Professor Malcolm McDonald on Measuring Marketing Effectiveness
Malcolm McDonald explains that the ultimate test of marketing investment is whether it creates value for shareholders. But few marketing investments are evaluated from this perspective.
The ultimate test of marketing investment, and indeed any investment, is whether it creates value for shareholders. But few marketing investments are evaluated from this perspective, and many would argue that it is almost impossible to link financial results to any specific marketing activity.
But increasingly, boards of directors and city analysts the world over are dissatisfied with this lack of accountability for what are, very often, huge budgets.
There is an urgent need for measurement frameworks, not only to answer the widespread accusations of poor performance, but corporate and financial strategists need them too, to understand how to link marketing activities to the wider corporate agenda. All too often marketing objectives and strategies are not aligned with the organisation’s overall objectives.
Historically, marketing expenditure has tended to escape rigorous performance appraisal for a number of reasons. Firstly, there has been real confusion as to the true scope and nature of marketing investments.
Too often, marketing expenditure has been assumed to be only the budgets put together by the marketing function, and as such, a (major) cost to be controlled rather than a potential driver of value. Secondly, the causal relationship between expenditure and results has been regarded as too difficult to pin down to any useful level of precision.
The first task undertaken in our new book from Kogan Page, Marketing Value Metrics is to define what marketing really is, certainly not the narrow understanding of it as promotion, followed by an exploration of the meaning of "value ", which could be seen as Porter's value chain analysis, shareholder value, brand and/or customer value, or even accounting value.
In this book, we explore the three main levels of measuring marketing effectiveness shown in the figure above, set in the context of the marketing discipline. In this book we examine all three levels of marketing metrics. The first two levels relate to the measurement of strategic as opposed to tactical marketing. To date, most books on marketing measurement concentrate on the highly visible promotional level of marketing. Level 1 explains how marketing strategies can be proven either to create or destroy shareholder value. A major part of the book, however, is about Level 2, which is the result of a number of years of collaborative research at Cranfield University School of Management between the Finance and Marketing Faculties. It sets out a new model for measuring the effectiveness of marketing strategies. Level 3 explores the measurement of the implementation level of marketing, including promotional effectiveness, social media and econometrics.
We have structured the book so that it is logical and easy to follow, and we believe it makes a major contribution to the domain of marketing effectiveness measurement.
- Emeritus Professor Malcolm McDonald MA(Oxon) MSc PhD DLitt DSc 23rd September 2014
About the Book: Marketing Value Metrics, by Professor Malcolm McDonald, Peter Mouncey and Stan Maklan, introduces and guides readers through a metrics model that shows not only how marketing systematically contributes to shareholder value but also provides a metrics-based framework for developing and implementing marketing strategies that are measurable and accountable. Visit the product page for more information.