Measuring Marketing Effectiveness

I read the recent post in the blog of Morgan Stewart, Director of Research and Strategy at ExactTarget, (a Market2Lead partner and all around good guys!) They just released a fascinating report they created with Econsultancy, on "Marketing Budgets 2010: Effectiveness, Measurement & Allocation". Great stuff and worth looking at the snapshot of the slides on Morgan's blog.  One slide in particular caught my attention:

So in their survey, 79% said increased Sales was a key metric for measuring marketing effectiveness, followed by traffic to the website at 71%. Wow. Yes I know increased sales is a goal of marketing, but it is a measure of the effectiveness of the entire company. Every other department could be doing awful, marketing is knocking the ball out of the park and gets a bloody nose because sales are down! And website visits - a measure of marketing effectiveness? So the increase in visits to Bank of America's website because of their notoriety over paying large bonuses after the bailout means Marketing is doing a good job (I hope they got bonuses for that).   My point is that an effective metric has to demonstrate a strong causal relationship to the thing it supposed to measure. Sales revenue is a good measure of the effectiveness of the channel, and the product/service. Website visits are a good measure of the brand awareness (both good and bad). Neither are good measures of overall marketing effectiveness.

Some good measures of marketing effectiveness

So what are some good measures of marketing effectiveness. Remember effectiveness is defined as doing the right things, and efficiency is doing things right. You combine both to get greater productivity. Let's measure effectiveness based on where you might allocate your marketing budget:

net new lead generation: Effectiveness measure is cost per "Sales Accepted" marketing lead

Notice that I am less interested in cost per "new" lead because anyone can drag in a bunch of garbage leads at a low price. A "sales accepted" marketing lead means that Sales is telling you that it is acceptable quality.

Lead nurturing: Effectiveness measure is velocity of leads through the funnel, or number of new opportunities from marketing leads. You can also look at your on going response rates to campaigns, how many open, clicked downloaded, although you have to be careful not to confuse this with the asset performance - A/B testing!

Awareness: Effectiveness measure could be brand recognition, website visits, social media mentions, traditional media mentions, etc

Loyalty marketing: Customer retention, satisfaction as mentioned in the report

Asset performance: Web pages per visit, asset downloads, form completion rates, event attendance.

A single measure of Marketing effectiveness?

I don't believe there is a single good measure of marketing effectiveness. All the ones I mentioned measure specific areas of marketing. Marketing ROI you say? So everything marketing does fits into nice little programs that are time bound, produce revenue in the near future and can be measured easily...not! Marketing ROI is good for specific campaigns.  So, anyone out there have any ideas for a good single measure of marketing effectiveness?

-Kevin

Comments

[Morgan Stewart]

Glad you like the report. Nice post and great points. We were also a bit surprised to see so many companies still looking at website traffic as a measure of marketing effectiveness.

I was also surprised to see so few marketers using Lifetime Value as a measure of effectiveness. Seems to me that ROI without the balance of longer term metrics like LTV or brand reputation can be a bit dangerous. After all, if you want to maximize topline sales and ROI for this quarter, the answer is send lots of email, every day. But then again, you'll burn all your bridges and have a really hard time hitting your numbers next quarter.

And no, I don't have a single universal metric for measuring success. ;)

[Kevin Joyce]

Thanks for the comment Morgan.
LTV is an interesting metric, and it is perhaps the holy grail of marketing effectiveness metrics from a company perspective. It has one drawback...the more of a "lifetime" you wait, the more accurate it gets. So it can be difficult to use as a feedback mechanism for what marketing is doing right if a long period of time has to pass in order to get accurate results.
-Kevin