The Idea in Brief
To build a leading brand, you must invest your marketing funds wisely. For global consumer-products companies, those investment decisions are especially difficult.
For example, how do you compare the potential ROI from marketing pain relievers in Germany versus shampoo in the UK? And even if you succeed in identifying the highest ROI opportunities, how do you ensure they get the lion’s share of your global marketing budget?
Do what Samsung did, say Corstjens and Merrihue. With $1 billion to spend annually on marketing worldwide, the company rigorously analyzed data to identify category/country configurations promising the best returns. It then reallocated funds from low-ROI configurations to high-ROI ones. And it overcame managers’ resistance to reallocations by making a compelling case for change and adjusting managers’ performance expectations to align with their units’ projected profit potential.
By knowing where to put every marketing dollar, Samsung became the fastest-growing global brand—boosting annual sales 25% between 2001 and 2002.
The Idea in Practice
Corstjens and Merrihue recommend these guidelines for maximizing return on your global marketing investments:
Analyze the Data
To allocate your marketing dollars wisely, compare the growth prospects of diverse categories in diverse countries, and the growth prospects of countries themselves. Product-category statistics include penetration rates, market share, profitability, media costs, and competitor dynamics. Country statistics include population level, per-capita GDP, and growth forecasts. Example:
Samsung placed its category and country data in one easy-to-access marketing repository called M-Net. It then built predictive models to identify where and how today’s marketing investments would yield the highest future returns. Through simulations, it tested a variety of marketing allocation scenarios.
Look for ROI/Resource Mismatches
Use your data analysis to uncover mismatches between the amount of marketing support some product/region configurations receive and those configurations’ relative growth and profit potential. Example:
Samsung’s M-Net revealed three mismatches:
• Overinvestment in North America and Russia. These regions got 45% of the company’s global marketing budget, yet their profit potential merited 35%.
• Underinvestment in Europe and China. The regions received 31% of the global budget but merited 42%.
• Overinvestment in three product categories. Mobile phones, vacuum cleaners, and air conditioners got more than half of Samsung’s total marketing budget—starving categories like DVD players and refrigerators of support they needed to realize their significant growth potential.
These mismatches were threatening tens of millions of dollars in future profit growth. To correct them, Samsung decided to reallocate $150 million of its marketing budget from more mature categories and regions to those offering major untapped potential.
Overcome Resistance to Reallocation
Most category and country managers will perceive a reduction in their marketing budget as a vote of no confidence, no matter how clear the logic behind it. Moreover, they will likely argue that a reduction would undermine their ability to succeed. To get them on board with your reallocations:
- Don’t rely on “robot reallocation.” Consider managers’ experience, insight, and intuition before making changes. And involve them in the decision process: you’ll help minimize their resistance.
- Personally meet with all managers who would be affected by your reallocations. Present the case for the companywide benefits of reallocating marketing resources—in terms of increases in overall profitable revenue growth, margin, market share, and share price.
- Set lower targets for managers who will be losing funds and higher targets for those gaining resources.
When Eric Kim, executive vice president of global marketing operations for Samsung Electronics, joined the company in 1999, he accepted a daunting challenge: build the Korean manufacturer’s brand into a force that would rival industry leader Sony in revenue, profit, and prestige—within five years.
