Download How Do I: Evaluate the effect of marketing spend?

How Do I: Evaluate the effect of marketing
spend?
“Half my media spend is working, I just don’t know what half” In this quote, Lord Lever summed
up the difficulty of teasing apart the effect of marketing investment. Fortunately, this uncertainty did not
discourage Unilever. While marketing activity is not scientific, a commitment to evaluation ensures that
activity can be properly understood and future strategy developed based on performance. This guide will
outline the evaluation process and methods of assessment. It might not tell you which half of your
marketing spend is working, but it will identify some good practice with which to evaluate your marketing
activity and help you adopt evaluation as an ongoing practice.
Every efficient business should evaluate its performance regularly. This is particularly important in the
case of marketing, where investment has been incurred and often the performance effect is not
immediately apparent. Understanding a campaign’s progress, success and achievements is key to
justifying its use and evaluating its effectiveness. Don’t underestimate this task, evaluation can be difficult
and needs careful planning to ensure the business gets the information it needs.
Don’t be tempted to view evaluation and monitoring as the same process. Monitoring is about
understanding what has happened with your actual campaign i.e. planned versus actual activity.
Evaluation is understanding the impact that campaign has had in the marketplace (for more information
on evaluation, see How do I: Monitor my marketing campaign?)
BENEFITS
Assessing the effect of marketing spend provides a number of business benefits, including:
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Management and control of marketing activity.
Informing future strategy and investment decisions.
A valuable audit of services supplied.
GETTING STARTED
Start with the objectives. Evaluation should be evident at the strategic planning stage of your marketing
activity, as it must underpin the objectives that are agreed. For example, if the advertising objective is to
increase brand awareness by 10% then an evaluation mechanism has to be available to asses the level of
awareness prior to the advertising campaign and to then assess whether the objective has been achieved
or not. Brand objectives should be agreed in the marketing plan and effective objectives should be SMART
i.e.
Specific - be precise about what you are going to achieve.
Measurable - ensure you can quantify your objectives and evaluate your achievements.
Achievable - do not set objectives which are too high - manage expectations.
Realistic - can you achieve them, do you have the resources to make it happen?
Timed - give yourself a timescale for achieving your objectives.
Following the SMART framework is good practice as it:
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Ensures evaluation is fully addressed at this early stage.
Identifies the key elements of a campaign which can be specifically assessed.
Starts the process of target of benchmark setting.
Clearly sets company expectations in a format that can be managed.
OBJECTIVES AND BENCHMARKS
Objectives can be broken into macro and micro. The macro objectives will be delivered by the overall
marketing plan and are set at a total level e.g. build market share to 15%. Micro objectives will be set for
each key element of the marketing plan e.g. advertising, promotion, direct marketing. Setting micro
objectives forces you to really think about the role of each activity and what it is contributing to the
overall plan. Effective marketing plans are often made up of a number of key activities, all stimulating
different consumer responses. Marketing is the cumulative effect of these elements. However, to assess
performance properly, each element should be evaluated individually (as far as possible) then as a whole.
Ideally the objectives will be assessed over time by a series of benchmarks. If you are aiming to achieve a
15% market share in a year then benchmarks can be used to track performance each month or quarter.
Using benchmarks will ensure regular evaluation can highlight problems early. Initial research may be
required to set the starting point e.g. level of awareness amongst the target audience. This will require
quantitative research to provide the numbers which represent your base level. For more information on
forecasting see the How do I: Forecast Sales and Profitability? guide.
PERFORMANCE INDICATORS
Overall performance can be measured in many ways and, for the marketing plan, will directly relate to the
objectives set in the marketing plan. There are principally three areas which should be considered:
Sales performance: a key macro objective which marketing can affect is sales. Internal data can be used
to analyse sales performance. A good IT sales system should allow you to interrogate sales performance
as thoroughly as is needed. For example, look at sales by key customer, key product line, by national
market. Reviewing sales will also inform seasonality and historical performance patterns. Driving sales offtake is the litmus test of marketing, provided the market conditions are as predicted in the original plan.
However, internal sales only tell you what goes out the factory gates. Reliance solely on this measure can
be risky. For example, if consumer sales are decreasing and a key account has not revised their forecasts
to reflect this then they will be carrying a lot of stock which will depress future orders. The real sales effect
is caused by consumer dynamics e.g. trial, awareness, and propensity to buy. To fully understand the
dynamics of your marketing, these drivers should be assessed in terms of consumer off-take.
Consumer Sales: there are a number of dynamics which will affect consumer sales. These include
awareness, interest, trial, repeat purchase and product satisfaction. At the planning stage you should have
identified the key dynamics that will drive sales. For example, at the launch of a new product, awareness
needs to be built, trial stimulated and product satisfaction delivered to increase propensity to repeat
purchase.
Market share: is a useful performance indicator as it takes into account competitors and market
conditions, as well as sales. For example, on first inspection a sales growth of 10% may appear very
successful but, if you are operating in a market which is growing at 40% per annum, then your
“successful” performance actually represents a loss of share to your competitors. Accurate market share
information is available from the large, multi-national market research agencies. However, it can be
expensive and it is worth ensuring you, and possibly your key accounts (if it is going to be used effectively
to influence account activity), are comfortable with its accuracy and application.
METHODS OF ASSESSMENT
The appropriate method of assessment will depend on the nature of the activity and its objectives. Below
is a list of the most common marketing activity objectives and potential methods of assessing their
effectiveness.
Brand awareness: in general, the more of your target audience who are aware of your brand, then the
greater the pool of potential consumers. Building brand awareness is often an objective of advertising,
sponsorship, promotion or direct marketing. Assessing brand awareness can be done through tailored
quantitative research. This can be via a bespoke survey or by buying into an omnibus study. The former is
used for difficult target groups or complex questionnaires. The latter is a less expensive option but may be
limited to broad consumer audiences and a finite number of questions.
Brand knowledge and understanding: will directly affect the propensity to purchase. For example, a
consumer may be aware of a particular brand of shortbread, but until they understand its heritage and
tradition, they may not be interested in buying it. This depth of communication is usually an objective of
advertising or direct marketing. It can be assessed using the same quantitative techniques as brand
awareness. For example, after a significant burst of advertising you would hope to see an increase in
certain knowledge statements or brand values (e.g. for a shortbread producer this might be “all-butter
traditional product, 3rd generation business”). Failure to achieve this may be due to a weak advert which
is not imparting this information in a sufficiently clear or impactful way. In some instances, you may need
to commission some qualitative research to help understand the problem that has been identified via the
evaluation process.
Product trial: specific consumer buying research that is available from large research agencies can
measure levels of trial. It can be sourced as a special report as part of the market share data (see above)
or as a one-off project. Trial can also be assessed in terms of response rates for promotions or direct
marketing which require the consumer to write to the company.
Product satisfaction: is most effectively assessed by the level of repeat purchase i.e. those consumers
who, after trial, go on to purchase again. Again this can be part of the purchasing data sourced from a
research agency. Another indicator or product satisfaction is the level of consumer complaints. This needs
to be interpreted carefully. When a complaint is being consistently received it may be indicative of a larger
problem because only a proportion of consumers will take the time to complain; most will just not buy
your product again. However, active consumer complaining is not always the ‘norm’, therefore the nature
of complaints may indicate an isolated, minority opinion.
Brand loyalty: in today’s competitive cluttered marketplace where consumers can demand almost
individual marketing, building brand loyalty is a key long-term objective. This can be built by a number of
marketing activities including promotions, advertising and direct marketing. A good example are store
loyalty cards. For accounts, which have EPOS (Electronic Point of Sale) data, buying habits including rate
of sale and weight purchase can quickly be accessed and assessed. Most manufacturers have to rely on
quantitative buying data which is supplied by the large research agencies. A special analysis of this data
will highlight what proportion are heavy, medium or light buyers. This can be compared to the market
average and key competitors to assess your relative loyalty profile. A further analysis at the end of a
campaign should highlight any changes to your profile in terms of weight of purchase, frequency or
purchase and average price. Brand loyalty can be built using direct marketing to particular target
audiences. In this case response levels are a good assessment of the effectiveness of your activity.
EVALUATION PLAN
The evaluation plan should be incorporated into the marketing plan for a number of reasons:
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To gain senior management approval of the evaluation plans.
To manage company expectations regarding level and timing of evaluation.
To provide investment and resource to action the evaluation.
LIMITATIONS
Evaluation is a critical business discipline that should be a continuous part of marketing planning and
implementation. However, assessing the effect of marketing activity is not always easy and you should
also be aware of potential limitations. For example:
Lagged effect: response to marketing activity is not always immediate. You don’t usually see an advert
one evening and rush out the following morning to buy the product. Odds are you had something else
planned for that morning. At best you may consider that product the next time you are in the
supermarket. Another example is with vouchers. These will usually have a three to six month redemption
period to accommodate lagged consumer behaviour. The timing of response must be carefully considered
when setting the activity objectives.
Isolating effect: marketing is the cumulative effect of different types of activity. Often it is impossible to
isolate the different effect of simultaneous activity. Again, this has to be given careful consideration when
setting objectives and agreeing the evaluation process.
Marketing focuses on affecting consumer behaviour at a number of levels to ultimately drive sales. By its
very nature, some activity may be less direct than others. This, and the above limiting factors, can make
the evaluation of individual activity very difficult. It is therefore critical that evaluation is managed within
the strategic process at the time the marketing plan is agreed. The marketing strategy will identify the
objectives for the overall plan. The evaluation plan should then provide the framework to evaluate
performance against the total planned objectives and key elements where this can be done.
HOW DO I? SUMMARY
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Set SMART objectives in the marketing plan.
Carefully develop the evaluation plan based on objectives and benchmarks. Include timing, resource
and investment within the plan.
Regularly evaluate the marketing activity and assess performance based on agreed timings.
Be aware of the limitations to assessment.
Use evaluation to inform future planning and strategy.
OTHER SOURCES OF INFORMATION:
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