What Is Marketing Effectiveness? A Guide for Marketing Decision Makers

By Aidan Mark, Global Director, Performance Strategy at CvE

Marketing effectiveness has a simple definition with years of research that sits behind it, but the application of these learnings is not common practice in digital and growth marketing teams. For anyone responsible for growth in large and famous brands, it is vitally important that you understand the concepts that are involved and how there is a fundamental difference between marketing effectiveness best practice and the training that is often taught in digital marketing.

In this guide we will cover:

  • What is Marketing Effectiveness?
  • Marketing as a Profit Centre
  • How Digital Attribution is Commonly Misunderstood
  • Building a Culture of Effectiveness

What is Marketing Effectiveness?

Let’s start with a simple definition… Marketing effectiveness relates to how effectively marketing delivers on business objectives. Ultimate success is typically measured in terms of incremental sales, revenue, profit, or market share. Success from marketing should reflect how marketing is expected to contribute towards business growth, of which there are many different routes.

Effectiveness practitioners use a variety of very different techniques to judge marketing efficacy, which when practiced correctly are rooted in scientific method. As such, these studies offer a powerful lens on which to assess the contribution of marketing, a lens that is not only accurate and impartial, but also demonstrative of how marketing is actively contributing towards business success.

Marketing effectiveness studies typically use a lot of data, often from disparate data sets, and use data in a structured and methodical way to ensure conclusions are reliable and repeatable. It is not possible to get an accurate marketing effectiveness report via any online platform. As such, decision makers should be aware that readily available data sources such as Google Analytics, Media Platforms of automated Digital Attribution are NOT measures of marketing effectiveness, because the automated reports that come from those platforms do not follow scientific method, and in addition they do not quantify success based on incremental business metrics. These platforms still offer useful insights, but marketers need to understand that there is a difference between efficiency and effectiveness metrics. Efficiency metrics are typically most available to the marketer, whereas effectiveness metrics tend to be more powerful yet less available.

There are a few other common characteristics of marketing effectiveness research and studies:

  • Marketing effectiveness research accounts for the medium- and long-term benefits of marketing
  • Marketing effectiveness strives to measure all the commercial benefits of marketing
  • Marketing effectiveness accounts for cross channel media consumption cross channel sales
  • Marketing effectiveness recognises the contribution brand reputation plays in influencing shopping behaviour
  • And to reiterate the most important element… marketing effectiveness deals in incremental metrics only

There is no one singular tool or technique used to calculate marketing effectiveness. Instead, practitioners rely on a variety of techniques to produce an evidence based approach that builds confidence in its findings and conclusions. Indeed, it is only when findings are consistent between different research methods the findings become robust and conclusive.

Marketing as a Profit Centre

Given that most businesses ultimately want to generate profit and to increase shareholder value, Apple is an obvious brand to examine from a marketing effectiveness perspective. Apple is the most valuable business to have ever existed, and they take 80% of smartphone profits worldwide.

Apple’s achievements are especially impressive when you see that their hero product, the iPhone, typically retails for 50% more than the leading competitor, Samsung. Being able to command this huge price premium is one of the reasons that Apple can generate so much profit.

So how do they do it? And what can their story teach us about marketing effectiveness?

Apple’s first step into global consciousness happened at the Superbowl in 1984 with their iconic Macintosh TV advert, named after that same year. Whilst the Macintosh product itself was considered a commercial failure, the 1984 ad drove fame, popularity, and reputation which won Apple a legion of fans. Apple would go on to monetise this reputation over the following decades, with most corporate historians would place the 1984 ad as being a crucial catalyst in Apple’s history of growth.

Attribution is Misunderstood

To practitioners of digital marketing, it might sound strange to claim that an ad made almost 40 years ago would be responsible for revenues today. This is because the practical and day to day meaning of marketing effectiveness has evolved with the practices of the modern and digitally enabled era.

Unfortunately, that means that attribution and marketing effectiveness are often assumed to be one and the same thing. They are not. This can be better understood when you consider the full breadth of business effects that have been proven to be positively influenced by successful marketing. Marketing has been proven to help businesses generate more sales, gain new customers, improve retention rates, gain market share, and reduce price sensitivity…. all of which help ladder up to larger and more reliable profits. Unsurprisingly, Apple is amongst the best in the world when assessed on any of the metrics that marketing has been evidenced to influence.

Of the marketing driven benefits mentioned above, it is only sales gain that can ever possibly be captured in the attribution models that are commonly used to judge whether marketing is effective. The missed opportunity for brands is seen when you consider that the majority of marketing driven profits occur in the long term.

Marketers that rely on simple digital metrics cannot ever possibly see the long-term benefits of good and effective marketing. Indeed, marketers own self reporting suggests that most businesses are not well equipped to recognise or accurately report on marketing effectiveness.

To compete with the likes of Apple, brands need to ensure they are optimising for long term metrics that suit the brand’s growth strategy. One such metric that most brands should consider is Brand Fame. IPA & Thinkbox research shows that brands that deliver fame from marketing typically have the least price sensitive customers.

So, it should come as no surprise that Apple uses a variety of different long term success metrics, including fame and favourability. This is a form of growth marketing, but one that optimises long term profit ahead of short-term revenue.

Building a Culture of Effectiveness

We believe there are 4 steps that growth marketers can take to ensure their work drives continuous growth:

1. Develop a business effectiveness roadmap, starting with marketing

An effectiveness roadmap is about having a coherent strategy and plan for continuous improvement. IPA research suggests that businesses that develop roadmaps around the areas of Focus, Process, People and Measurement tend to have immediate and recognisable gains in effectiveness.

It is important that these steps influence decision making throughout the business, so gaining buy in from senior leadership, finance and data stakeholders is vital.

Of course, the approach to effectiveness will differ from one business to another. It is important to align business maturity to measurement approach. At CvE we have developed a marketing effectiveness sophistication model which helps businesses to identify the best set up for their specific needs. We will outline this model in the final edition of this this content series.

2. Build a balanced measurement scorecard that combines the most important long-term & short-term metrics

What gets measured gets managed, so ensure you are measuring the most important metrics that contribute to growth. As we have shown in this article, digital teams tend to use easy to measure short term metrics by default.  Businesses like this will generally benefit from monitoring brand awareness and reputation, to ensure that marketing is playing an active role in positively influencing how consumers perceive the brand and their offering. As brand building plays an active role in driving incremental sales and profit, it is vital that this is recognised within a marketing measurement framework.

For smaller brands, measuring brand reputation can often be seen as an expensive luxury. But technology and the availability of data is changing things. Effectiveness guru Les Binet has shown that Share of Search can be used as accurate predictor of future market share. Whilst this is not same as using a brand tracker, Share of Search is a low-cost proxy that any brand could develop in-house using publicly available Google Trends data.

It is also important that this measurement scorecard reflects the strategy of how the brand intends to grow. By way of an example, if you plan to sell your product at a price premium, you will need to ensure that your target audience really does perceive your offering to be superior to those that are available from competitors.

3. Use a mixed measurement model to understand channel contribution

There are 3 ways that marketers can attribute sales & revenue to a marketing channel; channel attribution, Marketing Mix Modelling (MMM) and via controlled experiments. Each will give their own unique estimate on the contribution of marketing. The mixed opinions coming from these estimates often build distrust. The reality is that none of them are 100% accurate, and they each have their own strengths and weaknesses.

Marketers should seek to triangulate these estimates to gain an evidence-based view. When taking learnings from each discipline and applying these to another, the results from each discipline become more aligned. Over time they give consistent and accurate results, which builds confidence budgets and forecasting.

4. Gain an Independent and Expert review of Marketing Effectiveness

Business decision making is subject to considerable politics and bias – people and teams want to associate themselves with success and distance themselves from failures. Stakeholders with budgets want to have the highest possible confidence that their investments will generate positive return on investment, and this confidence is best gained from an independent view from experts which is especially important in a period where data availability is changing rapidly.

In the next article in this content series, we will outline the challenges involved in measuring marketing effectiveness.

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