Monday Mornings with Madison

Measure Marketing Effectiveness

At many companies, marketing is seen as a creative, costly — but often vague — process.  Unlike sales, which is viewed as the revenue-generating golden child, or operations, which is seen as the rubber-meets-the-road product or service producer, marketing is perceived to neither make money nor make anything tangible.  In fact, the perception has historically been quite the opposite.  Like IT, marketing efforts have been (and often still are) viewed as ‘grudgingly necessary expenses’.   Owners, Controllers and CFOs from big companies and small are heard to wonder “Why do we need a Social Media Manager anyway?” or dubiously ask “How does blogging generate business?” or sputter incredulously “Do we really need to spend that much to (fill in the blank: print one newsletter… exhibit at a trade show… sponsor one event… air one commercial during the Super Bowl)?!!!”

It is not surprising then that the most common discussion boards among CMOs and Marketing Directors are about how to get leadership to see the value of marketing.  Value starts with measurement.  Companies need – more than ever – to continually measure the effectiveness of marketing strategies.  But what should be measured?  Here are some questions to ask first and then five key measures to watch.

Aiming for the Bulls-Eye.

Marketing’s goal is to hit the right audience with the right message in the right place at the right time.  That is a small, moving target.  To really gauge marketing’s effectiveness in hitting that bulls-eye, companies should ask some key questions and make sure that they truly understand the answers, implement strategies based on those answers, and then measure often to gauge effectiveness.  Here are the questions to ask and answer.

a. What exactly influences our consumers (the specific ones our company is targeting) today? Technology has profoundly changed what influences consumers as they undertake their purchasing decision journey. Given the enormous changes in technology and how it is influencing and changing the way people shop for everything from music to mortgages, yesterday’s truths may be today’s outdated thinking.  When considering options for a product or service needed, today’s client seeks information, reads online reviews, compares prices and more.  Each company should consider if they truly understand how today’s clients, factoring in demographics, age, and tech-adoption, make buying decisions about the products / services that the company delivers.  The rules and behavior may be changing.  That leads to question 2.

b.  How well-informed (really) is our marketing judgment? Business leaders often impose their own personal perceptions on a company’s marketing efforts, but those perceptions may not necessarily be true.  Given that a great many marketing platforms are just so new, it can be tough for leaders to admit that judgment about what is and isn’t going to work is unclear, incomplete or out-of-date. Given the money required for some marketing efforts, it’s hard both to make a rational investment case for additional spending and—in the same breath—admit that it is really a passionate guess.  The goal then is to try different strategies and models, measure, identify what works and adjust as needed.  This approach requires the courage to try new things and be willing to fail in the search for what does work.

c.  How are we managing financial risk in our marketing plans? Spending on new marketing initiatives is a risky bet, but it’s a bet companies increasingly feel compelled to make given the changing world. The question becomes how much risk is too much?  Or is it enough or too much?  A company might take an approach that results in short-term sales dip.  A retailer might move too quickly away from circulars.  A financial company might reduce spending  on communications too fast.  Or a company feeling the heat from investors might ramp up online spending too quickly without finding ways to cut back in other areas.

A good approach might be to set risk parameters that enable some changes to be made in marketing strategies but limit the total shift per year. A maximum percentage for spending on unproven channels can be established.  Limits on annual spending reductions can also mediate abandoning proven approaches completely or too fast.   A gradual move incorporating new strategies mitigates risk while providing breathing room for piloting, testing, and learning.

d.  What metrics should we track? In an ideal world, the financial returns and the ability of all forms of communication to influence consumers would be precisely calculated, and deciding the marketing mix would be simple. In reality, there are multiple, often imperfect, ways to measure most of today’s marketing strategies. Nothing approaches a definitive metric for social media and other emerging communication channels, and no single metric can evaluate the effectiveness of all spending.  But there must be a way to track progress.  Here are some key measures to consider.

Key Marketing Measures:

1. Marketing Return on Investment – This is the money/sales earned as a percentage of total marketing investments.  Examples:  Paid Search, Events, Social Media, Brand Recognition, Market Penetration

2. End Action Rates – The various actions that prospects take as a result of their visit (whether that visit is online, at a store or in an office).  Examples:  Web Analytics, Point of Sale

3. Social Engagement by Channel – The measure of where audiences most frequently engage with your brand online or in the real world.  Examples:  LinkedIn, Twitter, YouTube,

4. Cost per Lead by Channel – The measure of which lead sources are producing the most cost-effective leads.  Examples:  Paid Search, Trade Shows, Seminars

5. Traffic by Source – The measure of which traffic sources drive the most visitors.  Examples:  Paid Search, Organic Search, Social Media, Referral Sites

The idea is to use the data coming from a variety of marketing efforts to gain insights into what works and what doesn’t.  Only when a company articulates specific questions it is trying to answer, and designs targeted strategies to prove or disprove them, can it finally push past a lot of “noise” and uncover a clear relationship between marketing spending and business results. Only then will the internal dialogue shift from “should we be spending on marketing at all?” to “what’s the optimum marketing spending needed to hit our targets?”

Quote of the Week

“The secret to successful communication is about saying the right thing in the right way in the right place and moment. However, the opportunities to do it right (and wrong) increase dramatically in the more complex and individualistic world.”
Sue Elms, Evp/Head of Global Brands, Millward Brown

 

© 2014, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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