The troubled economy is forcing corporate leaders to reevaluate their spending plans across the board, and marketing is not exempt. In fact, marketing is often first in line for cuts as corporate leaders attempt to identify immediate cost reductions that may take longer to achieve in other areas. In reducing marketing budgets, management faces difficult questions: How much is too much? Are we trading off long-term brand building, which may be acceptable in the current climate, or are we damaging our ability to drive revenue in the current period? Making these choices is particularly difficult if the marketing team lacks a systematic method of marketing spending and a proven method to link marketing spending to business outcomes. The reality is that in this economy, budget cuts may well be necessary to survive. Few can wait to generate better information, and most don’t have to. In this Aquent-sponsored AMA webcast, Fred Geyer, a partner at Prophet, will outline how businesses can use their existing intelligence to address five tough questions and rigorously guide how best to reduce and reallocate their budgets in difficult times.

3. Making Marketing Smarter Amidst the Cuts Fred Geyer Partner, Prophet

4. But how should marketers respond? The troubled economy is putting enormous pressure on marketing budgets

7. Reducing & Reallocating Marketing Budgets in Difficult Times Five Tough Questions For Marketers

8. Do you have a complete inventory of your growth investments? Can you separate waste from effective spend? 1

9. Don’t be surprised if your marketing spend far exceeds your expectations Silos obscure spending in even the most sophisticated organizations The more-obvious: The less-obvious:

10. 15% to 25% of marketing spend is typically wasteful and should be eliminated However, the clear producers need your support

11. How do you classify marketing investments? Conduct an Accountability Diagnostic

12. Do your marketing investments change your customers’ buying behavior? 2

13. For each group of customers... ... you want to focus on the key growth-generating behaviors

14. Prophet Marketing Investment Framework How do you know if your investments drive the desired behavior? Systematically assess the impact on behavior

15. Wasteful Spending Pattern 1 You overspend on attracting new customers when driving existing customers to buy more has more bottom-line impact

16. Wasteful Spending Pattern 2 Rewarding volume instead of loyalty

17. Are your investments focused on customers’ barriers to buying your brand? 3 Funnel stage Purchase rates Familiar Consider Aware Have Used Currently Use Loyal = 99.4 = 87.8 = 61.1 = 46.1 = 25.0 = 21.7 88% 70% 76% 54% 87%

18. Don’t be led astray by numerical efficiencies Understand barriers to growth and choose the marketing vehicles and messages to overcome them Highly-developed market... focused on building mass awareness because it seems more efficient Low market share... focused on closing sales because advertising looks too expensive MISMATCH! MISMATCH!

19. Familiar Consider Aware Have Used Currently Use Loyal = 99.4 = 87.8 = 61.1 = 46.1 = 25.0 = 21.7 88% 70% 76% 54% 87% Illustrative data A leading pain medication increased return on marketing investment by 45% It reallocated spend by focusing on the bottlenecks in the purchase funnel

20. Do you have the right mix of marketing levers among your investments? 4

21. Make the brand more available Provide temporary monetary incentives Change customer perceptions Slide ...so that customers buy more All marketing investments pull one or more of these levers...

22. But it is crucial to determine the right mix of investments Make the brand more available Provide temporary monetary incentives Change customer perceptions

23. Availability without strong brand perceptions reduces your ability to charge more Don’t Do

24. Strong brand perceptions without availability reduces your top line sales Before After 2000 $500M Sales, $56M EBIT 2007 $2.6B Sales, $1B EBIT Source: Coach Annual Reports 2008 vs. 2000

25. Inability to manage price incentives leaves money on the table Cuisinart 500 SmartPower Premier Source: Prophet comparison shop 7/4/08 Retailer Retail Price $104.49 $99.99 $79.99 (with food processor attachment) $67.49 $130.00 $69.86 (similar model)

26. Do you have a system to support “winners” and cut “losers”? 5

27. Supporting “winners” and cutting “losers” Consideration 1 System to debrief success & failure

28. Supporting “winners” and cutting “losers” Consideration 2 Maintenance versus growth

29. Supporting “winners” and cutting “losers” Consideration 3 Proven versus experimental Highly Aggregated Single Unit Level Mass Media Micro-Targeted Marketing Stimuli Sales Response Mass or Unaddressable Mixed-Media Chanel-Level Individual-Customer Level Geographic Markets Market-Level Field Tests Store/Channel Channel-Level Field Tests Individual Customer Level New/ Prospective Customers Market-Level Field Tests w/ Custom Tracking Channel-Level Field Tests w/ Custom Tracking Split Sample Testing Known Customers

30. Supporting “winners” and cutting “losers” Consideration 4 Direct and indirect impact

31. Supporting “winners” and cutting “losers” Consideration 5 Across the 4 Ps Product Price Place Promotion

32. We have no way of knowing when the economy will turn around Embracing marketing accountability is the smart thing to do

33. Slide Fred Geyer Partner, Prophet [email_address] + 1 (312) 879-1930 x 4814 www.prophet.com For more information, please contact:

34. Question & Answer

35. For More Information on our host, ReadyTalk , visit ReadyTalk.com/ama Questions for Today’s Speaker Email Fred: [email_address] Questions for the AMA Email: [email_address] If you’d like to receive the AMA’s monthly Media Digest containing information about upcoming webcasts, radio shows and podcasts, email [email_address] to subscribe. Thank you for your Participation!