Many CPG companies have an ad hoc or disjointed process for evaluating their shopper marketing ROI. Some companies wisely monitor marketing ROI using a process that continually improves their marketing returns. Foresight ROI has identified processes that are common at the most successful CPG companies.
These practices are validated and endorsed by the Marketing Accountability Standards Board (www.themasb.org).
- Link marketing actions to business outcomes using measurement that meets the ten characteristics of ideal marketing metrics
- Collaborate with customers so both parties win
- Manage stakeholder relationships with accountability
- Simulate results to optimize shopper marketing events
- Use a measure-learn-change process to continually improve
Our best practices were uncovered from a meta-analysis of 30,000 shopper marketing events measured using analytic methods specifically designed for shopper marketing. These events included products from every department of grocery, supercenters, club, drug, convenience, dollar and commissary outlets. The sales lift, return on investment and diagnostics were measured for every tactic in each of these events using analytic methods specifically designed for shopper marketing. These results have accumulated in the Foresight ROI Shopper Marketing Industry Benchmarks database.
1. Link marketing actions to business outcomes using measurement that meets the ten characteristics of ideal marketing metrics
Marketing measurement must be actionable to be valuable. The Marketing Accountability Standards Board developed a construct for this cause and effect relationship as well as a process to evaluate it. Foresight went through this process for shopper marketing ROI measurement to evaluate our measurement methods. The result was a best practice ROI measurement system for shopper marketing. The two components of this methods evaluation were:
- The marketing metric audit protocol to test for the validity of the cause and effect relationship to ensure that we were measuring the right things and that the data transformations and analytics accurately measured business results.
- Evaluation of the methods on the Ten Characteristics of an Ideal Marketing Metric
- Relevant . . . addresses specific (pending) action
- Causal . . . course of action leads to improvement
- Predictive . . . accurately predicts outcome of (pending) action
- Sensitive . . . identifies meaningful differences in outcomes
- Quality Assured . . . formal/on-going processes to assure
- Transparent . . . subject to independent audit
- Objective . . . not subject to personal interpretation
- Reliable . . . dependable & stable over time
- Calibrated . . . means the same across conditions & cultures
- Simple . . . uncomplicated meaning & implications clear
2. Collaborate with customers so both parties win
Ideally, shopper marketing is a collaborative process between CPGs and their retail customers. True collaboration entails measuring both parties’ key performance indicators (KPIs). To be clear, retailers care about growing the category and are much less concerned with a CPG’s ROI. But it behooves shopper marketers to care about both because of the importance and influence of retailers in maximizing shopper marketing ROI. If the brand’s key performance metrics are good but the event failed to grow the category, then the CPG may need to change tactics to ensure continued retailer support.
To assess whether each program resulted in a win-win, shopper marketers can measure both parties’ KPIs and plot the event on the matrix below.
Foresight ROI’s data analysis shows that the most profitable shopper marketing events tend to produce product lift through increased category sales for retail shoppers, so the goal is to get all of them in the “both win” quadrant. However, if an event lands in the lower right quadrant, then the brand scored a win and may want to repeat the event, albeit with less retailer enthusiasm and support than before. To garner support for a repeat event, shopper marketers may need to add one or more category growth drivers like shopper solutions, bundling, or multi-unit pricing.
If an event lands in the upper left quadrant, the customer may want you to repeat it. In this situation, by demonstrating that the event was not success for the brand, the CPG can negotiate for more retailer support to make some tactical changes or lower costs.
Of course, many of your customers have minimum spends and ask you to follow their marketing guidelines. However, with data you can get some flexibility in your programs. One division of one of the biggest CPGs on the planet left out in-store tactics from most of their programs at Kroger because they said they were restricted from it. Then we showed them our industry benchmarks that showed how many programs at Kroger were fully integrated with in-store tactics and the performance increases from the integration. This gave them the data they needed to be more assertive with Kroger and improve their ROI.
3. Manage stakeholder relationships with accountability
Your stakeholders want to know the business results from the shopper marketing programming. So, you need an accurate measurement that is comparable to the ROI metrics for the rest of the marketing mix. While typical marketing mix model measurement is accurate for measuring brand marketing tactics, it can be biased for shopper marketing because of the granular spend and high integration. Find a methodology designed for shopper marketing that measures the full effects and is consistent with your brand marketing ROI metrics. Use decision support metrics and benchmarks that are comparable across the marketing mix in order to help determine how much to spend on shopper marketing, where to spend to optimize the budget, and how to spend to create the most effective programs and ultimately justify increased shopper marketing budget allocations moving forward.
4. Simulate results to optimize shopper marketing events
Predictive analytics tools allow shopper marketers to predict the outcomes of proposed programs using different variables. When you know the likely results from your marketing actions, the decisions come easier. Though always use experienced judgement in your marketing planning so your plans fit the specific situation, objectives, and strategy.
5. Use a measure-learn change process to continually improve
Use a measure-learn-change process to continuously improve shopper marketing programs; Foresight ROI clients such as Nestle, Tyson and Campbells have done so for several years and just keep getting better. Measurement provides learning that accumulates into knowledge that makes you a better marketer. It also provides objectivity to help you align with stakeholders on what works.
The upside shopper marketing ROI opportunity in the CPG industry is at least +40%. We were able to do marketing simulations for the industry using our shopper marketing industry benchmarks. Below are the ROI improvement results from relatively small changes in the marketing plans.
Here is an example of the shopper marketing ROI performance and spending changes for one of our CPG partners that have been measuring for over three years now. Each year, they learned more about what works when and where for each of their brands, then implemented these learnings to drive increases sales lift, market share and return on investment. As their performance increased, the brands started to increase their investments in shopper marketing:
To get the most from your shopper marketing investments, develop effective strategies and activate with best practice program designs. Processes to optimize effectiveness is just one of the four strategies that we covered throughout this 5-part best practices blog series. See the other recent blogs from July and August in this Shopper Marketing Best Practices series for more insights.
Foresight ROI, the leading provider of shopper marketing ROI measurement, decision support, and software solutions, helps CPG companies and retailers increase their shopper marketing effectiveness. To learn more about our measurement, software, or industry ROI benchmarks, please contact us at Contact@ForesightROI.com