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Thursday, October 27, 2011

True Value: Measure Your Marketing Effectiveness (Part I)

Photo from Renjith Krishnan
Marketing is not just an expense to an organizationit is an investment.
(Part I of a two-part post)

Over the last 20 years, the range of marketing options and opportunities for marketers has expanded dramatically.  Once there was only a limited choice - print and TV.  Now there is a whole range of media from direct mail to video to new technologies (social media, QR codes, etc.). As marketers, we know that executives are asking us to justify the effectiveness of our efforts - demonstrate the ROO (return on objective) or ROI (return on investment) of how we spend a company’s marketing dollars.  With the proliferation of new marketing mediums to invest in, marketers struggle to understand which options deliver the greatest returns. So, how do marketers approach measurement?
As a marketer, my success with measurement is in defining relevant metrics and measurement criteria to demonstrate the value of my efforts to help advance business objectives.  The metrics must correlate the marketing activities (cause) with the marketing performance, financial results, and customer impact (effect). 

The Foundation

A successful metrics framework is used to understand the correlation of marketing campaigns to defined corporate goals and objectives. For any measurement to be meaningful, you first must define goals and objectives of the business and determine how marketing can build strategies and tactics to help advance the businesses objectives.  Prior to embarking on new marketing initiatives, develop a plan with specific, quantifiable objectives, e.g., achieve $5 million incremental sales, 10,000 inquiries, 10 percent of coupon redemption, receive 15 percent increase in web traffic, sell-in displays at XYZ account, etc.

Second, ensure you have a way to “measure” your efforts.  Develop and utilize a customer database that captures promotional responses, website registrations, advertising and trade show inquiries, etc.. Ideally, the database should integrate with your corporate information systems to report sales transactions, purchase history, new customer gains and losses (acquisition and retention), and other detailed information.  Consider testing your metrics to ensure you can gather the information that will be beneficial to driving business.

Third, to improve the effectiveness of marketing you need to not only improve the measurability of your marketing programs, but also ensure you are measuring the right things. Don’t simply look at how much is spent.  Look at how the activity has helped you reach a goal that leads to bottom line revenue. Remember to figure out how to value a customer and how much to invest in acquiring and maintaining that customer.

Finally, ensure that you are reporting back on the effectiveness of your efforts - in aggregate and at a campaign/initiative level. Includes lessons learned and quantify, as you can, revenue that is connected to the efforts. Remember, it's not always a straight line between marketing and revenue, but measuring your efforts can help determine efficiencies of your efforts to help drive business. Marketers can't always draw a line between content creation and financial return. An investment in words, visuals and online media that drive site visits, Facebook fans, retweets, video views and positive ratings is not reflected on the balance sheet. But, that doesn't mean these activities are without measurable value. Instead, they are leading indicators that the brand is doing something to create value, and that can drive financial results in the future.

As there is a lot of meat to this topic, I plan to continue my thoughts in Part II (next week) - examples of what can be measured.

Here's to planning and analyzing the effectiveness of your marketing efforts.

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