M6 – Marketing effectiveness – Flashcards

Doing marketing is very creative function, but not only this. We need to understand the metrics of our business. How can we measure and how to select the metrics? CHANGES IN MARKETING POSITION From 2004 -> marketing as an investment - Contribution to company value. Board room material: CMO - Resources investment related to customer acquisition, retention and relationship efforts - according to value of customer. -> Importance of marketing in companies -> Market-oriented approach made it cross-functional - Why is important and how? - Big shift in how marketing has been dealt within organisations - it has become an investment part - by investing in marketing you can create value. They realised that businesses exist because of customers. In long-term, marketing creates value. - Finance is a string driver within a board to allocate resources and make strategic decisions. - You have to speak CFO/accounting language to persuade why the investment should be made. - You have to think cross-functionally when you create marketing strategies.

AMA Def: The responsibility for the systematic management of marketing resources and processes to achieve measurable gains in return on marketing investment and increased marketing efficiency, while maintaining quality and increasing the value of the corporation. The extent to which the marketing department can convincingly link their activities to financial outcomes up front when setting up the marketing plan and ex-post when evaluating the marketing action.

1. Accountability 2. Innovativeness 3. Creativity 4. Customer connection 5. Quality market research 6. Marketing knowledge 7. Cooperation with finance

- 8-21% higher return on assets than peers, with slight improvement in analytics - Measurement has effect on (and with) MO and directly on business performance - Marketing metric use -> marketing-mix activity performance - Metric-based information will improve profits an shareholder value Contribution of marketing analytics to firm performance remains low but improves slightly. Most firms lack quantitative metrics to demonstrate marketing spending impact

"Half my advertising is a waste - I just don't know which half" - Henry Ford If you want to measure effectiveness - Time issue - Causality --> Conditions --> Activities - Brand perception - how do we know it is successful - have a questionnaire

Def. - The identification and measurement of how marketing influences business performance as well as the accurate calculation of return on marketing investment (ROMI) MARKETING METRICS The performance indicators top management use (or should use) to rack and assess the progress - specifically the marketing performance - of a business or business unit CHALLENGES FOR MARKETING VALUE ASSESSMENT What we need is: - good marketing metrics - causal links between metrics and marketing actions - effective communication to demonstrate the value of a firm's marketing Challenges: - marketing objectives? - Research methods? - How to communicate internally? ISSUE 1: MARKETING OBJECTIVES *Not always about profit maximisation - different objectives important in different situations *Effectiveness vs efficiency - highest return? or ROI? - short term vs long term *The scope of marketing: Tactics vs strategic - the broader the scope: more variables, less granularity *Marketing budget(investment)or Allocation (cost) - research more focused on tactics (sales/profit), not strategy (sustained growth) ISSUE 2: METHOD & MODELS *Method: models, surveys, experiments - secondary (historical) vs. primary (now) data - past behaviour (model) vs causality (experiment) vs reasons why (survey). Order: MEME *Findings: 'general' effects of activities - short term vs sustained impact? Innovation&distribution high - however, combinations of activities? Conditions for effect? *Soft and hard metrics - different characteristics - financial? behavioural? attitudinal? no strong relation between *Risk issues: deviation from plan - planning variation, execution and (comp) reaction variation SOFT VS HARD MEASURES: DIFFERENT EFFECTS 1. Condition Knowing - Slow - Awareness - Consideration 2. Action Doing -> Fast - Awareness->Click->Visit->Buy->Experience and WOM 3. Affect Liking -> Slow - Reference - Loyalty --> Slow measures - better predictors for he future ISSUE 3: COMMUNICATING IN ORGANISATION *Multiple marketing objectives in dashboard - objectives and metrics in one display *Adapt communication to style of top management - analytical vs intuitive decision style, numbers vs pictures *Adapt communication to marketing organisation - minimise resistance IN SUM 1. Marketing value assessment is essential but difficult - different objectives - long term vs short term results - soft measures vs hard measures - causality difficult to isolate 2. Currently, most improvements and knowledge: - are on tactical level - related to sales outcomes (vs soft metrics) - and used for budget allocations (vs investments)

The ultimate question - How likely are you to recommend our organisation to a friend or colleague (0 to 10) NPS = % of Promoters (9s and 10s) - % Detractors (0-6) THE VALUE OF NPS - The best predictor of company growth - Better than satisfaction and loyalty measures - This single metric better that multi-metric solution - 12 point increase in NPS -> doubling of growth rate

The value of marketing to the organization can and should be defined, assessed, and communicated. This article identifies gaps in marketing's knowledge base to set the stage for further research and enhanced practice in demonstrating marketing's value. The identification and measurement of how marketing influences business performance as well as the accurate calculation of return on marketing investment (ROMI) - Key Takeaways ​Marketing analytics can only improve decisions when it integrates value perspectives and communicates in the style of the human decision maker. Research should consider the scope and the objectives of marketing within an organization and balance the risk and returns of change. Academics should aim to integrate research methods for maximum impact in driving marketing decision making - Research Demonstrating the value of marketing is very important to create impact for the field. Because much research focuses narrowly on a single performance metric and method, major knowledge gaps include (1) how performance metrics relate to marketing's scope and objectives within an organization and (2) how research insights should be communicated throughout the organization to enable decision makers. Addressing these gaps in (a) assessing and (b) communicating the value of marketing will both enrich academic research and improve marketing practice. - Method We review past literature and draw on our own experience in helping marketing decision makers in large and small organisations over three continents. - Findings Practice-inspired research can help balance short-term and long-term, effectiveness and efficiency, online and offline, hard and soft metrics, return and risk, model and manager, learning from the past and experimenting for the future.​ - Implications Marketing affects all of us, and improving marketing decision making can improve our lives through better jobs, better products and services, and less time wasted with irrelevant marketing communications. Managers should be more involved with research from the start. They should share their specific scope and objectives to enable and enhance research relevance. They should articulate which insights they need at which time and in what form. Researchers, in turn, should broaden their consideration of performance metrics by integrating different methods and perspectives. It essential for research to "go beyond the paper" and communicate key insights to maximise impact.

Summary Brands spend billions of dollars a year on lavish efforts to establish and maintain a social media presence. But do those campaigns actually increase revenue? New research provides an answer to this question, which has vexed marketers ever since social media burst upon the scene. In a series of experiments, the researchers tested four increasingly interactive ways in which Facebook might affect customers' behavior. First, they explored whether liking a brand—passively following it—makes people more likely to purchase it. Second, they examined whether people's likes affect their friends' purchasing. Third, they looked at whether liking affects things other than purchasing (for example, whether it can persuade people to engage in healthful behaviors). And fourth, they tested whether boosting likes by paying to have branded content displayed in followers' news feeds increases the chances of meaningful behavior change. The results were clear: Merely liking a brand neither increases purchasing nor spurs friends to purchase more. Supporting likes with branded content, however, can prompt meaningful behavior change.

NPS - examination - Check if claims are true - Replication of method and link NPS to -->Revenue growth (macro method) -->Consumer behaviour (micro method) -->Compare to other single and multi-metric measures Results Study 1 - macro - Replication of Riechheld data + comparison to acsi in same period Examination Study 2 - micro *Longitudinal (2yr) survey, 3 industries - satisfaction and loyalty measures - Yr 2 also purchase behaviour (retention, share of wallet) - referral behaviour *Test 2 statements - NPS best predictor for loyalty behaviour - Single metric is as good as multi-metric model Results Study 2-micro *Link to behaviour is good but not different from other measures - depends on industry - link to share-of-wallet is very weak *Multi metrics outperform single metrics - 20% improvement in explained variance => So, NPS is fine measure but not special, industry dependent