Measuring Your Marketing Efforts

There is an old adage that 50 percent of an advertising budget is wasted: the only problem is that we do not know which half!

Measuring the effectiveness of marketing expenditures can help your business by ensuring you are getting value for money from your chosen marketing activities. It helps you to determine whether you have your marketing mix or communications mix right. This kind of measurement has always been important for smaller companies because they have to spend their limited marketing budgets carefully, but it is becoming increasingly important for large companies too.

Below are some tips on what to measure, how to measure and when to measure:

WHAT TO MEASURE
The basic principle of measuring is to set objectives that are quantified and measurable and then to measure activities to assess whether these objectives have been achieved. It is important to measure the right things:

Measuring overall marketing performance. These measurements usually relate to marketing or overall business objectives. Measurements sometimes used for the overall effectiveness of marketing include percentage return on sales or on capital employed. However, marketing is not the only influence on these measurements, so they are not usually a true measure of marketing performance. Some large companies go further by trying to measure intangibles such as their reputation in the marketplace and innovation as indicators of their future performance and strength.

Measuring marketing outcomes. Measuring outcomes will tell you what you have achieved. Examples of this type of measure include:

Cost per enquiry generated by a direct marketing campaign
Cost per lead generated by the sales force
Cost per order resulting from a combined PR, advertising and sales campaign
Levels of product awareness or recall after an advertising campaign

Measuring marketing processes. Measuring processes will tell you how effective you are being or how marketing outcomes are likely to be affected in the near future. For example:

Your average conversion ratio of enquiries into orders will tell you that, if you see a falloff in the number of enquiries, it is reasonable to expect that your orders are going to start falling over the next few weeks or months.

Measuring customer satisfaction levels will often prompt customers to talk about anything they are unhappy about, rather than saying nothing and simply going to one of your competitors.

WHEN TO MEASURE
You can measure before, during and after a marketing activity or communications campaign.

Before a campaign. Measuring before an activity such as a communications campaign can help you to plan the level of activity needed; doing so can also provide a datum for measuring the impact of the campaign. You can test advertisements and other forms of communication before they are released to assess the target audience’s liking, interest and enjoyment.

During a campaign. Measuring during an activity or process gives you valuable information on its progress toward your objective so that you do not have to wait until it is finished to see whether it has worked or not.

After a campaign. Most measurement takes place on completion of an activity or campaign to tell you what you have achieved. The measures you use will depend on the original objective. For example, consider:

The number of enquiries and leads generated
The value of orders received as a result of a campaign (Beware: it is impossible to attribute this achievement to the campaign alone since other factors like changes in economic conditions will distort the result.)
Levels of product awareness, brand awareness and attitude change – measured through sample audience surveys

HOW TO MEASURE
Measuring requires you to collect a small amount of data, most of which is already available in your business.

You can incorporate the measures in monthly management reports or simply use the measures periodically or at the end of a campaign. The table below illustrates the types of measures available to you and the data you need to collect to apply these measures effectively.