Industry News

How to invest in better marketing - Part Three

Editor’s note: This is the third part in a seven-part series on managing your marketing portfolio. Part 4 will publish next Friday. Check out Part 1 and Part 2.

Use a "bucket strategy" to keep enough marketing cash on hand.

The “Bucket Strategy,” made famous by financial planner Harold Evensky, is a sound strategy for funding your retirement cash-flow needs while maintaining a diversified portfolio of stocks, bonds and cash to promote growth and income.

The idea is to set aside one to two years' worth of living expenses in a cash bucket, while using additional buckets to hold more volatile assets with higher potential returns.

This "Bucket Strategy" can also be effectively applied to your marketing plan. While you should always be measuring and testing your campaign (and media channels) against your key performance indicators, it's hard to know at the outset with 100% certainty which of your paid, earned or owned media channels will produce a greater ROI.

Consequently, if you’re a big marketer like Geico, Toyota, Budweiser, or the Target’s of the world, it’s best to set aside one or two quarter’s worth of marketing dollars (bucket) that you can deploy for key marketing funds, grand opening funds, public relations opportunities, crisis management, or money to fund a tactical initiative such as emerging media.

Let your other buckets hold your media mix of assets with higher potential returns while your cash bucket is ready to deploy when and where you need it.

For example, let’s say that you are a traditional supermarket chain that now has increased competition from Whole Foods who recently opened 3 new stores in one of your key markets. Now may be the perfect time to reach into your “bucket” to fund an initiative that will help prevent an erosion of your market share.

Like your investments, rebalancing your marketing portfolio is something that should be done at least annually.

In general, there are three risk tolerance levels that an investor and financial planner must consider. Aggressive, moderate or conservative.

It's no different in marketing circles.

An aggressive marketer—like the beverage, technology and fast food industries—is willing to embrace new emerging channels, even before they are proven. The thinking is “if I’m the first to market in this new channel, I stand a better chance of outflanking my competition…it gives my brand a certain cachet to be first with this new technology.” It makes sense if the target audience of your brand is typically younger and more tech savvy. Another reason may be that the CMO wants his/her brand to be perceived as being forward thinking, in step with fashion, music and the latest technology trends. By being more aggressive in their creative, choice of channels and spending, this brand can remain on trend while building category ownership.

For instance, an aggressive advertiser will purchase 350 gross rating points (GRP’s) in one week rather than spread out over 4 weeks. They reason, “If I’m going to be on TV, I want my spots seen.” It’s that Super Bowl kind of mentality. A conservative marketer would never spend $4.5 million on one Super Bowl spot, opting instead to spend it throughout the year in successive months. And when you consider that display ads currently sell for $1.28 per thousand impressions (CPM) in the U.S., it would mean that a $4.5 million Super Bowl spot would fetch 3.5 billion online display ads or 50 million views on Facebook seen throughout the year.

A conservative advertiser—typically a financial, educational or healthcare client—is, by the very nature of their category, more regulated and less comfortable with out-of-the-box thinking (risk). Some may test and test to measure every dollar spent to assure that they are getting the most bang for their marketing spend. Most will rarely shoot from the hip, or shoot for the stars, like an aggressive marketer would. Nor will they feel comfortable with an edgy creative approach or an emerging media channel. Everything they do must be committee approved, calculated, measured and tested. And once a media channel or campaign approach has proven successful, then and only then, will they commit additional dollars.

A moderate investor—typically a retailer or auto manufacturer—also takes a disciplined approach to their marketing spend, but is more willing to try new media channels, new creative approaches, and take more risk than a conservative marketer.

Like an investment adviser, a marketing adviser’s skill in winning and keeping a client is understanding, going in, whether they are aggressive, moderate, or conservative. Many ‘ultra-creative shops’ won’t even take on a conservative client because they know going in it won’t be a good fit. They reason, “the most creative, most award-winning, most out-of-the-box idea will not be embraced by a conservative client because they are risk adverse.“ Best to leave those creative ideas for an aggressive client who is more open-minded and more comfortable with the new and untried.

Let’s face it, no financial adviser worth anything is going to recommend to a conservative client that he/she put their portfolio in commodities, precious metals and junk bonds. Certificates of deposit, municipal bonds, dividend stocks and a Russell 3000 index fund are more accepted asset classes for the conservative investor.

Check back next Friday for more insights on this topic.

Stuart Dornfield is an award-winning freelance creative director and copywriter with 40 years experience in marketing, strategy, advertising and production. A former senior vice president and creative director of Zimmerman Advertising (Omnicom), the 13th largest agency in the U.S., and the co-founder of Gold Coast Advertising, the third largest agency in South Florida, Stuart now offers his creative services and marketing insights as a freelancer with offices in New York and Miami.