How to turn marketing efficiency into growth

Those who participated in our Kellogg program will recognize the challenge we raised in the Danaka case.

At Western Union, fueling growth starts with taking a hard look at how effective current marketing programs are. Chief Strategy, Product and Marketing Officer Libby Chambers explains how it’s done.

Growth leaders are adept at finding money to invest in initiatives that drive revenue. In this interview, Libby Chambers, Western Union’s chief strategy, product and marketing officer since 2015, talks with McKinsey’s Barr Seitz about how she has focused on ratcheting up marketing effectiveness and efficiency to release funds for growth programs.

Thinking like an investor

The investing metaphor is apt in that you’ve got many different places where you can spend your money—countries, channels, products, and customer groups. You almost have to think like a CFO. You really need to stay on top of your numbers. I also think the marketing discipline has evolved over time to a place where being quantitatively rigorous and having as much financial acumen as the finance people has become really important.

We embarked on a marketing ROI project where, over eight or nine months, we broke everything down into two elements: efficiency and effectiveness. On the efficiency side, we consolidated our agency roster and got significantly better at running a really rigorous RFP and negotiating commercial terms with our agencies, be it media buying, creative, research—all the different parts of the agency constellation. That side of the work included getting better at understanding our costs and then being very precise about competitively bidding out the work.

The other side of the marketing ROI project included a number of different effectiveness measures like improved targeting of our digital-media buy, understanding exactly where the money was going and where the best ROI was. We also examined our research activities over time to make sure we weren’t duplicating th

e same study over and over again but were actually building and sharing knowledge.

A crucial aspect of the entire process was the creation of test-and-learn discipline. We did a bit of teaching to make more people aware of the fact that test-and-learn can help you navigate budget constraints by pinpointing the right thing to do. We probably came up with 50 different measures that we’ve been able to put in place and are now tracking.

Reallocating marketing spend: How much is enough?

We put our captured savings in a “pot,” where we measure it and then redeploy it to a series of growth projects. The challenge is to identify which of the many competing growth projects we should put the money into. I think a lot of people in the business thought it would just kind of fall to the bottom line, or the savings would just sit wherever they accrued, or they would be spent on a bigger campaign in that particular market or part of the business. But we designed a pretty clear mechanism around capturing it and redeploying it in a very purposeful way.

That’s because we’d had a peanut butter approach, where everyone was getting a constant percentage of sales. So the marketing budget would literally be the same percentage of sales everywhere, independent of whether the country was growing or shrinking or whether it was a priority or not a priority. So there was a lot of aligning the budget, not on a percentage-of-sales basis, but on a much more sophisticated, what-are-we-actually-getting-on-our-return basis for that marketing spend.

We had what we call “sufficiency” problems in many markets, where the money we were spending was not reaching any kind of critical mass to achieve the impressions needed to move the dial. There was lots of money being spent on paid search, for example, that wasn’t yielding anything like the sort of results that you would expect. So in a lot of markets, we said, “If you’re not going to be sufficient to actually achieve anything, let’s turn it off, and then let’s come back in with something that actually makes more sense for that market.” We also spent a lot of time looking at correlations between countries where we were spending a lot of marketing money and countries where we weren’t, and were actually seeing no difference in the measured business results. That gave us a clue that we might want to pull back on spending in those markets and do some AB testing around whether putting in more or less money actually even mattered.

So there’s been a little bit of doubling down and a little bit of pulling back and not doing things that aren’t moving the needle. There’s also been some more careful husbanding of resources to concentrate on the bigger bets.

Efficient marketing is science, not magic

I’ve spent most of my career in direct marketing, so for me, some of the science has just been rebranding stuff that people in the credit card or the publishing world have been doing for 50 years. But I do think that the cost of data has come down, the cost of the tools has come down, and the level of “real-timeness” of the information has gone way up.

The science is basically just classic: looking at test and control, reading the results, figuring out what worked, what you should do next, what didn’t work, what to stop. There isn’t a huge amount of magic to it. It’s just getting it all in one place and being able to produce analysis and information that people can use to make decisions. What’s changed is we’re trying to make the whole analysis through insight through decision cycle more rapid. Digital marketing has massively enabled that

Invest, Create, Perform: Mastering the three dimensions of growth in the digital age

By Kabir Ahuja, Jesko Perrey, and Liz Hilton Segel

http://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/invest-create-perform?cid=other-eml-alt-mip-mck-oth-1706&hlkid=fb0b43f73f664585a6e7a1380d31eb02&hctky=2805824&hdpid=76b6b86a-9bf1-4824-a04f-213a98ba7fa1

Growth winners think about growth in new ways and pursue it across multiple dimensions.

Very interesting article that you should read in its entirety.

Growth isn’t just about building value; it’s fundamental to long-term business survival. Consider this: almost half of the 100 largest companies on the New York Stock Exchange 30 years ago that enjoyed strong shareholder returns but did not post top-line growth had been acquired or delisted 20 years later.

Despite such compelling statistics, we find that many companies continue to focus on controlling costs as a way to drive earnings. When controlling costs dominates the corporate agenda, it sucks the oxygen out of any growth plan. Conversely, we’ve found that companies that have a clear agenda for organic growth and pursue it systematically outperform the competition….

….How companies actually capture that growth, however, has changed drastically with the rise of technology and advanced analytics. Digital has changed the nature of growth by rapidly accelerating the pace of business, expanding the scope of competition, and often introducing new business models seemingly overnight. Companies that are most successful at driving growth are those that can execute across multiple dimensions and inject speed, agility, and analytics into their corporate DNA…

….Given this new dynamic, we wanted to understand better how businesses think about driving organic growth and what the top growers actually do to achieve it. To that end, we surveyed almost 600 executives at leading companies around the world. We found that companies are active across three broad growth dimensions:

• Investing. These companies squeeze funds out of various sources (e.g., admin) to double down on existing high-growth activities. An example of this approach is Zara, which found a winning model in its rapid-fashion program and grew by relentlessly investing in it.
• Creating. Winning companies build value by designing and deploying new products, services, or business models. Adobe, for example, has grown rapidly by developing its Creative Cloud services and establishing an innovative new model in which customers get access to all Adobe products for an ongoing fee.
• Performing. These businesses continuously optimize core commercial capabilities in sales, marketing, pricing, and customer experience. Capital One epitomizes this approach by using advanced customer data to identify microsegments of customers, tailor products to them, track trends, and test products.

11 Types of Strategic Maturity: Which One Describes Your Company? 

https://www.strategy-business.com/blog/11-Types-of-Strategic-Maturity-Which-One-Describes-Your-Company?gko=9aa3b&utm_source=itw&utm_medium=20170620&utm_campaign=resp

Pretty interesting material

Almost every business today faces major strategic challenges, but different companies are challenged in different ways. That’s why so much conventional wisdom surrounding strategy — for example, understanding your external environment — can fall short of what a company needs. Winning today requires you to carefully balance your strengths (what you can do incredibly well) against your opportunities (what the market will reward). That complexity requires a level of strategic maturity: the ability to understand what is fundamentally holding you back, and to correct your course accordingly….

…These days, most companies recognize the value of this strategic approach, but it isn’t always easy to get from today’s incoherence to tomorrow’s focused strategy. We have identified 11 archetypes, each representing a different level of progress along this path.

The first three archetypes represent companies that are not concerned about coherence at all. They have not tried to establish focus and consistency in their portfolio of products and services, their capabilities, or value propositions, and they are not visibly moving in that direction:
1. Strategically adrift companies are either failing or lucky. They don’t have a meaningful strategic direction or a clear view of how they create value. The market generally does not perceive them as being advantaged.
2. Undifferentiated companies have products and services that compete effectively, but they lack a focused identity that sets them apart. Because individual products are relatively easy to copy, their advantage generally isn’t sustainable.
3. Underleveraged companies have a relevant strategic direction and good execution; they do many things right. But their strategy lacks coherence — it is based on following multiple directions, even if they fit together poorly. These companies risk losing to more focused competitors.

Two archetypes describe companies that aspire to a coherent strategy but struggle to develop one:

4. Portfolio-constrained companies offer a diverse group of products and services, which makes it very difficult to agree on company-wide priorities (although they’d like to do so)

5. Unfocused companies are pretty good at a lot of things, but not great at anything — and thus, although they value coherence, they struggle to choose which capabilities to prioritize.

Four archetypes refer to companies that have developed a coherent strategy but struggle to execute it:
6. Distracted companies have defined a coherent identity for their company, but they have a hard time resisting diversions. They pursue market opportunities that aren’t in line with their strategy.
7. Resource-constrained companies struggle to find the funds to execute their strategy. Building differentiating capabilities is difficult and expensive, and the executives at these companies don’t think their financial situation allows them to make the bold moves they need.
8. Capability-constrained companies lack the knowledge, skills, or technology needed to build out their capabilities to a world-class level, or to scale them throughout the organization.
9. Overstretched companies have defined a coherent identity for themselves, but it is so far away from the company’s current status — and their ability to enlist customers, employees, and investors on their behalf — that they can’t successfully realize their goals.

The final two categories depict companies that are living a coherent identity:

10. Coherent companies have a powerful value proposition and a system of a few differentiating capabilities that support that value proposition. Their portfolio of products and services grows successfully because of the strengths they consistently bring to bear.

11. Supercompetitors use their coherence to shape their future. They apply their capabilities to a broader range of challenges and loftier goals, serve the fundamental needs and wants of their customers, and ultimately lead their industries. These companies are not just playing the game of business well — they’re changing the rules.