The Best Marketing Investment You Can Make

I’m going to let you in on a little secret, one that’s helped me and many of our clients succeed where others have merely tread water. It’s not technology, it’s not advertising, and it’s not partnerships. It’s a dedicated inhouse business analyst.

An analyst will change the game for you on many levels. He will get you to the point where you can make intelligent decisions about which marketing is working and which isn’t. He will find opportunities to save money. He will find opportunities to spend money and generate huge return on investment. He will increase the overall ROI of your marketing efforts to a level that is incontrovertible. And most important, he will provide you with the ammunition to win every battle with finance.

Running some numbers makes the case loud and clear. Say you handle marketing for a $200 million company with 4% gross marketing spend and a 5% profit rate. With your $8 million marketing budget, an incremental dollar of sales generates $0.05 of profit, so you need to generate $1.6 million in incremental revenue to justify the additional investment of $80,000 for the new hire. Assuming you have enough staff to manage your existing projects and campaigns, what would an analyst do for your business?

First off, you can expect up to a 30% jump in incremental revenue from direct marketing. If direct marketing is 20% of your mix and you normally generate $2.00 in incremental revenue for every $1.00 of marketing, there’s up to $960,000 of your $1.6 million right there. Factor in improvements in costs per placement due to adjustments to electronic media mix by local market, optimizing insertion zones for free-standing inserts or run-of-press (ROP) coverage, adjustments to ROP placement and size, search engine marketing ROI optimization, conversion improvements, site selection improvements, …get the picture?

It’s critical that this person is an analyst. Not a project manager who also does analysis. You need someone who wakes up thinking about response forecasts and goes to sleep thinking about how to improve on PRIZM NE. Who can whip you with SAS in the morning and bludgeon you with ESRI in the afternoon. A degree in statistics would be ideal, preferably a master’s or a doctorate. He needs to be completely fulfilled by a day spent finding improvements, opportunities, patterns, and anomalies and producing reports, charts, graphs, pithy insights, and results.

I found such a person in Kevin B. at an earlier company. A master’s in statistics, trained at Kellogg (cereal, not the school) modeling promotion response and chafing to get his hands on the raw data behind our million-member relationship program. Over time his work transformed our direct mail and e-mail marketing and had considerable influence on site selection and marketing mix.

For example, Kevin essentially proved a long-held assumption, that we had two fundamentally different customer segments with different needs. We were moving toward a single point of view, and his work pushed us back to maintaining two very independent messages. He also convinced the company that vendor-designed and -funded advertising, while easy to implement and inexpensive, was horrendously ineffective. This led to shifts in the use of certain vendor funds to more-productive areas. There were dozens of other ways that his work changed how we operated as a company.

It’s easy to pick out the companies that have this skill set inhouse. The vice presidents have numbers at their fingertips; they can respond to queries within minutes, not days; they have a firm understanding of how each marketing effort performs; and most important, they have an intuitive sense of the forecasted results of almost any future marketing effort. This puts them in a position of towering strength, with the ability to effortlessly sort among options to choose the few with the highest likelihood of success, and to then measure and analyze results to learn from their choices.

The key is “effortless.” Having smart and analytic staff members can go a long way, but someone dedicated to the task full time is far more effective.

Hiring this sort of employee carries with it two risks. Your second biggest risk is that once your analyst is really up to speed and contributing, other parts of the organization will want to steal him. And you don’t want to tell your professional marketing associates about him either, or else they will recruit him from you the first chance they get.

The biggest risk, however, is that your analyst will figure out some other way to use his analytic acumen, shift into a different role or industry, and make more money than you could ever dream of offering him. (Kevin B., if you are reading this, my hat’s off to you. Can I borrow a little cash?)

Michael Greenberg is vice president of marketing for Loyalty Lab, a San Francisco-based developer of customer loyalty programs for the retail industry, and writes a monthly column for CHIEF MARKETER.