Griniute, I, (2012) has researched into the Measurement of Marketing Communications Performance for B2B Organizations. The study was to investigate the problem by looking at the case of DHL Supply Chain a division for the DHL group.
The findings of this thesis suggested that the current information has flooded and many various sources available have created difficulties for organizations to select the most relevant KPIs and implement measurement. Budget as we all know, plays a significant role when it comes to choosing measurement tools and frequency of measurements. The bigger the budget a marketing communications department is given, the higher is the need to track the money and ensure visibility because managers require marketers to be accountable respectively. In terms of metrics, organizations must be aware that some of them such as impressions can be subjective.
A system of marketing metrics
Today, there is A system of marketing metrics, Ambler (2008) discusses what marketing metrics can do for any organization:
- Brands’ activities in the market; for example, new product launches, price increases, changes in pack size, and so on
- How the market is reacting to these changes; for example, how buyers are buying, at what prices, and so on
- How brands’ market-based assets are holding up
Marketing metrics gives a baseline, which checks and balances and that Marketing performance, should be assessed using a combination of short-term cash flow, or profit, compared with a valid benchmark, e.g., a plan, and a proxy for the change in future cash expectations due to the marketing activities for a given period.
The Financial Measurement of Marketing Performance
Managers would like a single number, representing profit in some way, for each alternative ways of meeting customer needs. The plan selected would be the one with the highest number would be selected. And then they would like to assess performance by comparing the actual resulting number with the one predicted in the plan. We call this single number a “silver metric”, and it is the common goal of a number of methodologies such as ROI or DCF.
Return on investment (ROI) is used to compare capital projects where investments are made once and the returns flow during the following years. ROI is the net return divided by the investment or, more correctly, the incremental profit as a ratio of the incremental expenditure.
- ROI has become a fashionable term for marketing productivity and used to describe any type of profit arising from marketing activities. The American Marketing Association White Paper (American Marketing Association 2005:8) on marketing accountability identifies six “ROI Measures Currently Used” this could also be located under Measurement%20of%20Marketing%20Communications%20Performance.docx#ROI
- ROI gives Incremental sales revenue
- Ratio of cost to revenue
- Cost per sale generated Changes of financial value of sales generated
- Cost of new customer (sic)
- Cost of old customer retention
Discounted Cash Flow is the basic methodology for a number of apparently different techniques: net present value (NPV), brand valuation (Perrier 1997 cited in Amber 2002), customer lifetime value (CLV, Venkatesan and Kumar 2004; Gupta and Lehmann 2005), customer equity (Rust, Lemon, and Zeithaml 2004) and, usually, brand valuation (Ambler et al.2002).
This techniques can be used to compare alternative investments and also for regulating utility prices. There are few issues with the usage of DCF techniques for performance evaluation due to time, planning and comparison of alternative future scenarios; however, whatever the tools deployed, the performance of any organisation depends largely on its intended usage and positive outcome received.
Mintz (2013) finally states for managers to employ both marketing and financial metrics to assess the performance of the marketing mix activity. There may be financial uncertainty encountered, however it is expected that the greater the number of marketing versus metrics employed, better decisions are perceived for better performances.
By Jacinta Tupuola-Maua
Ambler, T, Roberts, JH (2008). Assessing marketing performance: Don’t settle for a silver metric
Griniute, Ilona, (2012) Measurement of Marketing Communications Performance:
Implications and Theory Building for B2B Organizations. Masters Thesis, AARHUS NIVERSITY