Here are the big four headline trends for spend this year:

Marketing budgets are projected to increase in 2012. Our survey suggests that B2B budgets are likely to increase in all segments. Budget growth is expected to be much more robust in B2B services organizations than with B2B manufacturing.

This is a continuation of a pretty long-term trend. B2B marketing is still maturing, and I wouldn’t be surprised to see budgets continue to rise for the foreseeable future (barring the very real possibility of a renewed recession). With margins higher in the services space, its not surprising to see marketing spend rising faster, either.

What is interesting, though, is that marketers are increasing program spend faster than people spend – which likely represents the increasing importance of digital, analytics, and marketing automation. The embedded assumption is that human expertise is, on the whole, less important – an assumption that we’ll see tested, I think, in the coming years.

Budget allocation for digital is increasing. This shouldn’t be surprising to any Interestingly, while budgets on the whole are set to grow more slowly in the B2B services space than in manufacturing, digital spend should increase significantly in manufacturing. Part of this, I think, is catch-up growth, but it speaks to how manufacturing marketers are embracing non-traditional sales and marketing techniques.

One interesting thing will be to see how vendors will adjust their strategies for the B2B manufacturing market, which does not at all match the core competencies those companies have developed for the consumer market.

Budget for traditional marcom activities and direct marketing is decreasing. Our survey suggests that spend on traditional marcom activities has decreased between 15% and 23%, and spend on direct marketing has dropped between 15% and 17% from 2010 to 2012.

Part of this is a necessary corollary to increases in spend on digital, but it appears that part is a genuine shift in tactics. Budget cuts in the late aughts, we think, led marketers to experiment more with virtual events – webinars and the like – which proved effective and have gradually replaced spending on live events, which are much more expensive.

Marketers are cutting back on sales support activities, and shifting spend to marketing automation. We’ll have more on marketing automation and analytics  in a few weeks (get excited!), but for the meantime, the big takeaway from this report is that spend in this category is increasing fast. B2B services organizations have increased spend by 45% on the suite of marketing automation technologies, while manufacturers have upped their budgets by 25%.

It seems like there’s some room for caution here, as big increases in spend and complex, not well understood technologies can sometimes equal vendors on the prowl.

Having worked in the restaurant industry, I can tell you that most bars and restaurants have a staffing plan that basically calls for more staff when there’s more likelihood of high demand. Depending on the place, restaurants staff up for weekends, happy hours, Mother’s Day, Christmas – the list goes on. But I doubt there’s a single restaurant on earth ready for that kind of foot traffic at 2:00 PM on a Tuesday.

Now, we can’t fault a restaurant for not guessing – or even having the capacity to handle – the inevitable surge of office workers evacuated after the second-strongest earthquake in the history of the East Coast. After all, with limited resources and the vanishingly-tiny likelihood of an unexpected surge in customers at that hour of the day, it would be uneconomic to have extra bartenders and waiters on hand.

But the bigger your organization is, the more products you sell, and the larger your geographic footprint is, the greater the likelihood of some kind of unexpected exogenous shock – whether the literal one we experienced in the DC area today, or something as innocuous as a rap lyric that mentions your product – can present an opportunity to serve more customers, strengthen your brand, or gain market share. And here’s the thing about shocks: they very often present an opportunity for breakout growth, as opposed to the more mundane linear variety – just look at the interest in Moscato before and after the rap lyric that brought it to renewed fame.

To me, shocks help explain why a lot of what marketers go through in the planning process is silly, wasteful and even dangerous. Geologists can’t predict earthquakes, weathermen don’t do terribly well with the weather, and marketers and executives aren’t going to be able to truly, repeatably identify and prepare for the kinds of shocks that can deliver huge returns to a brand – and that makes planning, at least as its traditionally done, an exercise out of touch with the real, unpredictable world.

So what can you do to prepare for earthquakes, literal and metaphorical? First, build agility into your organization and processes – my colleague Ana actually wrote about that very thing this week. Invest in staff – like our New Media Ringmaster – with proven records of accelerating organizational responsiveness; they won’t help you predict the future, but they’ll make you a whole lot better at reacting to the present as it happens. Consider strengthening your social listening capabilities; these can help you pick up on trends before they hit the mainstream. As you plan, keep it simple: members love Mastercard’s Plan on a Page for a reason. Most of all, stay loose and ready to tackle opportunities as they come – even if they aren’t “in the plan”.

MLC members, for more on marketing planning, please visit our topic center, and consider registering for our upcoming webinar on Agent-Based Modeling – one tool that can help remove some of the uncertainty around the future.

But too often, marketers have trouble transitioning from “flash-in-the-pan” customer focus efforts to embedding that focus at the heart of the enterprise. It’s easy to get executive buy-in for one-off customer focus campaigns – and, perhaps, many of them. But without a central process for discovering customer needs and how they align to brand promise and strategic priorities, one-off initiatives are doomed to ineffectiveness.

That’s why Tesco’s Annual Customer Plan is so exciting. The UK-based grocery retailer – faced with declining profit margins, intensifying competition and some evidence of customer dissatisfaction – came up with a way to centralize ongoing consumer focus. In the process, they reversed their slide of the early 1990s, and regained their place as the UK’s dominant grocery chain.

The process involves two inputs:

1. Brand Promise/Performance Gap Identification: The brand management team surveys customers to understand their perception of Tesco’s delivery on its brand promise and to identify areas for performance improvement relative to the competition.
2. Consumer Insight Gathering: Tesco’s customer insight team analyzes quantitative and qualitative research, loyalty card data, and competitive intelligence to identify emerging consumer trends and potential growth opportunities for the company.

From this, Tesco begins an four-step internal process designed to generate, filter and implement ideas for consumer initiatives:

1. Customer Initiative Idea Generation: Based on the consumer-insight-gathering exercise and the brand review, the customer insight team translates emerging customer trends into 30–40 customer-focused project proposals.
2. Senior Executive Customer Briefing: The Customer Insight Team presents the 30 to 40 potential customer-focused projects to the senior executive team in an annual “Customer State of the Union” presentation.
3. Senior Executive Customer Project Selection: The senior management team vets each possible project using a variety of brand, strategy, and profitability criteria, typically selecting 10 to 12 projects as the customer platform for the year.
4. Customer Project Implementation: Each of the approved customer projects is supported by a cross-functional implementation team with senior-level sponsorship.

But the most important aspect of the plan isn’t how it works, but the importance Tesco assigned to the process. In addition to finance, human resources, and operational plans, the customer plan is a key input for resource allocation decisions across the year – far superior than allowing the document to languish in the marketing department, unreferenced by peer functions.

One important caveat: the principle of garbage in, garbage out applies here. In-depth customer research is expensive, and since this is the most important input into the process, attempts to cut corners in this area will compromise the plan. It’s vital that research be comprehensive, well-structured and well-funded; for more on how Tesco structured its research departments, check out the full case (specifically, pages 12-13).

Of course, the creation of a customer plan only works under certain circumstances: the ongoing commitment of senior management and (potentially significant) resources for customer data-gathering chief among them. But given a true, organization-wide commitment to the customer, an annual customer plan is one of the best ways to ensure this focus throughout the year.

MLC members, for the full case, including how Tesco set up their customer research program and how they operationalized customer campaigns that emerged from the Annual Plan, please visit the full case. For all of our resources related to customer understanding, check out our topic center.

Not long ago, LG Mobile developed a new segmentation model.  Marketing leaders at LG Mobile quickly realized that to engage consumer segments more effectively, they needed to embed these segments into everything that LG’s employees do. Marketing leaders began by asking themselves the question- Is the segmentation understandable, relatable and relevant? Taking this as a starting point, LG worked to sell the segmentation internally. LG followed a 5-step process to create an internal buy-in of the segmentation.

LG’s success with the new segmentation is largely attributable to development of rich personae for each of their customer segments based on extensive qualitative and statistical studies. However, they didn’t stop at just defining segments; rather segments were introduced as relatable people with names, personalities and entire living spaces devoted to them.  If you work in LG Mobile’s corporate offices, escaping Friendster Fran’s or Gadget Garry’s presence was impossible. Employees befriended their new segment pals and soon talked of them in cafeterias, workstations and even in boardrooms. Employees came to refer to the personae as if they were personal friends or neighbors—not a bad litmus test for understanding how sticky your segmentation is.

MLC members, M. Ehtisham Rabbani, Corporate Vice President Product Strategy and Marketing with LG Mobile, shared his learning and perspective on segment personae with the MLC membership. We broke down Mr. Rabbani’s sage segmentation advice into bitesize clips.

• In the book “Winning,” Jack Welch describes a tactic he used at GE to force himself to always enter a business situation with a fresh perspective.  Every time he travelled, he got off the plane imagining that the Jack Welch of yesterday had had no idea what he had been doing.  He felt that this ritual of taking a critical eye to past decisions helped him enter every situation as an opportunity for improvement.

• In a recent issue of Bloomberg Businessweek, Laura J. Soave, a marketing executive at Fiat discussed details of Fiat’s ‘Return to North America’ marketing launch, adding that “My ultimate goal would be not to spend one dollar in traditional advertising.”  Instead, she says that she will focus on social media and other grassroots approaches to target likely buyers.

Now, consider the following:  If you were starting the marketing function within your business today, how would you choose to allocate your media mix?  In other words, if you had a zero-based planning process (rather than one based on the previous year’s plans), what would you choose to spend your money on?

Year after year the Council’s various investment benchmarking exercises show that, even as marketers identify more efficient and precise channels, few organizations tend to move beyond small-scale experiments to shift budget into these channels.  So what’s stopping us?

One big culprit: legacy thinking, which primarily manifests itself in one of two mindsets:

• How we manage our organization – The Council identified the key factors of ‘agile’ marketing organizations, i.e. having the ability to shift the marketing mix by 30% year over year vs. the average shift of about 5%.  It turns out the ‘legacy’ way of doing things actually puts up barriers to being nimble enough to shift the media mix in any substantial way.  Spoiler alert: contrary to popular belief, inability to measure returns is a factor but not the major factor; most ‘organizational inertia’ resides in motivation and engagement of brand / product owners, the nature and management of agency relationships, and the design and efficiency of an organization’s communications planning and execution process.
• How we think about our role – As Gandhi so eloquently put it, “we must become the change we want to see in the world.”  If marketers are responsible for keeping the customer at the center of our business, it must naturally follow that marketers must change as fast as our customers are changing (and they are changing; insert blatant plug here to participate in our 2011 research).  How fast are you changing?  How much time do you spend executing vs. experimenting?   What mix of your success metrics are backward-looking (to benchmark against historical data) vs. forward-looking (to invest in new and different media vehicles)?

Fortunately, there are ways to leave the legacy that binds us behind.  Let me offer Three Ideas to Break the Shackles of Legacy:

1. Proof of Life – do you have any “Zombies” in your marketing plan?  In other words, can you link each marketing tactic to a marketing metric to a marketing strategy to a corporate objective?  If you can’t see a straight line between these four pillars, then marketing shouldn’t do it (and you can potentially free up budget for more efficient channels).  Here’s how Vista (pseudonymed high-tech company) did this.
2. Permission to Play – it’s time to break out the sandbox.  Encourage experimentation among your team; foster an environment of learning.  As new ideas come up, encourage discussions to determine if the idea: a) could contribute to a desired business outcome, and b) if there is a fast and cheap way to test the idea.  Think about using a 70/20/10 approach to allocate your marketing communication budget.
3. What’s the Frequency, Kenneth? Your customers are talking – are you listening?  What are they saying, and where are they going for information?  Who influences their decisions?  Thought leaders?  Peers?  Here’s an idea from Purina – they use influencer network maps so that they can influence the influencers.



As we talk to heads of Sales, Marketing and Communications about 2011, I see a swing back to handling a common enemy – this time, ongoing uncertainty.  Uncertainty isn’t terribly attractive to most, but executives seem to be accepting it as part of the new normal and are trying to figure out ways to live alongside it.  That presents a little differently depending on your role in the organization.

• In Sales for example, the problem is that deals are getting “stuck” with customers whose response to uncertainty is indecision. But it looks like most sales teams aren’t doing enough to make deals easy for customers, abandoning them prematurely in the sales cycle.

• For marketers, the challenge lies in figuring out – and then using to their advantage – changes in the way customers think about purchasing (triggered by the uncertainty customers face).  Coping mechanisms like in-the-moment comparison and peer feedback are driving psychology few companies fully understand, but must.

• Communicators are trying to help their organizations deal with uncertainty.  Specifically, as companies try to become more agile and responsive, the premium on moving information and aligning the organization increases.  But those are new-ish areas to most Communications teams.

How is uncertainty affecting you and your organization?  What are you planning to do about it?  Our research makes it clear that early movers in moments like this stand to gain disproportionately. I hope you’re one of them.

“The single biggest reason companies fail is that they overinvest in what is, as opposed to what might be.”

–Gary Hamel, Author and Professor, London Business School

Professor Hamel puts his finger on one of the most important undercurrents facing marketing leaders in large enterprises today.  As products, channels, and geographic markets proliferate, marketers will overweight to the familiar (that which “is” today), and fail to account for the size of future opportunity (that which “might be”).  Why?

They certainly won’t do so intentionally.  Rather, the sheer complexity of resource allocation decisions across geographies, products and channels will lead many marketers to settle for incremental changes to last year’s budget allocation.  In the face of overwhelming complexity, this will feel like the safe, smart choice.

But this backward-looking approach to resource allocation will be ever more dangerous as consumption shifts massively to new geographic markets and channels across the coming five years.  Marketers will underweight opportunities that don’t fit neatly into their familiar worldview.  They will arrive late to seize the larger opportunities of what “might be”.  And so marketing leaders ought to be thinking hard—right now—about how to simplify the complexity that would otherwise lead them to the familiar and the safe.

To that end we at the Council will be on the lookout for the handful of marketers that are making strides in this area.  The first we’ve spotted is MTV Networks (hereafter referred to as MTVN).  MTVN has put in place a system for allocating MarComm resources that tames marketing complexity, enabling it to allocate resources on a forward-looking basis.  MTVN’s system does four things very well:

1)  Delivers data-driven insight—MTVN’s system is grounded on cycles of in-market media experiments, which enables rapid learning and validation (or invalidation) of key assumptions.

2)  Simplifies—MTVN’s system uses technology to simplify the resource decision experience for marketers, hiding complexity that clouds decisions, while highlighting the critical factors that illuminate the optimal courses of action based on future value.

3)  Serves as lingua franca—MTVN’s approach puts common language to implicit criteria that everyone from market research to finance were infusing into decisions, often unwittingly.  Establishing a common tongue enables stakeholders to engage in resource allocation discussions with healthy tension, not unhealthy friction.

4)  Integrates decisions “vertically” – MTVN’s system ties decisions together from the higher-level portfolio allocation decisions (“Of all our programs/products, what should we market?”) to the lower level questions of optimizing the mix on individual campaigns (“How should we market it?”)

MTVN is finding that its system boosts the productivity of its media budget by 15-25%. Moreover, in the words of MTVN’s Todd Cunningham, SVP of Strategic Insights and Research:

“We’re finding that [this approach] forms a system for how to think about marketing spend—its creating a kind of collaborative intelligence around planning that we didn’t really have before.”

MLC Members, please take a first look at the case study.  More importantly, join us for a webinar on September 29^th, where we’ll walk through MTVN’s resource allocation system in greater detail.  Todd Cunningham from MTVN will join us, as well as Rex Briggs, proprietor of Marketing Evolution, which supported MTVN in building the system.

(Note: This is Part 4 of our 6-part series on marketing planning. Part 1, “Making the Case for Higher Spend“,  can be found here. Part 2, “Selecting Metrics“, can be found here. Part 3, “Marketers Squeezing Productivity“, can be found here. Check back here every Wednesday in August and September for a new installment!)

As you’re preparing for another year of marketing planning, ask yourself these three questions:

• Do our marketing plans reflect our company’s overall strategic objectives?
• Are our marketing plans based primarily on incremental changes to last year’s activities?
• Even if we know that marketing is making progress, can we tie our activities to business objectives?

We all know what the answers here should be, but how many of us actually get it right?

You may be in the enviable position of not having to justify every expense, but for many organizations, Marketing contribution to firm performance is underappreciated.  Critical to overcoming this?  Making the link between marketing activities and corporate goals as clear as possible.  Here’s how one member organization cracked this nut (MLC members, you can find the full case here):

Step one: Poll all relevant stakeholders –within and beyond Marketing.  Survey midlevel to senior marketing leaders to capture their views on the current and “correct” focus (in terms of specific goals, metrics, and activities) for Marketing.

Step two: map the link from corporate goals to individual marketing activities.  This is generally low-tech and done with sticky notes, a white board and a facilitator (see the picture for how it looks).  This turns out to be easier than you might think.  Here’s where you’ll find that a number of marketing goals, metrics and activities can’t actually find a home.  Some of these may deserve to go away forever, others just need reconsideration of why you’re doing them.  An external facilitator can help ensure the process doesn’t become political

Step three: build a dashboard to allow transparency – and accountability – throughout marketing.  While admittedly this is where they spent some money (and used a vendor), solid dashboards can be built even within Excel.  What’s important here is transparency.

For the company we profiled (pseudonymed as Vista), this transparency made a big difference.  While many business units had come to accept weak metrics or soft goals for many marketing programs, the ability for management to peer into marketing progress practically ensures that all marketing programs are clearly tied to supporting discrete marketing goals. Junior marketing managers suddenly must reassess their mix and devote greater up-front attention to alignment and impact.  And in one year Vista saw a pretty big swing in their marketing mix.

The CEO was certainly impressed, saying: “The importance of accountability and measurement is key in everything we do; it’s about making the right investment decisions.  Marketing is clearly on board, demonstrating its impact on the achievement of our strategic goals.”

MLC members, take a look at the dashboard here – the full case includes screen shots and more functionality. And, if you’re looking for a little help in your planning process, please check out MarkPlan, MLC’s new software suite designed to help you write strategic, actionable, and impactful marketing plans that fit your organization.

(Note: This is Part 1 of a 4-part series on marketing planning. Check back here every Wednesday in August for a new installment!)

Don’t know if it’s time to spend more on marketing?  Unsure how to convince the CFO?  Pat LaPointe – managing partner at NPV Marketing, a leading marketing measurement firm – recently spoke to our members about how to justify spend increases. Read on for a summary of his top tips.

NPV’s research shows that ‘historical spend’ is still the number one means of allocating marketing budget, but lacks both rigor and credibility with the CFO.  What CFOs want isn’t certainty about the ROI of marketing spend (no business investment has a certain ROI, e.g., building a new plant in a developing country), but rather clearly stated assumptions and a sound understanding of risk factors. You can make a solid business case that will pass the CFO ‘sniff test’ by taking the 5 steps below.

1. Squeeze every drop from the current spend mix.

CFOs’ top piece of advice?  “Don’t ask for more money until you’re sure you’re making the most of your current money.”  You can find extra money in your budget by identifying and reallocating spend with low returns.  One way to do this is to eliminate spend at the point of diminishing returns and below the point of critical mass (see curve below). To determine where you are on the marginal returns curve, bring together experts and key stakeholders to reach an informed judgment of what you expect to happen with the next incremental dollar of spend.

2. Prioritize opportunities for investment

Get a clear sense of where the next incremental dollar is likely to get the greatest payback across products/regions/channels. This can be done without a lot of data by ranking opportunities attractive, neutral or unattractive (relative to each other) across 3 dimensions: 1) current performance, 2) future opportunity, 3) impact of marketing/sales spend. Boost investment in opportunities that are attractive on most dimensions, maintain neutral opportunities, and fix or exit opportunities that are mostly unattractive. You may find that some of the opportunities in the fix/exit zone currently have a high level of spend, while some of those in the expand zone have low level spend.

3. Check that prioritized opportunities have “points of leverage”: Make sure additional spend in prioritized areas is likely to produce returns by ensuring the presence of at least 3 of the following:

a)     A strong value proposition,

b)    Customers that are able to switch (and be kept),

c)     Customers that are likely to be responsive to marketing,

d)    A clear, resonant, distinctive message.

4. Assess the environment: Having assessed internal issues, look at the environmental context (e.g., economic, sociopolitical, technological trends).  If you think your internal assessment of trends may be too subjective, consider hiring an economics professor from your local university.  S/he can run your sales data from the last 5-10 years against a battery of macroeconomic factors to find correlations and assess upcoming conditions.

5. Manage risk factors: Estimate the likelihood and potential impact of competitor actions as well as a host of other events (e.g., delayed advertising, strikes, bad weather etc.)  If a risk factor has a high likelihood and high impact, avoid investment or carefully manage against it.

MLC members, access the full webinar replay here or join our upcoming webinar on Avoiding the Pitfalls in Marketing Planning (Aug 18) for more tips.

By Erin Lynch-Klarup

Measuring social media campaign effectiveness is a topic near and dear to the marketers we speak with – and justifiably so.  Experimentation is a key element of social media strategies, and evaluating the impact of experimental campaigns helps marketers maximize future investments.

For marketers who target viral campaigns to the blogosphere or use online PR as a marketing channel, measurement can be especially challenging.  Mentions of a brand can be monitored, but if they don’t link to the brand’s website, it’s hard to tell which mentions are leading to web visits, online purchases, or other objectives.  Certain third party sites might be especially influential in directing traffic to a brand’s website – but without the direct link, how do you know?

An emerging technology that we refer to as “view-through technology” can help.  This java script embedded in a company’s web page tracks visitors’ exposure to a set of third party sites that reference the brand.  While it doesn’t capture everything, in conjunction with a listening platform, leading marketers are using this technology to target online campaigns and fine-tune messaging. 

View-through technology is worth considering if:

• Your online campaigns are viral or otherwise often don’t include links to your site
• You engage in social media and viral marketing campaigns
• Your brand is mentioned regularly across the blogosphere
• You use online PR as a marketing channel

For more on the MLC’s approach to social media metrics, take a look at our post on Return on Objectives.  If you’re interested in exploring view-through technology a bit more, you might check out Tealium, one of the few vendors in this space.

MLC Members, Check out an example and vendor profile in our use case Using View-Through Technology to Understand Social Media Effectiveness.  Also, join our May 4^th webinar Cutting Edge Uses of Social Media Data to learn more about this and other potential uses of social data.

Then I must ask the rhetorical question: how close do marketers come to that definition when it comes to marketing planning? The search term ‘marketing planning’ has appeared in the top five search terms on the MLC website for 24 months running. Our annual executive survey has reported ‘planning’ as a top-five area of improvement nearly every year since the poll’s inception.

Sincerely now, what do marketers keep doing year after year that keeps yielding the same underwhelming results?

There are two near-constant mistakes that prevent most organizations from building successful marketing plans:

1. They replicate the previous year’s marketing plan, subtly tweaking resource allocation and marketing activities from the previous year, which was only slightly different from the year before that, and so forth.

2. Interim changes to plans are either made with little regard to the original strategy, or not made at all. In layman’s terms, some call this tactic the ‘stick-it-in-a-drawer’ method of planning.

Taken together, these mistakes yield plans that are unresponsive to changing market conditions, miss shifts in customer needs, and produce tactical plans reliant on ‘traditional’ media.  With continued uncertainty in today’s economy and social media shifting the communications landscape daily, an incremental, unadaptable marketing plan is the surest path to wasted effort and misguided strategy.

So rather than simply expecting different results, how can marketer do planning differently?  For starters, marketing plans must link to corporate strategy – it’s the only way to demonstrate the function’s contribution to the ultimate arbiter: shareholder value.  Marketers should implement metrics immediately after settling on strategy – not after selecting tactics. Cross-functional leaders don’t much care how many Facebook fans you have; they want to know whether your strategy worked … which most CFOs measure in dollars. The closer your metrics are to financial outcomes, the stronger the case for marketing investment becomes.

With linkage to corporate priorities, Marketing’s performance is inextricably linked to the performance of peer functions. Harness that cross-functional input during planning – solicit input from Sales (particularly B2B companies); understand how the R&D pipeline will impact future sales; make sure Market Research provides the best customer insight. Lastly, practice integrated marketing communications, with each medium and touchpoint serving a clear purpose toward the achievement of marketing objectives.

Implementing these principles will at least break the insanity habit, but by no means will they alone yield long-term success. There remains a need to build a repeatable process embedded in daily workflow, where the plan is a living document referenced throughout the year.

MLC Members, if you’re struggling with planning, we’d love to understand your specific challenges so we can build better resources to support you on this perennial pain point.  Please take this two-minute survey about the state of your organization’s marketing planning process or e-mail my colleague Abhaya Menon, and we’ll be sure to follow up!

A few weeks ago, I pulled 10 nuggets from The Economist’s special report on social media. Fittingly, The Economist followed that this week with a special report on managing information.

Managing and making best use of all the data trails that consumers create via digital and social media is critical for marketers (see this prior post on managing information richness). This capability is one of a few that will separate winning marketing functions (and even enterprises) from losing ones in the next 3-5 years.

So, without further delay, here are 10 of my favorite takeaways from the report.

10 Nuggets from The Economist’s Special Report on Managing Information

1. Decoding the human genome, which involves analyzing 3 billion base pairs, took 10 years the first time around in 2003. Now, it can be completed in one week. 

2. The amount of information in the world is growing at 60% compounded annually

3. The human brain can retain seven pieces of information in its short term memory, and can hold only four concepts at once. More information, or greater complexity, generally leads to confusion.

4. “A wealth of information creates a poverty of attention.”–Herbert Simon, economist

5. A new kind of professional is emerging— the Data Scientist—who combines software programming, statistics and storytelling/artist skills to extract insight from mounds of data

6. “What we are seeing is the ability to have economies form around the data—and that to me is the big change at a societal and even macroeconomic level” –Craig Mundie, head of research and strategy at Microsoft

Example: Microsoft’s Farecast examines 225 billion airline pricing data points to tell customers whether they should act now or wait to buy the lowest price airfare for a particular itinerary

7. According to Wal-Mart (and its gigantic purchase database): Leading up to hurricane strikes, people buy flashlights and batteries (no surprise)—and PopTarts (!!) PopTarts are an easily ported and consumed survival food.  Nimble, data savvy businesses can spot and seize opportunities to stock shelves just-in-time with the right goods.

8. By crunching numbers, Cablecom (a Swiss telecommunications firm) has reduced churn from 20% to 5% of subscribers annually. How? In sifting through data, it found that customer defections peak in the 13^th month, but customers decide to leave four months earlier (on average). Cablecom identified likely leavers, and made them special offers in month seven to pre-empt the month nine moment-of-truth.

9. “Understanding turns out to be overrated, and statistical analysis goes a lot of the way” –Edward Felton of Princeton University. In other words, if there are mountains of user data available, it can be used to augment the algorithms programmers normally rely on to execute a complex task.

Example: Google’s spellcheck program was effectively crowdsourced: using the millions of search queries with spelling errors, and offering a correct spelling (which searchers accept or don’t), allows Google to zero in on a statistical technique for spotting and fixing spelling errors.

10. Remember when “terabyte” was the term used to convey gobs of information beyond what most of us can comprehend? Well, beyond terabyte, you have petabyte, exabyte, and zettabyte (the total information in existence this year is believed to be around 1.2 ZB). Beyond zettabytes lies the realm of yottabytes—too big for us to imagine at this point.

MLC Members: See our work on Digital Marketing. As well, stay tuned for an upcoming webinar, slated for May 4^th, on Creative Uses of Social Media Data.

The study was commissioned by MySpace which, at the time, was on the top of the social networking heap.  You’ll likely want to skip the first 34 pages (unless you have a keen interest in MySpace circa 2007), and get right to the meat. 

There, you’ll find a section called “The Momentum Effect”, which is a research project on the ROI of social marketing conducted by Rex Briggs of Marketing Evolution.  The project studied social networking efforts from adidas and Electronic Arts. 

Here are three tidbits from Briggs’ paper that give you some sense of the substance:

• Of 30,000 TV ads the typical consumer sees in a year, she forwards less than 5 to friends
• By contrast, half of the value created by the social marketing efforts studied came from viral connections
• The number of incremental consumers moved to a top box Intent to Buy by viral impact was (approximately) 3:1 against those directly exposed to the marketing message

The piece is chock full of additional tidbits, figures and benchmarks.  Moreover, on page 44, you’ll find a good framework for social marketing executions in which the objective is to drive intent to purchase or recommend.  You may be able to use a model like this directly, or it may simply be fuel for constructing and proving out your own model.

Note: do take the results in this study with a small bit of salt.  It was funded by MySpace, and social dynamics for your brand and category may be different than for adidas or Electronic Arts.  However, the methodology is sound and the thinking therein is instructive. 

If you’re interested in learning more about MLC’s efforts to model different types of value created by social media (or you’d like to participate in the research), please contact me.

If you need help right now in thinking through social media metrics, take a look at our view on Return on Objectives.  Or, MLC Members, check out the metrics portion of our Social Media Strategy Builder.

Political affiliations aside, government touches more elements of our consumer-driven economy than ever before. One policy change here, another there, ripples through the system with unprecedented speed (like perhaps, an unintended consequence). If banks feel less wealthy as a result of taxation and more limited mortgage support, the less likely they are to expand credit. Tighter credit, as we saw vividly in the fourth quarter of 2008, leads to lower business investment and greater consumer savings – starting another cycle of money removed from our economy exactly at the time it needs capital injected.

Senior leadership teams don’t want excuses, though. After two years of stumbles, most executives look to 2010 for growth. Yet the number of extraneous variables affecting that potential growth is incredibly high, hence marketers’ collective uncertainty. Just take several possible scenarios that could happen across 2010:

• The U-shaped recovery currently underway transitions quickly to V-shaped as the government spends the bulk of stimulus bill dollars
• Health care reform passes with an individual mandate to buy insurance, changing the corporate benefits landscape and take-home pay
• Certain state governments can’t balance their budgets, leading to heavy cuts in government contracting

Will any of these come to pass? I don’t know. Should we be thinking about what happens if they do? Absolutely. Two major solutions come to mind to stave off the adverse affects of market unpredictability:

1)      Build an agile planning process that includes short-term scenario planning. Specifically in 2010 as the U.S. electorate gears up for midterm elections, be sure to include government action (or lack thereof) as a critical variable.

2)      Determine the jobs and outcomes your customers are trying to achieve and invest smartly in forecasting how those jobs may change under each scenario.

The 2010 winners won’t be those that wrote a plan in January and followed it unwaveringly all year. The winners will be those who understand how the market changes and can react fast enough before it changes again.

I’m an airline junkie. George Clooney’s character in Up in the Air hit a little too close to home. But suppose you’re a leisure traveler now subjected (as of today) to a $25 one-way charge for your first checked bag, and a $35 one-way charge for your second. You may call this a fee, but the airlines call this ‘ancillary revenue.’

From the airline’s perspective, the logic here is simple – collect additional revenue from an activity the customer already does. Yet people respond to incentives, and the incentive here is clearly don’t check a bag. How about those unintended consequences? Passengers don’t check bags; suitcases get larger; security lines back up, overhead bins fill up faster; gate-checked luggage increases (where there is no penalty for checking those bags); on-time departure decreases; upset business traveler who followed the rules misses his meeting.  The customer behavior change is easily predictable in this instance because the penalty is large enough, yet the unintended consequences and negative externalities abound.

But ultimately, here’s the question – does it work?  Not even close. Check out Joe Brancatelli’s analysis here. Ancillary revenues are great, but how about top-line revenues, the ones that count? The only major airlines to avoid double-digit revenue declines in 2009 are the two that do not charge for the first checked bag (Southwest and JetBlue). Account for the fact that a greater percentage of the top line is coming from non-ticket sources, and you see that the bottom has dropped out for most of the major hub-and-spoke carriers. People respond to incentives whether we like it or not.

After a year of upheaval in 2009 where many struggled to stay afloat, marketers must remember the simple truths of consumer economic behavior:

• Do our businesses account for different scenarios if A occurs rather than B?
• Do we understand both the rational and emotional incentives to which consumers respond?
• How has social media changed the incentive structure for our consumers?

Members, join us for a webinar on January 28th on recession-era insights you can’t afford to forget.

• Circuit City still had stores last year at this time
• The Dow Jones Industrial Average opened the year at 8776 and currently resides at 10497 after a nose-dive to near 6500
• Dubai went from filthy-rich monument of opulence to debt-ridden monument of opulence
• TARP transformed from economy-saving crisis relief to four-letter word that Citi and Bank of America can’t shed fast enough

These events and others sent our marketing executives on an emotional roller coaster that won’t soon be emulated.  Let’s play emotion-by-quarter.  Q1, scared.  Consumer demand plummeted, banks still teetered precariously.  Q2, uncertain.  Job losses mounted, spending retracted further, but the cliff’s edge didn’t seem quite so close.  Q3, ambivalent.  Everyone hoped for the turnaround, but no one had complete confidence it would come.  Today, encouraged (even hopeful, perhaps).

Back to the clichéd learning-from-the-past bit.  If ever there was a lesson that said so much yet gave so little guidance, it applies to 2009 as we look to 2010: expect the unexpected.  By no means will 2010 be easy for marketers.  Consumers have more control over your brand through social media at the same time companies need to define it to achieve growth.  Businesses will continue to haggle on price at the same time unique benefits rule the day.  Major legislation sits before Congress to transform sectors of our economy from health care to energy, with potentially long-lasting effects.  Buck up, my friends.  Another wild ride is coming.  Don’t say you weren’t warned.

Results from our tenth annual survey show that in 2009, spend on channels conducive to driving consideration (website, social media, direct mail, PR) held flat or grew; while spend on channels that primarily drive awareness (broadcast, print, online display ads) declined in comparison to 2008. The question we asked was what is driving this trend?The answer lies (as it rightly should) in viewing marketing budget allocation with the lens of business objectives. The vast majority of survey respondents – from both B2B and B2C companies – said accelerating loyalty (retaining and growing share of wallet from existing customers) was their key priority in 2009. The tight pressure on business is forcing most companies to focus on their existing clients and ensure that these clients ride through the storm with them.

Interestingly though, the tactics to drive consideration might have changed – perhaps as a result of cost pressure.  We found that the channel mix is most definitely changing. Although traditional channels (broadcast, media, print, shows, etc.) continue to remain important, the marcomm channel mix shifted gradually in favor of digital channels this year.  Digital spend in most companies skyrocketed in 2009.

Do the whiffs of optimism around the economic turn around reach the survey respondents? Not yet. Most marketers surveyed do not expect significant changes in their budget size next year.

MLC Members, download the full 2009 Marketing Investment Benchmarks study  or compare your spend to peers using our Marketing Benchmarks Center tools.

Take the sales cycle – or the time it takes somebody to go from an evaluation to a purchase. Over time, we observe that the sales cycle, especially in B2B contexts, is especially fixed by customer. Different people and different companies simply have different ways of making purchases and it’s very hard to lastingly change this. Of course you can inflect this through discounting or special offers, but these effects are temporary at best. Marketers can learn a lot from watching the sales cycle as carefully as possible because it’s a very powerful indicator of whether or not demand for a given offer is either slowing or expanding:

• If the sales cycle goes down across multiple regions and people for a given product/service, then this almost certainly means that the market is growing. This is the time to suggest aggressive campaigns to capitalize on the momentum. It’s also a good time to consider expanding coverage through the addition of people.
• Conversely, a contraction of the sales cycle should suggest a change in the nature of the demand.  People will tell you that deals are stuck in the pipeline, and this is when marketers face maximum pressure to come up with a quick relaunch or a new campaign. Realistically, they would do better to resist this and instead focus on quality of business, concentrating resources on fewer customers known to have significant needs.

Incidentally, there’s always the person whose sales seem to go much faster than everyone else’s, and most likely this person is doing something differently. It’s worth finding out so that marketing can tell everybody how to similarly get on board. But there’s also a chance that this person is simply a little more restrained about entering unlikely deals into their pipelines – and that too is worth understanding.

Click Image to Enlarge Sample "Plan on a Page"

By Tasneen Padiath

Almost every member I speak to is in throes of planning season, and many are struggling to build plans that reflect a growth agenda as budgets edge closer to pre-recession levels.  In many cases, we see marketers try to make up for lost time, sprinkling in a little bit of everything that they couldn’t afford to do last year.

To help members, we’ve been presenting a tried and true best practice more than ever. MasterCard’s Plan on a Page is about getting back to the basics – mapping your planned marketing activities to your company’s strategic objectives – and scrapping the ones that don’t help meet them.  Easier said than done, especially when your internal partners are grilling you about not being on Twitter or not sponsoring that golf tournament the CEO really likes.

Beyond activities, the other big part of the budget is obviously people. Over the last year, we saw a flurry of restructuring as companies shed workers and centralized resources to drive efficiency. There doesn’t seem to be a drive to add more people except in one area – social media. MLC benchmarking data shows – and anecdotal evidence confirms – that many companies plan to hire at least one FTE to manage social media initiatives.

MLC Members: We have a whole host of planning and budgeting tools and insights to help you through this busy time, including the full “MasterCard Plan on a Page” case study. And if you’re planning to hire that Social Media Manager, check out job descriptions here.

There’s a devilish catch-22 at play here.  As with any new touchpoint or technology, you can’t credibly project ROI until you make an investment, but you can’t get the investment resources without showing ROI.

How to skin this cat?

Click Image to Enlarge

Try the 70*20*10 portfolio argument (illustrated at left).  The logic goes like this:

In any fiscal year, marketing communications spend should be reviewed at a portfolio level.  Roughly 70% of spend ought to go toward “tried and true” touchpoints. Our organization is familiar with these touchpoints.  We know their mechanics. We know the returns they deliver, or at least have benchmarks for what good looks like.

On the other end, 10% of spend should go to experimental efforts for which there is no in-year expectation of ROI.  Of course, we’ll want to structure these efforts in a way that gathers data to seed future benchmarks, but we don’t burden them with an expectation of immediate results.

Finally, the middle 20% is spent on the most successful tactics of the 10% experimental bucket from prior years.  These touchpoints are incubating—we should manage them to develop benchmarks for success.  These touchpoints eventually move over into the 70% as the organization accepts them.

Over time, you’ll risk falling well behind your audience’s changing media consumption behaviors if you aren’t experimenting with at least 10% of your marcomm resources each year.  It’s the old frog-in-boiling water bromide.  Try that on for size the next time you face the ROI catch-22. 

Other ideas for beating the catch-22? Share them with us via your comments below.

MLC Members: Looking for help making the case for social media?  We’ve put together a social media business case template, complete with mini-case examples from companies like Comcast, DuPont, and Intuit—très handy, non?