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Kpis To Measure Marketing Effectiveness
Posted By: tim.thirlway on 10/14/2005 5:00 AM (CST) 125 Points
I would like to understand how other organisations are measuring the effectiveness of their marketing departments. We are in a position like many other companies where we need to demonstrate the impact of marketing on the business overall which of course includes the bottom line. What approach has your organisation adopted and what are the metrics being used?

Posted by: amy* Member Response
10/14/2005 7:54 AM (CST)
I'm looking forward to seeing the answers on this. It's a question I've been asked recently. One of the more obvious metrics is website visits. Others may include mentions in the press, inbound calls, revenue over time.
 
Posted by: DR Hitch* Member Response
10/14/2005 8:01 AM (CST)
Ok,
in any enterprise, the marketing team budget (SG&A overhead) "should" be related to the overall revenue. But, be sure to separate "marketing" from "marketing communications". Our MarCom group budget as a percent of revenue has actually gone down in the past five years, even though revenues have shot upwards. Why? Well, the "investment" made in MarCom five years ago, is NOW paying off. So, there is no direct correlation between marketing and revenue at any one point in time. The statistical R-squared just isn't there.

Metrics for marketing team (personal annual objectives) may include things such as:
a) number of product focus groups conducted
b) number of customer satisfaction surveys administered
c) number of marcom placements in trade magazines
d) number of trade shows attended/participated in
e) web site hits/click-throughs/leads generated

Again, none of these metrics will see an immediate up-tick based on any given period of spending. Marketing is a science; albeit an inexact one.
 
Posted by: blanalytics Accepted Answer
10/14/2005 8:49 AM (CST)
I don't mean to be critical of Douglas, but the 5 points he listed are sort of like being evaluated for how many times you can hit a wall with a rock. None of that has anything to do with results. Leads are only relevant if they are closed...so close ratio is more significant.

Now if you are in a BtoB enterprise, what I am going to say here is difficult to do. But if you are in a BtoC firm, this is imminently feasible.

Marketing can and should be measured relative to the ROI and incremental revenue per marketing expenditure. That can be done for each marketing initiative. Thus, it is almost always feasible in a BtoC enterprise to measure incremental sales relative to any marketing initiative. Once that is done, you can tie costs and margins to that to derive ROI.

If I could be a little bit mercenary here, this is what my company does. It is called marketing effectiveness modeling and there are some papers on the website www.bottomlineanalytics.com to learn more about it.

The benefits of the exercise are usually substantial. That is because marketing mix spending usually is not allocated in the most effective fashion. We have found substantial evidence through experience that companies can gain or save the equivalent of 20% or more of their total marketing budget just by doing a little due diligence here and going through the process.
 
Posted by: wnelson Member Response
10/14/2005 8:49 AM (CST)
My experience has been in Product Marketing in the B2B world (similar to brand management in the B2C world). Marketing has been measured on:
  • Revenue (meeting plan)

  • Margin (meeting plan - given we control price too)

  • % new product revenue of total revenue (this is a indicator of product definition and launch success

  • Design wins (a design win is when a customer specifies the product for use in their product and buys over $1000 - presumably for prototype build. This minimum buy is to ensure the customer has actually committed to the design and is something we could measure versus just a paper with our product on it)

  • Staying within the department budget

    • On-time, on-budget targets for specific major projects (trade shows, seminars, new catalog launch, etc)

I hope this helps.

Wayde
 
Posted by: DR Hitch* Member Response
10/14/2005 2:02 PM (CST)
Well guys, I'll reply and keep adding value.

1) The "marketing" department should NEVER be measured on "revenue". That is the key success metric for the "sales" department. Yes, all senior managers in a team/division should share common (bonusable) success metrics such as revenue, profit, and inventory targets.

2) You cannot critique the marketing department nor can you "task" and take-away budget if you are measuring the success too frequently. If sales farr below forecast for any given month or quarter, don't go and blame the marketing dept. Take it out on the sales team or don't sweat about it until a longer period of real qualified time has passed. Marketing is an INVESTMENT not a instant promotion.

3) Although I agree with blanalytics, I'd scream bloody murder if the CEO was holding me, as marketing manager, accountable for closing sales leads! Again, the companies I've worked for have about 50% of my performance and bonus associated with individual marketing metrics (e.g. # of trade shows set-up) and about 50% of my bonus is a SHARED team compensation based on the really important financial metrics.

But, don't hold me solely accountable for the salesperson's job. It's out of marketing's control. Going back to the original question "we need to demonstrate the impact of marketing on the business overall", the marketing department's metrics will only INDIRECTLY show immediate impact on the bottom line; it's a SUSTAINED effort to grow awareness, consideration, and market share.
 
Posted by: amy* Member Response
10/14/2005 5:12 PM (CST)
I agree with much of what has been said, but I think it overstates the case to say marketing should never be measured on revenue. Marketing is, indeed, a long-term investment and shouldn't be held accountable for increasing revenues week-over-week or month-over-month ... not even quarter-over-quarter. (Special promotional offers excluded.) But certainly marketing should want to look at their revenue impact over time ... e.g., year-over-year. Not all metrics are for short-term performance evaluation. I am a marketing VP in it for the long haul, and will absolutely look at my impact on revenue over time.
 
Posted by: RafeVDB Member Response
10/14/2005 10:52 PM (CST)
Hello - Seems to me a lot depends on the structure and scope of responsibility. I've seen organizations where "marketing" is nothing more than a support organization for sales. I've seen other organizations where marketing is responsible for the full scope of real marketing - from segment targeting to product definition to product management to pricing to promotion to sales training and incentives. In still other organizations, marketing means communications and advertising. Still others, product development.

Certainly, marketing departments can't be measured by the same metrics - they aren't responsible for the same things. Measuring a support group by revenue metrics would be interesting indeed!

:-)
 
Posted by: jlevin Member Response
10/15/2005 11:05 AM (CST)
One way I have seen clients do this is to run programs concurrently in test and control groups. You expose one group to a promotion, campaign, discount, etc., and observe their behavior over time as compared with consumers who were not exposed to it. This can be most easily done, for example, with direct mail campaigns. However, it can be applied to other programs as well, for example trade shows, by observing the behavior or customers brought in by the show compared with others. A few rules of hand -

1) Objective metrics should be set up ahead of time.
2) One of the challenges in these campaigns is to fight the instinct to apply the campaign to all eligible - some execs will feel that they are losing an opportunity by not exposing control group customers, but the gains can be well worth it.
3) I argue that it's not so much a matter of holding managers accountable, as it is developing an understanding of what really works and what gives the business the greatest benefit - similar in a sense to what some of the others have said.

Good luck,
Joy Levin
 
Posted by: tim.thirlway Author Response
10/19/2005 2:34 AM (CST)
Many thanks for your time to respond. I would say that your feedback has been useful but I think a lot more work around how we as a company measure the effectiveness of our marketing department is still to be done. Further reading around the subject and identifying any constraints we currently have with our systems to set-up certain KPIs is needed I feel.

Thanks again.
Tim
 
Posted by: aalzu3by Member Response
11/22/2008 2:23 AM (CST)
ALFANDI

I think measuring all the marketing activities must take into consideration both factors, ROI (financial result) as well as its communication effects (awareness, intention, desire, action). Due to the fact that marketing is an investment, and for the investment as there is a short-run objectives there is also long run objectives which could be increasing sales in the future or increase the market share of the company by reinforce the brand equity and customer satisfaction as well as customer loyalty. Thus, any approach to measure the effectiveness of the marketing activities must measure all marketing effects.
 
Posted by: aalzu3by Member Response
3/4/2009 10:07 PM (CST)
ok, what aout this, awareness of the advertising, awaereness of the brand, brand image, purchase intention, attitude towared the brand?

all of these are the communication effects that marketing should achieve in order to have SALES,,

becuase effectivness used to be the effects on sales, marketers always refer to the revenue as the marketing effectivness to demonstarte their acctivties,,, but we should never forget all the variables that could lead to sales

ASHRAF
 
Posted by: st Member Response
5/13/2009 7:41 AM (CST)
I agree with your above responses but if you could begin to track measured KPI's of specific campaigns as well as brand engagement and general profile raising, you can start to gather some benchmark stats on your marketing efforts. These could include measurements such as (monthly reporting of):
- No. of leads generated - has this increased over time
- Lead to opportunity conversions - is the lead quality effective
- Cost per lead
- Number of website hits (unique and returning) to cater for both new (hunting) and existing clients (farming)
- ROI - Value of sales against spend of campaign
- Newsletter subscriptions - has this increased
- Newsletter click throughs (increase) and unsubscrobe (decrease)

I hope this helps.

Sarah
 
Posted by: John.m.barton Member Response
7/23/2009 8:25 AM (CST)
Marketing should be responsible for awareness of the advertising, awareness of the brand, brand image, purchase intention, attitude toward the brand as “aalzu3by” said, but I also think that marketing is in the business of generating qualified leads, at least with most of the work I do.

Therefore a key metric should be number of qualified leads generated by a campaign. This is a measured marketing philosophy. Ideally, those leads are passed to Salesforce.com, or something similar, and the eventual close rate can be determined. Bonuses should reflect both qualitative feedback on marketing efforts that can only be measured indirectly with market research, but a good part of bonuses should be based on number of qualified leads, or accepted leads.
 


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