Monday, September 17, 2007

Maximize Marketing Investment By Understanding Tool Interactions

[Click the Image above for a Larger View.]

I’ve previously discussed the importance of aligning CMO goals with CEO objectives to maximizing return on marketing investment for the organization. Now, assuming the CMO has ensured alignment, the challenge remains to maximize the marketing mix to deliver on those goals. Maximizing marketing return on investment requires a deep understanding of the often elusive interplay between marketing variables. Whether you define you marketing toolkit as the traditional 4 P’s or as a more comprehensive kit of tools, do you understand how they work together? Understanding the interaction between variables can allow the marketer to enhance the overall return of the marketing investment spend by combining efficiencies with effectiveness. The less the guesswork about the interactions, the lower the inherent risk of any selected set of tactics.

A simple interaction grid shows that the 4 Ps impact one another. Not very helpful, though.

A deeper analytical staircase grid structure provides deeper insight and challenges the marketer to ask the questions appropriate for each cell of the grid. For example, in the grid above (click the image above for a larger view), let P1= Product. Column 1, Row1 is the intersection between Product/Product. Evaluate this cell by asking all of the traditional Product marketing questions to determine if the product is optimized to meet customer needs and profitability requirements. Let P2=Price. The cell below, Column1, Row2, reflects the interaction between Price and Product. Here, the marketer asks questions about the tradeoffs between product features and price points. Are there high end product opportunities? Are there opportunities to introduce lower priced products with a different set of features or services? Let P3=Place. Column1, Row 3 addresses the interaction between Place and Product. Are all products in the portfolio sold in the same channels? Do product features differ by channel?

Note that the questions in each cell can be modified to address situations and challenges specific to any business. By completing the grid with the questions relevant to your business you have a dynamic set of marketing questions to be addressed. Then, assess your ability to answer the questions in each cell. You will quickly determine the degree of knowledge that you have about the performance of the key elements of your marketing mix. Where the data is insufficient and a gap exists, further research may be warranted. Your ultimate goal is to understand the mix tradeoffs to maximize ROI against the marketing goals which are aligned with the business objectives of the CEO.

Note that while this example used the “4 Ps”, the same interaction analysis can be conducted against a deeper list of marketing tools, and it is a simple steps (but a lot of effort) to evaluate interactions at a deeper level with any given element. For example, you might construct a similar interaction analysis against each major element of the Promotion mix, evaluating the impact of print media and sponsorships or between coupon discounts and trade marketing.

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