marketing is the major budget item that traditionally has Your organization isbeen the hardest to understand and measure from a probably overspendingperformance standpoint. Quarterly and annual reviews on marketing for the valueprovide some idea of how the money is being spent, and you’re getting by 30 to 80 percent.frequency, reach, target rating points, media impressionsand press clip counts are among the long-standing measuresof marketing effectiveness. But these are becoming less andless informative as the world moves at Internet speed.And here’s another unsettling reality CFOs are all tooaware of: Your organization is probably overspending onmarketing for the value you’re getting by 30 to 80percent. As U.S. department store magnate John Wanamakersaid: “Half the money I spend on advertising is wasted; thetrouble is I don’t know which half.” Knowing this, CFOs oftengo to their marketing departments for spending reductionswhen quarterly earnings per share (EPS) targets are notgoing to be met. Marketing dollars effectively serve as arainy day fund that can be tapped for those extra cents pershare needed to meet Wall Street’s expectations.It doesn’t need to be this way anymore. Through socialmedia and other channels, consumers are increasingly vocalabout their likes, dislikes, intent to act and discussion ofpast actions. Email: info@networkedinsights.com Phone: 608.237.1867 www.networkedinsights.com © 2011, Networked Insights, Inc. 2
  2. 2. Marketing can leverage these “conversations” to become farmore efficient — especially with its spending on advertising.The key is not just to monitor the conversation, however— almost any company can do that now with today’s socialmedia monitoring engines.Instead, marketing needs techniques and analyticalcapabilities that cut through the conversational clutterto identify trends and perform predictive modeling thatnot only captures the pulse of the marketplace now butoffers valuable insights as to where the market is movingor where new markets are likely to appear. Armed withthis information, chief marketing officers can identify theminimal effective amount of spending needed to drive thegreatest market awareness. More than half a billion people, a twelfth of theThis new form of “marketing intelligence” can dramatically world’s population, isreduce wasted spending. As a result, such a shift in spending connected on Facebook.effectiveness can contribute directly to earnings per shareimprovement. Marketing can finally — and with far greateraccuracy — prove its accretive value to the enterprise andshareholders.Right message, right place, right timeFor decades marketers have considered television to bethe major driver of awareness. But today highly engaged,potentially massive audiences can be found in many otherplaces. More than half a billion people, a twelfth of theworld’s population, is connected on Facebook. Twitter hastwo hundred million users. Twitter has two hundred million users.Numbers like these demand that marketers think about us-ing their resources differently. It’s not just about appendingsocial media to traditional ad buys, or even integrating thetwo. Instead, CMOs can start using their customers to helpsense and inform what awareness and promotionalactivities should be done in marketing and which of thosewill be most effective in reaching their exact audience.Media buying can be made hyper-efficient by abandoningthe traditional “spray and pray” approach and insteadfinding out exactly when and where to use it — the timesand places that targeted consumers will not simply hearmarketing’s messages but be highly receptive to them. Email: info@networkedinsights.com Phone: 608.237.1867 www.networkedinsights.com © 2011, Networked Insights, Inc. 3
  3. 3. Social Loves an UpsetCMOs can then identify the most valuable components of themarketing arsenal — the right messages — and sequencethem in ways that both resonate with target audiencesand deliver measurable, substantial improvement inmarketing ROI.The two largest portions of the marketing budget typicallyare developing content and buying media. Being efficientand effective in both of these processes boils down to deliv-ering the right message in the right place at the right time.Case study: An NCAA slam dunkEach year American businesses brace for a productivityplunge during the NCAA men’s collegiate basketballtournament — by one estimate, a total hit of $1.2 billionin 2010. Without question, March Madness stirs thepassion of fans from coast to coast.Companies typically try to capitalize on this fervorby adhering to a traditional marketing approach. Oneconsumer services company believed it could dominateits category during the three-week tournament by buyingexclusive advertising rights to TV broadcasts of games,at a cost of about $42 million. By throwing thisexpensive advertising blanket over the proceedings, thecompany effectively locked a competitor out of directtournament advertising.Searching for another way to get in front of tournamentfans, the competitor turned to Networked Insights, whichused social media data analysis to build a strategy for reach-ing this target audience at a fraction of the price of the TVbuy. The typical approach in a situation such as this is to buyup all the online media, but there simply isn’t enough onlinecontent to achieve the same reach as a TV buy. Social media engagement aroundSo Networked Insights challenged this approach and teams with the biggest upsets.uncovered one especially promising insight associated withMarch Madness — the appeal of the upset. Combining socialmedia and search data analysis, we learned that of all thestorylines emerging during the tournament, the one fansenjoy and talk about more than any other is David takingdown Goliath in a real upset. Email: info@networkedinsights.com Phone: 608.237.1867 www.networkedinsights.com © 2011, Networked Insights, Inc. 4
  4. 4. To capitalize on this interest, the company could developand license content associated with upsets — the creativepossibilities are endless — and then be ready to roll itwhenever the little guys triumph. Placement opportunitiescould include interstitial ads that appear when someone goesto YouTube looking for upset-themed videos. Google searchresults could include company-generated links that drive usersto company-sponsored content.Sequencing became the key to the success of such an approach.Content should be placed in venues that enable it to rippleand increase its social reach as much as possible as peoplepass it around.Networked Insights’ comparison of the effectiveness ofa targeted, sequenced media approach and a traditionalexclusive-rights approach revealed striking differences. Bymodeling the overall ripple effect and social reach of thesequenced approach, we proved that a $2 million paid media More than 95 percent of theinvestment would generate the same amount of reach and brandproduced (Figure 1). $42 million spent using theawareness as the $42 million spent on traditional advertising traditional media approachInvestment Summary was wasted. NUMBER OF SOCIAL IMPRESSIONS IMPRESSIONS COST (Figure 1)Viewed another way, more than 95 percent of the $42 millionspent using the traditional media approach was wasted. That’sabout $40 million that could have been spent on other priori-ties, or taken to the bottom line to boost EPS. For this client,that translated into 8 cents of EPS for the quarter.A slam dunk indeed. Email: info@networkedinsights.com Phone: 608.237.1867 www.networkedinsights.com © 2011, Networked Insights, Inc. 5
  5. 5. How to make it happen What can you as CFO do to set your company on the path to hyper-efficient spending on marketing? A good place to start is by asking the CMO if he or she knows the minimal effective amount the company can spend on marketing to reach the awareness goals it seeks. More than likely, your CMO will not know what you mean. This line of thinking is new, and the methodologies and tech- nology that enable this type of social media data analysis have only come into their own in the past two years. In light of this, a valuable next step is to conduct a pilot program to begin identifying inefficiencies and realigning resources to the rapidly changing, social media-infused marketplace. Networked Insights was founded in 2006 by industry leaders and seasoned entrepre- Begin to tap the true value of marketing CFOs are sometimes grateful that marketing provides a piggy- neurs in the fields of social media bank their company can draw from to shore up earnings. But and customer intelligence. they also know that the flab in the marketing budget is stark Headquarters are in Madison, evidence of costly, continuing inefficiency. WI, with offices in New York and Chicago. Consumer analytics can help CFOs and CMOs speak the same language and, for the first time, understand the minimal effec- tive amount they need to spend on their marketing initiatives. Placing the right message in the right place at the right time based on quantifiable real-time “intelligence,” your company can economically reach target audiences that are tuned in and responsive to your message, while enjoying a boost in EPS. EXAMPLE WORKSHEETTotal Savings on Advertising 50,000,000Number of Shares Outstanding 534,000,000Impact on EPS 8 cents per share Email: info@networkedinsights.com Phone: 608.237.1867 www.networkedinsights.com © 2011, Networked Insights, Inc. 6

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