Mungo Dunnett Associates: Management and Marketing Consultancy

Marketing Evaluation

The main elements in evaluating marketing

Starting with the end in mind

Marketing, when boiled down to its simple essentials, has a single purpose: to drive (or sustain) additional profit. This should dominate the decision process for the planning and execution of each separate activity – yet very rarely does.

The other element that must be considered from the outset is the absolute necessity to evaluate.

Driving profit: focusing marketing on measurable successes

Whatever the task (brand-building, awareness, promoting a new product, keeping in touch with customers) the purpose is to create profitable revenue – either by generating sales, or by helping the salesforce to generate sales

Demystifying the marketing process in this way clears the decks for evaluation. The questions that need to be asked of every marketing activity are: what can this do to create profit? What customer behaviours are we hoping for?

Once the customer behaviours are identified, what you need to do is look for them.

Measuring for incremental sales

There are two common mistakes in evaluation. The first is simply failing to bother, or bother doing it properly: those involved in producing the activity lose interest in it once it is out of the door. The second failure is in proving that the sales created were genuinely incremental – i.e. sales that would not have occurred if the activity had not taken place.

In order to understand the residual level of sales (the sales that would have occurred even without the marketing to help it) a ‘control’ cell must be used. Its purpose is to select customers exactly like those who were exposed to the marketing, but not to target them with the marketing activity under evaluation. This will demonstrate the residual sales level.

This residual level needs to be subtracted from the sales level achieved by the ‘live’ cell (i.e. the customers exposed to your marketing activity) to determine the actual effect of the marketing in generating incremental sales.

It is not necessary to attempt a 100% level of robustness in these evaluations. So long as a clear and unchallengeable pattern is produced, the evaluation will be conveying an important message.

There are three usual outcomes: either the activity has made a noticeable difference to sales performance (i.e. it has significantly outperformed the control cell); or it has made little difference, but would appear to merit another attempt with a slightly different offer or communications medium; or it appears such a dead duck that it strongly suggests that this line of marketing should not be pursued in future.

Other ways to measure

Proving that customers have responded (or not) is not as difficult as is often thought. Ideally, you want evidence that Customer A has bought from you, after being exposed to your marketing, where an identical Customer B, who did not see the marketing, did not. Direct mail lends itself well to this black and white type of analysis.

But traditional ‘above the line’ advertising (press, radio, posters, TV etc) does not. You simply do not know who saw your marketing and who didn’t.

The answer is to ask customers. Select a group of customers who bought from you in the period after your marketing was carried out, and ask them two questions: 1) did they see the marketing? 2) If so, did it play a significant or crucial role in causing them to buy?

This will go a long way to unravelling the mysteries of how and why customers buy from you, in addition to delivering answers about the effectiveness of your marketing spend.

Measuring for return on investment

Once the incremental sales have been measured, the most important calculation of all can be done: the measurement for incremental profitability generated by the entire marketing exercise.

It is critical that the complete cost of the exercise is established: this includes all expenditure relating to the production of the marketing.

Only when the profitability of the incremental sales is established, and the total costs are subtracted from this, will the incremental profitability of the exercise be known.

Many apparently successful campaigns fall at this last hurdle. Remember: the purpose of marketing is to generate or retain profitable sales – and this is the benchmark and purpose for all evaluation.

Test-learn-improve

Marketing is an iterative process. It will never, in our experience, be executed perfectly first time: that would be a shot in the dark that resulted in astonishing good fortune. Good marketing is the application of common sense and scientific rigour – and a scientific testing process will demonstrate where the marketing needs to improve.

There is a vital need for this iterative process to be embedded in all marketing activity: the process is Test – Learn – Improve. This mechanism will deliver systematic increases in performance – and visible, unquestionable improvements to the bottom line through the application of successful and carefully managed marketing activity.

One final point: the failure of any given marketing activity in generating a positive return on investment is not reprehensible: but failure to learn from failure is