Suzanne Harrison

on January 7, 2010

category: integrated marketing

Senior Business Development Manager

How do you measure success?

Over the past year, I’ve spoken with marketing leaders from a number of companies who are grappling with just what yardstick to use when measuring their return on marketing dollars spent. In these economically challenging times, there’s an ever-greater focus on accountability. What to measure — and how to measure — are at the top of the list of questions to be answered.

Of course, you need to have a strong grasp of your sales cycle and all the conversion points along the way. You need to understand your cost per lead and cost per sale. You also need to know the lifetime value of your customer in order to make the wisest marketing choices. These are basics. The other question — the one that has surprised me time and time again from clients recently — is what costs should be included when figuring ROI.

Many companies who have advertised their products and services have traditionally measured their ROI against media alone. If they spent several thousand dollars to place a TV spot on a number of stations, it’s likely they only measured the results against the cost of the ad time. Never mind that they spent a lot of money in creating and producing an ad, in researching their target market, or in trafficking the spots. In the midst of one conversation with the marketing director of a major fast food chain, he looked up in surprise and said, “Well, I guess I should include my salary…and my team’s salaries as well!”

He’s right. If you truly want to understand—and repeat—your success, you need to be honest with and include all marketing costs when measuring your return. Know your real benchmarks. That’s the only way you can truly measure one campaign against another.

 

 

Comments:

3/8/2010 at 2:39 p.m.
Cost allocation is an art
agree w/your comments, but cost allocation is always an art. say you spend $x to acquire a new patron. the lifetime value of that patron will be impacted by future marketing (including offers). determining how to evaluate the success of the acquisition program when so many factors can impact it after the first visit presents a real challenge
>>brian flynn, seattle WA

Jürgen Stephan

on January 5, 2010

category: direct marketing

Executive Director, New Business Development

Why are they buying?

Just found this quote from Steve Jobs on my recent AMA MarketingPower newsletter.

"It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them."

Darn right, Steve. I would even go a step further. Customers are unpredictable: not only until you show them, but until they buy.

There are more choices with time and money than one can imagine, or handle for that matter. As witnessed throughoutt this holiday shopping season, if you walk into an electronics store with a straight mission to buy a new iPod, you’re golden. If, however, you are looking for any type of music player for a gift and are price conscious, the choices have just increased exponentially. Especially if you walk into an independent retail store or shopping on the worldwide and never-ending Internet.

So now you have seen it all on display or on the Net, and maybe a competent sales person explained it to you. Now what? You buy one, or you go home and defer the purchase until later. Chances are you left the store with product, bag, receipt and a good feeling.

But how did we get here? Well, at the start someone built a good-looking product, invested money in building a brand – like Steve Jobs and team. Perhaps they made a smart and timely offer to make the sale: a discount coupon of 20% that you brought into the store; a secondary product that convinced you of an added value; added points to your loyalty status; or something else stimulating.  Most likely, both  retailer and manufacturer helped you with convincing arguments to purchase the item.

If, however, we asked shoppers in a focus group, they couldn’t tell you what enticed them to buy. They’d make up stuff or take guesses at best. Better to track responses live in action, via item-level coding. It’s amazing what technology is out there already in retail or online, but hardly ever gets used to measure marketing success. Sure – we have seen coupons both printed and digital; barcoding has been used mostly for cost-saving focused supply chain management – and digital screen displays and more intelligent RFID tagging allowing retailers to interface with the end customer wirelessly in store aisles.

Both manufacturers and retailers are interested in faster product turnover, lower inventory cost (you may have noticed empty shelves during this holiday season) and more direct feedback mechanisms with the customer, allowing both to make smarter decisions on matching supply and demand.

As an agency accountable to manage our clients’ marketing spend, we have limited influence on this type of shopping infrastructure. Yet as direct marketers we always like to help push the envelope and zero in on cause and effect. When we do, we really are at our best. And our clients get credit for their effectiveness when asking the CFO for more budget.

Let’s do more of that in 2010 and measure more where the register rings: better, faster and with predictable ROI.

 

Comments:

3/9/2010 at 2:01 p.m.
Delay . . .
I agree with Brian that often multiple messages help push someone to consider buying. For one thing, it can help build some credibility for the advertiser. However, I think companies like Capital One would do better if they did a little better job of data mining -- and even list hygiene! In their heyday, my husband and I would get identical mailings on the same day. That's just wasteful.
>>Carolyn Hansen, Seattle WA3/8/2010 at 2:45 p.m.
delayed ring
agree that monitoring the register is ideal. sometimes, the marketing goes out...and that customer doesn't reply in a given 'window' when an offer is valid or some arbitrary timeframe. sometimes, the register rings not after the first mailing, but after the second, or twentieth (e.g., why Capital One keeps mailing us all). second, it's important to use experimental design to vary offers...and i believe you do this...to figure out the 'optimal' offer to give to a prospect with a certain profile.
>>brian flynn, seattle WA