3 Distinct Levels for Measuring Marketing Effectiveness
How Do You Measure Marketing Effectiveness? Malcolm McDonald, Peter Mouncey and Stan Maklan Present a 3-level Framework
Marketing managers have long understood the value, indeed necessity, of measuring the effectiveness of the very large expenditures typically under their control. There is a sophisticated industry that has grown up supporting the big budget marketing companies. Traditionally, this was exclusivly the B2C sector particularly packaged goods (CPG)/fast moving consumer goods (FMCG); Unilever, P&G, L'Oreal, Diageo and car companies. However, big spenders now include technology firms, financial services, holiday firms, government and some of hte largest B2B companies, too. Nonetheless, we maintain that best practice initially grew in FMCG because of the number of advertised brands the sheer amount of money spent. The major advertisers have developed very sophisticated means of assessing the value of their advertising and promotion spend.
The proliferation of promotional methods and channels, combined with an empowered and more sophisticated consumer, make the problems of measuring promotional effectiveness increasingly complex. Consequently, this remains one of the major challenges facing the marketing community today as part of the discussion around 'big data'.
But, at this level, accountability can be measured only in terms of the kinds of effects that promotional expenditure can achieve, such as awareness, or attitude change, both of which can be measured quantitatively.
But to assert that such expenditure can be measured directly in terms of sales or profits is highly contested, when there are so many other variables that affect sales, such as product efficacy, packaging, price, the sales force, competitors and countless other variables that, like advertising, have an intdeterminate impact on sales and profits. Again, however, there clearly is a cause-and-effect link; otherwise such expenditure would be pointless....
So the problem with marketing accountability has never been with how to measure the effectieness of promotoinal expenditure, for this we have had for many years. No, the problem occurs because marketing isn't just a promotional activity. In world-class organizations where the customer is at the centre of the business model, marketing as a discipline is responsible for defining and understanding markets, for segmenting these markets, for developing value propositions to meet the researched needs of the customers in the segments, for getting buy-in from all those in the organization responsible for delivering this value, for playing their own part in delivering this value, and for monitorintg whether he promised value is being delivered.
Indeed, this definition of marketing as a funciton for strategy development as well as for tactical sales delivery, when represented as a map (see below), can be used to clarify the whole problem of how to measure marketing effectiveness. From this map, it can be seen that there are three levels of measurement, or metrics.
This excerpt has been taken from Marketing Value Metrics. More information about the three levels of measurement and the metric-based framework for developing and implementing marketing strategeies that are measureable and accountable is available in the book.
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