Connect Your Marketing Plan to Your Financial Goals

by Jeff Fromm

Your marketing strategies absolutely must align with your business goals to maximize “ROMI,” or Return On Marketing Investment. ROMI is vital to every brand. After all, even strong brands have failed to turn clever marketing into solid financial results (think Pets.com). Let’s look at a few common financial objectives within the framework of marketing strategy:

 

- Increase EBITDA (Earnings Before Interest Taxes Depreciation & Amortization) One common financial goal is to increase EBITDA. What marketing strategies help achieve this objective?

 

Segment Your Market

Divide your customer base into segments. A large wireless brand defined six customer segments. Each segment had semi-discrete product and service needs. The company realized price elasticity for each segment was dramatically different. Business customers, consumers with discretionary dollars and price-sensitive users each had varying service requirements, and showed different levels of willingness to pay for different levels of service. That’s vital knowledge that can affect your company’s financial performance.

 

Set Priorities

Next, prioritize which segments to serve. In the wireless example, the company wanted to be number one in market share among certain business and better consumer segments. By segmenting the consumers into separate groups with like interests, the company was able to optimize the service offering for each distinct customer group. Companies must be careful, however, in setting pricing structures. Be too aggressive and there’s the risk of driving better customers to offers targeted to price-elastic customers. A common outcome of this mistake is decreased lifetime value of your better customers.

 

Serve Customer Needs

Introduce new products and new services to meet current and future needs by segment. Primary research among the most high value segments that your brand is trying to serve should inform stakeholders regarding the use of human and financial capital tied to new product introductions.

 

- Increase Gross Margins Many brands don’t have a strong enough value proposition to withstand a price increase, and it’s not the most consumer—centric way to achieve margin growth. Alternative approaches include:

 

Adjust Delivery Modes

Shift the purchase process from the company to the consumer. A national travel brand used its website to streamline internal costs and simultaneously give customers more control of their purchases. Consumers loved the change, and so did the company’s finance department.

 

Bundle Up

Another retail company bundled select products and services, offering a suite of related enhancements. This strategy improved the company’s operating margins because it added a lot of incremental revenue with minimal cost per customer. Most importantly, according to research, consumers were significantly more brand loyal. Bingo.

 

Eliminate

Sometimes a program doesn’t work as originally intended. As one national retail brand evaluated its frequency program (they dubbed it a “loyalty program,” but it only rewarded customers based on how often they visited the store) it became apparent that despite enormous human capital and margin expense, the program had no statistically significant impact on annual customer visits. Eventually, the company cancelled the program. There is no room in business for initiatives that don’t create value.

 

- Increase Sales Rarely do clients say “we want an ad.” Most clients seek increased sales or greater market share. It’s critical to identify the best way to engage the highest value users. Sometimes that’s through advertising.

 

Focus On Indirect Competitors

The state lottery had become a mature brand that faced intense sales pressure from indirect competition—casinos. The state utilized a strategy I called “promotion du jour.” Without a brand strategy, the state promoted Powerball or instant scratch games. Repositioning the brand allowed the state to own something proprietary—the feel-good emotion that consumers experience after they purchase a ticket. We empowered the brand to own the time when consumers “dream” about “what if I win.” This strategy manifested itself in a marketing campaign known as Luckytown. The new strategy was implemented with new products aimed at unique segments. Sales increased 50 percent despite a reduction in spending on traditional media (TV and radio) by over 60 percent. Draw a line going up on sales and down on expense and you’ve really accomplished something.

Two primary strategies increase sales—attracting new customers or gaining more share of wallet from existing users. According to numerous surveys, including a study conducted at Harvard Business School, increasing share of wallet typically has a far greater impact on net profits. Of course, most companies need to use both strategies to maintain strategic health.

Clarify your financial objectives. Then build measurable marketing strategies. The more time and energy you spend on the front end to ensure a tight link between marketing strategies and financial deliverables, the more likely you will get the results you desire on the back end.

Jeff Fromm is CEO of Link, a marketing communications firm. He can be reached at 816.682.5401 or by email at jfromm@linkmarketing.com.