Every marketer has heard this line before, either from the CEO, their manager, or from their traditional minded sales colleagues: “We can’t spend money on something which doesn’t generate new sales right away.” How should a marketer answer that question? Especially brand marketers will cringe when hearing this statement since a lot of what they are trying to achieve (raise brand awareness, develop the brand, build luxury brand equity in the eye of affluent customers, etc.) is next to impossible to measure in the short-term. Building a brand takes time after all (LVMH, Richemont, Kering, and most large luxury hospitality chains know exactly what I’m talking about), and an increase in revenue from brand marketing doesn’t come overnight. But what options do luxury marketers have in terms of measurement and forecasting available to them in general? How can they satisfy these doubts and negging questions from colleagues and stakeholders? Let’s find out.
Why measuring results is important
For a long time, marketing was supposed to do one thing and one thing only, create product or service awareness in the mind of the potential customer. That meant frequency and reach, people had to see your ads often and everywhere to really remember them. Then brand marketing changed this focus to communicating certain values about your brand consistently, especially in luxury this became the paramount way of doing any type of marketing, on or offline. But apart from reach, frequency and the associated cost of ad-spaces and exposure being measured in CPM or CPC pricing, the only way to truly measure any significant impact of brand marketing remains voice of customer research (which costs even more money to do it right) and a simple cost-analysis which compares marketing spend to overall bottom line revenue. Now that puts most luxury marketers in a difficult position when they want to argue for more budgets and the management is instead keen on sending their sales reps to yet another luxury VIP event or buyer tradeshow.
Why making forecasts is a good thing
Data-driven direct marketing solves this problem by being able, through marketing analytics and attribution modelling, to directly correlate bottom line revenue to conversions and ultimately to marketing spend. To state the obvious, making an effort to measure results, costs and effects on brand awareness as well as conversions and bottom line revenue is the best way to align sales & marketing efforts, increase the relevance of digital marketing in your organization and make solid, data-backed arguments to upper management or investors when asking for more money. Sounds good right?
How to make a realistic marketing forecast
It is simple, first measure as much as you can and use all on and offline tools at your disposal. Most organizations these days do some form of marketing analytics or business intelligence in-house, but most of the time their datasets are limited or lacking due to a failure to align IT and marketing on these important issues. Obviously a lack of resources can also be a huge detractor in this case. But If you have the budget and capability to implement marketing analytics as a function in your company it should include the following:
- Historic sales and customer facing intelligence (ask your colleagues)
- CRM & multi-touch attribution analytics
- Sales pipeline or ecommerce backend analytics
- Marketing automation or email marketing analytics
- Advertising, PPC, programmatic, affiliate & direct media buying analytics
- Social media analytics (engagement, clicks, followers, sharing, etc.)
- Web analytics (including heatmaps, screen recordings, etc.)
- Financial analytics (ERP data or finance KPIs)
- Voice of customer research (surveys, focus groups, interviews)
- Customer service analytics (net promoter score, customer lifetime value, customer loyalty)
Once you are collecting some or all of this data on an ongoing basis you can, based on previous data and external industry research or benchmarking, start finally making decent marketing forecasts. All you need to do is take all the relevant KPIs you have measured on your previous brand or direct marketing campaigns and put all of them into a marketing forecasting tool (we like to use GERU for example) and then run a data-driven funnel simulation. These should then be based on the advertising budgets that you have available to calculate applicable low success, medium success or high success scenarios. These scenarios in turn can then inform your actual marketing planning for the year.
What to do afterwards
Now that you have run your simulations and you have your actual forecasts, you should communicate to stakeholders what level of conversions or sales volume they can expect. Armed with data and being able to actually show what marketing can do for the company will enable you to not only negotiate more budget, but also convince and align sales and marketing better by showing the importance of marketing activities in your overall sales cycle. Saving these forecasts and making them a part of your formal marketing planning document for the year is the final step of your forecasting activity.
You should keep refining your forecasting capabilities
When you first start doing forecasts as part of your marketing planning, they most likely won’t be very good or accurate. You first might need to implement more analytics and data-collection activities in your daily marketing operations to have all the necessary information you need to make a forecast in the first place. Even after running your first couple simulations you might want to incorporate more industry and benchmark data over time to account for internal in-accuracy or small sample size when it comes to making assumptions about future campaigns.
If you constantly apply a critical eye to your data collection, data analysis and marketing analytics activities you will eventually be able to make pretty accurate estimations when it comes to the results that you can achieve with your future marketing campaigns. Of course you will never be able to predict the future perfectly or account for externalities like a global pandemic for example, but forecasting is nonetheless a great tool in the toolbox of the modern luxury marketer that can showcase the power and effect that marketing can have on the bottom line of a luxury brand. As such it should not be underestimated. If you think that this sounds complex and like a lot of work you are probably right, but don’t worry we can help.