1. Marketing: Return On Investment Updated: May 6, 2009

2. Agenda 2  Importance of measuring the effectiveness of marketing programs  Different ways to calculate ROI  Real Life Examples

3. Importance of Measuring ROI 3  Creates the ability to understand and communicate the return on your marketing dollars  Helps to better evaluate which programs are the most effective and which need to be modified or eliminated  Assists in getting the resources you need  Allows you to have an intelligent conversation regarding your marketing budget  Prevents you from becoming a Dilbert cartoon

4. The Marketing Process 4 1. Market Assessment 2. Competitive Analysis 3. New Product and Offer Creation 12. Media Mix Selection 11.Operational & Systems Planning 17. PR and Internal Comm. 16. Product Pricing and Offer 15. Sales Support 14. Promotions/ Merchandising 13. Marketing Message & Creative 8. Client Understanding & Segmentation 7. Internal Brand Mgmt. 6. Brand management 5. Brand Development 4. Financial Analysis with ROI 20. Measuring Performance & Quality Control 19. Staff and Partner Management 18. Marketing Role Definition 10. Retention and Process Improvement 9. Experience and Service Management Effectively Managing the Twenty Activities of Marketing Developing Marketing Strategy/Planning Defining Brand Strategy/Managing the Brand Understanding and Managing Clients Executing the Marketing Plan Managing the Marketing Function

5. Budget Approaches 5  Percent of Assets -- “Rule of thumb” formula is 1/10 of one percent of bank assets or $1,000 for every million dollars of bank assets  Incremental Increase -- Adds an “inflation factor” -- usually 2 to 5% -- to previous year’s budget

6. Budget Approaches 6  Comparative Parity -- “Keeping up with the other guys” or spending in line with the competition to retain share of voice position  All We Can Afford -- Marketing/advertising funding is established last in the bank budget process and allocated only those dollars remaining in non-interest expense forecast

7. Budget Approaches 7  Objective and Task -- Marketing/advertising budget based on measurable business objectives and the cost of programs required to achieve these objectives

8. Factors that Affect Your Budget 8  Strategic Direction of Your Bank -Consumer vs Business -Market Segments -Market Share -Growth Goals -Orientation towards Marketing and Branding  Media Costs in Your Markets  Number of Branches  Ability to provide ROI

9. A Day in the Life of a Marketing Director: Real Life Examples 9  “I think giving away a free DVD player for a free checking account is a stupid idea and will never pay for itself.”  “I do not think that home equity direct mail did us any good, should we save the money next quarter and just drop it?”  “We are projected to sell 46,000 new small business checking accounts this year. How much could we sell next year?”  “I liked our TV commercials, but did they really do anything for us?”

10. 10 “I think giving away a free DVD player for a free checking account is a stupid idea and will never pay for itself.”

11. Calculation of Required Sales Lift (RSL): 11 RSL = Offer Cost /(Product Profitability-Offer Cost) It answers: How much of an increase in sales volume will I need to pay for my marketing program?

12. 12 What is the lift required on Checking Account Sales to pay for a DVD Player? DVD Checking Offer Analysis

13. 13 “I do not think that home equity direct mailing did us any good, should we save the money next quarter and just drop it?”

14. Calculation of Return on Investment: 14 ROI = Incremental Profit - Marketing Investment Marketing Investment It answers: What kind of return did I get on my Marketing Expenditure?

15. What should your hurdle rate be? 15  Recover the cost of your marketing expenses, or achieve a 100% ROI  Recover your expenses and produce a 20% return on your investment, or a 120% ROI  Double the return on your marketing dollars, or produce a 200% ROI

16. 16 Mailed 120,000 Home Equity Pieces and Tested $100 Home Depot Offer Home Equity Direct Mail Analysis

17. 17 We are projected to sell 46,000 new small business checking accounts this year. How much could we sell next year?” Business Checking Projections

18. Definition of Insanity: 18 “ Doing the same things over and over again and expecting different results.”

19. Calculation of Projected Sales Units (PSU): 19 PSU = Current Sales Run Rate + New Marketing Programs It answers: The collection of marketing activities will generate this number of sales

20. 20 Projections estimate a 15% increase in 2005 Business Checking Projections

21. We can make a sales goal of 53,000 new accounts if we can have…….. 21  A new offer to give away a $50 Office Max gift card for the first quarter  Our prospect direct mail budget increases from 1.5 million pieces to 2 million pieces  Our customer direct mail budget increases from 300,000 to 500,000 pieces  We add 10 new sales people

22. 22 “I liked our TV commercials, but did they really do anything for us?” Multimedia Campaign Analysis

23. 23 Unaware Aware Understand / Value Consider Positive Experience Cross- Sales Advocate Accept Information Seek Information Active Consideration Purchase Commitment Retain Recommend Acquisition  Communication & WOM Driven  “Rational” and “emotional” elements Retention/ Growth  Experience Driven  “Rational” and “emotional” elements Acquisition / Retention Process

24. 24 Multimedia Campaign Analysis Examine both sales and awareness level changes

25. Summary 25  Focus on creating intelligent conversations with your managers  Build a strong partnership with your Finance Group  Results for programs work best when both the field and Marketing have ownership  Pilot programs are a great tool for testing new ideas and creating realistic projections  Always have your results close to you