Financial and Non-Financial Metrics for Quantify the Effectiveness of Marketing Campaign - Essay Example

FINANCIAL AND NON FINANCIAL METRICS FOR QUANTIFYING THE EFFECTIVENESS OF MARKETING CAMPAIGN (MARKETING ANALYTICS) Marketers use the data from different sources carrying insight about the market using various techniques to plan marketing campaign for growth (Winston, 2014). Success in use of such data is to be reflected in the results of marketing campaign’s effectiveness. There has been constant debate on the appropriateness of the metrics to be used for the measuring the effectiveness of the marketing campaign. FINANCIAL METRICS The financial metrics that can be employed for assessing the performance of the marketing campaign included Return of Marketing Investment (ROMI), Increase in Profit, Net Present Values (NPV), Internal Rate of Return (IRR) and Customer Life Time Value (CLTV) etc. Verhoef and Leeflang (2009) assert the idea of financial metrics and state that influence of marketing department in the organisation is positively associated with the financial performance of the firm. Importance and role of the financial metrics for the effectiveness of the marketing campaign can be clearly assessed from the B&K Distributors. The company integrated marketing and communication tool for building its access to the potential customers. The use of the financial measures revealed clear future potential. For example, the growth potential was estimated to increase at 6% as compared to the inflation rate of 3%. Similarly, increased fixed cost for the IT system integration was also justified with 1% as compared to the 3% of the other channels investment (Jeffery and Anfield, 2006). Hence, in the similar format the cost of the entire project is assessed against the revenue and cost savings. This empirical evidence provides sound basis for the decision making in alignment with the main objective of the business which revolves around profitability. However, the net and actual increase in return is not defined after discounting the investment against factors such as the cost of capital which is 12% and has considerable impact on the return inflows. This makes the investment and the claimed benefits questionable. Also the marketing activities with long term objective are also required to reflect on other parameters such as increase in customer loyalty and image of the company etc. It is important to notice the measure to enhance the image of the company by signing contract with leading fast food chain did not fetch to B&K significant business from independent franchisees. The new plan of IT integration and respective financial metrics and growth projections are again silent on impact on above mentioned parameters. In no contradiction to this fact that empirical evidence provide concrete grounds to justify the marketing campaign investment, the question lies in understanding the different between the overall marketing effectiveness than simply measuring financial benefit. According to Wyner (2008), understanding of the difference between mere ROMI (and other financial measures) and marketing effectiveness is critical. The victory of achieving the desired financial saving or net income would be hollow victory if the overall objectives set forth for the marketing are not met (Wyner, 2008). The case of the B&K Distributors has apparently managed to win numerical case draft of the communication campaign. On the other hand, marketing campaign could not define the way it aims to trigger purchase intention among its customers to select B&K Distributors. It was mentioned that one of the reasons for this inability was limited personnel capacity of the B&K to reach out customers (Jeffery and Anfield, 2006). Hence, the financial measures have declared clear potential to reach out customers; but are silent on effectiveness of the campaign to generate sales lead by successfully passing through the customer decision making funnel. Financial measures generated in response to the marketing campaigns have often been contrasting. For example, Apple’s campaign to reduce the price of Apple’s new cell phone by USD 200 led to the negative financial measure in terms of stock price (or shareholders’ value). The event led the price of Apple stock to slide down by five percent (Information Week, 2007). On the other hand, the financial impact and measure if taken in terms of share price value then share price of General Motors increased to 2.4% on GM’s announcement of extended warranties in 2006 (Chon, 2006). B&K has only created the assessment with respect to reduction in cost and increase in revenue. The system defined is mainly using the method of Activity Based Costing where cost and benefit of each contribution is assessed and the overall or the holistic impact on the company’s growth is not assessed. Moreover, over the period of five years, the IT integration can only reduce the web based channel by 12% (from 60% in first year to 48% in the second year). In the fast paced world of today, the IT integration is commonly being picked by businesses, Complimented with the saturated condition of the market where growth is only 2%, this pace transforming customers towards the new channel is considerable slow. Hence, financial measures often lack to predict the intangible and non- empirically measurable value that comes along the marketing objectives. Therefore, before investing in the new IT system, it is important to assess the NPV of the proposed IT plan while considering the sensitivity analysis such as change in percentage of response both positively and negatively. Also, it must explore factors that are creating the customers loyalty towards competitors and shall ensure integration of such factors in proposed plan. This will increase the effectiveness of the campaign. NON-FINANCIAL METRICS Non financial metrics, as name signifies, are those metrics that does not provide the empirical ground for the effectiveness of the marketing campaign. Some of the metrics include value of the branding, customer loyalty, customer satisfaction, comparative marketing activities and overall performance of the marketing campaign. All these non-financial metrics have an increasingly important role in the business today. For example, Liang, Wang, & Farquhar (2009) assessed the impact of the customers’ perception, trust, and loyalty on the financial performance of the organisation and established positive relationship. Most importantly, the result of the similar study states that effectiveness of these measures translates into repurchase intention which in turn brings financial benefit to the firm (Liang, Wang, & Farquhar, 2009). The case of DuPont NASCAR marketing has clear implications. The case did not provide any apparent empirical evidence or ground to justify investment. However, the marketing campaign was highly effectives as it succeeded in winning the customers’ attention at large. For example, comment of the Sally Clausen posted on the website of NASCAR.com revealed the long term impact of DuPont marketing and its brand impact. This customer awareness generates indirect success and financial benefit to the brand (Jeffery, 2007). The impact can be understood from the results established in the study of Trusov, Bucklin, & Pauwels (2008), which states that word of mouth has 20 and 30 times higher elasticity as compared to the marketing and media appearance respectively. The similar study further states that referral carryover effect of the word-of-mouth is much larger when compared to the traditional marketing actions as Tyvek Flashing Systems schemes generated overwhelming response (Villanueva, Yoo, & Hanssens, 2008). Therefore, overall non-financial measures have made its success such as on 25 June almost 75 million of U.S. NASCAR fans were stuck to the product logos and impressions of various DuPont products while looking for Jeff Gordon. The concern of the organisation from every aspect is the financial benefit. For the purpose, organisations do not necessarily rely on the financial measures only. The case of DuPont NASCAR marketing has also reported such evidence where financial benefit is reported; though not in the form of the financial measures. The customer example of the ken Odem, CEO of the Aeropres which was leading propellant manufacturer and distribution company turn into a NASCAR fan as a result of comprehensively planned campaigns of DuPont. (Jeffery, 2007) Moreover, the clearly generated financial impact was the doubled size of the Aeropres business with the DuPont during 2001 to 2006 (Jeffery, 2007). This financial benefit is just one case to mention. Moreover, the strategy of the plan to serve the customers of the high value clients is also important to develop strong bonding with the customer which ultimately translates into the financial benefit. The clients of the DuPont would in turn develop the positive attitude towards the company as one who cares for their (customers’) customers. It can be inferred as a result of phenomenon using which the social cause related marketing gains benefit. Studies reveal that customers develop positive attitude towards the companies investing in social cause and develop the purchase intention for such organisations. Moreover, study also established that this trend is higher among women as compared to men (Ross III, Stutts, & Patterson, 2011). The statistics of the NASCAR fans have also increased the percentage of women. This in turn can generate greater number of women decision makers in the client base of the DuPont as women might give extra consideration to the products of DuPont on the basis of loyalty (Jeffery, 2007). Hence, there has been constant increase in the exposure of the DuPont products to the customers and DuPont is required to make financial assessment of these factors. For example, the change in the growth of sales revenue generated from the customers whom were provided passes for their respective clients has much potential to explore. DuPont can associate the pass distribution to a system where clients will be awarded certain free passes in addition after exceeding certain level of sales order. Similarly, end customer can also win the direct pass on having DuPonts products being used for their cars. Change in sales number of different products on changing their respective position on the Gordon’s car and uniform will provide the empirical evidence for the sales of new products. CONCLUSION The objective of the effective marketing campaign is to win the customer preference over competitor. However, this is only single objective working behind the real marketing objectives that brings success to the organisation in gaining competitive edge. The successful marketing campaign’s effectiveness must be gauged in all possible ways that result in customers spending least time in consideration every time need is identified. The two cases discussed focussed on the extreme of relying on single form of metrics which resulted in vacuum of overall assessment of impact. Therefore, the combination of financial and non-financial measures shall be employed for measuring the effectiveness of the marketing campaigns. The non-financial measures to be used to identify and govern the factors and trends that lead to required pattern of buying behaviour, while on the other hand, the financial measures to evaluate the overall financial benefit. For example, Softer Side of Sears campaign had positive financial measure based results. The campaign also resulted in the driving the traffic to stores; however, the lack of effective merchandising resulted in customers’ disappointment and the campaign failed (Wyner, 2008). This implies that marketing campaign shall be defined as a wholly coordinated strategy in accordance to the three components defined in the analytics model presented initially. This would require the marketers to measure non-financial measures that are often concerned with driving and governing the behaviour while the using financial measures for the development of the empirical evidences. Moreover, while financial metrics provided direct evaluation grounds, the strength and role of gaining non-financials metrics can be gauged using surveys etc. Hence, the focus shall remain towards achieving the marketing objectives and not the selection of measures only. LIST OF REFERENCES Chon, G. (2006). GM Ups the Ante in Warranty war. Available from http://online.wsj.com/news/articles/SB115755049294755067 [Accessed 1 February 2014] Information Week. (2007). Apple Stock Tumbles Adter iPhone Fiasco. Available from http://www.informationweek.com/news/showArticle.jhtml?articleID=201804925 [Accessed 1 February 2014] Jeffery, M. (2007). DuPont – NASCAR marketing. Kellogg School of Management Jeffery, M., and Anfield, J. (2006). B&K distributors: calculating return on investment for a web based customer portal. Kellogg School of Management Liang, C. J., Wang, W. H., & Farquhar, J. D. (2009). The influence of customer perceptions on financial performance in financial services. International Journal of Bank Marketing, vol. 27, no. 2, pp. 129-149. Ross III, J. K., Stutts, M. A., & Patterson, L. (2011). Tactical considerations for the effective use of cause-related marketing. Journal of Applied Business Research (JABR), vol. 7, no. 2, pp. 58-65. Trusov, M., Bucklin, R. E., & Pauwels, K. H. (2008). Effects of word-of-mouth versus traditional marketing: findings from an internet social networking site. Robert H. Smith School Research Paper No. RHS, 06-065. Available from http://164.67.163.139/Documents/areas/fac/marketing/bucklin_effects.pdf [Accessed 1 February 2014] Verhoef, P. C., & Leeflang, P. S. (2009). Understanding the marketing departments influence within the firm. Journal of Marketing, vol. 73, no. 2, pp. 14-37. Villanueva, J., Yoo, S., & Hanssens, D. M. (2008). The impact of marketing-induced versus word-of-mouth customer acquisition on customer equity growth. Journal of marketing Research, vol. 45, no. 1, pp. 48-59. Winston, W. L. (2014). Marketing Analytics: Data-Driven Techniques with Microsoft Excel. John Wiley & Sons. Wyner, G. (2008). Marketing effectiveness: it’s more than just ROI. Available from http://www.cips.org/Documents/Membership/MillwardBrown_MarketingEffects_Feb08.pdf [Accessed 1 February 2014] Read More