Counterintuitive Marketing: Surviving Death Wish Research

March 18, 2002This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from Copernicus: The Marketing Investment Strategy Group, Inc. Copyright 2001 COPERNICUS, all rights reserved

PMRGprepared for:

2

These are tough times for American businesses. Consumer confidence has dropped like a stone; revenues are down; profits down even more;

investments in R&D and marketing have been

cut to the bone.

3

There is a major role for marketing in this period of adversity. Not marketing

as it is often practiced today, but state-of-the-science marketing.

4

“Marketing is the discipline concerned with solving people’s problems with products and services profitably.”

Procter & Gamble

“Marketing is the discipline concerned with solving people’s problems with products and services profitably.”

Procter & Gamble

5

“The difference between selling and marketing is that selling is getting rid of what you have, while marketing is having what people want.”

Ted Levitt

“The difference between selling and marketing is that selling is getting rid of what you have, while marketing is having what people want.”

Ted Levitt

6

“The business enterprise has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.”

Peter Drucker

“The business enterprise has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.”

Peter Drucker

7

“The purpose of a business is to get and keep a customer. The purpose of marketing is to get and keep customers for businesses. The purpose of a business and the purpose of marketing are one and the same.”

Kevin Clancy

“The purpose of a business is to get and keep a customer. The purpose of marketing is to get and keep customers for businesses. The purpose of a business and the purpose of marketing are one and the same.”

Kevin Clancy

8

“Marketing is the engine that drives business.”

Phil Kotler

“Marketing is the engine that drives business.”

Phil Kotler

9

Marketing may be the engine which drives business, but in most companies the engine is broken: most marketing programs don’t work as well as they could or should.

Marketing may be the engine which drives business, but in most companies the engine is broken: most marketing programs don’t work as well as they could or should.

10

How Well Is Marketing Working

in 2002?

14%Above

average

2%Well below

average

68%Average marketing

program

The Zone ofExceptional Marketing

The Zone ofConventional Marketing

14%Below

average

2%Well above

average

The Marketing Performance Bell Curve

Marketing Performance

Embarrassing

Troubling Disappointing PleasingAmazin

g

Market Share Growth

Precipitous

Decline

Significant Decline

Modest Decline

Significant Increase

Dramatic

Increase

New Product Success Rate

0% 5% 10% 25% 40%+

Advertising ROI

Negative 0% 1-4% 5-10% 20%

Consumer and Trade Promotion Disaster

Very Unprofitabl

e

Marginally Unprofitable Profitable

Very Profita

ble

11

14%Above

average

2%Well below

average

68%Average marketing

program

The Zone ofExceptional Marketing

The Zone ofConventional Marketing

14%Below

average

2%Well above

average

The Marketing Performance Bell Curve

Marketing Performance

Embarrassing

Troubling Disappointing PleasingAmazin

g

Customer Satisfaction 0-59% 60-69% 70-79% 80-89% 90-95%

Customer Retention/Loyalty

0-44% 45-59% 60-74% 75-89% 90-94%

Customer Acquisition Programs

Disturbing Losses

Significant Losses

Marginal Losses

Break EvenProfita

ble

Brand Equity ($ Value) Disturbin

g LossesDramatic

LossesModest Decline

Stable to Improving

Dramatic

Improve-ment

How Well Is Marketing Working in 2002?

12

Declining Brand Equity is so important that Copernicus and

Market Facts decided to study it.

13

AirlinesAthletic ShoesAuto Insurance

BanksBeers

BookstoresBottled water

Catalog clothingCigarettes

ColasCold Cereals

CookiesCosmetics

Credit CardsDepartment Stores

Fast Food Restaurants

Gas StationsHaircare Products

Headache RemediesHealth & Fitness Clubs

Home Entertainment EquipmentHotels

Household CleansersInternet Search Engines

Internet Service ProvidersJewelry

Laundry DetergentsLiquor

Long-Distance Telephone Services

Luxury American CarsLuxury Foreign Cars

Major Household Appliances

14

Mid-priced American CarsMid-priced Foreign Cars

Motor OilsNewspapers

Office Supply StoresPersonal ComputersPet Supply StoresPolitical Parties

Potato ChipsRental Cars

SoapsSpaghetti Sauces

ToothpastesTV Networks

Weight Loss ProgramsWireless or Cellular Telephone

Services

15

The study revealed that out of 48 product categories, Brand Equity

scores are:

Decreasing in 39 Stable in 5 Improving in only 4

16

The study also showed that in two-thirds of all product categories, a

low price is becoming more important than brand driven

product features, attributes, and benefits.

17

The study led us to conclude that far more brands are being

transformed into commodities than commodities are being transformed

into brands.

18

M.B.A. stands for “Murderer of Brand Assets”

What guides marketing decisions at most companies?

20

IT

21

That’s Intuition and Testosterone.

22

The certainty of being right plus the personal and professional power to ram it through the

organization.

23

Symptomology

Decisions based on intuition, not research No time to do it right, lots of time to do it

over The pursuit of short-term results, often in

30 days Emphasis on brand juice not brand

equity; visual identity, not strategy and substance

Little knowledge of real customer needs and problems

No clear targeting and positioning Entertaining rather than informative

advertising Weak implementation, poor follow

through

Decisions based on intuition, not research No time to do it right, lots of time to do it

over The pursuit of short-term results, often in

30 days Emphasis on brand juice not brand

equity; visual identity, not strategy and substance

Little knowledge of real customer needs and problems

No clear targeting and positioning Entertaining rather than informative

advertising Weak implementation, poor follow

through

24

Feeling under the gun, IT marketers typically ask researchers to run a few

focus groups, make 100 telephone calls to test a concept, or undertake one of the many other conventional

techniques we call….

25

Death Wish Research

26

(a.k.a., Misinformation)

Death Wish Research

Focus group fixation Hypnotized respondents Customer satisfaction studies by mail The three-minute segmentation study New product concept testing by

telephone Strange, non-representative samples Web-based surveys with ½ of 1%

response rates High powered analysis of non-sensical

data

Focus group fixation Hypnotized respondents Customer satisfaction studies by mail The three-minute segmentation study New product concept testing by

telephone Strange, non-representative samples Web-based surveys with ½ of 1%

response rates High powered analysis of non-sensical

data

27

The Advertising Research Foundation recently found CEOs put less faith in marketing research than in most of their other sources of information.

28

CEOs reported that research had been most disappointing in predicting new

product success and in measuring advertising’s true effectiveness.

29

We as marketing researchers are by no means innocent in this situation.

30

Research Jargon Bingo, Anyone?

R-squared Logit Regressio

n

Gap Analysis

Lisrel ROI

Revisit the

Numbers

Not Statisticall

y Significant

Interaction

Brand Juice Drilling Deep

Value Propositio

n

Brand Equity

Pareto Curve

Think Outside the Box

Pattern Recogniti

on

Marketing Metrics

Best Practice

Knowledge Based

Optimal Data Mining

Neural Network

Customer Relationsh

ip Manageme

nt

Leverage Ethnographic

Heavy Users

31

To rebuild confidence and the perceived value of marketing

research, we must acknowledge the reckless use of bad research and put

an end to it once and for all.

32

It all starts with using the tools and technology available today to make the most profitable decision at each

stage of the marketing process.

33

“Strategy is about making choices. The essence of strategy is choosing to perform activities differently than rivals.”

Michael Porter

“Strategy is about making choices. The essence of strategy is choosing to perform activities differently than rivals.”

Michael Porter

34

“A T-shirt is not a strategy.”

Joe Tripodi

“A T-shirt is not a strategy.”

Joe Tripodi

35

“The most important strategy decisions are targeting and positioning. Once you nail these, everything else follows.”

Phil Kotler

“The most important strategy decisions are targeting and positioning. Once you nail these, everything else follows.”

Phil Kotler

36

Most companies have a fuzzy market target. They make targeting decisions in about 5

minutes.

37

Undifferentiated Market

All Prospects

A Good Target

An Optimal Target

Automobiles $1000+ $325 $150 $99

Credit Cards $300+ $182 $88 $49

Packaged Goods $80+ $63 $29 $8

PCs $500+ $366 $155 $83

Private Banking $50,000+ $12,100 $6,300 $3,500

Software Services $1000+ $644 $357 $216

Utilities $800+ $417 $132 $75

Acquisition Costs for Different Targets

38

Create Hundreds of

Ways to Segment

the Market

•Attitudes/Values•Buying Behavior•Motivations•Psychographics•Demographics•Sociographics•Lifestyles•Lifestage•Database Variables

Testagainst

rigorous, profit-related

criteria to identify

key market drivers

Put into taxonomi

c analysis

(e.g. neural

network, latent class,

proprietary

cluster)

Evaluate different solutions

using statistica

l, manageri

al, and financial criteria

Identify a

financially

optimal segment

a-tion and

target(s)

39

“CategoryInvolvement”

MediaExposurePatterns

Databaseand

Third-Party

DemographicFactors

PsychographicFactors

Buyer Behavior

BuyerMotivations

Market Segments

…In fact, variables from each of these may be needed to develop segments

Variables

40

16% 24%15%

19%15%

6%

20%

16%

21%17%

8%

24%

55%

26%

18%

% of Households

Share of Current

Spending

Share of Potential

Profitability ROI IndexROI Index

229229

3838

130130

3232

9494

Speedsters Represent 24% of the Population and Account for 55% of Potential Profitability

Speedsters

Soccer Moms

Car Buffs

Price Shoppers

Loyalists

41

The next task is to create a powerful positioning directed towards the

most profitable targets.

42

One, two, or three words, phrases or sentences about your brand that you want to

imprint in the heads of key stakeholders.

So clear, so succinct, and so powerful that once launched, it begins to move people

toward your new evolving brand.

Powerful positionings lead to powerful brands.

A Positioning Must Be:

43

Apple iPodBMW

Burger KingCharmin Tissue

Coke Chevy Trucks

Colgate Total ToothpasteDisney

GEMobil Service Stations

Universal’s OrlandoVisa

Volvo

1000 songsExceptional performance

Have it your waySoftness

Authentic, real, originalTough, strong, durableTotal dental protection

Wholesome family entertainment

Improves the quality of lifeFast, friendly service

Thrills, excitement, escapeAccepted everywhere

Safety

44

In most companies, if products, services and brands are positioned at all, it appears to be in the minds of marketing managers

and not customers and prospects.

45

In categories as diverse as airlines, beer, copying machines, financial

services, wine and spirits, prescription drugs, and soft drinks … few buyers associate anything with the leading brands that we could begin to call

“positioning.”

46

Only 7% of 340 primetime commercials in the summer of 2001

communicated a raison d’être.

47

Many researchers believe that the key to a great positioning begins by

asking people what is important.

48

….A soft drink makes you feel younger than you are?

….A prescription drug that helps you get and maintain an erection?

….An automobile impresses your neighbors when you drive it home?

How important is it to you that…

49

“Motivating Power” of Different Benefits/Attributes

“Dream Detection”

Self-reported “desirability” in questionnaire

“Problem Detection”

Desirability rating versus satisfaction

“Preference Detection”

Relationship between

perceptions and preference

A Different Model of Consumer Motivations

50

Comparative

Advantage

High

Moderate

Low

Comparative

Disadvantage

Parity

Motivating Power

A Colossal Disaster

The

Failure

Zone

of

Normative

A Powerful Positioning

51

With the elements of marketing strategy in place, we devise a plan of

action and of attack that connects inputs with

desired outputs.

52

“An excellent strategy is a necessary but insufficient condition for success. It needs to be ‘captured’ in an innovative, realistic, and achievable marketing plan.”

Clancy and Krieg

“An excellent strategy is a necessary but insufficient condition for success. It needs to be ‘captured’ in an innovative, realistic, and achievable marketing plan.”

Clancy and Krieg

53

Today marketing plans at most major companies are developed without any

real knowledge of the relationship between marketing inputs and outputs.

54

Sales and/or profit objectives are set by top management without any real insight into whether they can be

achieved.

55

These objectives are only remotely related to the strategy. The tactical plans ( e.g., GRPs by month) are based on last

year’s failed plan and their relationship to the objectives is weak at best.

56

It’s no wonder that these plans, held together by scotch tape and prayers,

fail to achieve their objectives.

57

Innovative model-based marketing plans with empirical underpinnings

– thereby integrating objectives, strategy and tactics.

DTC modeling (a.k.a., simulated test marketing, marketing mix

modeling, promotional modeling) can then be employed to evaluate and improve plans before a real

world introduction.

A Different Approach to Marketing Planning

58

What is DTC Modeling? A set of equations which predict real world

output (including new and repeat Rxs) from marketing plan input (such as primetime network television target rating points per month)

These equations are grounded in marketing science, some of it published in academic journals and much of it fire-tested in real world applications.

The parameters of the equations are estimated using proprietary research appropriate to the state of development of the marketing program.

59

Pharmacy Visit

Product Satisfaction/EffectivenessRepeat and Share of RequirementsNormative TRx/NRx dataMarketing and Manufacturing Costs

DTC Campaign:Media Types EmployedTRPs by MonthMedia ImpactShare of VoiceAdvertising Impact by MediaPublic RelationsWebsiteWord of Mouth

Product Concept:Benefits, Side Effects, DeliveryAd PersuasionPrice:Patient Co-pay Amount

Product Availability

Sufferer Needs:Category InvolvementSufferer Compliance

Total Sales/Profits

Incremental Sales/Profits (due to DTC Campaign)

TRx

NRx Filled

Physician Compliance

NRx Written(see Physician submodel)

Brand or Campaign Awareness

Sufferer Universe

Forecast conducted with/without DTC Campaign

Physician Contact

MCO Formulary AcceptanceGeneric Availability

DTC Consumer Model

60

Incremental NRx’s Written

(due to DTC Campaign)

Professional Campaign:Media Weight & ScheduleShare of VoiceAdvertising ImpactMedia Impact

Medical Sources: Ref. books, Journal articles, Colleague Recommendations

Detailing

DTC Campaign:Media Weight & ScheduleShare of VoiceAdvertising ImpactMedia Impact

Product Concept:Benefits, Side Effects, DeliveryAd Persuasion

Price:Patient Co-pay Amount Sampling

MCO Formulary AcceptanceGeneric Availability

Analysis conducted with/without DTC Campaign

Physician Innovativeness

Product Availability

Brand or Campaign Awareness

Physician Universe

NRx’s Written

Patient Inquiries/Requests

DTC Physician Model

61

An Example of a DTC Forecast

62

“All too often a marketing strategy and plan, however well conceived, is not implemented carefully.”

Clancy and Krieg

“All too often a marketing strategy and plan, however well conceived, is not implemented carefully.”

Clancy and Krieg

63

Example of terrible implementation:“The Case of Subliminal, Sleeper Effects.”

64

Advertising is like the canary in a mine shaft.

65

Guided Implementation

Audit implementation plan Assess conformity to strategy and plans

Assist the project team in realigning work processes Organizational design; Roles and Responsibilities

Ensure organizational alignment with the new strategy At the Business Unit as well as Corporate levels

Monitor execution to keep the program on strategy Metrics and Milestones

66

“A good monitoring system not only tells you how you are doing, but also what to do.”

Clancy and Krieg

“A good monitoring system not only tells you how you are doing, but also what to do.”

Clancy and Krieg

67

Monitor performance to make on-going adjustments and improvements to the plan—that model of the marketing mix will help.

68

DTC Campaign PenetrationDTC Campaign Penetration

Year-End Forecast Based on Three Data Points

Year-End Forecast Based on Three Data Points

Weeks after LaunchWeeks after Launch

0%0%

10%10%

20%20%

30%30%

40%40%

50%50%

1313 2626 3939 5252

Objective

Forecast

Actual

69

Bottom-line:

Balance intuition with counterintuitive findings grounded

in unimpeachable data and analysis.

70

“Destiny is not a matter of chance, it is a matter of choice; it is not a thing to be waited for, but a thing to be achieved.”

71

Thank you!