Bringing To Life PAR & BAR
I must admit for someone adverse to ‘left brain’ thinking, the one section of Marketing 4.0 that I faced with trepidation was the financials:
Last week we looked at metrics that can allow a greater depth of understanding in the new wave of marketing metrics Today we will decompose the two leading metrics:
- Purchase Action Ratio (PAR)
- Brand Advocacy Ratio (BAR)
For someone who has often been ‘allergic’ to metrics this has been an eye opener for me. The value of the metrics does not stop there. When companies manage to measure “conversion rate” from awareness to advocacy, they can answer the overriding question: How do companies make necessary interventions and increase the number of loyal advocates?
Again drawing insight from our friendly finance executives, we should break PAR and BAR into their elements.
When comparing brands, a higher ROE might result from higher profitability, more efficient asset use, and higher leverage. A better ROE due to the first two causes is clearly a great result. But a better ROE due to higher leverage requires a more careful examination to determine whether the company is over-leveraged or under-leveraged. Breaking down PAR and BAR can reveal similarly useful insights. It turns out that PAR may be calculated by dividing market share by brand awareness.
Accordingly, marketers may roughly estimate the potential market share increase of their brands if they increase the awareness of those brands.
I was speaking to a client during the week where we are building their Marketing Capability. The one request she had was to include different ways to evaluate than just the standard Return on Investment (ROI). This is where PAR and BAR come into it. For example, Brand X wishes to spend more to increase its brand awareness by 1%. From a previous study, Brand X knows that its PAR score is 0.5. This means that half of Brand X’s spending is being wasted in the process of generating market share. All other things being equal, Brand X may expect to have a market share increase of 0.5%. Although this is a ballpark estimate, it helps marketers plan their spending more accountably.
Marketers should also measure every conversion rate from awareness to advocacy. A low conversion rate from aware to appeal for a brand reflects low consumer attraction.It indicates that customers who are made aware of the brand do not find it appealing. That may stem from poor positioning or poor marketing communications execution. Fixing these problems may result in an attraction level of closer to 1.
A low conversion rate from appeal to ask for a brand is a sign of low consumer curiosity. Consumers do not feel compelled to ask questions and research the brand further. This usually stems from a company’s inability to trigger conversation and facilitate information sharing among consumers.
However, the curiosity levelof a brand should never be overly high. When consumers have too many questions about the brand, it means the brand message is unclear. Pepsi may have intended to share a message of peace and how similar tastes bring people together, but the ad was widely perceived as a ploy to co-opt the Black Lives Matter movement for profit. It became a public relations disaster and never-ending nightmare for the brand, and a cautionary tale for others. A curiosity level that is too high also requires the sufficient capacity of brands to answer consumer questions directly (through their own communication channels) and indirectly (through loyal advocates).
Unfortunately, marketers can never control the outcome of conversations with advocates. Therefore, among conversion rates across the five A’s, curiosity level is the only one that should not be closer to 1.
A low conversion rate from ask to act for a brand indicates low commitment; people are talking about the brand without making the commitment to buy. Usually this means that the brand has failed to convert confirmed interest into purchase through its distribution channel. There are many possible marketing mix (four P’s—product, price, place, promotion) flaws that may contribute to this failure; consumers might find the actual product to be disappointing during trial, the price might be too high, the salesperson is not convincing enough, or the product is not readily available in the market. Fixing these issues will help the brand to increase the commitment level.
A low conversion rate from act to advocate for a brand indicates low affinity; customers who have experienced the brand are not delighted enough to recommend it. The low conversion rate may be a result of poor post-sales service or poor product performance. Consumers are attracted to buy the brand but are eventually disappointed with their purchase. Improving the usage experience will help increase the affinity level.
See below for the McDonalds Case Study that brings conversion rates to the forefront.
When broken down into their elements, PAR and BAR scores reflect the process rather than just the outcome. Building consumer loyalty is a long, spiral process of creating attraction, triggering curiosity, securing commitment, and finally building affinity. Ideally for a brand, every consumer who interacts with the brand goes through the entire five A’s unscathed. In other words, the ideal BAR score is 1: every consumer who is aware of the brand eventually recommends the brand. But in the real world, a perfect BAR score of 1 rarely occurs. More often, a certain proportion of consumers drops out and does not complete the entire five A’s.
A lower conversion rate in any given stage across the five A’s reveals a bottleneck. Like a bottleneck in manufacturing, a bottleneck in the five A’s reduces the productivity of the entire consumer path. Identifying the bottleneck that limits PAR and BAR scores allows marketers to pinpoint the problem and fix it. Using this simple diagnostic process, marketers now know exactly what intervention to make across the consumer path. Instead of trying to improve across the board, marketers may now focus their attention on what really matters. Altering the right bottleneck touchpoint often leads to higher PAR and BAR scores that are closer to 1. The objective to this entire exercise is to improve marketing productivity and avoid unnecessary waste in marketing spending.
CMO Perspective: Silvia Lagnado – McDonalds
There aren’t many brands that could chop up their logo and be sure consumers would still recognise it. Yet this is exactly what McDonald’s did in one of the cleverest bits of outdoor advertising this year.
Its ‘Follow the Arches’ campaign, created alongside agency Cossette, saw McDonald’s cropping its golden ‘M’ to help create guiding arrows to direct drivers to the nearest fast-food outlet in high-traffic areas of Toronto, Canada.
The campaign originally consisted of four billboards, three static and one digital, with sections of the golden ‘M’ appearing alongside slogans such as “just missed us”, “on your right” or “on your left”.
Messing with a logo often seems to serve brands well, but context and tone are everything. This campaign from McDonald’s was bold yet simple. And it was so well-received, it won the Outdoor Grand Prix at this year’s Cannes Lions Festival. McDonald’s also flipped its arches to mark International Women’s Day this year.