Strategies for Measuring Marketing
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Published: Thu, 22 Feb 2018
“Conviction is the luxury of those sitting on the sidelines. For those of us who choose to play rather than watch, measurement is the compass that guides us through our mistakes.”
Famous dialogue of movie A Beautiful Mind
Business world has become very dynamic in current times. Technological advances are bringing changes in lifestyle of customers. It has generated necessity for introduction of new products in market or drastic changes in existing products so as to meet changing customer needs. It has made job of marketing department more challenging. Assessing customer needs, preferences, satisfaction and expectation level are few important domain, which marketing people has to handle at one hand. Whereas at the other hand, positioning product in market for particular customer segment and launching marketing scheme so as to enhance market share and profitability is other main area of working for marketing professionals. These twin tasks are very much essential for success of any business organization. There are other divisions also in almost every business unit like procurement, production, sales and marketing etc. Each one of these division contribute in making organization run profitability so as to meet the ultimate aim of establishing business i.e. maximizing profit of shareholders. Often there are discussions about contribution of individual departments in making organization successful and resources allotted to respective departments. Though, each and every department has its unique role to play in growth of business, few walk away with greater share of budget allocation while others have to manage their operations with lesser budgetary allocation. It has necessitated that work performance of each division should be measured in terms of revenue generation contribution. It will make budgetary allocation decision on more professional lines. It will also help individual divisions in measuring performance of various schemes and programs internally.
It has been often observed that different work divisions allege for greater budget allocation to marketing division without rational but just on tall claims. Generally marketing professionals come to meetings without facts & s and try to describe their achievements qualitatively. But finance division insists for factual position and achievement in terms of some well defined variable linking performance to financials. Though, marketing professionals have been found resisting this demand of finance professionals in general. But is has made a impact on general board room environment where marketing professionals are asked to bring in more credible feedback about their performance. But performance of marketing efforts cannot be measured simply as is the case of production or sales, where it is easy to make out every evening. So there is a need to first establish a performance metric for marketing, which may vary from one type of business to another type of business. But it is for sure that, once metric is established and performance evaluation for marketing starts, it will bring in more transparency, credibility, accountability and efficiency in marketing department operations. Each marketing efforts cost a lot in terms of manpower engaged and finances. A single slot of just few seconds in TV channel may cost thousands of dollars. So if company gets evaluation of its impact on sales, it may streamline its spending on it. Besides that few expensive media campaigns may be cut short or diverted so as to bring desired outcomes.
A drastic shift in Coca Cola advertisement campaign to shift from costly family entertainment channel to some sport, movie and adventure channel was a result of one such marketing measurement campaign, which not only helped in saving lot of money, but gave better results also in terms of revenue generation. These measures help company in making budgetary allocations more professional and transparent, but are opposed by marketing professionals. It happens as they are made more accountable for expenditure. It necessitates involvement of change management professional also in the whole process. It has been observed that gradual changes supported with workshops and training programs are more likely to succeed then swift changes for marketing management adoption. Benefits of marketing measurement are immense, most prominent being smart use of scarce human& financial resources. These can be deployed on schemes giving best returns rather than schemes of marginal success. It also helps in reviewing performance of schemes at regular intervals and takes corrective action if required.
So we find that marketing measurement is not only trend for present day business, but a necessity to make business more dynamic, result oriented and efficient. It helps in bringing in better coordination among various divisions so as to achieve business target of making organization more profitable.
Gone are the days of stable and predictable business environment. Business world has become very dynamic with new technology playing greater role in our lives. (Kristy Sheppard .2009. Diversify your business to defy the downturn) World has turned in to a village, with the spread of internet and other related information technology far and wide in every part of the world. Communication and transportation is becoming easy and economic day by day. (Data monitor. 2009).It has opened new challenges and opportunities for the businesses all over the world. Companies are facing enhanced level of competition on account of newer options available to customers from other new entrants in market. At the same time companies are getting new opportunities in the form of newer markets. But either it is taking up competition with new entrants or approaching new markets, working of marketing professionals become of utmost importance. (James Walsh. 2009). What is the competitive position of company products with respect to rival companies, need to be analyzed so as to retain and increase present share. At the same time demography of new markets, customer needs and preferences also need to be investigated in details so as to bring in new products suiting customer needs in newer markets. It requires resources in terms of finances and manpower to be deployed so as to bring in positive outcomes out of whole marketing efforts. It is after some initial deliberation on the prevailing issues that funds are allotted so as to launch marketing campaigns in new markets and existing ones. But it can happen only in starting that funds can be allotted with a rough estimate reached on account of judgmental forecasting. But as time proceeds, it is desired that outcomes of previous and current expenditure is measured, before demand of more funds is put forward. It has been observed that divisions of work like sales, production, human resources and procurement etc. comes out with facts and s about performance outcomes leaving marketing division alone which depends solely on qualitative statements about their performance (Michelle 2005). Here comes the issue of measuring performance of marketing division functioning. Decisions regarding budgetary allocation to various business divisions must be very professional. Especially budgetary support to various marketing campaigns must be extended after getting the effectiveness measured in clear financial outcomes of these. In no case allocation should be extended on the basis of only qualitative explanation, tall claims not supported by any real time performance measurement. There is a need to not only measure performance, but it is also required that this measurement must be in terms of such variables, which can link up performance to financials.
Operations of Coca Cola in Indian Territory are running in loss on account of smaller sales volume. To boost sales, company launched advertisement campaigns on prime entertainment TV channels. For months, these campaigns continued but sales did not pick up. It was only after few months that a survey was conducted to find out impact of these advertising campaigns. To shock of everybody in company, it came to notice, that actual consumer of Coca Cola, the youngsters, watch movie, sports and adventure channel more and les the news or family entertainment channels. It emphasizes the need of marketing measurement at regular intervals. If company were using marketing measurement at regular interval, this major drawback would have been detected at much earlier stage of campaign. Corrective steps at that stage would have resulted in saving lot of funds and streamlining marketing efforts so as to result in achieving required targets.
Competition is increasing day by day and margins are shrinking, depleting finances in almost every business (Boston Consulting Group. Nov 2007). . As a result availability of funds has come down and there is emphasis on smart use of resources. In such a scenario, it becomes of utmost importance, that funds are used where they are not only needed most but are most productive also. It warrants that the mysterious world of marketing be mapped very carefully, schemes & programs launched evaluated very systematically and free judgment be taken with rational so as to continue, strengthen or cut short designated programs. This will not only help in making smart use of resources, but also weed out less productive schemes and programs.
Rudy Gulianui, former mayor of the Newyork, once said that whatever operations may be, if we do not measure, we cannot manage. Though his comments were more focused towards civic services, but these are equally applicable in business world. Management prime function is to control and direct the organization in right direction. But unless management gets feedback about various business activities I the form of performance evaluation, how can we expect them to give right direction as desired. So all these instances shows that measuring marketing is an essential activity which brings objectivity in functioning of marketing department but also prudent decision making of management.
NEED FOR MEASURING MARKETING
In everyday life, we see that that all the activities are directed towards some specific objectives. If we look at school children, performance of these is measured by way of examination at regular intervals. Performance of teachers are also measured by the way of results achieved so. Either it is civic authorities, policeman controlling traffic or the house keeping staff of the office, performance of everybody is measured and money spent of their functioning is accounted for. Then why the performance of the marketing professionals should not be put to measurement. There are efforts to determine economic order quantity for procurement department, machine utilization parameters in production floors as well as sales volume generated per sales personnel, then why should the marketing professionals not justify the funds spent in their operations and results achieved out of it. Once measuring marketing mechanism is put in place, it will clearly bring objectivity in the functioning of marketing professionals and enhance level of accountability for them.
Minimizing risk in the business operations is very important. But unless we generate expected results of various marketing activities, we may not be in a position to mark, various marketing activities on the basis of their expected returns (Tim Riesterer 1999). Once we start measuring output of various marketing moves, marketing vehicles and channels, it helps us in assessing the real output of each one. This way, it becomes comparatively lesser risky in starting new moves, as we are already aware of previous output of various constituent elements of a particular scheme to be launched. In measuring marketing mechanism, performance of various schemes is measured on continuous basis helping in controlling, modifying and changing course of action for various schemes. This way, it becomes easy to continuously monitor performance of select schemes and drop the programs not performing up to the mark and proving to be costly as compared to other schemes giving better returns.
There remains divergent view all the time, in all possible areas of operations, if standards are not set so as to measure performance. It applies to marketing as well. If standards are not set, it will let senior level marketing professionals to look for many flimsy and personally convincing excuses to be put forward, as explanation for lesser impact of marketing programs. There are also chances that outcomes of various marketing schemes are mixed so as to show success of few programs for others also, where as not to indicate real poor performance for others. Measuring marketing mechanism let every scheme be monitored for real output of the concerned scheme only. It gives factual success rate of each and every marketing program in transparent way. Measuring marketing moves also reduces the chances of performance being misrepresented in terms other than those which represent true one. Once metric are decided for each specific type of program, it becomes less probable, that performance can be misrepresented.
Once proper measurement takes place for each and every marketing initiative, it becomes more satisfying for the leadership as far as resource allocation and its utilization is concerned. (Demand Metric.2009.Measuring marketing governance maturity). Leadership takes decision regarding budgetary provisions on various facts and s generated out of measuring marketing campaigns. It also helps in midterm review of various marketing programs, especially those which are costly and whose success if critical for the growth of the organization. In today’s business scenario, when business is so dynamic and competition so stiff, it is not possible for the companies to wait for long to get results of marketing moves. In such case, measuring marketing helps companies in evaluating the performance on continuous basis and taking corrective measures as and when required without waiting till the end of the marketing programs. It not only helps company in acquiring competitive edge over other rivals, but in making smart use of resources.
Surveys conducted recently by various research bodies have found that companies practicing measuring marketing moves remain confident and clear about their budgetary allocations at various point of time. Their financial decisions remain more prudent and productive as compared to companies not adopting measuring marketing moves. It is also found that marketing operations became more transparent in due course of time since adoption of measuring marketing techniques.
Surveys have also pointed out that top leadership became more confident and positive about their marketing division as every investment made is accounted for. Top leadership also feels confident that metrics chosen so gives performance of marketing team in terms of revenue parameters, which help top management in taking decision regarding investment more rationally without getting entangled in technicalities of marketing.
SCHOOL OF THOUGHT FOR MEASURING MARKETING
There are basically three schools of thought for measuring marketing concept. Fist one focuses on return on investment, where as second one focuses on brand equity being created out of adverting campaigns. The third and last one is the concept of considering customer information as asset. In the first school of thought investment in marketing is considered just like any other investment. How much return a marketing campaign will give justifies the investment made there. There is no long term gains considered here in this school of thought. There is very plain relationship of investment and return in particular campaign itself. No looking beyond the life of particularly targeted marketing move. Generating brand value or establishing a brand is not the concept over here. Measurement remains focused on just the return a particular campaign makes. Developing measuring marketing metric is most easy in this type of school of thought as performance has to be evaluated in terms of incremental revenue for every investment made in the marketing efforts.
In the second school of thought, brand value has been given the prime focus. Here prime target of the marketing is considered as creating brand value and further value addition to it. It generally happens with the fast moving consumer goods companies that brands are established more prominently rather than anything else including products itself. Here products keep on changing over period of time as per consumer preferences and life style but brand remains the same. Here focus of marketing campaign remains on establishing brand value, which remains there for longer period of time, though the products may keep on changing. Developing measuring marketing metric is most difficult task in this domain. There is no consensus among industry experts as to what are the parameters, which help measure performance of marketing campaigns in the area of brand management. Otherwise also, brands value is not created for certain short period only. It is a long term process to create a brand which benefits company over life time of the business.
Third school of thought for measuring marketing is of consumer equity school. Here focus of the marketing activities remain on generating loyalty of the customer towards company by way of exploring consumer details and customizing services suitable to him. Telecom services and financial services are the most glaring example of this school of thought. Here focus remains on generating information of the customer so as the products can be customized to his needs. It is the information of the customer which helps in retaining him or enabling company in cross selling other allied products to customer. Developing measuring marketing metrics in this domain is comparatively easy as compared to brand equity school, but a bit tougher to return on investment school of measuring marketing concept. Brand equity school of thought proves to be most difficult challenge in developing measuring marketing campaigns. Though in present times, this school of thought has got limited applicability, but in coming years, it is expected to gain not only popularity but enhanced level of applicability on account of increasing domain of customer centric services.
INSTANCES OF DILEMMA FOR MARKETING PROFESSIONALS
Whenever the issue of measuring marketing is raised and efforts are initiated so as to measure performance of the marketing programs, the most likely answer which comes is the focus being on creating brand and enhancing brand value. Measuring brand value, which is a part of the measuring marketing exercise, is not the job of marketing division, is the way, marketing people comes out generally. It is true also to some extent. Ultimately conducting surveys are not easy and is a reasonably costly affair. So companies, and especially marketing divisions, already in financial stress to meet the expenditure of currently running programs, try to avoid measuring marketing. It is true that measuring marketing do involves the process of survey and then finding out the enhancement in the value of brand as a result of marketing campaign. But dilemma here comes for spending fist to bring in efficiency, which may come for saving later. This dilemma f faced more in medium size companies where investment in marketing campaign is not huge, and conducting surveys to measure performance of marketing initiatives may cost a certain noticeable percentage of total budgetary provisions of marketing department as a whole. In case of smaller companies, measuring brand values through surveys or other applicable techniques may even cost re than creating it. As smaller companies have limited market, so while creating brand they look for targeted markets only. This allows them to create effective brand for themselves in limited market space and in particular segment to create brand in lesser cost. But if the go for measuring its effectiveness, the budget required may go well beyond original allotted for creating and establishing brand.
There are many instances, when company do not benefit by being there, such as trade fairs and exhibitions etc. Company does not get many business leads from few of these exhibitions which may not be very focused or targeted. But even then, general business environment warrants, company presence in these exhibitions, so as to negate any possible rumors about company performance or financial health of company. These are few instances, where company has to invest in marketing moves, even if it knows that not much of return is there by going ahead with these marketing moves. All these exercises do cost company and expenses falls under the head of marketing division only, though the purpose served may be in larger interest of the company itself not the marketing side of the company only. So care, must be taken while putting in measuring marketing mechanism in place, so that these do not discourage some activities, which may not be translating in revenues in immediate times but are for larger interest of the organization.
It is also a fact that in exhibitions, though company may bit get buying leads in immediate future, but it helps in generating profile of the prospective customers in near future. How many people are visiting company exhibition stall, of what age group and with what income level are some crucial questions about demography, which can be answered by collecting data over here. Processing of this data and subsequent business intelligence developed helps marketing division in taking strategic moves, which may be of crucial business importance. So though these exhibitions may not be turning in to revenue generation, but proves to be of utility in other way for marketing people. Measuring marketing mechanism may rate these activities as low profile as these are not directly related to revenue generation but are oriented for long term planning and strategy. So there is a need to take care for this situation, while developing measuring marketing metrics in organization.
It is often argued that not many people respond to the e-mails sent to them asking their feedback about marketing related areas. But the point here is that it does not cost heavy to do online marketing related survey. Besides that a lot many people can be sent e-mails at comparatively less cost. Out of this, if even a fraction of people respond to e-mail campaign, it gives fair idea about the opinion of concerned people. If care is taken is selecting the sample frame carefully, it can lead to generation of very useful information for the further marketing programs. Here stress should be that sampling of the whole sampling population should be done with care that statistical parameters are satisfied so as to give accurate representation of target market.
Another area of dilemma comes from business analysts’ side. It is for sure and well established that business analyst do affect the fortunes of company to some extent. They also help leave their impact on some high profile clients, who may be of importance for the company. But main issue raised here is that, it may not happen in immediate time, that analyst meet effect the business. Sometimes it also becomes difficult that which client has been referred by business analyst at at what point of time. So it makes more difficult to measure the net impact of business analyst meet. So there comes a stage of dilemma for marketing professionals, as to what extent these meets are successful in affecting business of company and in turn the growth of revenue.
We find that in all these cases, company faces a situation of dilemma so as to either adopt the measuring marketing for above mentioned situation or go ahead with traditionally accepted norms & practices. But it has been argued all the time by measuring marketing people that measuring or generating some estimate is always better than not to have even a rough estimate of impact, which marketing programs leaves behind. Measuring marketing opens a scope where a selection among the various marketing options can be made more rationally & logically based upon facts & s rather than just on the views of professionals. It also opens scope for midterm review of expensive marketing campaigns and related corrective actions, which can be taken to avoid big failures or less impressive results at last. Measuring marketing mechanism just ensures lightning up the mysterious world of marketing and its impact on company’s fortune.
ELEMENTS TO MEASURE OF MARKETING PERFORMANCE
There are various parameters to measure the effectiveness of the marketing programs. One of the most important parameters which show the performance of marketing programs is sales and resultant revenue generated out of it. Prime target of any business establishment is to generate profits, which is possible only when sales are there. Net result of marketing campaigns should come in the form of sales. This is one of the most important parameter to measure effectiveness of marketing programs in immediate future. Other important parameter is generation of leads for sales to take place. It may be that products of company are not very much competitive, cost wise and value these offer to consumer. But if a marketing campaign is able to generate quality leads, we can safely say that marketing campaign is serving the basic purpose for which it was launched. But sales leads so generated must be of potential that if followed seriously then can be converted to actual sales. Especially the exhibitions, workshops and seminars are the events , performance of which can be measured effectively by way of focusing on the leads generated so. Sometimes we find that company has very specific business objectives to be served. In such cases to measure performance of marketing operations, specific parameters related to these objectives are taken in to consideration while developing metrics. But one almost universal goal for any business organization is to get returns of the investment made in it. So, one very objective measurement for performance can be finding out return on the investment made on marketing programs. There have also been seen that out of some mass media campaign, there comes lot of leads for products and services offered by company. But how many of these leads actually get converted to sales reflect, the performance of marketing team. It is also true for business ventures that it is not the volume of total profit, but in essence the profitability of organization, which matters most. Smart investment is the most sought after feature of today business world. So is the marketing efforts resulted in enhancing profitability of organization as a whole, is one such parameter for measuring performance and effectiveness of various marketing programs. Conducting surveys so as to find out awareness about company products and services can also help in measuring performance of marketing programs focused on generating brand value. It is also very important for marketing division to make reach of company in media, which help generate awareness about company in general public. Sales to cost efficiency are another important parameter, which can form the basis to evaluate the overall performance of the company’s marketing programs. Stock prices are also taken as a measure of effectiveness of marketing programs, though not directly. Among all the parameters mentioned above, few have high degree of correlation with marketing performance whereas other parameters have comparatively lower degree of correlation with marketing program’s performance.
Marketing related data is generated at every stage of customer engagement cycle. This data becomes very voluminous for companies having larger customer base. But not all the data generated is useful and serves the purpose of measuring marketing. There is need to segregate data and categories in such a way, that it can be used effectively and logical inferences about marketing activities can be drawn out of it. In each area of marketing, there are few parameters which can be used to measure performance. For each area, certain parameters are selected to develop metrics. Basically whole marketing exercise can be divided in following domains of activities.
- Establishing brand identity and enhancing brand value on continuous basis.
- Product and services marketing management
- Public relationship of the company
- Developing business in newer and unexplored areas
- Various advertisement campaigns
- Product promotion through various events resulting in leads generation.
- Making company website popular, attractive and rich in features
- Managing sales operations
- Managing customer relationship.
Important variables which can be used to measure performance of marketing performance in this domain are as brand equity, brand awareness, brand preference, brand image and brand loyalty. It becomes imperative that measuring marketing exercise should try to pick up right variables, which reflect true performance of the brand management team in marketing department. Each area of brand management can be evaluated by specific variable, which correlate to enhanced brand value.
Product Marketing Manager
Products and services of the company are most important and pivotal link between customer and company. It is products and services, around which whole business is woven. It becomes of utmost importance that product design is done in such a way, that it meets customer requirement completely. Pricing of the products and services should also be kept at a level which gives customer satisfaction for the needs fulfilled by these. It is prime job of the marketing division that it keeps track of the customer preferences and needs arising out of changing lifestyle of consumer on account of technological advances and other developments. Marketing departments are supposed to keep close track of the level of customer satisfaction. Various important domain, in which marketing team is supposed to work here are like customer satisfaction, market share, price sensitivity, overall sales and sales by various channels.
Public Relations Management
Managing public relations is another important domain for marketing division. Especially the lifestyle of customers has become fast and it is observed that company image do affect buying decisions. So it becomes more important that customers are made to receive good image of the company as well as its products and services through various public relations programs. Various parameters which can be used to measure effectiveness of the marketing department in this domain are like media mentions, size of audiences for each of such happening, number of interviews conducted on reputed media channels and nature of these occurrences. All these may happen in different media channels like print media, television or magazine etc. But care has to taken as which media channel is popular and effective in targeted population. Elements of reputation and popularity of the channel, in which company is getting mention, should be taken in to consideration. Important point is that channel is popular and reputed among the targeted audience. As a survey found that coca cola was focusing on popular family entertainment channels for public relations management, but it was found later that English movie channel and sports channel were more popular among targeted youngsters forming major customer base. So while forming metric for measuring marketing, care must be taken so as to include all these factors.
Business Development Division
Business development division helps company in exploring possibilities of business opportunities in newer areas. Few important functional areas, where performance can be measured are as follows.
- How many new business partners have been added so as to develop business in new areas?
- Out of new business partners added, how many actively participated in dev
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