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How To Measure and Grow Return On Marketing Investment
How To Measure and Grow Return On Marketing Investment
How To Measure and Grow Return On Marketing Investment
Return on Marketing
Investment
• Econometric representation of
customer, competitor and
environmental drivers
•
4
Immediateeffect
3
1
No Permanent effect
Consumer
0
Competitive
y E
s
ticS
le
a
-1
-2
-3
Adjustmenteffect
-4
1 2 3 4 5 6 7 8 9 10 11 12 13
Weeks
Discount ‘works’, so
company repeats it but gets
lower returns
5
1
Consum
0 Compe
y E
s
ticS
le
a
Compa
-1
-2
-3
-4
1 2 3 4 5 6 7 8 9 10 11 12 13
Worst case: each time you
promote it hurts your
bottom line
Retailer Revenue response
CHEESE
0
1 3 5 7 9 11 13 15 17 19 21 23 25
-20000
-40000
effects
-80000
-100000
-120000
Immediate effect
-140000
Weeks
Best case: permanent benefits
through consumer trial and
learning
5
1
Consum
0 Compe
y E
s
ticS
le
a
New pr
-1
-2
-3
-4
1 2 3 4 5 6 7 8 9 10 11 12 13
Profitable Growth
Conditions
7
6
5
4
3
2
1
0
1 3 5 7 9 11 13 15 17 19 21 23
Months
Direct-to-Consumer ads
show Wear-in and Wear-
0.18
out
0.16
0.14
DTC Elasticity
0.12
0.1
0.08
0.06
0.04
0.02
0
1 3 5 7 9 11 13 15 17 19 21 23
Months
What is the Best that
could Happen? Permanent
Benefit
5000
4500
4000
3500
Gross Margin $
3000
2500
Honda launches
2000
1999 Odyssey
1500
1000
500
Oct-97 Feb-98 Jun-98 Oct-98 Feb-99 Jun-99 Oct-99 Feb-00 Jun-00 Oct-00 Feb-01 Jun-01 Oct-01 Feb-02
Months
One-shot innovation
increases Honda’s Firm
$50
Value Forever
$45
$40
Firm Value ROI in Millions
$35
$30
$25
$20
$15
$10
$5
$0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
Weeks
Long-Term ROI Varies by
Segment and Firm
Toyota Daimler-Chrysler General Motors Ford
250
200
ROI in $ Millions
150
100
50
10
8
ROI Elasticity
0
1 2 3 4 5
-2
-4
Innovation Level
In Contrast, Rebates
Decrease Firm Value in the
long run
$140
$120
Firm Value ROI in Millions
$100
$80
$60
$40
$20
$0
-$20
-$40
-$60
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
Weeks
As They lead to Competitive
Escalation
Chevy Dodge
$2,500
$2,000
Average rebate
$1,500
$1,000
$500
$0
1/3/99 5/3/99 9/3/99 1/3/00 5/3/00 9/3/00 1/3/01 5/3/01
Evolving Business:
Detailing needed to
9000.00
maintain Sales
8000.00
Detailing and Sales
7000.00
6000.00
5000.00
4000.00
3000.00
2000.00
1000.00
0.00
Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul-
93 93 94 94 95 95 96 96 97 97 98 98 99 99
Month
Site subscribers go up with
higher but also go down with
SE activity
Need to know which
scenario
• Economic boom and category growth
Evolving business scenario
attractive: positive performance-
spend cycle
•