Measuring Success: Both externally and internally

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Measuring SuccessBoth externally and internally

• March 2003

SEARS, ROEBUCK AND CO.
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Agenda

• Measuring external communication
• Linking public relations to sales
• Focusing on ROI
• Measuring internal change management
  communication
• Scope of the Conversion
• Measuring associate understanding and attitudes
• Customer and financial measures
• Conclusions

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Keep it simple

• Revenue - Costs Profit

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Simplifying further...
Marketing Communication Media Relations Events,
Publicity, etc.
Revenue Increases
Crisis Communication Investor Relations Etc.
Cost Control
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Typically measurement...

• Stops at awareness
• Often stops short of awareness
• Measures output. Not impact.
• Is often compared to advertising
• Ad equivalencies are the wrong measure
• No measurement of impact, change in attitude or
  behavior

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Do they believe?

• Businesses want to measure behavior change -- Are
  they buying?
• Are customers buying your products and services?
  
• Are employees buying your messages?

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Clipping and Message Analysis

• Can be a useful management tool
• Measures activity and output of PR group
• Measures whether key messages are being seen
• Helpful in gauging whether coverage is negative
  or positive
• Identifies positive and negative bias of media
• Can calculate cost per impression
• But, it is not a measure of ROI or behavior
  change

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Taking clippings further...

• Link to changes in awareness, preference or
  behavior (purchase)
• What is the impact on revenue?
• What is impact on cost control, associate
  attitudes or other intermediate measures?

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Effort that never gets printed, broadcast (0
impact)
Most people never see the article or hear the
broadcast (0 impact)
Budget funds PR activity ()
Those not in target audience - not likely to
purchase. (minimal impact)
Percent of wasted effort
Publicity (semi-controllable and measurable)
Measure is circulation or viewers (MediaLink)
News Releases Events Media calls,
etc (Effort) (Difficult to measure)
Percentage of effort results in publicity
Target Audience Consumers who see or hear the
publicity and are part of the intended audience
for message (difficult to measure, but assumed to
be a fraction of the circulation number)
Businesses keep score with What is the
relationship between a invested in PR and
company revenue or profit?
No impact on consumers I still wont shop.
Consumers who have an attitudinal shift -- I
will shop as a result of that story (measurable-
- Oprah and BrandKeys)
Consumers who take action as a result, and visit
a store with intent to purchase (Traffic - no
current measurement device)
Customers make purchase Measure is revenue
(SPRS report)
Those who read the article, intend to shop, but
never follow through
Those who dont find what they need or want and
make no purchase
Subtract customers who purchased without benefit
of the publicity (test market vs. control or
incremental above baseline) (AdEffect)
Subract cost of all investments, leaving profit
tied to PR program. ROI is how much of this is
generated for every dollar invested at beginning
Measures existing
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Does it work?

• Can you identify changes along the path?
• Is there a link between public relations events
  and revenue?
• Two examples of how changes have been measured at
  Sears and how you can design a model for your
  business.

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Background

• One placement on the Oprah show involved
  providing Christmas gifts for foster children in
  a small Texas community.
• Sears provided all the gifts for 100 children
• Oprah exclaimed We love Sears!
• Can this be measured?

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Sears is high quality company

• Slight positive shift following the broadcast
• 65 agree vs. 58
• Shift came from all rating levels

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Sears does good things for community

• Following broadcast saw a huge shift to positive
  on this question
• Almost a five-fold increase in number of those
  agreeing completely

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Plan to shop Sears for Holiday

• The show provided the incentive to move viewers
  from neutral to positive intent
• Increased to 70 vs. 59 before show

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I plan to shop at Sears for the holidays.

• The Oprah PR placement provided the additional
  incentive needed to move some viewers from a
  neutral position to a positive intent to shop at
  Sears.
• Neutrals dropped from 73 respondents to 52, and
  somewhat negatives dropped from 29 to 18.
• The strongest negatives remained the same.
• The positive side of the intent to shop increased
  from 178 to 210 respondents.

Percent
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estimate what youll spend at Sears during this
holiday season.

• We saw earlier there was a positive shift in the
  number of people saying they planned on shopping
  at Sears.
• About 10 increase in positive intent.
• If we assume the mid-point for each range, and
  600 for the over 500 data, then these 300
  respondents represent an average of 195 per
  respondent after seeing Oprah, versus 140
  before.
• An increase of 39 per shopper in the amount
  they estimate theyll spend at Sears.

Percentage of Respondents
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What was the impact?

• Shift in attitude led to planned spending
  increase of 40-million
• Discounted by 2/3 to account for intentions that
  never come to fruition, the actual spending
  increase may be about 13-million
• Subtract costs and calculate ROI

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Fashion Footwear and NYT

• January feature placement in New York Times --
  New York/New Jersey edition
• What was the impact in that market vs. a control
  market and vs. national?

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The New York Times
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Fashion Footwear Results

• Week following placement NY and NJ markets were
  up vs. year ago.
• Chicago down
• National down

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Footwear Conclusions

• A single placement in a credible publication made
  a dramatic difference in sales compared to both
  national and comparable market
• The only variable that changed that week was the
  New York Times placement
• Translated into measurable dollars
• Cost of placement vs. incremental revenue
  increase gives ROI

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Connecting the dots...

• Two examples measure the impact of single
  communication events -- not the cumulative
  impact of entire program
• The right events can have a significant positive
  impact
• Activities and events which do not have positive
  impact are suspect
• Impact can be either a shift in attitudes or
  actions

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Measuring internally

• Can the same principles be applied to an internal
  audience?
• How do you define success in a large change
  management communication program?

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Background

• In late 2001 in Full Line Stores
• Announced 4,000 layoffs
• Announced Productivity Improvements
• Sears. Where Else? introduced
• Morale is not at an all time high

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Measures going in wrong direction...
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Conversion Objectives

• Improved customer satisfaction
• Easier to shop
• Easier to operate and easier to support store
  model
• Clear lines of accountability throughout the
  organization
• Improved execution on in-stock, in-store
  marketing, customer service
• Improved profitability

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Communication Principles

• Open and honest
• Share information as soon as its available
• Focus on key audiences, while making information
  available very broadly
• Credibility is key
• No sugarcoating
• No promises we cant keep
• Focus on the end result and how to get it
• Use existing communication channels where
  possible emphasize personal communication

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Communication Objectives

• Gain alignment among senior management for the
  changes that will be necessary
• Create high awareness and understanding for
• Why change is needed
• What changes will be made and why
• Win support for the dramatic changes, despite
  announcements of layoffs and new job descriptions
  and accountabilities
• Focus on new model easier to shop, easier to
  operate

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Communication Tactics

• Identify and leverage credible channels
• Senior leadership meetings - FLST initiated
• One-on-one meetings with leadership
• Town Hall meetings (existing and new)
• PMO Website
• Regular features in S Journal, S Update
• Training meetings and support materials
• Detailed conversion manuals
• Communication materials provided to DGMs for
  cascading through stores organization

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Communication Tactics (contd)

• Issues and questions fielded in multiple ways,
  with response ASAP
• Video Updates to field midway through conversion
• In-store meeting materials for consistent
  messaging
• Input into training materials to reinforce new
  store model of excellent customer service
• Ongoing communication through newly defined MAP
  and Weekly Updates

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Measurement

• Baseline MOC results reviewed
• Key questions pulled for ongoing pulse surveys
• Surveys following major communication events
• Weekly review of QA and Issues raised to
  identify gaps in communication program
• Informal discussions within stores organization
• Didnt overreact to anecdotal information
• Checked feedback against data

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Performance Improvement Program

• Projects that have a direct impact on the store
  were grouped together into a synchronized field
  Conversion calendar

Strategy
Marketing
Supply Chain
Store Field
HR

• Store Field Organization
• Store Activity
• In Store Marketing
• Labor Management
• Sign Creation

• Flow Optimization
• Integrated Order Management
• Liability Inventory

• Ad Production
• Promotional Profitability

• Lands End Initiative
• Covington Roll out
• Center Core
• Home Fashions
• Footwear
• Appliances

• e-Learning
• e-Recruiting
• Associate Services

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Conversion Scope

• Store Structure
• District Structure
• Region Structure
• Number of Stores
• Center Aisle Cashwraps ALL
• Signage and Fixturing ALL
• Four Zone Merchandising ALL
• Appliances 101
• Center Core 543
• Home Accents 557
• Mattresses 32
• Mens Big and Tall 349
• Open Sell Shoes 216

Field Organization
Service Levels

• Merchandise and Customer Assist
• Consultative Selling
• Center Aisle Cashiering
• POS Signing
• Ad Setup/Take-down
• Replenishment
• POG/ZOG
• Liability Merchandise
• Labor Management
• e-Learning
• e-Recruiting

Activities and Processes
Store Environment
Note initiatives will be implemented in all
stores except where a specific number is given
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Communication Output

• PMO website has had more than 2-million hits
  during conversion Of the 24,000 visitors 23,000
  are from the field.
• PMO base conversion has been successfully
  implemented, and has been widely supported
• Articles every month in corporate publications
• Communication is becoming embedded as a core
  leadership responsibility in the stores
  organization
• Web site is becoming an operational tool more
  than information only tool

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Communication Results - Associates

• Associate attitudes (all store associates) are
  more positive than they have been since 1998.
• Understanding of strategy is higher than it has
  ever been.

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Store management is even more positive ...

• Assistant Store Managers and hourly leads feel
  good about the future, believe we are making the
  changes necessary to compete, and understand our
  strategy.

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Customer feedback is also encouraging

• Customers reacted favorably to the new store
  environment
• Store revenues were on target for Holiday

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Financial Benefits are on track

• Conversion costs stayed on budget
• Field operating costs met planned savings
• Capital expenditures within budget
• Communication had no incremental budget increase
• Full Line Store profitability is up more than 30
  
• Sears posted record earnings in 2002

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Productivity

• Objective is to create a culture of continuous
  productivity improvement
• Ongoing process of continuous improvement in
  efficiency and effectiveness
• Ultimately, time will tell
• Can we continue to improve both customer
  satisfaction and productivity?

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Conclusions

• Looking at measurement from the perspective of
  the CEO will help clarify whats important
• Establishing a logic model for communications and
  measurement of results is good start
• Building evidence over time will help improve
  ability to make fact-based decisions about public
  relations and communication investments
• In some areas (such as marketing public
  relations) we can remove the mystery of the craft
  and earn respect of management team on their
  terms
• There is still much to do

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Questions?
Tom Nicholson Sears, Roebuck and Co.
Tnich00_at_sears.com
SEARS, ROEBUCK AND CO.