At Digiday Social, a case study was presented by imc2 for Secret deodorant, a brand they have been working with since 2003.  The first type of cause marketing is finding something of marketing interest that resonates with the core values of the brand.  For example, Secret’s core brand value is “empowering women” so imc2 latched on to Lindsey Van’s petition to allow women to participate in ski jumping in the 2014 Olympic Winter Games (visit LetHerJump.com to sign the petition).  The commercial, which can be seen here on YouTube, resonated with the Digiday audience and received a round of applause, to which the speaker was unabashedly flattered.  Although the YouTube video has only received 1,500+ views, the company forwarded the LetHerJump domain to their Facebook page, which was smart.  The Page has nearly 40,000 Facebook Fans, which can be marketed to repeatedly (although this should be done well, which is a whole other challenge).

As a side note, another speaker at DigiDay pointed out how the advent of social sites such as Facebook has created the opportunity to constantly market to an audience, which on the plus side can increase Lifetime Customer Value (discussed in a previous post) but on the down side makes it harder to evaluate the affects of a particular marketing campaign.

In order to effectively implement the brand-alignment kind of cause marketing, several steps need to be achieved through primary research (if you need assistance, the company I work with, C.A. Walker, does this).  First, you must know what values you would like the brand to stand for, then you can use surveying to evaluate your brand’s values currently in the mind of the target markets (if any), and whether the values you would like to have associated with the brand would be acceptable in the mind of the target(s).  You can also ask what nonprofits, if any, they donate their time to so you can determine those you may want to evaluate if their brand values are in-line with yours.  From there, you need to create opportunities to attach the brand value to a particular nonprofit objective and market it.  Lastly, you should then re-test the market post-campaign to see what lift was created in terms of brand value awareness, brand loyalty, likelihood to purchase/switch from a competitor, etc.

In the instance of the Secret campaign, although I was one of the persons clapping for the video’s message at Digiday, if they were to ask me I would tell them it did not move the needle much towards me purchasing their product (this is why it’s always good to test campaigns!).  While it had some positive lift in my understanding and appreciation of the brand’s objectives,  there are other factors at play when it comes to my decision to purchase deodorant that, if I became a Facebook Fan based on this campaign, would still not be communicated.  The campaign needs to be reinforced by standard product feature marketing, including price, whether it goes on clear, effectiveness and possibly also scent.  Ways they could swing my vote are:

1. Allow me to buy a sample size before committment of the next several months of my armpits to their product, or send me a free trial in the mail or via in-store handout.
2. Package trial-sized versions of different scents together, so I could determine which of several options I prefer.

The second type of cause marketing is the more typical “sponsorship,” expected to grow 6% over the next year to $1.61 billion, according to a recent IEG Sponsorship Report.  Much marketing discussion recently has centered on the increase in “microsponsorships,” which is the giving, by a company/brand, of a few hundred or few thousand dollars to consumers to fund pet projects.  There are pluses and minuses to the trend, specifically (numbers correspond to sources at bottom):

Pluses:

• Well-conceived programs can be priceless, both in terms of the value they provide society and the business benefits they bestow on the corporations and brands that undertake them.1
• They can be a truthful, sustaining, committed approach to improving the environment and people’s lives.1
• More marketers are latching on to this, and rightfully so, because there is more transparency in where the money is going.2
• For some marketers, microsponsorships present a much-needed icebreaker in social media.2
• Sponsorships may be more market research than marketing campaign.2
• They build databases of those consumers applying for grants or voting…so marketers can reach out to them in more meaningful ways.2
• 79% of consumers say they would be likely to switch from one brand to another (when price and quality are about equal) if the other brand is associated with a good cause.2

Minuses:

• Too often we see marketers adopt causes just for the sake of having one, which often results in a mismatch between the cause’s purpose and the marketer’s [reason for being].1
• Causes appear to be a convenient charity upon which a brand can piggyback to goose its Facebook friend count or incite some quick blogger hits.1
• Just as consumers quickly saw through the rampant green-washing of the past decade, brand beware: They’ll see through your cause-washing, too.  And even if they don’t, they’ll forget about you and what your brand stands for when you move onto the next shiny marketing idea.1
• Too often companies view cause efforts as a tax they must pay.2
• Even tiny sponsorships have to be closely associated with your brand…whatever you decide to pursue can’t be an isolated campaign.  It has to tie into a bigger program that attracts people with similar values and those have got to be clearly stated.2
• Microsponsorships make it easy to “lose control of the brand,” especially when doling out small sums to far-flung strangers.2
• One downside of these programs is that they are “just pecking away” at big problems.2
• For people to be more engaged is generally a good thing, but what are the tradeoffs if people think, “I’ve voted for this; I’ve spent half an hour online looking at these projects and signing petitions, so I’ve done my civic duty.”2
• Often microsponsorships lack focus, and it’s difficult to determine ROI.  The most successful sponsorships are long-term, sustained sponsorships. Microsponsorships fly in the face of that. It’s the equivalent of unfocused granting. You want to have an impact on a cause and be given credit for that impact.2

One of the largest and well-known microsponsorship campaigns currently is Pepsi Refresh.  In order to address the issue of hard-to-define ROI, “Pepsi is employing a battery of diagnostics, including gauging of brand-equity measures that correlate with volume. The brand has also partnered with Good, Global Giving and Do Something, third parties that are on-board to ensure quality and credibility. As for getting the word out about the brand’s impact, there are plans to profile the grant winners and highlight what they’ve accomplished with the money later this year.”2

An upcoming microsponsorship campaign by Prilosec OTC is one to keep your eyes on also.  Read Prilosec Works to Become ‘Sponsor of Everything’ for more on their efforts.

1 AdAge -  Cause Campaigns Must Benefit Brand and Greater Good

2 AdAge – Cause Effect: Brands Rush to Save World One Deed at a Time

Related posts:

1. Evaluating the ROI of Your Online Friends
2. Email Marketing Provides BEST Marketing ROI?

Yesterday I was helping a friend work on a marketing plan for her business.  While she is an excellent hair stylist, she has not put any effort so far into monitoring metrics in her business so she can determine how to affect them, nor has she yet conducted any formal advertising, having relied exclusively on word of mouth.  We’re working on changing that.

The first thing I suggested is that she build a simple spreadsheet to log, backwards and forwards, who are her clients, when they are coming in by month/date and how much they are spending.  When completed, she can then make some important calculations.

I have been her client for nearly 14 years, but I don’t know if this is common for her.  In fact, my devotion to her talents may be an outlier that skews her average.  Therefore, we want to first calculate the mean (average) and median (middle figure) in the number of months that her customers have been with her.  Excel makes it really easy using the formulas: =average(starting_cell:ending_cell) and =median(starting_cell:ending_cell).  If the average is much higher than the median, then we know that the results are being skewed.  For a more visual representation, we can create a scatterplot by using Excel’s Chart Wizard tool.  Highlight all the months, click the Chart Wizard, select Scatter, hit Finish and voila!  A helpful chart that lets you see outliers at a glance.

Let’s say that the results of her analysis shows that the majority of her customers are with her for 20 months.  We then have to connect that value with the amount they are spending.  By adding a second column next to the months for dollars spent, we can do similar calculations to derive average and median dollar values.  Taking a look at my own spending with her, on average I’m seeing her every 6 weeks and spending $60 each time.  I’m getting my hair done about 9 times per year, which means over nearly 14 years, I’ve spent $7,560.  So for every new customer that spends $60 a visit, she now knows that’s $540 over a year’s time.

However, that’s not entirely true.  Another thing she has to look at is how much she’s spending to acquire and keep her customers.  If she spends $200 a month on advertising, she has to deduct those costs of $2,400 in the first year towards those clients’ acquisition costs.  Additional monies in subsequent years spent on mailings to encourage those clients to come back will also reduce her profit per customer in those years.  Then there’s the product costs – color, gels, hairsprays, shampoos and conditioners, scissors, scissor sharpening, brushes, blow dryers – which adds up.  Those costs have to also be applied to each client.  Some of those costs can be spread out over all clients using an average and some she may want to do on a more granular level, e.g. color products she may want to apply on a per-person basis since longer/thicker hair requires more product.

Then there’s the cost of inflation to consider.  My $60 paid today is worth less than the $60 given to her nearly 14 years ago.  Using the inflation rate calculator I can see from January 1996 to September 2009 (the most recent month provided), inflation rose 39.88%.  So therefore, my $60 can buy $23.93 less than it did in January 1996 (=60 x 0.3988).  For each of her current customers, she can calculate on an annual basis how much to adjust for inflation.

A really nifty spreadsheet from Harvard Business School makes doing all this pretty easy: Download the Lifetime Customer Value Calculator tool. Clicking on the “Basic Model-Assumptions” tab, I can input:

• Time between purchases.  Every six weeks would be =1.5/12.
• Retention Rate or likelihood that a customer will buy again in the next period.  Let’s use a guesstimate of 80%.
• Average Purchase value.  Let’s use $70.
• Net Profit Margin.  Assuming product costs of $15 per visit and 9.25% taxes, Net Profit After Taxes = $48.53 ($70 – $15 – ($70 x .0925)).  $48.53 divided by Revenue of $70 x 100 = 69.33% Net Profit Margin.
• Profit Per Purchase is calculated for you at $48.53.
• Discount Rate is currently 0.75% as of November 8, 2009 (it rounds to 1%) – think of the discount rate as a forward-looking inflation rate.
• Product (or Service) Inflation Per Year.  Using the inflation rate calculator again, we can see the inflation rate from September 2008 to 2009 has actually decreased -1.29% (it rounds to -1%).
• Cost of Reaching a Potential Customer.  As she plans to spend $2400 a year to reach potential customers, targeting 10,000 customers, her cost per potential customer is $0.24  ($2,400 / 10,000).
• Response Rate.  This is the percentage of respondents to her advertising efforts.  Let’s say 2% until we know for sure.
• Cost of Attracting a Customer is calculated for you at $12.
• Coupon or Other One-Off Costs.  This is the cost to obtain that particular customer, for example, a 10% off coupon for first visit.  The cost to her would be $7 ($70 x 0.10).
• Total Customer Acquisition Cost is calculated for you at $19.

Having inputted these values, I now click over to the “Basic Model-Calculations” tab and see that the Net Present Value of Acquiring a Customer (taking into consideration the stream of a customer’s income, ongoing costs, and cost of acquisition) is $221.

Now I click over to another handy Harvard Business Screen tool, the Customer Lifetime Value Calculator, which does something a bit different than the downloaded one.  First, I clicked in the top right side Reset Inputs to Zero.  I then entered my inputs:

• Average Spend Per Purchase = $70
• Average Number of Purchases Per Year = 9
• Direct Marketing Costs Per Customer Per Year = $0.24 ($2,400 / 10,000 mailing) + $7 coupon = $7.24.
• Average Gross Margin = 69%
• Average Customer Retention Rate = 80%
• Annual Discount Rate = 1% (rounded from 0.75%).

In summary of the below grid:

• The cost of acquiring a new customer is $362 = (cost of mailing / response rate) = $7.24 / 0.02.  What this doesn’t allow me to do is change the mailing costs where in the first year they receive the 10% coupon and in subsequent years they don’t, so I will assume they receive an annual coupon.
• Expected Net Present Value in the 6th year is only $132 because it looks at the value of a dollar today compared to the value of that same dollar in the future, taking inflation (based on the discount rate) and returns into account.  If the NPV is positive, it should be accepted.
• The cumulative Net Present Value (taking into consideration expected inflation, based on the discount rate) of a new customer in the 6th year is $1,171.
• The cumulative Retention Rate shows that in the 6th year, with an 80% retention rate, there is only a 33% chance of making another appointment.  The longer they are a customer the more likely they are to “expire.”

Lastly, those things that she can affect to increase Lifetime Customer Value:

• Work to improve retention rate above 80%.  Be on top of how often her customers come in.  Call customers a week in advance of their normal scheduling to ask if they are ready to make an appointment.
• Send welcome and thank you cards.
• If a customer leaves, be sure to find out why and work to improve those areas she can (if someone moves away, there’s not much that can be done).
• If a customer is not coming in due to financial reasons, make a discount offer for their next session to keep them on schedule. The longer someone is away the more likely they are to look for someone else to do their hair next time.  They will appreciate her understanding their situation and become a more loyal customer.
• Get creative in her approach in obtaining new customers.  For example, she could evaluate the least she could charge someone and still maintain profitability.  She could then offer this discounted rate to the unemployed as a “get back to work” special.  As long as they show her evidence of unemployment, such as a recent pink slip or unemployment income receipt, they can receive their discount.  When they do get back to work, she can then raise her rates to normal and have a new loyal customer.
• Offer a loyalty card, such as buy 9 get the 10th haircut free (color, highlights and other services not included).
• Ask for referrals, which eliminates much of her acquisition costs.
• Offer a discount for purchasing several sessions in advance.
• Survey her customers to better understand who they are, what’s important to them, how satisfied they are, and areas she can improve.  Follow up with calls and letters.
• Segment her customers by lifetime value group.  Conduct different marketing programs designed for each segment.
• Monitor inflation and adjust prices accordingly.
• Reduce product costs where she can, and charge more for people who require more products.
• Offer additional services that bring in higher-paying customers.
• Sell products that will increase her revenue per customer.
• Improve response rate on mailings with messaging that better resonates with potential customers.
• Test mailings’ response rate with and without the 10% coupon.  If she receives a similar response rate without the coupon, eliminate it for cost savings.
• Test different advertising vehicles to determine which provides a better response rate, then focus on those with the highest return and provide unique audiences.
• Determine if other promotions instead of a 10% coupon would yield a better response rate, such as bring a friend with your first booking and receive half off (on the cheaper service of the two).  The LCV of the friend would cover the upfront cost on the other person.
• Don’t just focus on the response rate, but also on the return received (number of new customers times lifetime value) for the advertising investment made. Suddenly she may find she can justify a much greater promotion investment when looking at returns in this way.
• Advertise in higher-income neighborhoods where she can command a better price.  If this is outside where she works, she can make an arrangement with another salon to rent a chair on an as-needed basis when she obtains customers in that area.  She can schedule appointments in that area together to minimize travel and chair-rental costs.
• Use as many free advertising vehicles as she can, such as LinkedIn, Facebook and Myspace.
• Conduct co-operative advertising with related businesses such as spas and nail shops in her area, to reduce advertising costs.

Anyone else have suggestions I can pass on to my friend to improve her LCV?  And if you’re in the Venice Beach, California area and are looking for a great stylist, please call Sondra at 310.780.0290 to make an appointment.

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First, the different types of partnerships:

• One type, which I’ve been seeing a lot of lately, isn’t a true partnership.  It’s when someone tries to sell you something and they sugar-coat it as a “partnership.”  If it were truly a partnership, the company would be putting up their time, product/service, experience, effort, and/or money, while your company also takes some of these risks, in order for both to achieve increased revenue.  Instead, these “partnership opportunities” involve you putting up all the risk by purchasing their product/service, while they put up zero risk.  This faux proposal seems to me that the company doesn’t have enough faith in what they are selling to talk straight: “I want to partner with you” just sounds nicer than “I want to sell you something.” Granted, by buying what they’re selling, you may increase profitability for your customers, improving their ROI, and/or you may be lowering your overall costs, improving your ROI.  Call it a partnership if it makes you feel better, but I call it a sale.
• However, in the above example, should the selling company align their success to the performance of their client, i.e. they make money in a shared-reward revenue model, they could then call themselves a partner without me griping as much, as they would then have a vested interest in their client’s success.
• In the press release WPP and Omniture launch partnership to improve marketing ROI, a true type of partnership is highlighted.  The first company (Omniture) stands to gain significantly from the second (WPP) by offering its business clients greater ROI, and the second company (WPP) buys a significant amount of stock in the first (Omniture).  Thus, both take on risk and are equally committed for the partnership to work.  They then collaborate on sharing information, best practices and services to develop joint solutions for mutual clients.  In this situation, the companies share employees, with some from the first company (Omniture) going to work within the second’s offices (WPP), and training is conducted of the second company’s (WPP) employees in the first company’s (Omniture) products/services.  The second company’s (WPP) technologies, data, and products are integrated into the first company’s (Omniture) platform, thus the second company (WPP) can now deploy the first company’s (Omniture) solutions to clients with their add-ons.
• Even simpler, another type of partnership blends two or more company’s product/service offerings, with neither investing in the other, so together they can provide a greater solution to current clients, or reach a new or wider audience.  In this type of arrangement, partners are primarily finding a new way to market their products/services in a cooperative arrangement without changing what each are doing day-to-day.  The investment typically required in this case is to verify that the arrangement works and there is a market for it, as well as develop co-marketing materials.
• Another type of partnership is the Affiliate partnership, where one company simply refers business to a second company through their marketing efforts and receives a commission.  Affiliate partners typically will look for companies (Merchants) who are managing an Affiliate program, and apply to be their Affiliate through third party sites like Shareasale.com.
• There’s a special type of partnership that we’ve all heard about, the Sponsorship.  If one company can know enough about the other company’s demographic audience and can deliver it to them via a channel, such as an event, there may be an opportunity for a Sponsorship.  In BusyEvent’s Growing sponsorship revenue through brand partnership it is stated, “Real creativity is required…Simply placing logos on stuff isn’t going to fit into shrinking marketing budgets.  The emerging trend is to gather better data before, during and after the event so you have something tangible to show a brand to obtain their involvement in your event(s).  We use…reward-focused program[s] to know as much about a group of people as we can without anyone feeling manipulated.”
  • As an aside, the company that I work with, C.A. Walker, can assist with online surveys to segment audiences and measure emotional engagement to brands, intercepts during events for feedback, and “brand fit” studies to ensure the Sponsor and Brand are a good alignment that enhances the Sponsor’s image.
• The last type of partnership involves distribution, where two companies collaborate to sell and distribute the products/services of one of them.  This is also called a channel partnership.  There are various types of channel partner arrangements:
  • Partner sells products and/or services and deliver services.
  • Partner sells products and/or services but doesn’t deliver services.
  • Partner doesn’t sell products or services but delivers services.

The following is recommended in a true partner support program to increase and measure partnership profitability (from 2009 TSW Support Partner Program Best Practices – note: the PDF opened for me after downloading but not in my browser):

• Have at least four trained support staff per product, with recognized certifications and specific partner training.
• Offer 24x7x365 support for partners, with case tracking and reporting.
• Conduct initial and ongoing partner audits, with quarterly reviews.
• Conduct third-party quarterly customer satisfaction surveys, which is part of the partner’s overall scorecard tied to their income agreement.  Customer satisfaction is as critical in acquiring and retaining partners, as it is customers.
  • As an aside, if you need assistance administering customer or partner satisfaction surveys, C.A. Walker also provides this service.
• Create automated reporting of necessary metrics, reports and partner scorecards.
• Offer Web-enabled tools for partners to provide customers, and a partner portal.
• Put in place appropriate metrics, such as:
  • Quarter over quarter and year over year, revenue, net profit margin, return on assets and return on equity (new accounts established).
  • Track customer satisfaction measures over time.
  • Track partner satisfaction measures over time.
  • Track customer renewal/repeat purchase behaviors.
  • Establish and track cost per case and case resolution times (i.e. customer complaints) per million of total revenue.
  • Measures of product quality and reliability improvements (i.e. customer complaint case deflection).
  • Measures of ease of doing business with partners.

Companies have great opportunities in this economy to develop new partnerships that will enhance their market position.  So get out there and make some noise!

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