• by Pat LaPointe , Op-Ed Contributor, June 19, 2009

I recently saw a terrific presentation by Steve Smith, CMO of Enterprise Car Rental (not a client, just to be clear) in which he outlined the fairly comprehensive approach they were taking to measure the payback on their marketing investments. Here are a few highlights:

Enterprise categorizes marketing expenditures into one of four areas:

Equity - intended to build awareness, consideration, and preference for the Enterprise brand.
Demand Generation - intended to stimulate near-term demand and leads through more promotional efforts.
Loyalty - intended to increase the value of specific customer segments.
Channel - intended to enhance the productivity and/or profitability of relationships with channel partners.

If a proposed initiative or program is not clearly associated with one of these four buckets, then it is assumed to be unclear in its intent and sent back for further refinement. Likewise, if a proposed initiative is associated with more than one bucket, its focus is suspect and greater clarity is warranted.

In the "Equity" bucket, initiatives were measured against their ability to advance prospective customers from vaguely aware to specifically aware of at least one of Enterprise's key message platforms. Over several years of methodical experimental design and research, Enterprise learned to predict the expected incremental value of increasing "salient" awareness by one point in terms of how it would translate into higher levels of consideration, preference, and ultimately purchase behavior. No magic algorithms, just diligent effort behind clear focus to define its brand value chain.

In the "Demand Generation" bucket, every proposed program had a single hurdle to achieve: it had to deliver incremental rental business for less than 5 cents on the dollar -- meaning that marketing could spend as much as it wanted, provided it spent less than 5 cents on every incremental dollar generated. Knowing who was renting and how often, it wasn't difficult to actually measure what was incremental business. Applying the same methodical A/B testing approach both online and off with regards to offer delivery and message execution, it similarly wasn't difficult to ascertain which programs were driving the incremental spend. Consequently, this "retail" marketing effort was imminently trackable and fairly mechanical to maintain.

On the "Loyalty" front, Enterprise had been working for several years to develop its customer loyalty program through a series of controlled experiments. This gave them very high confidence that they had in fact found the most compelling value propositions that translated into higher share-of-customer. But more interestingly, they continued to measure the value of the loyalty program by holding out pockets of customers who might otherwise have been eligible to participate so they could gauge the differential value of the enrolled vs. unenrolled groups proactively. Consequently, they have a very solid understanding of exactly which features/benefits of the program are driving the most value, and where they can pump up business if/when they need it.

In the Channel area, Enterprise has developed similarly disciplined ways of applying experimentation to learning what works best amongst its many and varied channels, and how to "dial-up/back" channel spend when necessary to ensure consistent, profitable outcomes.

What made this story so interesting was that, as a result of all this diligent effort to understand the payback on their marketing investments, Enterprise had no "marketing budget" per se. There was no annual budget setting and there were no budget cuts. Instead, marketing would tell the regions how much demand they thought they could stimulate over what period of time and at what cost, and the regions would decide how much to allocate to marketing accordingly. In effect, Enterprise created a learning organization that cracked the proverbial code and learned how to use marketing as a growth lever to be applied where/how the business required in the context of all the macroeconomic and competitive dynamics.

In the end, there was no big secret. Just focus, commitment to learning through rigorous methodical effort, and open/transparent communication between marketing and its business partners in the other functions around the firm.

If you have a similar story, I'd love to hear it.