Where have all my marketing investments gone?

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investments gone?

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The state of marketing today

Marketing today is nothing like the marketing of even as little as five years ago. New information and communication technologies have revolutionized business. Consumers’ expectations have risen; they want better products and services, more choice and more value, and they expect an ongoing two-way conversation. Globalization has given customers everywhere many more options. Social media makes it possible for anyone to become a publisher, broadcaster and critic. Marketing expenditures have changed dramatically with the bulk of investments shifting to digital away from offline. As a result, marketing organizations are moving toward the ownership of customer interaction and customer information. In the 2013 IBM State of Marketing survey of 500 marketing professionals, the surveyed marketers mentioned an increased desire to implement customer management and customer experiences that are informed and delivered by technology.2

In fact, the study also revealed that marketing organizations that are using technology to know their customer context and integrate accordingly, act on insights systematically and take a broader view of the customer experience are outperforming their peers in major financial categories.3

These shifts, combined with competitors who are gaining financial advantage by being ahead in the technology game, create major challenges for the CMO. In the 2011 IBM CMO Marketing Study, CMOs stated that the changed marketing landscape had affected their organizations, citing issues with data explosion, social media, proliferation of channels and devices, and shifting consumer demographics. The digital revolution has given more power to individuals, tipping the balance in their favor. Because of this power shift, CMOs must concentrate even more on understanding individual consumer needs as well as markets so they can better target marketing programs and campaigns and use the right channels to achieve optimal business outcomes. To put it simply, they are feeling the push to get the most bang for their marketing buck.

Executive summary

In the US $83 billion is lost each year because of poor customer experiences.1 This kind of loss puts immense

pressure on marketers to:

• Understand and engage with empowered consumers. • Evaluate and prioritize channels.

• Create a consistent customer experience.

• Coordinate and deliver a seamless experience throughout

the enterprise.

• Optimize marketing performance.

This pressure comes at a time when the marketing landscape is dominated by technology-savvy customers who expect more and better products and services and are quite happy to broadcast their needs, likes and dislikes in new channels created by social media.

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Clearly demonstrating financial accountability

In an article in Advertising Age, John Quelch wrote, “financial accountability of marketing is here to stay.”4 In their

book, The Marketing Accountability Imperative, Michael E. Dunn and Chris Halsall describe accountability in marketing terms as “Simultaneously organizing company growth and the return on customer facing spending through disciplined planning, rigorous tracking and education and continuous performance improvements…to link marketing spending cause and effect.”5 The emphasis is on delivering measurable,

positive return on marketing investments, translating brand experiences that span differing touch points and achieving more with smaller budgets. CMOs, therefore, must provide the rest of the C-suite with daily status of key performance indicators (KPIs) and the return on investment (ROI) of key marketing programs. These KPIs must be more than page views, engagements leads or brand awareness; they must be tied to revenue.

Developing the financial acumen to run marketing as a business

In his Advertising Age article, Quelch also wrote that “improved accountability requires CMOs to be financially literate, to understand the balance-sheet as well as the income-statement effects of marketing initiatives.”6 Marketing

organizations are now a business within a business with CMOs responsible for driving revenue and tracking ROI. In fact, in the IBM CMO Study, 16 percent of the respondents said they needed to boost their financial proficiency to become more successful in the business and in the marketplace. The good news is that ROI for much of marketing’s expenditures can be derived with help from a good business or financial analyst, who can show CMOs how to present ROI clearly and how to drive revenue. And, as they strengthen collaboration and openness with the office of finance, CMOs can gain financial analysis and reporting acumen in-house.

Along with the requirement to make the most out of marketing investments comes the need for CMOs and their organizations to quantify and analyze the financial results of their marketing initiatives and communicate them to the wider organization as a way of establishing credibility and effectiveness. In addition, businesses are pushing CMOs to demonstrate and link the contribution of marketing activities to revenue and overall business performance. Open communications with finance and other parts of the business are critical. Each one of these challenges brings new analysis and reporting requirements, and the last challenge requires discipline, data-driven insights and critical focus on return on marketing investments (ROMI).

Marketing imperatives for financial and

performance accountability

CMOs and their marketing organizations are increasingly responsible for tying marketing initiatives directly to business performance. Marketing organizations are expected to transform themselves from cost centers to revenue generators. The result is the creation of new and very different imperatives for CMOs and marketing organizations than they have had in the past. CMOs are expected to:

• Clearly demonstrate financial accountability.

• Develop the financial acumen to run marketing as a business. • Run their business through the lens of customer groupings,

whereby the allocation of resources is pushed down to more granular and insightful levels, and align the marketing mix accordingly.

• Track, measure, analyze and report on key marketing

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Using customer groupings and aligning marketing mix

Now more than ever, CMOs are being asked to determine the “right formula” for the company’s aggregate marketing mix. This requires surveying marketing systems and communication channels with the aim of moving from tactical campaign execution to a total, systematic sense of revenue-generation. This can involve investments that balance priorities and help achieve effective and detail-oriented execution at the periphery that remains constantly guided and bounded by the strategic whole. More importantly, getting the marketing mix right requires CMOs and marketing organizations to use

information, data and analysis to create personas for prospects and existing customers. The objective is to bring focus, empathy and consensus to marketing campaigns and then plan to interact with them along their buying journey.

Tracking and analyzing inbound and outbound channel metrics

In the past, outbound or offline marketing was king. However, Web 2.0, social media and digital marketing have created a revolving door of simultaneous inbound and outbound marketing activities that are used to acquire and nurture new prospects. Now, instead of simply measuring the success of sales calls, referrals, prospecting programs and media buys, companies are having to track performance of inbound tactics such as online engagement, social media interactions, pay per click, share of voice and more. CMOs, therefore, must track and analyze activities, such as:

• Monthly growth in organic website traffic • Social engagement

• Lead generation by content, channel and initiative • Percentage of leads with an inbound original source • Conversions

These imperatives not only affect CMOs, but also the entire marketing function with far reaching consequences for nearly every role and responsibility.

How the imperatives are challenging key

marketing roles

The four imperatives that have resulted from the

transformation of marketing into an organization that must be creative but demonstrate measurable results of campaigns and programs have also had an effect on marketing operations and business analysts who support the marketing function. They now require holistic, consolidated customer or segment views to go along with traditional campaign hierarchies. Demand generation marketers also face new challenges such as providing results-driven views and analysis of programs and challenges; they now must have answers to the question of which combination of offers and channels is performing best for target customer segments or micro segments. In addition, new marketing roles have emerged in the changed marketing landscape. For example, teams of specialists are needed to support data-driven decision-making, keep their eyes on ROI and determine specific methods that span preferred channels to get even closer to customers.

Marketing performance analytics

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Home Trust optimizes marketing activities with marketing performance analytics

Home Trust is Canada’s largest independent trust company. When Home Trust’s senior management asked the marketing department to optimize its loyalty programs, the team used features of the IBM Marketing Performance Analytics solution to conduct “what if” analysis of different scenarios for its loyalty programs and decide on the best course of action. They reviewed the effectiveness of the loyalty program and provided supporting evidence for cancelling it. With scenario modeling, they discovered that the loyalty program resources could be redirected to an incentive program that better met Home Trust’s objectives. In addition, the solution accelerated month-end sales reporting processes from four days to just four hours, and users were able serve themselves with sales and

marketing analysis, giving the marketing team more time to focus on other priorities.

Addressing the needs of key marketing roles

With marketing performance analytics, CMOs and VPs of marketing can identify, track, share and analyze the right information about the effectiveness of marketing campaigns and program initiatives to drive better decisions and outcomes that span the organization. The process of defining, planning and modeling their marketing mix, including budgeting costs, margins and expected sales, is quick. Budget cycle time is reduced, which helps drive demand and enables the business to react to competitive threats. Marketing performance analytics also includes sensitivity modeling, which CMOs can use to determine optimal ROMI. Most importantly, marketing performance analytics solutions make it possible to share “what-if” scenario models and updated marketing investment allocations with the finance team so they can incorporate and update the current forecast monthly or quarterly for an accurate reflection on marketing investment.

Marketing performance analytics helps directors of demand generation and other demand generation professionals measure the effectiveness of marketing campaigns with greater speeds than with spreadsheets and at intervals they choose (weekly, monthly or quarterly, for example). Demand generation professionals can analyze data from online and offline channels and data sources to make data-driven decisions and take immediate action. KPIs are tracked automatically on dashboards that can be customized, and reports are generated, along with insights on campaign and program effectiveness by funnel stage (that is, qualified versus validated), program, channel, region, product or service.

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Effective planning, modeling, budgeting and spending for customer lifetime value

Tracking and measuring marketing’s contribution to business success and demonstrating financial accountability requires effective planning, modeling and budgeting, along with optimal spending. Marketing performance analytics enables marketers to generate driver-based plans that are modeled for distinct initiatives and target customer segments that

demonstrate high customer lifetime value (CLV) for an organization’s product or services portfolio. CLV is a critical metric for any business to embrace because a focus on CLV can help boost revenue , minimize unnecessary costs and significantly increase the bottom line.

With marketing performance analytics, marketers can understand the costs of serving segments and initiatives for all touch points in aggregate for a holistic perspective of their business. Marketing operations professionals can weigh, consider and make the tradeoffs on spending opportunities. Using the models they develop, they can determine the optimal marketing resource allocation for the highest ROI.

CNDC improves promotional planning with marketing perfor-mance analytics

The Chickasaw Nation Division of Commerce (CNDC) is the economic arm of the Chickasaw Nation, which supports the Chickasaw people and their way of life with a diverse range of enterprises. As part of a major effort to improve decision-making, CNDC decided to use features of the IBM Marketing Performance Analytics solution to support the process of promotional planning for the CNDC marketing team. CNDC can now see how profitable their campaigns and promotions are, which enables them to confidently determine which types of promotion perform best in which revenue areas. For the first time, they are deciding which promotions to run based on facts, rather than gut feel. They have more detailed insight into their promotions, and the solution also helps them plan and develop the promotions more quickly. CNDC can conduct promotion analysis in the system about 75 percent faster than before they implemented the solution.

Linking back to the financial plan and much more

Marketing performance analytics enables CMOs and their marketing organizations to model initiatives or new programs and evaluate alternative programs to see which is most likely to achieve the best returns and meet revenue targets. They can identify the programs, campaigns or channels with higher ROI and also those that cover their marketing targets. With these tools, marketing and business analysts can develop the outputs for scenario modeling, budgeting and ROI analysis. The team can then link these outputs to the finance organization’s projections to help finance generate a more reliable and consistent quarterly forecast. The finance organization can project cash flow and income more accurately and then adjust core strategies.

With marketing performance analytics, the marketing organization and the finance organization can also work together to determine metrics that work for both departments. CMOs and their organization often have a wealth of customer information that they might not be tapping fully. Finance organizations, by contrast, have a wealth of analysis expertise that could be put to use on this data. So, along with marketing budgets and projected returns, the two organizations can identify ways to use customer and prospect data more intelligently. The result can be more accurate, workable targets for everyone.

Supporting the optimization of marketing mix

Marketing performance analytics provides the tools necessary for uncovering insight from multiple customer information sources such as customer relationship management (CRM) systems, sales force automation, marketing contact databases and more. With this insight and a consolidated 360-degree view of customers, channels and touch points, CMOs and their marketing organizations can optimize the inbound and

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In essence, marketing performance analytics can yield significant benefits not only for marketing organizations, but also for finance organizations, the C-suite and more. The key is to implement a solution with software and technology designed to address all aspects of marketing performance analytics with automation, preconfigured software, integrated business intelligence solutions, multidimensional analysis and more.

The right solution: IBM Marketing

Performance Analytics

The IBM Marketing Performance Analytics solution is scalable, preconfigured software that helps marketing organizations and CMOs understand and justify performance by answering three critical questions: “how are we doing?”; “why?”; and “what should we be doing?” A combination of IBM® Cognos® Business Intelligence and Cognos TM1®

software, the range of this solution moves from descriptive analytics, or what is going on, to prescriptive analytics, or recommendations that can make “what we should be doing” happen. Marketing operations professionals can gain a 360-degree view of all marketing activity results and returns, including all relevant customer and marketing interactions. In addition, the solution is designed to provide the capabilities necessary for measuring, evaluating and improving the performance of marketing initiatives and campaigns. These capabilities include:

• Powerful and scalable business intelligence and performance

management that helps users track, analyze, measure and report marketing performance analytics results, share insights with colleagues and act on findings to drive the company forward

• Visibility of key marketing performance indicators such as

responses, conversion rates, pipeline and leads that can be accessed daily, weekly and quarterly

• Powerful “what-if”’ scenario modeling for optimized

marketing resource allocation based on quarterly revenue targets

• Simulation of marketing scenarios to improve

decision-making, planning and budgeting and to understand investment tradeoffs

• Ability to unlock insights from multiple data sources.

including marketing automation platforms, social media, CRM and financial systems

With this solution, marketing VPs and CMOs can identify, track, share and analyze information about marketing campaigns, programs and initiatives to drive better decisions and outcomes for their organizations. Demand generation and campaign professionals can monitor and measure marketing campaigns to determine their effectiveness. Business and marketing analysts can generate insight daily, weekly and monthly by program, channel, customer segment, location or region, and product and service. They can engage in scenario modeling to understand marketing investment and allocation tradeoff decisions. In addition, marketing organizations and finance organizations can share information and expertise more easily, which results in improved accountability and outcomes.

Conclusion

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This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates.

This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates.

The client examples cited are presented for illustrative purposes only. Actual performance results may vary depending on specific configurations and operating conditions.

THE INFORMATION IN THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF

MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF

NON-INFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided.

The client is responsible for ensuring compliance with laws and regulations applicable to it. IBM does not provide legal advice or represent or warrant that its services or products will ensure that the client is in compliance with any law or regulation.

1 Jack Loechner, Poor Customer Service Costs Companies $83 Billion Annually, Research Brief, the Center for Media Research, 18 Feb. 2010 (www.mediapost.com/publications/article/122502/#ixzz2VMym0Xcu Accessed 5 June 2013)

2 The State of Marketing 2013, IBM’s Global Survey of Marketers (www. public.dhe.ibm.com/common/ssi/ecm/en/zzl03043usen/ZZL03043USEN.PDF. Accessed 4 June 2013)

3 The State of Marketing 2013, IBM’s Global Survey of Marketers (www. public.dhe.ibm.com/common/ssi/ecm/en/zzl03043usen/ZZL03043USEN.PDF. Accessed 4 June 2013)

4 John Quelch, “Why CMOs Are Gaining Ground in the Recession.” Advertising Age, 10 March 2009 ( www.adage.com/article/cmo-strategy/cmos-gaining-ground-recession/135145/. Accessed 7 June 2013)

5 Michael Dunn, Executive Summary: The Marketing Accountability Imperative. Prophet. 2 February 2010 (www.prophet.com/thinking/ view/429-executive-summary. Accessed 7 June 2013)

6 John Quelch, “Why CMOs Are Gaining Ground in the Recession.” Advertising Age, 10 March 2009 (www.adage.com/article/cmo-strategy/ cmos-gaining-ground-recession/135145/. Accessed 7 June 2013)

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YTW03339-USEN-00 segments. And, very importantly, it is designed to improve

organizational alignment by linking back into finance systems to help finance organizations develop more accurate and reliable forecasts.

About IBM Business Analytics

IBM Business Analytics software delivers data-driven insights that help organizations work smarter and outperform their peers. This comprehensive portfolio includes solutions for business intelligence, predictive analytics and decision management, performance management, and risk management.

Business Analytics solutions enable companies to identify and visualize trends and patterns in areas, such as customer analytics, that can have a profound effect on business

performance. They can compare scenarios, anticipate potential threats and opportunities, better plan, budget and forecast resources, balance risks against expected returns and work to meet regulatory requirements. By making analytics widely available, organizations can align tactical and strategic decision-making to achieve business goals. For further information please visit ibm.com/business-analytics.

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