Fourtoutici Enterprise Marketing Management_9 pptx

based on sound strategy and statistics, not hunches or tradition—and by any measure, that’s a positive change.CASE STUDY: Harrah’s Casinos MARKETING INVESTMENT STRATEGY YIELDS A PRODUCTI

based on sound strategy and statistics, not hunches or tradition—and by any measure, that’s a positive change.

CASE STUDY: Harrah’s Casinos

MARKETING INVESTMENT STRATEGY YIELDS A PRODUCTIVE, PROFITABLE BRAND EXPERIENCE

There is no industry more dedicated to the power of marketinginvestment management than casino gaming Gamblers are creatures

of habit, and no gaming corporation has done a better job of tracking,analyzing, and capitalizing on those habits than Harrah’s At its 25 casi-nos around the country, Harrah’s learns everything possible about itscustomers, and then presents specifically targeted offers to thembased on their value to the corporation, their responsiveness, andtheir willingness to spend

At a central processing office in Memphis, Harrah’s compiles anincredibly detailed record of every movement and every bet of everyvalued customer in all of its casinos Harrah’s can monitor the num-ber of machines the customer plays, the number of wagers made, theaverage size of bets, and the total money deposited in machines

(called the coin-in) Before a customer has even arrived home from a

visit to a casino, Harrah’s has compiled enough information on them

to build a detailed profile of their gaming habits, a plan for enticingthem back to the casino, and even an individual profit-and-loss pro-jection that will aid in future marketing investment in the customer.Harrah’s tracks customer information by using a plastic loyaltycard that valued customers slide into slot machines and card tableswhile they play.The benefit for the company is obvious; the informa-tion gathered on the customer is invaluable and is used to refine itsdatabase, now segmented into 90 behavior-driven demographic tar-gets Each segment receives its own custom-tailored direct-mailincentives

For their part, customers can earn platinum or diamond statusbased on their gambling levels.They can visit www.harrahs.com to findtheir point levels and learn more about benefits Based on which cus-tomers choose which benefit packages, Harrah’s can continue torefine and improve its marketing investment

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Conventional wisdom would hold that the slots players, playingonly a quarter or a dollar at a time, are Harrah’s least valuable cus-tomers And conventional wisdom would be dead wrong Slots andother electronic gaming machines account for the majority of Har-rah’s $3.7 billion in annual revenue and constitute more than 80 per-cent of the company’s operating profit Because it has tracked andretained its slots players, Harrah’s has grown to be the second-largestgaming company in the United States, behind only MGM Entertain-ment Harrah’s also boasts the highest three-year investment return

in the industry In just the first two years of its Total Rewards program,Harrah’s saw a $100 million increase in revenue from customers whogambled at more than one Harrah’s casino

So how does Harrah’s track its 25 million customers? With acombination of technology and strategic analysis.The company beginswith four key pieces of information—gender, age, area of residence,and games played—and uses that information to offer early predic-tions of which customers will become the biggest spenders.The com-pany designs appropriate marketing strategies to lure customersback The goal is not a product-based one—say, designing games toreach particular revenue levels—but rather a customer-based one,working to maximize revenue from individual customers, regardless

of which games they play

Each of the demographic factors demands its own series of tives Out-of-town customers typically receive discounts on hotelrooms or transportation, while local customers receive cash, food,and entertainment incentives Early expiration dates encourage cus-tomers to return quickly or switch from competitors Harrah’s trackseach incentive based on response rates and return on investment, andadjusts future incentives accordingly

incen-Analysis of customer data found that the 30 percent of Harrah’scustomers who spent between $100 and $500 per visit accounted for

80 percent of company revenues and almost 100 percent of profits.Those gamblers were typically local residents, who visited theirnearby Harrah’s frequently

With this data in hand, Harrah’s marketing teams developed aprofile of the ideal Harrah’s customer As it turns out, the ideal gam-bler is a 62-year-old woman who lives within 30 minutes of a casinoand plays dollar video poker.These ladies typically have substantial dis-posable cash, plenty of time on their hands, and easy access to a Har-rah’s regional casino

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Harrah’s has made an intensive, extensive marketing investment,and it’s now beginning to pay off The lesson for other companies isclear—learn who your best customers are, or you’re liable to losethem.

M A R K E T E R’ S S C I E N T I F I C M E T H O D :

A C T I V I T Y-B A S E D M A R K E T I N G ( A B M )

By applying activity-based costing theory to marketing, you canestablish a rigorous process for evaluating which marketing activi-ties create value In turn, you can use this information to develop arobust, fact-based decision-making process for how marketinginvestments are made The overall objective of this activity-basedmarketing (ABM) analysis is to maximize the return on marketinginvestment (ROMI) that an enterprise can achieve ABM includestools for measuring and analyzing ROMI, and it represents a struc-tured methodology to perform the following:

~ Apply scientific discipline to maximize the return onevery marketing dollar spent across the enterprise

~ Optimize the performance of each marketing channeland the portfolio of channels overall (i.e., which chan-nels perform better than others? Where should we investlabor and dollars?)

~ Model what-if investment scenarios

~ Forecast the number of leads needed per month, perchannel to achieve revenue objectives

~ Provide a common language and fact base for the keting and executive teams to make informed decisionsWhen appropriately implemented, ABM delivers substantialbenefits to an enterprise:

mar-~ Laying out a road map to success for each business unitacross an enterprise, based upon the expected effective-ness and efficiency of each marketing activity, initiativeand/or campaign, and so on

~ Identifying risks and critical success factors to hit formance targets

per-1 8 6 E N T E R P R I S E M A R K E T I N G M A N A G E M E N T

~ Providing visibility into the number of leads required ateach stage of the sales process in order to achieve finan-cial objectives—giving the management team sufficienttime to take corrective action

~ Aligning enterprise marketing and customer strategieswith operational investments (i.e., people, process, andtechnology)

The power of ABM comes from the insights your managementteam gains as a result of conducting the analysis, asking the rightquestions, and gaining a new understanding of your business

ROMI tools alone do not provide the answers; rather, they provide

data on performance and a framework for asking pointed questions

Of course, as discussed in this chapter, organizational involvementand buy-in of the analysis is critical

Your goal should be to conduct the ABM analysis with the priate level of rigor to provide “good enough” data for understandingperformance, identifying opportunities, and modeling the future.Above all, avoid analysis paralysis—don’t spend so much time look-ing at your plans that you don’t have time to implement them

appro-Step 1: Understand Past Performance

The first step requires an intimate understanding of where you are

in your business and where you have been This begins with fying all marketing activities that you perform to reach your targetcustomers It is important to break down your activities in sufficientdetail to ensure that you can reveal and measure the things thatreally help generate value for customers and for your business Forexample, if you think one of your key activities is driving brandpreference, you may want to consider breaking this down into sev-eral more detailed activities that you believe help drive preferencefor your brand You may publish a newsletter, maintain a web site,

identi-or conduct seminars, each of which drives preference fidenti-or yourbrand So instead of having an activity called “drive brand prefer-ence,” you may have several activities in which you invest, such as

“publish newsletter” or “maintain web site.” Give marketing ities clear names and develop consistent descriptions; otherwise, itwill be difficult to track revenues and costs associated with eachactivity and the value of the analysis will be compromised

activ-M E A S U R E I N V E S T activ-M E N T P E R F O R activ-M A N C E 1 8 7

Next, try to attribute customer revenue to each activity Thiswill allow you to compute average, maximum, minimum, and stan-dard deviation of deal sizes by activity and begin to identify oppor-tunities To start with, keep it simple Try to tie the source ofcustomer leads to specific activities At this stage you should alsoallocate marketing labor costs and discretionary costs to each activ-ity Once this has been completed, you should begin to get a clearerunderstanding of which marketing activities actually generate thehighest return and drive your business Table 9.3 shows a samplescorecard that results from Step 1.

Step 2: Model the Future and Perform What-If Analysis

The next step is to model the future performance of your businessand determine how to optimize investments There are two differ-

ent approaches Top-down analysis is used to determine how to

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Table 9.3 Sample Scorecard

Avg Deal Activity % of # of

M E A S U R E I N V E S T M E N T P E R F O R M A N C E 1 8 9

Table 9.3 (Continued)

# of % of Total Activity Cost Per Cost per Activity

mize your activities to hit a specific revenue target The revenuetarget is fixed and the analysis focuses on optimizing the levers thatdrive total revenue and provides insight into marketing investment

and hiring requirements Bottom-up analysis is performed to

deter-mine the maximum revenue that can be attained by optimizing enue drivers Revenue is the dependent variable This form ofwhat-if analysis provides insight into the following:

rev-~ How total revenue will be affected if we increase theprobability of closing (e.g., enhance training or resourceinvestment)

~ What type of return we will get if we invest more in thismarketing activity (e.g., invest in labor or promotions toincrease the number of leads)

~ What type of return we get if we increase the averagedeal size

Step 3: Forecast Monthly Lead Requirements

The final step of the ABM analysis is to forecast the number of newcustomer leads that are required per month, per sales processstage, to hit revenue targets Modeling revenue distribution byquarter, average deal size, probability of conversion, cycle time, andcash flow recognition, the enterprise begins to get a clear picture ofcurrent performance and progress against business objectives.Using this lead forecasting approach, an enterprise will know well

in advance whether marketing has insufficient leads in the pipeline

to meet revenue targets The obvious benefit is that with increasedvisibility, the management team will have additional time to coursecorrect marketing initiatives, realign marketing investments, andget back on track to meeting targets

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OPTIMIZE MARKETING

INVESTMENTS TO DRIVE

PROFITABLE SALES

Every day, every marketer faces the critical decision of

deter-mining where to make marketing investments or—thinkingmore broadly—where to position marketing assets in order

to drive profitable sales Even if you’ve successfully developed abrand architecture that describes that combination of emotionaland functional benefits that drive purchase intent for your brand,translated these benefits across the entire brand experience, andthus developed a brand experience blueprint, you’re still not done.You still have to think about where to invest your marketing funds

to drive sales

The brand experience blueprint is just that—a blueprint of all

of the potential customer interactions, ideally across both the rent elements of the marketing mix, and all of the customer touchpoints However, it doesn’t tell you where you need to be investingyour marketing dollars It doesn’t provide you with the creativespark that might be the basis of a market-based experiment Soeven after applying a significant measure of science to your mar-keting efforts, there’s still plenty of room to let your hair down andget creative

cur-The brand experience blueprint represents the marketer’s oratory and stands as the compendium of all your opportunities to

lab-191

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communicate and engage your customers This is where the imentation can really begin, at least as it relates to identifying thosetactics that might drive sales By thinking horizontally, or evenholistically, across the entire brand experience, the scientific mar-keter can identify those areas where marketing investment andexperimentation make sense The bottom line is that marketinghas to invest in those campaigns and initiatives that drive sales If

exper-an idea doesn’t, then it’s not worth your money

This theory goes back to the premise of EMM Part of bringing

a scientific approach to how you invest in marketing is realizingthat you will make mistakes Too many marketers try to avoid eventhe possibility of making a mistake, tending to their sacred cowsand staying on the safe, predictable path

This isn’t to say that safe and predictable decisions are sarily good ones On the contrary, these terrible decisions are all tooacceptable Outsourcing strategy to an advertising agency, continu-ing to support investment in marketing events, or paying for spon-sorships that have no relationship to sales whatsoever are threeexamples of investments that conventional wisdom believes aresafe—and real marketers believe are often heedlessly wasteful.Marketers must bring an analytical approach, yes, but also adesire to apply the scientific method to what marketing does in aneffort to continually increase knowledge of what drives sales andwhat doesn’t Unlike the traditional sciences, marketing is inti-mately connected to the enormously dynamic business market-place This means that what you learned last year might not be truenext year And this constant change makes the science of marketingterrifically exciting—as long as you’re willing to adhere to the rig-orous discipline required to learn what actually works and whatdoesn’t

neces-For example, can the marketers in your company detail whichinvestments pay out and which ones don’t? Or, if that’s not yet fea-sible, can they rank-order marketing mix investments to indicatewhich ones seem to perform better than others? At an even moreelementary level, is there a simple record of investments and salesresults?

Part of bringing a scientific discipline to marketing investingmeans applying the discipline from start to finish, not just waking

up one day and deciding to apply ROI metrics to what’s already

been done When you make a marketing investment, do you askyour marketing managers to create a financial profile of their pro-posed investment, indicating specifically where they expect tomake cash outflows and also expect to see sales inflows? Think of itthis way: This is exactly the sort of information you would demand

if you were talking to your broker about where to invest your earned money, regardless of risk Why does your company deserveany less?

hard-In making the decisions about where to invest marketing lars, the marketer can use the brand experience blueprint as his orher portfolio, because it adequately lays out all of the current cus-tomer interactions in such a way as to communicate the brand’sbenefits What levers should we pull for activating the brand?Where should we invest marketing dollars, either in marketing mixelements or in altering some current aspect of interaction across acustomer touch point? Should we allow differentiation of offeringsbased on geography or targeted segment? All of these questionsform part of the research and investigation that makes up the mar-keter’s job Granted, it’s impossible for you to simply read a bookand learn exactly where to make your marketing investments todrive the sales of your company But you can learn the proper steps

dol-to follow and how dol-to think through your approach dol-to make the most

of your marketing investments

Generally speaking, every marketer should follow the sameapproach to making marketing investments, regardless of whetherthe investment is for launching a new product or for continuing topush your current offerings This approach is relevant for everypotential change or investment in the brand experience blueprint.Whether you’re spending money to purchase advertising produc-tion and media, to create a more compelling customer extranet, or

to ensure that your sales force communicates brand benefits, thisapproach works

To drive profitable sales using EMM, marketers must take tain steps before even thinking of spending that first dollar:

cer-1 Ensure alignment with the strategy that the marketing

investment supports

2 Identify where in the brand experience blueprint tomake your marketing investment(s):

O P T I M I Z E M A R K E T I N G I N V E S T M E N T S 1 9 3

a Create the marketing investment program—marketing

mix element or customer touch point

b Develop a profile of the investment and the return on the

invest-The appeal of this approach is that with every investment, youhave the opportunity to get smarter, on individual, brand, and cor-porate levels If the business model isn’t in place to make this possi-ble, then your marketing investment in learning is going to waste.You might hit a few home runs, but the loss of one key player willland you back in the cellar Keep this in mind—learn from every-

thing you do as a marketer Everything.

E N S U R E A L I G N M E N T W I T H

T H E B R A N D A R C H I T E C T U R E

Before even thinking about where to put your marketing ments, it’s critical that you align potential marketing efforts withyour brand architecture While the emotional and functional bene-fits of your brand have presumably been incorporated into yourbrand experience blueprint, it’s critical to make sure that everypotential marketing program is synchronized and aligned with thatsame brand architecture

invest-While this may be as simple as reviewing your brand ture before moving to the next step, many brands have to struggle

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with far more complex questions, like, say, How much does mybrand vary from France to Japan? Which of my brand benefits areinviolable, and which ones are subject to interpretation?

The question that many marketers struggle with is how tomake a particular brand architecture work in a local market Forexample, given Pepto-Bismol’s popularity in the Hispanic commu-nity, how should the brand architecture be applied differently inLatino markets as opposed to the broader U.S market? Or if you’regrappling with the age-old global versus local conundrum, how canthe global brand manager ensure that a brand’s positioning isapplied consistently around the world, while giving the local mar-keters the leeway to make the brand’s benefits relevant?

Figure 10.1 highlights the process trade-offs that any marketermust make when addressing such a challenge The bottom line isthat there are inevitably core elements of the brand architecture orcore marketing processes as well as potentially regional/shared andlocalized elements The placement of the dividing line must bedriven by the inevitable investment trade-offs as determined bytheir ability to drive incremental sales To answer our own question,

the Pepto-Bismol brand architecture is the brand architecture The

leeway in interpretation will be driven by the specific return frominvesting in Latino-specific marketing

O P T I M I Z E M A R K E T I N G I N V E S T M E N T S 1 9 5

Marketing Recruiting & Training Customer Service Global Brand Strategy & Positioning & Trademark Compliance Corporate Sponsorships & Marketing Alliances

Sales Research Pricing Promotions Advertising

Sales Research Pricing

Sales Research Pricing Promotions Advertising

JAPAN CANADA U.S.A FRANCE GERMANY

FIGURE 10.1 Positioning Brand Assets to

Drive Profitable Sales