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Enhance Value by Increasing Effectiveness

Enhance Value by Increasing Effectiveness

When it comes to maximizing value in experiential marketing, focusing solely on cost tends to miss the point. Yet corporate procurement departments have lately shown an inclination to do just that.

To our minds, value is better thought of as a ratio of effectiveness to cost. It can be expressed as simply as V=E/C.

And a quick look at the mathematics behind the equation demonstrates the limitations of only minimizing cost.

Sure, if you maintain a set level of effectiveness and you decrease the cost, the value increases. But there comes a point where cost becomes too low to support the basic infrastructure of the program. At that point, effectiveness starts to fall just as cost falls; value, therefore, will certainly not increase and often will drop.

How might this play out in experiential marketing? In a live presentation, reductions in cost increase value until, for example, a proper audio system becomes cost prohibitive. At this point, value plummets. (The audience can’t hear the presenters’ content!) In turn, it’s plain to see that cost control has a limited ability to improve value.

Increasing effectiveness, on the other hand, is limitless — so long as effectiveness is well defined and well planned. That’s why at GO! we encourage our clients to articulate the objectives of a program, establish KPIs consistent with the objectives, and identify target ranges for each. This upfront process ensures that the program itself is strategically developed to achieve the clients’ goals. It allows us to design measurement systems that will facilitate program optimization and analysis. And it provides a framework for a quantitative determination of effectiveness. This consistently allows us to maximize the value of our clients’ engagements. But, of course, this essential upfront work comes at a cost.

 Let’s look back at that equation: V=E/C.

So, the optimal scenario for value creation occurs when we minimize the denominator (cost) and maximize the numerator (effectiveness).

Clients benefit most when we work both sides of the equation instead of just blindly reducing costs as procurement departments are currently wont to demand. We believe our industry and our clients will evolve to this approach, as the momentum on simple, procurement-driven cost containment reaches its limits and value starts to drop.

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