Measuring Marketing Productivity

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An important task of marketing research is to assess die efficiency at id effectiveness of marketing act ivii its, \latkeu>rs itîcne;isingly nn' being held accoumalile for thetr in vt;sti n i'ins and m iisi be able tO justify marketing expenditures to senior manage me Lit.-21 In a recent Acccnturc survey, 70 percent Of marketingexecutives Stated that they did noi have a handle on the return on iheir marketing investments.- Another study revealed that ftf percent of senior management said f ii l'y wen : d issa i i ^ r led with tl iei r n laikct i ng perfi un in nee measi ire n lent syslen î a nd want ed m aike t ing t o supply prior and poster io r est! n îates of il le ini pact i >f i narket ing pro gran is.a With marketing e<>sis already high and continuing to rise, senior executives are tired of seeing what they consider to hi' ivastefu] mariccting -failed new products ami lavish ad campaigns, extensive sales calls, and expensive protnol ions that are unable to move the sales needle.

Marketing research tan help address iliis Increased need for accountability. T\vo complementary approaches to men sure marketing productivity are; (t) marketing metrics to assess marketing effects and (2] marketing-mix modeling to estimate causal relationships and how marketing activity affects outcomes. Soma developments in the financial louls [fiat can lie used tu measure key marketing assets are described in "Marketing Insight: Seeing the Big j'icuire and Getting to the Bottom Line in Marketing,"

Marketing Metrics

Marketers employ a wide variety of measures to assess marketing oft'octs. Marketing metrics is the set Of measures that helps firms to quantify, compaift. and interpret tiieir marketing performance. Marketing metrics can be used by brand managers tu design marketing programs suid by senior management to decide on financial allocutions. When marketers can estimate the dollar contribution of marketing activities, (hey are better able i<> justify the value of marketing investments tu senior management.-'1

fa provide a financial overview of marketing activity. several authors have developed new approaches !o thinking about majketing, Hire ate three notable ones. Peter Doyle maintains Ihat:

vaiue-based marketing is nol primarily about numbers. [Jtather,] it consists o' three main etements. First is a set el beliels atout the objeclives of marketing. The... primary task is ¡0 develop strategies thai wi1 maximize shareholder return... Second is a sel ol principles for choosing marketing strategies and making marketing ¿scisens (hat are consistent nil these beliefs. These principles are based on estimating ilia iuture casn flow associated wiiih a strategy to calculate the shareholder value added. Finally, il is a sel ol processes lhat ensure that marketing develops, selects, and implements a strategy that is consistent with these beiieis and principles. Tbese processes concern management ol me linancial, marketing and organizational value drivers ol the business. The financial value drivers are those key ratios lhal have the most significant impact on shareholder value. The marketing drivers ase tfie CMStMneT-Qiiemeifl pians necessary 1o dri^e improvement in the financial ratios. The organija-I:0n<-| value drivers are the core capabilities, systems and leadership styles needed lo create and implement Ibe shareholder va^ie orientation in tte twsmess.

According to Doyle, financial value drivers relate to sa'es growth, operating margin, and investment: marki ng value drivers relate 1o Slnong brands, cuslomei loyalty, straleif £ relationships, market selection, and di-ferentiel advantage. Roger Best maintains lhat;

Market-based management is at (he base of a buSiiess with a strong maikeiorientaton. A, strong maiket orient jtiflft transudes into a strong customer locus,oompeblor orientation. and a team approach lhal cuts across organizalicng) lunctiois. The resu1! is a martiei-baaed business lhal is in a strong position to develop and deliver market-based strategies designed to attract, satisfy, and retail customers. Implemented successively across a wide range of market situations, a market-based approach ... will deliver higher leuets tfl probability, cash Elov;, and shareho'def value llian will a cost-based approach.

Best maintains thai the only source ol positive cash flow is We customer and tberefae liie customer must be the focus o1 market-based management.

Tim Amwer suggests lhat if iirms think they are already measuring maiketing perlormance adequately. ihey should ask ihemseivcs live queslions:

1. Do ycu routinely resea-ch consumer behavior {retention, aHiu-silion. usage, elc.) and why consumers behave Itiat My (amre-ness. salislaction. perceived quality, etc.)?

2. Are me results □( this research routinely reported to tne board in a format integrated with financial marketing metrics?

3. in those reports, aie Itie results compared with (be levels previ-ousiy faecasied i.i the business plans?

A Are mey also compared with the levels achieved by your key compete using (he Same indicator?

5. is short-term perlotmance adjusied accoidmg to ihe change in youi marketing-based asset(s)?

Ambler belcves firms must give priority (o measuring and reporting marketing performance 1ti«jtigh marketing metrics. He believes evaluation can he splil into two parts: (1) short-term results and \2) changes in brand equity Snort-tern results often reflect pcfil-ml■ tea ccreenns as Shown by sales lurnover. sliareholder vaSuc, or some combination of the Civo, Qrand-e<iiiily measures inclutfc awareness, market share, relative inice, number ol complains, distribution and availability, lotal numter ol customers, tHiceuied duality, ami ksyaltyfretsntion. taWcr also recommends developing employee measures and melrics. arguing that Encr users ore Die ultimate customers, but your own staff are your first yoo need to measure Ihe heahh of the internal market."

Settees. Peter Dc^e, Mrt« -SaäKi1' MarM^^p.' ^{^.ir^r Shifts?«; tot Corpo/etd GrWifit aniJiiis.iifleMigr lötic idi.chestcr, Eivj arm jww Wiley ä Sons. 20001. ROflSr J, BesV ^tel-B^Maa&mMt&ile&ei to Gnmmsr CuSSOfifcF VaixiälXlPiiililatitty 2WKl ed. (Upper Sa« ffiver, HU: Pontic* Hat. 2ÜD0J: Tim AinKer. Upteiing antj ¡he &Mowi Line: IfyNew AieMS of Copante Wfeaitfi (London: Financial Timei'PreJflice Hjii, 2DG0),

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  • Galileo
    What are the complementary approaches used to measure marketing productivity?
    3 years ago

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