How to cut advertising costs

IN FIVE YEARS, sales of GloCell, a cellphone service provider, went from zero to more than R1,5bn as the group expanded to 1 000 outlets. Behind that success story is a marketing tool developed by Francesco Mariola, one of its founders, who was responsible for group advertising, marketing and sales.

"I ran our entire cellular business on this system," says Mariola. "In three years GloCell's advertising cost per unit dropped dramatically as improved insights flowed into sales. Despite fiercer competition and rising media costs our figures got better."

Mariola's solution is now available to other marketers. In 2007, Mariola sold his GloCell shares and started Media and Business Tracking Solution (MBTS), a company dedicated to marketing his system. The principles are uncomplicated, but what makes the system work is the use of computer technology to give practical application to the underlying formulae.

On the basis of that experience Mariola predicts companies could cut their media advertising bill by 20% or more. "It quickly pays for itself," he says.

The core ratio is the marketing cost per unit (MCPU). Decide what's vital to your business - sales, website hits, number of successful mortgage applications, new subscribers or anything else - and divide that into your media expenditure. The lower the number, the better.

Mariola's system tracks that and other measures and shows over time which medium works best for each product. It also establishes the effect of variables, such as time of the month, day of the week, competitor activity, advertising style and variations in the media mix.

In practice, you can probably work those ratios out for yourself with a calculator - but it would take all day. The MBTS system does the job painlessly and accurately, providing daily online feedback that allows you to respond instantly to problems.

Other measures include media reaction time (you can expect advertising to result in sales after a day for radio, a week for print and a month for billboards); how long your advertising remains effective; saturation point; a ranking of media by their effectiveness in producing sales.

Mariola recommends a minimum media spend of R5m to justify the cost; however, the system is scalable. "It enables you to find the best media solutions for each product with previously unobtainable precision. It establishes whether the advertising is working, ranks media types for effectiveness and calculates the cost of advertising down to the single known unit. Within the first week it will show you which regions, outlets, categories and products are performing better, thereby improving your return on investment."

Mariola has surrounded himself with a team of experienced ad industry veterans, including business director André Hübner (formerly MD of Red Nail), research and development director Luisa Belter (formerly MD of MindShare), technical director Frans Venter (a leading physicist and mathematician) and former Absa chief economist Christo Luus.

The system is patented internationally and investors overseas have shown interest. Says Mariola: "This could change the media industry as we know it."

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