Most business functions are able to be measured and evaluated on the basis of their productivity, contribution, and direct impact on the business. For example:
A salesperson and sales functions in general are measured in the following ways (not exhaustive list):
- Sales volume sold (in total)
- Sales volume sold (of new products, to existing clients, to new clients)
- Incremental sales
- Length of sales cycles
The production component of companies can be measured as listed below (not exhaustive list):
- Speed of production
- Cost containment
- Down time/maximization of resources
The accounting-related functions or finance departments often use the following as measurements (not exhaustive list):
- Incrementality (revenue, profit, cost, etc.)
However, the measures used for evaluating Marketing don’t often lead to the kinds of clean analysis and insight. For instance, a recent client organization put what they considered to be a successful marketing campaign together. The organization has multiple products, services, and offerings that they provide to a local geographic region of approximately a 20-mile radius. In an effort to build awareness in the community, they “partnered” with a local ice cream retailer. Every sale of ice cream products would return ten percent of the sale to the organization.
What is the way to measure that effort?
- Incremental business over a baseline?
The execution of the initiative was poorly managed by the organization. There was no coupon offered to use the organization’s services. There was no representation from the organization at the ice cream retailer to answer questions about their products and services from curious customers. There was a brochure on the counter of the retailer, but was not spotlighted and most customers were unaware it existed. There was minimal advertising (a Facebook post and a small sign in the retailer’s window). So – at no surprise to anyone, the entire event generated $20 at most for the organization.
The conventional approach to judging the business relevance of one initiative over another is the measure, Return on Investment (ROI). However, ROI is most applicable when looking at the purchase of equipment and comparing it to the purchase of other products or other singular event. Marketing is an ongoing effort. Different than sales or operations which can be viewed as transactions (containing a start and a finish, i.e., a product is produced, a sale is made), marketing is not easily captured in the same way.
Marketing efforts by their very nature may not be acted upon immediately by the prospect or customer. There is a longer-term focus to some of Marketing’s assignments. Yet, it is not acceptable for most business people, and executives specifically, to continue to fund Marketing without having the ability to capture what is effective and should be continued and what is to be eliminated and recognized as ineffective.
A relatively recent concept, Return on Marketing Investment (ROMI) attempts to get at the difference between an investment (classic ROI) and an expense captured or recognized in a particular time period, as Marketing activities are in current corporate practice. For a review of this new approach, click on http://en.wikipedia.org/wiki/Return_on_marketing_investment.