MES 2020: How to secure resources at a time of budget scarcity

The Bradley Group's John and Carrie Bradley explain how marketers should measure ROI.

grab3

Carrie Bradley and John Bradley, managing partners of The Bradley Group, spoke at a virtual session of the Marketing Evolution: C-Suite Summit.

Forecasting with any degree of accuracy remains one of the biggest challenges facing all businesses at the moment, and that has “put the squeeze on budgets and resources,” said John Bradley, co-managing partner of The Bradley Group, during strategy’s virtual Marketing Evolution: C-Suite Summit (MES) on Nov. 19.

“Most companies have actually pulled budgets back to the centre and instigated a zero-based budgeting approach where everyone has to make a case for a sum of money to spend on an activity,” he said. “We actually believe the days of having pre-signed, pre-authorized budgets, decentralized across the organization, are probably gone forever.”

John and co-managing partner Carrie Bradley (no relation), who have collectively spent 40 years on the client-side, offered advice on how marketers can continue to secure resources at a time of budget scarcity.

According to Dentsu Aegis Network’s 2020 global CMO survey, which was cited by the consultants, brand leaders’ top concern over the next six months is understanding which consumer behaviours are temporary and which will become permanent (40% globally), followed by declining consumer spending (39%) and aligning with changing customer sentiment (39%). Meanwhile, lower on the list of concerns was obtaining the right data to make timely decisions (32%), decreasing marketing budgets (26%) and demonstrating ROI (23%).

John and Carrie Bradley believe this prioritization of concerns is ultimately misguided. If marketers can’t demonstrate ROI and secure marketing resources, John said, understanding how consumer behaviours and sentiments are changing is “completely pointless” because they won’t have the money necessary to act on it.

“Anyone who’s thinking about six months ahead probably isn’t being very helpful in the organization at the moment,” John Bradley said, noting the CMO for McDonald’s in the U.K. is currently only planning around four weeks ahead.

In this environment, properly quantifying past and future value creation is going to be key to securing marketing resources, added his business partner.

To do that effectively, brand leaders must start by asking themselves two questions: “What would have happened if the marketing initiative didn’t run? And what else in the business changed as a consequence of the campaign or initiative?”

Using the right baseline 

When calculating campaign ROI, many marketers currently compare sales at the beginning and end of the campaign period.

But this method does not account for a “do-nothing scenario,” because sales that were in decline before the campaign period would not “magically stop declining” if the campaign hadn’t run, the consultants said.

Instead, ROI should be calculated based on the difference between sales at the end of the campaign period and a “reasonably sensible, not aggressive” projection of sales in a “do-nothing scenario” (in which sales continued to decline based on current trends). In many cases, the value creation achieved in the latter scenario is many times higher.

“Because it involves a bit more work, we believe, than actually just taking the sales outlook at the beginning of the activity – people tend not to do it,” John Bradley said. “So as an industry, marketing [departments] and advertising agencies have been under-claiming the value that they do actually create for their companies for a long time.”

Calculating ROI

Accounting for consequential benefits

To secure greater marketing resources, the consultants believe it’s also imperative that marketers understand the full set of impacts their initiatives have on the business.

Measuring SuccessThese results (see image on the right), which can fall outside of the marketer’s remit, include the financial impacts (such as increased sales, greater product or service availability and reduced costs) and non-financial impacts (such as customer satisfaction, service quality and sales momentum) that are easy to measure, as well as those that are more difficult to measure (such as customer retention, increased price elasticity and more effective work processes on the financial impact side, and enhanced reputation and increased teamwork on the non-financial impact side).

“With the changes that have happened inside businesses in the last nine to 10 months, you really should be almost taking an X-ray of your current organization to understand where all of these factors lie and where you can get the information,” Carrie Bradley said.

The Bradley Group used results from Koodo’s “Shock-Free Data” campaign to help illustrate the consequential benefits that come with a successful marketing initiative. The service provider hoped to win new customers by promoting an existing feature that helped users avoid unexpected charges related to data usage.

The campaign was successful in hitting many of its initial targets, including an 8% increase in new customers and improvements on brand health and reputation. But there were two other benefits that the brand didn’t anticipate, according to the consultants, including a 115% increase in top-up revenue (meaning people were purchasing more data after being notified of potential overage charges) and a 60% reduction in data-related complaints from customers.

Knowing the latter, the organization could decide to have the customer service team spend more time on each call, which could lead to better service quality, or put the extra capacity towards activity to generate sales momentum.

“You really want to show all that value that you created from your campaign or your initiative,” she said. “As soon as you can show that value, then your argument for future resources becomes that much stronger.”