What Drives Marketing Performance
CMC- InsightExec 25 Apr 2006
In current thinking it seems to be generally accepted that the main objective of every business is to fulfil its mission or vision statement. Laudable or questionable as they might be, vision statements usually express where the company might like to be, and how it might like to be seen at sometime in the future.
Generally, such statements have little to do with the reality of the business as it is in the present. The danger with vision statements, as someone unkindly said, is that they are often made by people who have visions or are otherwise described as suffering from delusions.
To clarify the point, a Vision statement which may also be called a Mission statement, frequently use words similar to “striving to become recognised as the best in the world”. These statements propose a general aspiration of the business with which everyone might agree, and are not defined objectives. As such they are often a vague form of words whose meaning is imprecise and open to interpretation.
By contrast, a statement of strategic purpose should clearly define why the business is in being e.g. “to develop a self sustaining profitable business manufacturing automotive parts for world wide markets”. Therefore, in order to be valid, a Vision Statements ought to go together with a Statement of Strategic purpose as the two statements are complementary.
However, many businesses spend a lot of time and money developing often meaningless Vision statements, but never complete the process by developing the corresponding Strategic statement. Few if any vision or mission statements, mention the purpose of the business, which is to make money in the form of profits for the benefit of the employees and the shareholders.
To get profits there first has to be sales and to get sales there have to be customers. Finding, gaining and retaining customers is the responsibility of the business getting activities of an organization, which are collectively described as Marketing. If making money and profits is the primary purpose of a business, then the efficient management of the resources and assets allocated to generate the revenue and profits, must be of prime importance to the company executives at every level.
When measuring overall marketing performance, no matter what else is measured the only measurement that really counts is the amount of generated profitable revenue. Therefore, in assessing the success of marketing management the only real measurement must be the amount of profitable money generated by marketing activity in relation to the money invested.
Some may argue that information based on customer relationship marketing (CRM) is a good measure of marketing performance, while others look to find measures in return on advertising expenditure, or changes in share holder value. These measures are important to those managers responsible for customer relations or advertising, but they are only contributing elements of all marketing activity, and do not in themselves indicate the effectiveness of marketing activity as a whole.
For the Chief Executive Officer (CEO), who needs to know how well the money being invested in getting and retaining customers is being converted into profits, CRM based information and the return on advertising investment are of limited importance
The CEO has to be able to assess the management performance of every aspect of the business, whether it is in production, finance, or the business getting activities. Measuring performance in all these aspects is essential if the senior management is to ensure that the business objectives are reached.
For managers of the marketing function, understanding the factors that drive marketing performance is essential for the effective management of marketing assets and investment. The ability to identify those factors that generate profit and those that generate cost is therefore paramount.
Advertising and sales performance are both indictors of marketing performance, however being only elements of the overall marketing budget, they are not indicative in themselves of the overall performance of the company marketing strategy. For some fast moving consumer goods businesses (FMCG), the effectiveness of their advertising campaigns is all important.
For a company such as Coca Cola, establishing the return on their advertising is fundamental to maintaining their brand position. The consumer has already been conditioned by the advertising and general promotion, so that the salesmen, who are unlikely to sell any product direct to the consumer, have become de-facto order takers. By contrast, salesmen selling diesel engines may have direct contact with buyers, specifiers and users, so that their individual performance will probably have greater effect on sales than will a supportive advertising campaign.
Thus for the FMCG company, measuring the effectiveness of an advertising campaign and its return on investment may be a significant driver in determining overall marketing performance. However, for businesses involved in direct selling to their customers and users, sales performance indicators may be the more significant drivers of marketing performance. For other businesses, webpage selling has become the main driving factor of their marketing strategy, so that the monitoring of webpage performance will be of prime importance. Different types of business will have different marketing drivers.
The analysis of actual marketing performance in comparison to that of the marketing plan enables the effectiveness of both the marketing strategy, and the marketing management to be assessed. The continuous measuring of marketing performance enables marketing activity to have equal importance and comparison with the other business activities of operations and finance.
Effective marketing generates revenue, but only efficient management makes profits. “If you can‘t measure it you can’t manage it.” Measuring marketing performance is essential if management is to produce the profits, and meet the objectives of the business plan to fulfil the business’s strategic purpose and vision statement.
© N.C.Watkis, Contract Marketing Service 27 Apr. 06
Contract Marketing Service, (Specialists in Measuring Marketing Performance
and Return on Marketing Investment.)