Why is measuring marketing effectiveness so important?
“… a new marketing era is dawning. Media fragmentation, addressability – including TV and interactivity were accelerating a dramatic shift in consumer purchase behavior…This new landscape, pioneering marketers were embracing ‘Left Brain Marketing’ practices – the rise of analytical marketing strategies, skills and processes that are centered on audience knowledge, not media.”
1. Add up all costs associated with advertising. These costs can include development, retainer fees, cost of media, equipment, air time, actors, telemarketing, shipping and handling, testimonials, etc.
2. Review the CPO (Cost Per Order) model. This model looks at the direct profits that are associated with each product sold and the television media costs per order.
3. Subtract the expenses from the revenue of each item sold. This is your gross profit for that product. Let's say you have a product that sells for $150 and costs $50. Your gross profit is $100.
Cost of Radio Advertising: $ 300 Number of Items Sold As a Result: 50 Retail Price of Individual Item: $ 20 Profit on Individual Item: $ 6 Gross Income on Items Sold: $1000 Gross Profit on Items Sold: $ 300 In this example, you have spent $300 to make $300. Your ROI is 100%.
Cost of Newspaper Advertising: $150 Number of Items Sold As a Result: 60 Retail Price of Individual Item: $ 10 Profit on Individual Item: $ 3 Gross Income on Items Sold: $600 (60 x $10) Gross Profit on Items Sold: $180 (60 x $3) In this example, you have spent $150 to make $180. Your ROI is 120%.
Pros: The Direct Marketing Association claims that direct mail earns $10 for every $1 invested
Cons: Expensive, and costs are rising due to USPS rate hikes; lots of room for error; not all DM campaigns can be compared apples to apples; not viewed as “green” or eco-friendly
Best practices: Test DM with a small group before you send to a large group to gauge early response rates; soft offers (free gift) tend to work better than hard offers (free trials, free consultations); use segmentation for higher response; watch the source of your lists; collect bounce responses; use strategic creative
“ One of the things we look at when we do Web analytics is to look at organic, unpaid traffic, versus paid traffic from purchased keywords,” said Tom Pick, an online marketing executive at KC Associates. “We then split this traffic into branded versus nonbranded searches. Nonbranded searches are due totally to SEO; but branded searches, when they’re looking specifically for your company, have nothing to do with SEO. They have to do with everything else you’re doing, like talks, PR and advertising. When companies slow down those activities, their branded search levels go down.”
Pros: Testing variations in copy and creative can tell you what your customers are most interested in; results come quickly; can be cost effective
Cons: Impressions (the number of times the ad was delivered) can’t tell who might have read or ignored your ad, CTR may not be a good indication if the click was an accident; not right for every business; may need a vendor to manage PPC activity
Best Practices: Consider a short-term test, if you don’t see results after 3 months reconsider moving forward; Link to specific pages with the product you mention in your ad, track analytics of this page and sales conversions
Pros: Offers real-time information on your audience (results in 48-72 hours); Identify recipients who are most active; can be cost effective $0.01/email or based on volume (after initial set-up costs)
Cons: Surprisingly some companies do not utilize email analytics reporting at all for mass mailing and others underutilize the information
Best Practices: Build a list over time that exceeds legal requirements (quality over quantity); Learn what recipients open, click on and respond to and build future mailings around this information; Reference Google Analytics to see what clicks lead to a sale
Pros: By tying a communications program metrics to the company’s key performance indicators, the value of PR campaigns can be shown by demonstrating trends of how the company is perceived
Cons: Some traditional PR measuring tools are quantitative (attendance at events, number of clips) not qualitative (don’t measure tone of clip) and may give an inaccurate depiction of value (advertising equivalence values and impressions)
Best Practices: Utilize surveys to measure reputation and relationship metrics before, during and after a PR campaign; Factor in 3-7% of your budget for measurement (surveys, focus groups, media analysis, etc.); Consider short-term (meeting goals) and long-term value (building goodwill)