Mediapost writes today about Diageo’s multimillion-dollar holiday campaign for its premium single-malt Scotch, Johnnie Walker Blue. The campaign reinforces the Scotch’s positioning as a high-end luxury item – which, at $200 a bottle, certainly seems to qualify it as such. The program is heavy on experiential tactics, with a Traveling Art Gallery traversing New York, “bottle engraving” at a kiosk in NYC’s Time Warner Center, and sponsored free-admission nights at museums in New York and Miami. Mediapost quotes a Diageo spokesman saying the company has tripled its spending for the holiday season.
Might sound like Diageo is a bit loose with its marketing pursestrings, but that’s far from the case. Last year around this time, a former CMO colleague and I interviewed Rob Malcolm, the president of global sales, marketing and innovation for the spirits behemoth. He walked us through the economic profit valuation model that his group uses to allocate resources across its broad brand portfolio:
“Our CFO [Nick Rose] is a strong believer in making sure that we’re looking at all of the costs that a business incurs, not just the profit line, when we’re making allocation decisions. For example, in our Scotch whiskey business, because the nature of Scotch whiskey being aged three years to, in some cases, up to 50 years, we carry a pretty heavy load of working capital in inventory. So we make sure, in the economic calculations, that we load those brands with the inventory-carrying costs. Since we don’t have that same phenomenon, say, in vodka or Bailey’s Irish Cream, [those costs] don’t get loaded. So we’re able to look at the true, fully loaded contribution of our various investments. And then we look at our spreads and the overall profitability.”
Malcolm had this to say about how the formula helps with specific marketing spend decisions:
“Through experimentation, testing, trial and error, we’re able to determine on a geography-by-geography basis what we think are the right investment levels. For our brands that are strong and growing, we’re always testing upside potential of incremental investment and we’re always testing some reallocation and some different growth drivers. It is through that process, and the rigorous testing and learning in our annual analysis, that we determine where we should be stepping up the investment. We tend to have a philosophy of fueling those brands that have momentum.”
The full interview was never published (CMO: RIP), but through the magic of this blog you can now read it here. Worth the read, I think – and maybe Malcolm will forgive me now for wasting his time on an interview that never saw the printed page.