Proof Should Be in the Pudding

Increasingly clever promotions don’t always increase the ROI. The bigger payoff lies in a closed-loop, enterprise-wide approach to consumer targeting.

Brand marketers and agencies alike are getting increasingly clever in integrating communications forums and formats in order to surround – even ambush – today’s time-pressed consumers. The ante for it all, from trade promotion allowances that just won’t go away to elaborate store- and Web-centric consumer events, keeps rising. As it does, top management – the folks who have to look at the ultimate bottom-line profitability of the entire enterprise – has to keep asking the question, “What are we really getting out of all this?”

The question hasn’t changed over the years, but the urgency is mounting. Over the past decade, consumer product manufacturers have stripped down their overhead structures and streamlined their supply and distribution chains through a series of heralded re-engineering sprees. That’s helped keep profits at acceptable levels for the Wall Street engine that really propels today’s multinational corporations.

For most companies, though, there’s simply no more operational fat left to cut. That means growth has to come in the form of increased sales at real profits, which demands organizational commitments to increasing marketing ROI.

Promotion can, and should, play a central role in this future, as an imminently measurable form of sales and brand-equity development. Yet as it’s practiced now, promotion serves a disconnected series of goals. It’s regarded and undertaken as a complex weave of activities designed to boost product trial, incremental sales, site traffic, or general brand awareness. Promotions are typically measured against these limited objectives, whereas the business’s bottom-line goals depend on more profitable sales.

The surest route to more profitable sales is to deepen relationships with established consumers who continually increase purchasing over time and act as brand advocates. That calls for a broader, more powerful context for promotion: a full-cycle, enterprise-wide, disciplined, consumer-centric marketing process that achieves ROI measurably and consistently. To achieve this, organizations need to alter the structure, process, and practice of marketing. The targeting and measurement tools and tactics required are all there – what’s missing is the strategic commitment.

Quality Control A good starting point is to establish a common consumer currency, which will provide a unified framework for every activity that affects a brand’s relationship with consumers. Define consumers by qualitative measures; link the different targets used by brand management, sales, advertising, and promotion agencies at the household level; then apply that common platform to the entire execution plan. This is a radically different framework for organizations accustomed to targeting by geography or by accounts where brand sales lag the category totals.

Instead of targeting communications through niche media and then counting total sales or inquiries, set the consumer targets as the measuring sticks up front. For example, volume per 100 households within the core group of loyal shoppers known to be rural households with teenagers is an effective ROI target. All of the disparate processes that combine to build the brand, from distribution to advertising, can be organized around the goal of increasing purchases by these types of consumers.

Such targets can now be used to evaluate all forms of outreach, thanks to a number of alliances between the gatherers and processors of consumer information. For example, frequent-shopper data can be integrated with household panel research to determine the right stores for end-aisle displays, along with the right circulation for free-standing inserts and optimal radio stations and billboard placements in key markets. Volume rating points (VRPs) can now be assigned to TV programs – indicating the brand purchasing volume of, say, Frasier viewers – and Internet audiences can also be understood in a brand-specific context.

Smart companies will put their marketing money where the action really is by evaluating the difference each promotional investment can make in selling more to targeted consumers. Parceling out budget percentages according to the overall reach and cost of communication vehicles doesn’t increase return on marketing capital. Nor does blindly committing to retailers’ programs without counter-offering on the basis of a target analysis.

From there, it’s easy to measure results. Did we increase volume and share with target consumers? How much did we increase relative to the investment we made? This isn’t a weekly scorecard or a post-promotion report that gets filed away for future use; it’s a quarterly and annual review forming the core of brand performance measurement on which everyone is evaluated.

Clients need to lead this process, but promotion agencies can play a key role. In fact, marketing ROI calls for a broader mandate for agencies. Hire them to help build consumer franchises rather than “bumps” in product sales or brand awareness. Give them more information on the targets, thereby pulling them into the strategic process earlier. This also clears the way for a new compensation system for agencies – one that rewards impact with target consumer groups rather than the performance of marketing tasks.

Today’s explosion in product variety, shopping formats, and meal alternatives merely underscores the time-honored foundation of marketing: relationships with consumers based on giving them what they need, consciously and systematically, over time. In an age in which retail, Internet, and lifestyle venues (from festivals to health clubs) increasingly represent the places where consumers can be found, promotion may encompass the most reliable forms of communication. Promotion pros are experts in connecting with consumers. Now, marketing management must commit to the context that will yield long-term business results.

Teamwork and a fellow named Lance turned U.S. cycling sponsors into winners.

Sponsoring the winner two years in a row is the ideal script for every sports marketer. Sponsoring a winner who is a courageous cancer survivor in addition to being a peerless athlete makes the story much better. And being able to say you were there from the beginning rather than being a bandwagon jumper completes the victory.

That’s the scenario the U.S. Postal Service, Visa, and Nike are basking in these days, now that U.S. Postal Service Cycling Team star Lance Armstrong has captured two consecutive Tour de France titles.

Those sponsors have supported the U.S. team for several years, even though cycling was considered strictly a European passion and while Armstrong was attempting to make a fairy tale comeback from his successful battle with cancer in an event he had never even won.

In fact, it was the European aspect that first caught the attention of the title sponsor U.S. Postal Service, Washington, DC, which wanted to build its brand internationally. The Postal Service signed on in 1996, and the early days were an uphill challenge.

“We’re a quasi-independent government agency, so we need to market ourselves just like a private business,” says senior vp-sales Gail Sonnenberg. “It was difficult for a lot of people to accept the Postal Service as a sponsor – they didn’t understand this wasn’t their tax dollars at work.” (20/20 reporter John Stossel recently criticized the agency for wasting money on marketing.) But the sponsorship has translated into $10 million in new business, Sonnenberg says.

Visa, Foster City, CA, has been a cycling team sponsor since 1997, and this year ran a sweepstakes along with the Postal Service and Nike, Beaverton, OR, that gave away a trip to the 2001 Tour de France. For Visa, its fellow sponsors were an even bigger attraction than the cycling team itself.

“The cycling team gave us the opportunity to partner with the largest retailer in the U.S., the Postal Service,” says senior vp-marketing Armen Khachadorian. “And any time you partner with a major retailer, you want to create awareness that your card is accepted.” The sweepstakes was backed by P-O-P posters and counter mats displayed in more than 35,000 post offices, which generated more than 650 million consumer impressions.

Elsewhere, pharmaceutical manufacturer Bristol-Myers Squibb, New York City, featured Armstrong in a $25 million print campaign that included transit ads (and featured the cycler bedecked in his uniform, complete with Postal Service and Nike logos). Bridge Information Systems, New York City, ran a $1 million ad campaign and received team member appearances at corporate events. Yahoo, Santa Clara, CA, ran an online ad program and sweepstakes for the cycling team that generated more than 39 million page views.

Bike manufacturer Trek, Waterloo, WI, the official team bike, was featured in three Nike campaigns. Trek also licensed Nike’s logo for use on the official bike, and ran a national ad campaign worth more than $1 million. Online retailer bike.com featured the cycling team extensively on its site and ran an ad campaign worth more than $500,000. Fourteen other sponsors including Volkswagen and Gatorade received logo identification.

The cycling team is owned and managed by sponsorship and event marketing company Disson Furst and Partners, Washington, DC, which has roots in the sport: Partner Mark Gorski took home a gold medal in cycling from the 1984 Olympics.