A brand-new year is upon us. Most businesses have taken stock to see what was achieved during the past year. Measuring the results and value of marketing is high on the agenda. So let me start off the new year by giving you some advice and tips that may help make 2018 even more successful for you as a marketer.
Measuring your marketing impact doesn’t have to be overly complicated. Basically, there are three factors to consider:
1. Focus on measuring what's important for your customers and for your business
2. See how these characteristics evolve over time
3. Try to gather an understanding of how different efforts affect the market’s perception and behaviour
Let me elaborate on this a bit further by summing up the above three disciplines in ten key points:
1. Willingness to pay is the most important marketing effect metric.
The purpose of marketing is to improve your company’s sales performance. That means not only to increase sales, but to achieve more profitable sales. To market and build your brand means that you are increasing the segment in your market that is both willing to buy and able to pay.
2. Your brand positioning statement is probably less relevant to your customers than you think.
Most brands are defined from an internal point of view – "our purpose and vision - what we want our company to be.” According to studies, less than half of the image attributes a company has defined and use to position a brand are actually relevant to its customers – in terms of influencing willingness to pay and drive purchase decisions. Consequently, most of your brand communications do not create much customer value.
3. You cannot simply ask your target market what they think is important.
You need to analyse and understand your market and its dynamics. Tools such as behaviour and key driver analysis are often valuable tools to identify what attributes to highlight to achieve growth.
“Consumers don't think how they feel. They don't say what they think and they don't do what they say.” - David Ogilvy
4. Several KPIs are better than few.
Occasionally, companies wish to focus on a single KPI, such as sales revenue or market share. However, the risk of sub-optimization is evident: if sales is my main objective I can simply offer a few extra discounts to achieve the desired growth – but in doing so I’m putting profit at risk.
Alternatively, set goals that challenge one another, since these require a more holistic view. For instance, set goals in terms of both conversion rate and number of requests. Or even better: Increase your market share AND your average price compared to your competitors.
5. Pay attention to your KPIs over time – but with different scales.
Les Binet and Peter Field conclude that there are two kinds of effects, operating in different time frames. Attitudes are influenced slowly, build gradually over time, but are essential for long-term profit and willingness to pay. Here, you want to measure and follow up over a timeline of at least six months, preferably longer. Activation, in the form of offers and promotions, drive rapid behavioural changes and can lead to short-term sales increases, but these activities rarely have any long-term effects.
6. Cross-functional analysis.
Most KPIs can be measured and monitored over time. And many companies do this, using brand tracking, Google Analytics, CRM systems, and the like. But this is mainly done separately for each metric. However, a cross-functional analysis of the KPIs happens less frequently. Even less often are external factors such as weather, price changes or sales contests part of the equation – even though this kind of data is easily found. Establishing routines for shared reporting and cross-functional analysis of the different KPIs – and what might have impacted these – ought to be an easy task.
7. Separate brand measurements from campaign measurements.
Brand measurements over time show how all efforts combined affect market perception and customer behaviour. This includes not only marketing communication, but also elements such as product characteristics, customer service, the distribution channels, and how the CEO responds to questions in the media.
Campaign measurements can help you understand how your marketing communications activities help promote desired brand characteristics. However, campaign measurement is not a good way of measuring brand development over time as it measures a specific part of the market at a specific point in time and focuses on a specific opportunity for impact.
8. The most common measurements are often the least relevant.
In my experience, two of the most common campaign metrics are observation/recall and how well your marketing message is getting across. But observation is largely a brand penetration metric (regardless of the campaign) and getting your message across is primarily relevant if you are measuring an activation campaign aimed at presenting an offer.
Many of the most successful branding campaigns have no message and are designed purely to make you like that particular brand more. Two metrics that are more important to measure, especially for brand building, is how much your target audience likes the advertising, and if they are able to identify who is behind it.
9. ROI is the wrong metric for measuring campaign performance.
In theory, it makes sense to want to measure campaign ROI. In practice, it is less successful – but still common. The ROI metric has two issues. The first is how it is defined. ROI is a function over time between what I invest and what I get in return. As a result, you easily end up with a number of definition issues:
a) What time frame? Only during the activity, or for how long afterwards?
b) What investments? Campaign cost only, or product development, accumulated brand awareness, sales support, etc. as well?
c) What revenue? Growth against average / previous period alone, for the full range, or for particular models only, and so on?
The other issue is a purely mathematical one. ROI rewards short-term revenue growth, often due to some kind of discount or incentive, but not profit. In other words, the stronger the campaign ROI, the lower the margin generated (as the share of sales coming from discounted products goes up, total margin goes down). And those who hope that these customers will become loyal and profitable brand ambassadors may very well end up disappointed.
10. Media is an efficiency metric, not an effectiveness metric.
Many campaigns include media effects as a KPI, i.e. how many people have seen the campaign, how much it has been shared and liked, and how much PR it has generated.
These are good metrics, but they are steps along the way and are about efficiency, i.e. how to make your media investment last longer. However, how many people who saw a campaign doesn’t really matter unless its content influences the target audience in the desired direction.
Good luck with your marketing in 2018!