Measuring Marketing Effectiveness

by Kate on September 19, 2011

How much does your organisation spend on marketing? How much should you spend? Where should you spend it? How do you know that the money was well spent?

Marketing effectiveness is central to business success, yet in many organisations there is an endless debate over the financial returns that marketing generates. Added to this is the challenge that people from other business disciplines frequently find it hard to understand what marketers actually *do*.

Even though “marketing is everything”, and the return on investment may come over a fairly long period of time, we must still think carefully about the returns from marketing dollars. This is particularly important when budgets are under careful scrutiny – as they are in many organisations at the moment.

“Spend More” isn’t a good case

In a world of uncertainty and change, the need to measure the effectiveness of marketing activity is central to survival. We must pay attention to the results of activities. If the results aren’t there, something may need to change. To say “We need to spend more” isn’t a robust case and the CFO and board are right to look for something more concrete.

The numbers matter

When it comes to connecting marketing to results, I think two things can help.

First, the people responsible for marketing should understand the strategic goals of the organisation, including specific financial goals. Marketing is about creating profitable customers, so if the results of marketing aren’t seen in revenue, profit and growth there’s something to look at.

Second, measure the results of activity. Results are feedback. They are the basis from which to make adjustments to what we do so we can reach our goals. Present the finance people with metrics and a thoughtful response to them and conversations about return on investment are likely to become much more valuable.

Which numbers?

But what numbers should we pay attention to? The fundamentals are unchanged. We should still measure basics like customer numbers, transaction frequency, conversion rate, revenue and profit.

However, the growth of Inbound Marketing means there are many more useful (and important) things to track which will help define and refine where our marketing dollars and efforts go.

In a helpful blog post, Craig Wilson, of Media Hunter (@mediahunter), wrote a clear and concise list of the things he is measuring as part of the launch of his new business. Some of the items are:

  • Search rankings for targeted terms
  • Traffic generated from links in social networks
  • Mentions in other blogs and online journals
  • Inbound links accumulating for the new website
  • Number of visitors daily to new website
  • Traffic from search engines
  • Direct traffic
  • Best keywords
  • Time spent on site

Something I particularly appreciated about Craig’s post was he didn’t forget that, marketing works when it leads to sales. The ultimate measure is how many people inquired (visited the site), how many bought and what revenue was produced.

It’s important not to mistake activity for results. If a business doesn’t meet the shareholders financial goals there’s work to be done. As Craig’s observed: Data has never been more available or useful. The days of blasting with advertising and hoping for customers are behind us. These new metrics can change the way we operate forever.

We have more opportunity than ever before to receive market feedback and use that to create profitable business. There is no excuse for marketers to stop with “I just need more budget”.

About Kate Groom:

I help people become skilled in Financial Conversations. I design and deliver programs for organisations that want to improve the financial literacy of their team, and their financial results. 

My weekly newsletter contains insights and common sense suggestions for better business. You can sign up here .


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