Sunday, April 6, 2008

3 measures of your marketing

Inside the walls of many companies, marketeers have poor reputations.

We are often seen as the fluffy creative people that like to talk about design, font types and logos. We do long lunches and spend our budgets with little concern for hard measures. Famous quotes such as "I know that half of my advertising is wasted....I just don't know which half" don't help our situation either.

It has been my experience however that most marketing folk are in fact very keen to measure their marketing investment.

What we are often missing is a common language and clarity around what measures are appropriate. As mentioned in a recent post 'Nobody clicks on 48-sheet billboards', using the wrong measure is not helpful either.

When explaining measuring marketing, I find the following 3 classifications useful (devised by Malcolm McDonald):

Promotional effectiveness
This is the stuff most people seem to refer to when they talk about measuring marketing effectiveness. While important, this is really quite a narrow measure and is the most tactical of the three measures. We use this to understand the effectiveness of our ad campaigns and communications. Outputs might include spontaneous awareness, recall, response rates, share of mind etc.

Marketing effectiveness
This includes the entire marketing mix - so not just our promotional effectiveness, but also our pricing, propositions, our use of channels for our particular customer segment. So, they might remember our ads (and love them) but if our pricing is too expensive or if our product does not interest them, they won't become our customers. Outputs here would include sales, market share etc.

Strategic Marketing
This is the broadest measure of marketing and focuses on decisions about what customer segments to target and how risky these strategic decisions are to implement. So, for example our ads may have amazing recall, our pricing is good, our channels are right and we are generating loads of sales and leading in our customer segment. But we might be chasing the wrong customer segment, which may lead to unsustainable competitive advantage. The output here is shareholder value.

Promotional effectiveness is the easiest one to measure, to plan for and is the most immediate to get results. Understanding and planning for the other two is more complex.

I think it is important that marketeers get their heads around these distinctions so they can hold their own in discussions about whether we are spending our budget wisely. There is little point in talking about 'advertising recall' if this is not the question being asked.

Hope this makes sense.

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