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Posts Tagged ‘Marketing Metrics’

Marketing Budgets and Marketing ROI metrics in 2011

Monday, May 2nd, 2011

Econsultancy and SAS have released the Marketing Budgets 2011 Report, exploring the relative levels of planned marketing spending in 2011 and comparing various marketing channels, mediums and technologies. The study was based on a survey of more than 500 company and agency marketers, conducted during December 2010 and January 2011.

Some of the report highlights are as follows (Econsultancy & SAS, 2011):

52% of the surveyed companies plan to increase marketing budgets for 2011, compared to 2010, probably in the context of the improvement of the economic conditions. However, on the supply-side, the surveyed agencies are not that optimistic, only 32% of them considering that their clients will typically increase their marketing budgets this year;
Companies surveyed spend, on average, 37% of their marketing budgets on digital. 72% of the them say they will increase their digital marketing budgets, compared to only 26% planning to increase also their offline marketing spending (TV, printed media, direct mail). However, while the digital marketing enables a greater measurement of results, marketers are considering integrating the online with the offline – for example, use TV and radio ads to drive website traffic.
Regarding the budgets for various digital marketing channels, the top three is made of:

Off-site social media (third party websites such as Facebook and Twitter), with 75% of companies planning to increase budgets;

On-site social media (blogs, ratings etc.) with 64% of companies planning to increase budgets;

Email marketing (63%);

The investment directed to marketing technology envisages mostly analytics software (45% of the respondents stating they will increase these expenses in 2011), CRM (40%), CMS – content management systems (39%) and emailing platforms (39%).
Despite the availability of more and more sophisticated analytics and attribution management technology, marketers say that measuring the return on investment (ROI) in digital marketing becomes more difficult. Only 20% of the surveyed companies claim they have very good understanding of their ROI in digital marketing, while agencies consider that only 7% of their clients have very good understanding in this context.
While more respondents claim to understand the return of their traditional marketing investment (40%), an explanation might be the fact that many companies can use the digital as a barometer for the success of their traditional marketing channel efforts.
Regarding the metrics employed to measure marketing effectiveness, the most frequently mentioned were:

Metrics to measure marketing effectiveness

Source: Econsultancy & SAS (2011)

For more marketing metrics examples, visit Marketing & Communications functional area on smartKPIs.com.

Reference

Econsultancy & SAS (2011), Marketing Budgets 2011, available at: http://econsultancy.com/uk/reports/marketing-budgets (accessed 29 April 2011).

Tags: Digital Marketing, Econsultancy, marketing budget, marketing budgets 2011, marketing effectiveness, Marketing Metrics, Marketing ROI, marketing technology, return on marketing investment, SAS
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Book review: Marketing and the Bottom Line by Professor Tim Ambler – Part 2 of 2

Monday, February 28th, 2011

Continuing the review of Professor Tim Ambler’s book, Marketing and the Bottom Line, we now focus on a very interesting topic in the context of marketing performance measurement, in particular and performance measurement, in general, which is the process of performance assessment itself.

Whenever describing a performance measurement or management system, it is of crucial importance to determine the level of maturity of the system, in order to have a clear image on the expectations from the assessment and what can be done to improve the system itself and take it to a next level of complexity.

Professor Tim Ambler identifies five possible stages of marketing performance assessment, as follows (Ambler, 2003):

1. No assessment at all

This characterizes companies in which the idea of marketing performance assessment has not yet even risen, the possible causes being the fact that marketing is not seen as something that needs attention from top management or that things are going so well for the company that there is no place for changes or critical marketing review. However, what these companies neglect is that market conditions may always change impromptu, taking the company by surprise and causing serious damages.

2. Marketing assessment from a financial point of view

In this case, top management is mostly preoccupied with the financial figures, determining that marketing, as well as other functions, is evaluated by means of revenue, profits and, in some cases, brand valuation. The weak point in this context is that financial evaluation lacks the assessment of the sources for cash flow and it only reflects effects, and not causes for that effects.

3. Mix of financial and non-financial metrics

In this stage, management has realized that financial indicators alone are not enough, thus a multitude of non-financial metrics are introduced across the company’s functions, including marketing. Although offering a larger perspective on performance, this situation usually involves the lack of finding a balance for the volume of metrics to be employed. If not treated with caution, measurement can lead to new demands and questions being raised, new metrics being introduced and so on, until the system becomes overwhelming and confusing, the value it adds being limited considering the efforts.

4. Development of a market focus

At this point, the overwhelming variety of metrics (both financial and non-financial) are being streamlined by management, and a collection of indicators are selected in order to give a single coherent view on the market. While projecting a more focused and rationalized approach, the problem in this stage remains the question of whether these metrics are the “right” ones. The author argues that it can happen that marketers hold tight to familiar indicators, which can be a good thing if aiming to maintain comparable data, but also a bad thing if not accurately analyzing the relevance of those metrics for the particular case of the company.

5. Adoption of a scientific approach to measuring performance

This stage involves an even more rationalized and refined process of selecting the performance measures, by applying mathemathic and qualitative analysis to the database of past and current metrics in order to provide the shortest and most relevant list. Where possible, this analysis would reflect which metrics used in the past were best to predict current performance, and although it cannot be guaranteed for sure that they would predict future performance, it would be a good starting point for preparing the pool of the most representative metrics for top management to choose from.

The five stages of marketing performance assessment

Source: adapted from Ambler (2003)

Reference

Ambler, T. (2003), Marketing and the Bottom Line. The marketing metrics to pump up cash flow, Second edition, Prentice Hall, London, UK.

Tags: Book review, Marketing Metrics, Marketing Performance Assessment, Marketing Performance Measurement, Tim Ambler
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Book review: Marketing and the Bottom Line by Professor Tim Ambler – Part 1 of 2

Tuesday, February 22nd, 2011

Professor Tim Ambler from the London Business School is one of the leading authorities in marketing performance measurement and investigating the impact of marketing on finance. In his 2003 book, ‘Marketing and the Bottom Line’, he explores aspects such as marketing metrics, performance of the marketing mix, innovation performance and brand equity.

Source: commons.wikimedia.org (2008)

One of the topics analyzed in detail is the concept of brand equity and brand equity measurement. Ambler discusses the confusion around these terms, brand equity being ‘such a big concept that people have difficulty describing it’ (Ambler, 2003: 41), using the metaphor of an elephant.

This metaphor is suggestive in illustrating why top managers have such a difficulty in giving the proper attention to brand equity: ‘one has little perspective of an elephant if one is riding it’ (Ambler, 2003: 43). Just like an elephant in combat, brand equity is the means to gain more and more territory or market share, while it is very easy to ignore or overlook the well-being of the elephant itself.

Aiming to put some light into the confusion around brand equity, the author argues that brand equity is the asset itself, while brand valuation, market share etc. are the metrics that can be used to measure and quantify the asset (Ambler, 2003). While brand equity is mostly associated with dimensions such as brand loyalty or brand awareness and intellectual property assets (i.e. trademarks), why is it so important from a financial point of view? The answer to this question relies in the definition of brand equity from an accountant’s perspective: ‘brand equity is the accumulated intangible asset from past marketing that has not yet been taken into profit’ (Ambler, 2003: 47). This is why many current brand valuation methods are based on discounting future cash flows that are estimated to be generated by the marketing or brand investment.

Referring to brand valuation methodologies, the author makes an analysis of some of the most popular methods used to measure brand equity, such as the BrandAsset Valuator developed by Young & Rubicam or the Brand Evolution model from Ipsos-ASI. However, the author emphasizes the difficulty to measure brand equity in a direct manner, by investigating customer attitudes towards the brand by means of surveys or other similar techniques, as it is quite difficult to look into customers’ minds and ‘count the brand synapses’ (Ambler, 2003: 62). Moreover, such measurements must be treated with caution in terms of accurate data interpretation and subjectivity of the respondents.

The author then proposes the use of proxies that would give a more reliable and complex image of the brand value. These proxies would be of three categories – inputs, intermediate measures and behaviors – and would include aspects such as:

Marketing mix metrics, such as amount of advertising (as input);
Brand awareness, perceived quality, customer satisfaction (as intermediate measures);
Value of sales or customer retention (as behavioral metrics).

An interesting idea that emerges from Tim Ambler’s argumentation on brand equity is that this asset makes the distinction between marketing and sales. While marketing is about investing resources with the expectation that at a future point in time these will generate sales, selling is mostly about rapid gaining of revenues and profits. From this difference of perspectives can emerge one of the most dangerous mistakes in assessing marketing performance – measuring the latent benefits of the marketing investment before its actual impact on the sales figures.

To sum up, we can draw the following conclusions from Ambler’s argumentation on brand equity:

Do not confuse the asset (brand equity) with its measurement (brand valuation);
Brand valuation should be done with cautions, in order to have a multidimensional perspective and overcome the limits of customer surveys;
Timing is vital, in order to accurately capture the impact of marketing investment on brand valuation, sales and the bottom line.

Reference

Ambler, T. (2003), Marketing and the Bottom Line. The marketing metrics to pump up cash flow, Second edition, Prentice Hall, London, UK.

Tags: Book review, Brand Equity, Brand Measurement, Brand Valuation, BrandAsset Valuator, Ipsos-ASI, London Business School, Marketing Metrics, Marketing Performance Measurement, Tim Ambler, Young & Rubicam
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