As a generally large business expense, there is increasing pressure to produce meaningful financial metrics to demonstrate the effectiveness of marketing activities. The concept of saying that “the May advertising campaign increase sales by 150%” or that “there was a return on marketing investment of 200% last year” sounds fantastic in theory! But look a little closer, and there appears to be a few holes in these figures.
Common ‘silver metrics’ (Ambler & Roberts, 2008) used or requested by boards and CEO’s are listed below, however there are a multitude of issues that can be identified with each of these methods.
- Return on Investment
- Discounted Cash Flow
- Return on Customer
Some things that muddle the water
What is the value of brand equity? Accountants currently calculate the value of brand equity for an entire company, and this alone is disputed in accuracy. What about the brand equity generated from a particular campaign, or from 1 year’s worth of marketing activities? Brand equity in itself is not a finite number; unlike the sale of 100 units of stock, brand equity can change over time. When a company first starts, the brand equity might be very low, however over time it may grow (and even diminish once again!). Take Google for example who ranked #1 in 2014 on the Millards Top 100 Global Brands list, with a brand value of $158,843 million, and experienced 9% increase in brand value for the 2015 year to $173,652 million. Is the change in value the benefit of that year’s marketing investment? What if the number stayed exactly the same year on year; does that mean that the Marketing Investment achieved nothing?
Can anyone actually predict the future? Answer; No (let’s be realistic here, we don’t live in the same world as Harry Potter!). Discounted Cash Flows rely heavily on the accuracy of projections for future performance, which is incredibly hard to predict, not to mention there are many motivations for managers to put down higher or lower targets than are realistic to boost share prices or to achieve their own KPI’s. Another issue is that the achievement of Discount Cash Flows’s (think of it like meeting a budget) does not necessarily tell you that the marketing was effective, and the money was well spent. It simply tells you that you projected correctly. A bad target, is still a target.
So what CAN we track?
Google Adwords (2016) provides a great example of trackable digital marketing metrics providing information, however most of these are non-financial results.
Whether it’s website visits, shop visits, online sales, phone enquiries or newsletter sign-ups, the tracking tools always show you what Google AdWords is delivering.”
There are a multitude of platforms like Meltwater that provide an online platform that automatically tracks use of key words, hashtags, likes, shares and can even track media coverage of a campaign. While these metrics might not tell you how much revenue they have brought in, they do tell a story of brand awareness , which in its own right, may drive up sales performance.
Of course we can’t forget the age old techniques of lead generation and conversion rates. These are most easily measured through direct sales efforts, and targeted advertising (e.g. Mailchimp)
It goes back to the age old saying:
“we know half of our marketing works, we just don’t know which half!”
Perhaps an intelligent, combined approach to measuring the marketing mix is a sound approach. Return on Marking Investment, Discounted Cash Flows and Return on Customer are all great metrics…if taken with a grain of salt, and backed up with a marketing plan that you can measure in additional, non-financial ways.
Author: paijeterrell; Student ID: 900192578; email@example.com
Ambler, T, & Roberts, JH 2008, ‘Assessing marketing performance: don’t settle for a silver metric’, Journal of Marketing Management, vol. 24, no. 7/8, pp. 733-750.
Google 2016, Google Adwords, Pay only for results, retrieved 23 April <https://www.google.co.id/intl/en/adwords/costs/?channel=ha-ef&subid=id-en-ha-rhef-skmp0~101316371407>.
Millward Brown 2014, Branz Top 100 Most Valuable Global Brands 2014, retrieved 10 April 2016, <http://www.millwardbrown.com/docs/default-source/global-brandz-downloads/global/2014_BrandZ_Top100_Chart.pdf>.
Millward Brown 2015, Branz Top 100 Most Valuable Global Brands 2015, retrieved 10 April 2016, <http://www.millwardbrown.com/BrandZ/2015/Global/2015_BrandZ_Top100_Chart.pdf>.