OC&C: Measuring Marketing ROI in the digital age

01 October 2014 Consultancy.uk

In the third article looking at OC&C Strategy Consultants' research into CMO's top priorities, Fergus Jarvis, partner at OC&C Strategy Consultants, discusses the trials and tribulations of measuring ROI.

CMOs from across a range of brands ranked measuring the ROI of marketing spend second only to personalising the customer experience

Measuring ROI is in every CMO’s DNA and an essential part of their role. Today’s CMO is one of the most measured board members - and scrutiny from across boards is continuing to increase, with the return on every pound spent examined in detail. In many ways, the cult of ROI has been the saviour of marketing by answering questions that were once unanswerable about the real effect of campaigns - however it is not always a panacea.

Realising the importance

When we spoke to over 50 CMOs from across a range of brands big and small, measuring the ROI of marketing spend ranked second only to personalising the customer experience when it came to their highest priorities. But because ROI has been such a central concern over many years, the CMOs we interviewed felt that they had the processes in place to manage it and make informed and dynamic decisions about how to optimise spend.

OC&C Marketing

In their view, competent marketers have worked out how to use the models and data sources available to provide measures of success that justify spend levels, and these tools are now fully embedded in their day-to-day routine.

However, this confidence might be misplaced. While simple metrics like revenue growth are effective measures of overall business performance, it’s becoming increasingly difficult to understand what really moves the needle with ROI when it comes to specific marketing initiatives, as potential exposure to different media types continues to proliferate. Importantly, the question posed to marketers by the business is increasingly less one about customer acquisition and top-line growth alone, but one about the profitability of the customers acquired through different channels.

Variable standards

As digital and social media have become fundamental components of integrated campaigns over the last five years, the interrelatedness of different channels has become a bigger issue and remains poorly understood. What’s more, there continues to be a real issue around the measures available for each media channel and the extent to which these are comparable, or more simply the right measures.

Social Media

Responsive campaigns

Many of the CMOs we spoke to stressed the importance of nimbleness, speed and the need to calibrate campaigns in real time. The days of a six monthly marketing plan are long gone; CMOs are now working dynamically, making decisions quickly and making them happen on the spot. Some of the companies we spoke to tweaked their spending profile on a weekly or monthly basis, while others don’t have set campaign plans in place but iterate ‘live’. The implication of these changes can be profound in some instances, especially in the role that traditional buying agencies play for their clients.

In many ways, this is no bad thing. The data CMOs can capture by measuring how their campaigns are performing across digital and social channels is allowing them to tweak them in real time to ensure they’re reaching their customers in a more effective way. But there is also the risk that the cult of ROI and pressure to prove value at every point could lead CMOs into the trap of directing marketing spend into approaches with easily measurable outcomes – like digital and social for instance – at the expense of long-term brand building, where return is not so easily quantifiable. 

Blinded by ROI

Many CMOs believe that the ROI-led approach to marketing has left some of the more traditional skills of brand marketing and customer engagement delivered through more traditional media underplayed as part of the marketing mix. Despite this belief, it remains very hard to win spend to fund these types of campaigns in a business ecosystem that increasingly obsesses about ROI and doesn’t recognise that the bias towards measurability may be flawed.

Fergus Jarvis

CMOs may be feeling comfortable with the notion of ROI, but there are still challenges ahead. There remains plenty of mileage to drive improvements in ROI to enable better decision making - but this is going to require more integrated and complex approaches than segment and sub-segment customer types to determine the optimal marketing messages, channels (and mix of channels) and campaign execution. This next wave of innovation will require more concerted investment to continue to drive the productivity gains from spend on marketing achieved historically.

- Article 1 of the series: Major trends impacting Chief Marketing Officers.
- Article 2 of the series: Personalisation priority for Chief Marketing Officers.

This article was previously posted by Fergus Jarvis in Marketing Magazine. 

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Four ways digitalisation is transforming car brands and dealers

16 April 2019 Consultancy.uk

From changing expectations from the customer to new stakeholders entering the industry, the digital transformation of global automotive industry means it is facing the wholesale transformation of its business model. In a new white paper, global consulting partnership Cordence Worldwide has highlighted four major digital trends that are transforming the relationships between car brands and dealers with consumers.

With digital transformation drives booming across the industrial spectrum, automotive groups are no different in having commenced large digital transformation programmes to improve productivity, efficiency, and ultimately profitability. Falling sales figures mean the automotive sector is facing an increasingly difficult road ahead, something which means companies in the market are even more hard pressed to find new ways to improve their bottom lines.

While it offers major opportunities, the industry’s move to digitalise is not without complications. It has triggered a series of major internal changes, which have presented automotive entities with the challenge of becoming a “customer-oriented” industry. A new report from Cordence Worldwide – a global management consulting partnership present in more than 20 countries – has explored how automotive companies are navigating the rapidly changing nature of digital business.

New business models

The level of change likely to be wrought on the automotive industry by digitalisation is hard to overstate. Automation could well lead to significant reductions in the number of accidents, higher vehicle utilisation and lower pollution levels, while leading to a $2.1 trillion change in traditional revenues, with up to $4.3 trillion in new revenue openings arising by 2030.

As a result of this colossal opportunity, it is easy to see why almost all automotive groups now have digital departments, with generally strong communication within the digital transformation and the customer approach. The changes to society which this may have are potentially distracting automotive firms from the change it is leading to in its own companies though, according to Cordence’s paper.

The automotive market is dead, long live the mobility market

Because of this, the sector’s business model is set to transform over the coming decades. With digitalisation speeding up the appearance of concepts such as car-sharing, a subscription package model will likely become more palatable. At the same time, car and ride-sharing models will cater to the sustainability criteria of millennials, who will rapidly become one of the automotive market’s leading consumer demographics in the coming years.

Antoine Glutron – a Managing Consultant with Cordence member Oresys, and the report’s author – said of the situation, “These ‘old school industries’ are now working on creating new opportunities, but in so-doing are facing challenges and threats: new jobs, new technologies, new ecosystem of partners, necessary reorganisation, different relationship with customers, and even new businesses. The customer approach topic is in fact a real challenge for car companies as it implies changing their business model and adjusting their mind-set to address the customer 4.0: from product-centric to customer-centric, from car manufacturer to service provider.”

Digital customer experience

In the hyper-competitive age of the internet, even top companies face an uphill challenge when it comes to holding onto customers through brand loyalty. Digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly out-dated strategies. As modern customers wield an increasingly impressive array of digital tools and online databases, they and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The automotive sector is no exception to this trend, according to the study. In order to adapt to the needs of the so-called ‘customer 4.0’, car companies will increasingly need to change their business model and move away from product-centric companies to customer-centric ones, from car manufacturers to service providers.

Glutron explained, “As an automotive company, you can no longer expect customer loyalty simply with good products; you must conquer and re-conquer a customer that “consumes” your service. The offer now has to be global, digital and personalised. Your offer has to be adapted to this customer’s needs at any given moment. A key issue related to data control is to build customer loyalty by creating a customer experience 'tailored' throughout the cycle of use of the 'car product': purchase, driving, maintenance and trade-in of the vehicle.”

One way in which the sector may be able to benefit from this desire for a tailored experience is via connectivity. Consumers are generally positive about new connective features for automobiles, and many are even willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are already particularly interested in paying a little more for navigation and diagnostic features in their future new car. This can also enable automotive companies to exploit a rich vein of customer data, enabling them to rapidly tailor their offerings to consumer behaviour.

New automotive segments

Digital transformation has also brought with it the rise of completely new application areas. As mentioned earlier, the most well-known example is the autonomous or self-driving car, where the last steps forward were not taken by major automotive groups but by technology companies such as Tesla. While this may have given such firms the edge in the market briefly, a number of keystone automotive names will soon be set to take the plunge into the market themselves, leveraging their car manufacturing prowess and huge production capacities to their advantage.

Before companies rush to invest in this market, however, it is worth their while to remember that the readiness and uptake for such vehicles differs greatly geographically. For example, following a study published in 2018, 92% of Chinese would be ready to buy an autonomous car, compared with only around 35% of drivers in France, Germany and US. Meanwhile, the infrastructure of different nations will also be significantly less accommodating of the new technology.

Use digital for steering thr activity

Elsewhere, Cordence’s analysis has suggested that hooking the cars of tomorrow into the Internet of Things is also likely to see a rapid change in the business model for car maintenance, providing real-time diagnostics for problems. This presents chances for partnerships to improve the connectivity of cars, especially with tech companies; for example, PSA partnered with IBM for a global agreement on services in their vehicle. Meanwhile, data could also be sold to other parties with an interest in this data, such as the government, which could use it to manage traffic levels, or ensure that only adequately maintained vehicles take to the road.

Glutron added, “With the increase in the amount of client data and connected opportunities, the recommendation is to set up data-centric approaches. The value is now in the customer data. The general prerequisites are to rework the data model and the Enterprise Architecture and generally build up a data lake including data from all sources (internal and external, structured and unstructured).”

From automotive to mobility

Relating further to the idea of connectivity, the report claimed that automotive firms must now adjust their models in line with the provision of end-to-end mobility, rather than treating the sale of a car as an end point in their relationship with the customer. In order to realise this transformation, transformations are likely to become more and more important.

A network of partner companies means automotive firms can provide a global mobility experience. As the vehicle is increasingly connected to its environment, new partners can also be cities, governments, and other service providers within the global mobility services industry in which the car brands want to take part.

According to the study, the target is clear. Companies must look to a holistic transport service, offering to move customers from A to B in a unique and pleasant way – otherwise they might as well take public transport. At the same time, they should extend the services reachable “on-board” (especially the enhancement of the connectivity between the car and smartphones or other connected devices), and reach high standards in terms of user experience (online sales, online payment, customised experience during and after the use of the car).

Concluding the report, Glutron stated, “These mobility market transformations could be considered a threat for the car manufacturers. Quite the opposite: if they take up the challenge and review their business model so that they become the service provider – communicating no longer to a driver but to a ‘mobility customer’ – they can then take advantage of their expertise and their position as a historical player. The most convenient means of transport are cars, and building a car is highly-skilled work.”