We work with clients to prioritize their marketing spend across geographies and products, define the right messages for their customers, and find the optimal mix of vehicles among today’s wide variety of media types.
The marketing opportunity
Global marketing spend exceeds $1 trillion, which makes it between 1 to 2 percent of global GDP. Marketing spend has been rising faster than the top line for several decades. In our experience, 15 to 20 percent of marketing spend can be released through better marketing return on investment (MROI) efforts, either for reinvestment for growth or return to bottom line. That’s up to $200 billion globally per year. (See Chief Marketing & Sales Officer Forum’s collection of articles on MROI.)
The challenge of marketing
Marketers face many challenges today, including high growth expectations, cutthroat competition, and the digital and social-media revolution. Embracing MROI as a discipline can help build strong brands that generate improved returns.
Our core beliefs
- Better MROI starts with better objectives that are based in the consumer decision journey (CDJ). Better marketing objectives, in turn, shape better metrics.
- Brand messaging is one of the most important determinants of MROI success. It is more important to be clear on the most effective messaging attributes for the given brand objective than it is to have a precisely optimized marketing mix.
- Marketing-mix analytics that don’t make sense to the end business user are useless. Marketing-mix models should be informed by industry knowledge, built with transparent assumptions, and delivered in a way that makes sense intuitively to the business user.
- Marketing-investment decisions need to factor in both short- and long-term impact. Marketing mix models, for example, can capture only short-term impact and must be augmented with long-term (brand-building) impact estimates.
- Future potential is a critical input. Spend should be biased toward future growth, and not just optimized based on past performance.
- Ultimately, driving marketing spend effectiveness comes down to capabilities, processes, and talent. Invest in your organization (not just your data) to build and sustain excellence in MROI.
See our eBook Big Data, Analytics, and the Future of Marketing & Sales
Our five-step approach
- Spending priorities: Understand where all consumer-facing dollars are being spent at an enterprise-wide level. Include all working and nonworking spend across all geographies, brands, marketing vehicles, etc. Ensure that enterprise-wide spend allocation is aligned with the company's strategic priorities and with the avenues of future growth.
- Message definition: Understand deeply CDJ, and clarify the priority “battlegrounds” for your brand. Clarify the messaging and identify the marketing vehicles that will be most effective at moving consumers through the selected stage in the CDJ. (See “Winning the consumer decision journey,” McKinsey Quarterly)
- Marketing mix: Pick an approach based on business needs, data availability, and analytical preferences and stick to it. Look at three approaches—benchmarks, advanced econometrics, and consumer surveys—which can be used independently or together. Don’t forget business judgment.
- Spend efficiency: Optimize marketing spend through lean techniques and purchasing controls. Find opportunities to reduce nonworking spend (for example, agency consolidation, research-vendor appraisal) and improve buying efficiencies on working media (such as best-practice procurement and optimized time-length).
- Sustainability: Drive sustainable impact through all the classic organization levers. Instill best-practice capabilities, supported by ROI tools and processes, key performance indicators, and by senior-level behaviors. Make marketing an investment, not a cost center.
Examples of our work
- Optimized the marketing mix of an insurance carrier by geography, distribution channel, and marketing message
- Optimized both online and offline investments of a telecom provider and measured the impact of earned social media on performance
- Completed a multiphase commercial transformation enabled by advanced marketing-mix modeling (MMM), including a rapid diagnostic, proof of concept, and capability building for a direct-selling company
- Created transparency on the MROI of multiple brands for the board of directors of a multibillion dollar food company, with results presented to the “street”
- Increased revenue for a food retailer without increasing marketing spend by applying econometrics to understand impact across all key commercial levers (See “Big data & advanced analytics: Success stories from the front lines,” Forbes)
Proprietary tools and solutions
McKinsey’s approach to MMM is a holistic data-models-organization approach that is designed to tap big data, creatively fill data gaps, demystify the analytical “black box,” and engage marketers in the exercise. The goal is to create models that the business understands and trusts and therefore uses to change future marketing plans. (See “5 steps to squeeze a lot more ROI from your marketing,” Forbes)
McKinsey’s Benchmarking/Reach-Cost-Quality media mix optimization tool provides the most relevant criteria to measure marketing effectiveness, allowing precise allocation of funds across marketing vehicles.
McKinsey’s Social GRPTM quantifies the impact of social media by measuring the frequency and reach of positive, negative, and neutral social-media sentiment. (See “Getting beyond the buzz: Is your social media working?” Financial Times)
McKinsey’s Short-Term/Long-Term methodology is able to put a value on long-term brand equity and enable trade-offs between short-term and long-term outcomes.
CMAC
The MROI service line is part of McKinsey's Consumer Marketing Analytics Center (CMAC). CMAC accelerates your ability to capture the potential of big data by driving insights from advanced analytics into action across your marketing and consumer-facing organization. CMAC's global team of 130 advanced analytics practitioners have deep expertise in data, approaches, proprietary tools, client industries, and best practices for organizational transformation. In addition to MROI, CMAC delivers impact in pricing, promotions, customer life-cycle management, and assortment-optimization programs across retail, consumer goods, banking, insurance, telecom, media, and health-care organizations. To support our advanced analytic work we can host client data in our ISO-certified data center in Atlanta. CMAC has high-quality, cost-efficient advanced analytics-offshoring capabilities through our India and Poland-based Centers of Competence.