Let’s face it: You cannot always measure the efficiency of marketing in an exact way

Marketing is not the same as business

It is certainly not true that the only goal of marketing is to sell. Of course marketing must contribute to the company’s profit (just like any other activity in the company). Especially if we talk about marketing in its entirety (i.e. the “4Ps” - product, price, place, promotion), it is obvious that finding a clear “cost-benefit” link is virtually impossible.

But even if we narrow our focus to marketing communication only, we are not out of the woods with measurability. After all, marketing is about better or worse communication (with customers, employees, the public) and about emotions. But trying to quantify the benefit of communicating better with customers or having a positive emotion towards us would be naive.

The whole topic of marketing effectiveness needs to be viewed from several angles.  It is necessary to accept that not everything can be evaluated in an exact way. And sometimes there is no choice but to rely on feelings and intuition (both ideally combined with experience and knowledge).

The perspective of time

As we know, time is relative. This is true not only in physics, but also in communication. It makes a fundamental difference whether we evaluate the benefits of marketing activities in the short or long term.

In the short term (days, months) we are often able to assess the benefits of performance marketing channels very accurately. This is especially true for online marketing, where we use various attribution models to evaluate which marketing channels are profitable and which are not. We boost what works and stop what doesn’t. In other words, we are learning as we go and based on our newly acquired knowledge, we are constantly trying to do different activities better and more efficiently. It could be information from Google Analytics that helps us find out what works or doesn’t work, information gained from a marketing survey with a customer, or even testing a new technology.

In the long run, the situation is fundamentally different. Everyone agrees that branding makes sense. After all, goodwill - or brand value - is also valued in accounting terms, and all the big well-known brands are astronomically valuable. The push comes to shove when the topic of branding investments comes up. How much to invest in the brand, what budget to allocate? What is the return on branding? What does €40 invested in promoting brand awareness bring? In the short term, nothing at all. But in the long run, an increase in brand awareness.

With that in mind, we need to look beyond the horizon of “one election period”. The following questions need to be asked:

1. What is my market position? 

Do I care how the brand will appear to customers? What are the competitors looking like? Is it important to customers? It makes a difference if the brand wants to appear luxurious, hi-tech or discount-like. If it’s a discount, the presentation can be simple (and cheap). If luxury, communication is likely to be exponentially more expensive. If I’m a monopoly, I almost do not have to care what the presentation looks like - but the more competitive the market is, the higher are the requirements of the quality of presentation.

2. What should market share look like in 5-10 years? 

If we want to gain it, the increase in brand awareness or media budget must match it. It has to be sufficient to ensure a “share of voice” that matches the company’s stated long-term growth objectives, the activities of its competitors and, of course, its financial capabilities.

3. What is the budget available? 

I need to get a good handle on how much I can and want to afford to invest in brandbuilding on an ongoing basis over the long term. I also need to include the cost into the selling price – which must remain competitive at the same time. An example where a brand invests heavily in marketing is Red Bull – the cost is a dominant part of the selling price.

The perspective of practicality

The evaluation of the effectiveness of promotion is based on data under the motto “what I don’t measure, I don’t manage” or “what I measure, I can work with and manage”. In today’s digital world, many indicators can be measured, but in practice there are a wide range of challenges that complicate the evaluation.

For example, the following phenomena are typical issues that block actionability:

• There is no data. Some examples of this are when Google Analytics measurement is not working well, the cookie bar is blocked, or you can’t see the success rate of a deal in the CRM system. In these cases, technical and process issues need to be resolved and the cause of the missing data needs to be addressed.
• There is too much data. The opposite phenomenon is where, although the data is available, it may be fragmented across different systems so that no one in the company can piece together a meaningful picture of reality from it (or only in a one-shot, and with disproportionately high effort). The solution is to create a “single source of truth” that will continuously aggregate data into one place and create clear management reports from it. It’s a very technical thing - if you need help with this, feel free to reach out to our colleagues at Databy.
• There is only the bare minimum of data. If you only have single units of conversions (typically B2B, very niche products or services), the information you get is statistically inconclusive and you have to accept the fact that you’ll have to bet on feelings rather than data. It doesn’t mean your campaigns are running poorly, but to navigate only by data misses the point here.
• The data varies. An example can be a situation where the data from the advertising system and Google Analytics report different conversion values. In this case, you need to go back to the path of finding what makes sense and return to the “single source of truth”.
• You’re not just online. If you’re moving beyond the online space, you can’t measure everything. An example would be a company that has both online campaigns and TV advertising, and sells both online and in physical stores. In certain cases, it can help to try marketing mix modeling instead of the traditional Google Analytics approach. This is an econometric modeling that can better capture reality, including brand building.
• The decision cycle is long. If the data comes in with such a delay that it cannot be attributed to marketing activities (typically B2B industries with multi-year decision cycles), again you need to move away from “numerical evaluation” and also put on knowledge, experience and best practices.

The perspective of meaningfulness

Sometimes it is useful to step back from current activities and ask yourself whether they make sense. Once you have enough data to evaluate, the situation is relatively easy. I evaluate, I decide. And so it goes over and over again.

The mere existence of data is a necessary condition, but far from sufficient. Everything works on the premise that you know which KPIs are correct and that you are able to evaluate them. This means that the knowledge and experience of the marketer is important. A typical mistake that some marketers tend to make is, for example, evaluating brand campaigns with performance metrics. It really doesn’t make sense to evaluate a banner brand campaign by cost per conversion…

If I don’t have enough data, sometimes I have no choice but to focus on qualitative characteristics:

• Does it make sense? Do we know why we’re doing it? Aren’t we just doing something out of old habits?
• What is the benefit of this activity? Does it serve anyone? Will customers appreciate it?
• Can I afford to fund the activity at the risk of it not delivering anything?
• Is it realistic that the money invested in the activity will pay off in the long run?
• Is there room to grow brand awareness? In which target group? With regard to customer buying behaviour?
• Are there analogies I can stick to?
• Is there at least some microdata available to reassure me that I am moving in the right direction?
• Do I have enough knowledge and experience to be able to make decisions based on intuition? Do I have an expert on hand to consult?

Advertising can therefore be evaluated from multiple perspectives - and there is no simple solution. You always have to consider two factors: Do you have data or not? And does the activity make sense or not? 

The activity makes sense and I have the data

Great. This is the best option. If the data works out, you know you can continue the activity with peace of mind and address ongoing optimization.

If the results are not satisfactory, you need to change something or stop the activity. In online marketing, we often see that the profitability of performance campaigns is not positive. In that case, we need to look for potential in optimizing campaigns or managing them better. Managing it for margin maximization may be the way to go.

Activity makes sense but data is missing

If the activity itself makes sense from some perspective, although you are unable to quantify the outcome, it is a good idea to continue with it. Management by knowledge, experience and intuition alone has the advantage of being very fast.

The other side of the same coin is though, that decision making is subjective and based on the individual skills and attitudes of the decision maker. Therefore, it can easily happen that the decision is a priori wrong because “I don’t know that I don’t know” and I make the wrong decision due to lack of experience or operational blindness.

It is a good idea to rely on best practices, proven guidelines and try to ask experienced colleagues for their opinion or consult experts – at least from time to time.

I have the data, but I don’t see the point

If I can see from reliable data that an activity does not make sense, the situation is simple. The activity needs to stop immediately. And if I have data that I don’t understand and therefore can’t evaluate, I need to get advice from someone more experienced.

I don’t have the data and the activity doesn’t make sense

This situation is a dead end that needs to be broken. This means either getting data or finding meaning.

In conclusion, evaluating the effectiveness of marketing cannot be solved by hard data alone. There is no choice but to accept this and sometimes purposefully use knowledge, experience, intuition, best practices or expert advice. However, it is certain that both the quantitative approach and the qualitative approach have their limits, and for best results, both approaches need to be combined. 

Let us help you with strategy and evaluation

Do you want your marketing to make sense? A properly set strategy simplifies decision-making and makes not only the marketing, but also the business activities more efficient. At Proficio, we can help you with research and analysis, setting up a strategy and setting the right OKRs and KPIs – our strategists are the true professionals.

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