It works for Coca-Cola and Google and it can work for you too: the 70-20-10 rule
The 70-20-10 rule: a way of embracing new communication channels with confidence. By John Svendsen, Global Brand Director, Media, Millward Brown.
Today most marketers are creating multi-channel campaigns to engage with their customers where they want, when they want and in a format that they prefer. They are accustomed to changing the creative content of their campaigns to suit new formats on a regular basis.
But as new media channels emerge, marketers and media agencies are often unclear how to allocate spend among the different and many channel options. Fear of making the wrong decision can make exploration in new channels daunting and weighting options requires time and effort.
Yet innovation cannot be avoided. Brands that don’t advance with the world as it moves forward can be left behind.
Finding the optimum mix of channels becomes more complicated with the continuous emergence of new media options that requires marketers to continuously innovate. By the time you’ve established whether a new channel is a good investment there’s another three to evaluate.
Coca-Cola implemented a new approach for investing in creative content with the adaption of the established 70-20-10 protocol for apportioning resources for investment.
In its quest to double the size of its business by 2020, Coca-Cola would apportion its communications spend so that 70% would be low-risk, bread and butter content; 20% would involve innovating but be based on what had worked in the past and 10% would fund high risk content involving brand new ideas.
Coca-Cola is not the only company to put this old rule to new use. Google used it to manage innovation and other companies for leadership programmes. There’s no reason why this rule shouldn’t be used to allocate investment to new channels such as mobile, gaming, augmented reality or the latest social media sites to set its eyes on advertisers (Twitter and now Tumblr for example).
Creating space for innovation
70-20-10 is not a strict formula and the precise allocations are not important; what is essential is that some fixed proportion of spend is spent on innovation. This will encourage forward thinking and experimentation in a disciplined and structured way.
By using such a framework brands can steer a safe and prosperous middle path while evolving both their media and research budgets.
For most brands the 70% zone of low risk marketing is likely to involve established channels such as TV, print, outdoor and radio or even, for some brands, word-of-mouth marketing. These channels are safe, familiar and effective.
It doesn’t need to remain static from year to year of course. Based on ongoing learning and evolving brand objectives, channel composition within this zone could vary significantly over time and from campaign to campaign.
A total of 30% of investment should be focused on innovating. We suggest that most of this – 20% of your total budget – is restricted to media approaches that are known to be effective, but involve some risk because they are new for your brand. It might mean taking a risk by changing the application of something that you’ve done before – for example sponsoring a sporting event rather than a music festival.
The insurance brand targeted at women, Sheila’s Wheels, invested 30% of its TV budget into sponsoring drama when it launched in the UK in 2005. This was considered innovative at a time when most insurance brands focused almost exclusively on TV spot advertising.
The risk paid off and Sheila’s Wheels reached an awareness level of 75% in just three months, surpassing sales targets by 65% within the first year.
For most brands today, the 20% of innovation is usually around social media. Marketers have signed up to the benefit of enabling interaction with consumers, but they still raise questions about return on investment (ROI) and are learning how to create and deliver campaigns that are truly social by design.
The remaining 10% of channel investment is for experimentation with new and emerging unknown channels. Although it is relatively high risk, brands should remain in line with their core brand and campaign objectives; iPhone apps and Pinterest pages are right for some brands, but not all.
Monitoring progress
As you measure the success of your 70-20-10 strategy, it is likely that some of what begins as innovation becomes a core activity and moves into the 70% comfort zone.
After a few years of investing 30% of its budget in sponsorship, Sheila’s Wheels expanded its sponsorship allocation to £10 million with the launch of its home insurance product, making sponsorship its largest channel investment in one of British television’s biggest sponsorship slots: the ITV national weather broadcast.
Measurement is critical to reaping the rewards of this strategy and ensuring that there’s always room for investing in the ‘new’.
Channel optimisation is a core part of campaign planning. While some marketers are actively involved in the process, others leave the decisions to their media agency. Whichever route you take, it is clear that the 70-20-10 approach will allow you to embrace change without being swallowed up by it.
New channels will be given a chance to shine and your brand can continue to use communications to support core business objectives in the most optimal and innovative ways.