Marketing:
Return On Investment
Updated:
May 6, 2009
Agenda
2

Importance of measuring the effectiveness of
marketing programs

Different ways to calculate ROI

Real Life Examples
Importance of Measuring ROI
3

Creates the ability to understand and communicate the
return on your marketing dollars

Helps to better evaluate which programs are the most
effective and which need to be modified or eliminated

Assists in getting the resources you need

Allows you to have an intelligent conversation regarding
your marketing budget

Prevents you from becoming a Dilbert cartoon
The Marketing Process
Developing Marketing Strategy/Planning
1. Market
Assessment
2. Competitive
Analysis
Managing the Marketing Function
4. Financial
Analysis
with ROI
5. Brand
Development
6. Brand
management
9. Experience
and Service
Management
10. Retention
and Process
Improvement
18. Marketing
Role Definition
17. PR and
Internal Comm.
16. Product
Pricing and
Offer
15. Sales
Support
14. Promotions/
Merchandising
Executing the Marketing Plan
4
Brand Mgmt.
8. Client
Understanding
&
Segmentation
Effectively Managing
the Twenty Activities of
Marketing
19. Staff and
Partner
Management
7. Internal
13. Marketing
Message &
Creative
12. Media Mix
Selection
11.Operational
& Systems
Planning
Understanding and Managing Clients
20. Measuring
Performance &
Quality Control
3. New
Product
and Offer
Creation
Defining Brand Strategy/Managing the Brand
Budget Approaches
5

Percent of Assets -- “Rule of thumb” formula is
1/10 of one percent of bank assets or $1,000 for
every million dollars of bank assets

Incremental Increase -- Adds an “inflation
factor” -- usually 2 to 5% -- to previous year’s
budget
Budget Approaches
6

Comparative Parity -- “Keeping up with the
other guys” or spending in line with the
competition to retain share of voice position

All We Can Afford -- Marketing/advertising
funding is established last in the bank budget
process and allocated only those dollars
remaining in non-interest expense forecast
Budget Approaches
Objective and Task -- Marketing/advertising budget
based on measurable business objectives and the cost of
programs required to achieve these objectives

7
Factors that Affect Your Budget

Strategic Direction of Your Bank
-Consumer vs Business
-Market Segments
-Market Share
-Growth Goals
-Orientation towards Marketing and Branding
8

Media Costs in Your Markets

Number of Branches

Ability to provide ROI
A Day in the Life of a Marketing Director:
Real Life Examples
9

“I think giving away a free DVD player for a free
checking account is a stupid idea and will never pay for
itself.”

“I do not think that home equity direct mail did us any
good, should we save the money next quarter and just
drop it?”

“We are projected to sell 46,000 new small business
checking accounts this year. How much could we sell
next year?”

“I liked our TV commercials, but did they really do
anything for us?”
“I think giving away a free DVD player for a free
checking account is a stupid idea and will never pay
for itself.”
10
Calculation of Required Sales Lift (RSL):
RSL = Offer Cost /(Product Profitability-Offer Cost)
It answers:
How much of an increase in sales volume will I need to
pay for my marketing program?
11
DVD Checking Offer Analysis
What is the lift required on Checking Account
Sales to pay for a DVD Player?
Revenue (5 Years)
On Going Expense (5 Years)
Set Up Costs
Marketing Costs
Profit Before DVD Offer
DVD Expense (Delivered)
Profit (Full Life)
RSL (61/(528-61)
12
NO DVD
$
851
267
10
46
528
0
528
DVD Offer
$
851
267
10
46
528
61
467
0%
13%
“I do not think that home
equity direct mailing did
us any good, should we
save the money next
quarter and just drop
it?”
13
Calculation of Return on Investment:
ROI = Incremental Profit - Marketing Investment
Marketing Investment
It answers:
What kind of return did I get on my Marketing
Expenditure?
14
What should your hurdle rate be?
15

Recover the cost of your marketing expenses,
or achieve a 100% ROI

Recover your expenses and produce a 20%
return on your investment, or a 120% ROI

Double the return on your marketing dollars,
or produce a 200% ROI
Home Equity Direct Mail Analysis
Mailed 120,000 Home Equity Pieces and Tested
$100 Home Depot Offer
16
Response Rate
Cost of Mailing
Applications
Approvals
Loans Booked
Cost of Home Depot Cards
Profit of Loans Booked (Full Life)
Total Marketing Expenditures
60,000
0.66%
46,200
396
178
125
0
292,500
46,200
60,000
0.80%
46,200
480
218
153
15,300
351,900
61,500
ROI (292,500-46,200)/46,200
533%
472%
Business Checking Projections
We are projected to sell 46,000 new small business
checking accounts this year. How much could we sell
next year?”
17
Definition of Insanity:
“Doing
the same things over and over
again and expecting different results.”
18
Calculation of Projected Sales Units (PSU):
PSU = Current Sales Run Rate + New Marketing
Programs
It answers:
The collection of marketing activities will generate
this number of sales
19
Business Checking Projections
Projections estimate a 15% increase in 2005
2004
Current Branch Run Rate
New Branch Offices in 2005
Special Offer
Prospect Direct Mail
Customer Direct Mail
Small Business Bankers
Small Business Specialists
Telemarketing Program
Adverse Effects of Competitors
Total Accounts
20
26,000
0
0
4,000
4,500
3,500
6,000
2,000
0
46,000
2005
26,000
2,000
2,500
6,000
6,000
3,500
10,000
2,000
-5,000
53,000
We can make a sales goal of
53,000 new accounts if we can
have……..




21
A new offer to give away a $50 Office Max gift
card for the first quarter
Our prospect direct mail budget increases from
1.5 million pieces to 2 million pieces
Our customer direct mail budget increases
from 300,000 to 500,000 pieces
We add 10 new sales people
Multimedia Campaign Analysis
“I liked our TV commercials, but did they really do
anything for us?”
22
Acquisition / Retention Process
Recommend
Retain
Acquisition
Advocate
Communication
& WOM Driven
Commitment
“Rational” and
“emotional”
elements
Active
Consideration
Seek
Information
Accept
Information
Aware
Unaware
23
Understand /
Value
Purchase
CrossSales
Positive
Experience
Consider
Retention/
Growth
Experience
Driven
“Rational” and
“emotional”
elements
Multimedia Campaign Analysis
Examine both sales and awareness level changes
24
Required
Sales Lift
Actual
Sales Lift
Denver
Dallas
Phoenix
28%
22%
18%
9%
21%
34%
Denver
Dallas
Phoenix
Awareness
Level-Pre
5%
10%
15%
Awareness
Level-Post
11%
20%
19%
Worth Try Worth Try
Pre
Post
17%
22%
26%
24%
27%
34%
Summary
25

Focus on creating intelligent conversations with
your managers

Build a strong partnership with your Finance
Group

Results for programs work best when both the
field and Marketing have ownership

Pilot programs are a great tool for testing new
ideas and creating realistic projections

Always have your results close to you