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How To Measure Marketing Activities

Marketing is a critical activity for any business that is not in a monopoly supply position or operating in a marketing where demand overwhelms the ability to supply. But how can you measure marketing and know if it is working?

“Half the money I spend on advertising is wasted. The trouble is I don’t know which half” is a famous quote from John Wanamaker, a department store entrepreneur in the late 1800s and early 1900s.

One hundred years later, it’s still a sentiment that many business owners and senior managers can relate to.

The Two Types Of Marketing

I normally talk about the two types of marketing being the difference between search marketing and outreach marketing:

  • Search marketing – making sure your business is found when a customer or prospective customer is looking for suppliers.
  • Outreach marketing – reaching out to target potential customers to encourage them to take action to contact you before they begin searching more generally.

Today I want to refer to a different two types of marketing activities:

  • Brand building – promotional activities to increase the awareness of a brand name and (hopefully) the brand positioning, i.e. what the brand stands for and means.
  • Direct response marketing – actions taken to encourage a customer to make contact with you immediately.

There is some crossover since direct response advertising can also help to build brand awareness depending on the extent to which the business name and any slogan is emphasised in the promotions.

A classic example is how copywriting entrepreneur Joe Sugarman built a brand around JS&A with a reputation for innovative “technical” products. If you look at his advertisements you will see that he leads with a headline about the product he is selling but in the bottom right hand corner is the JS&A logo.

Brand building relies on the drip drip effect of regular exposures to the name and a positioning phrase or concept into the minds of potential customers. Sometimes all it takes to win a sale is brand name familiarity. It gives buyers reassurance that the product quality is probably good because the brand is so well known to them whilst product names that are unfamiliar carry more risk.

Generally speaking, I think small businesses should concentrate most of their marketing efforts on direct response marketing but use these customer contacts to also spread knowledge of their brand.

Since the initial purpose of these two types of marketing is different, you have to measure their performance differently. The ultimate purpose of both is to increase sales and direct response marketing has an immediate effect and brand building takes months or years.

Measuring Brand Name Awareness

Big companies will survey consumers and possible customers with a series of questions like:

  1. What is the first brand name you think of when you think about the particular product category?
    .
    Ideally you want to have top-of-the-mind awareness. To be the first name recalled without any significant effort conveys a big advantage, especially when it’s not a product or service you buy or use regularly.
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  2. What other brand names can you think of in the product category?
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    If you’re asking, you need to capture the order that the names are mentioned but also whether they come to mind easily or the person has to think carefully.
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  3. What does a particular brand mean to you?
    .
    Knowing the brand name isn’t enough for effective marketing, potential customers need to know what the brand stands for, whether that’s favourable or unfavourable and whether it’s what the management want to brand to mean.
    .
    A question I encourage my clients to ask their customers so that we can understand the current brand positioning is “What three words or short phrases would you use to describe our business (or product)?”
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    It’s a question that’s easy to ask and to answer. Try yourself with makes of cars. e.g. Volvo might produce something like – reputation for safety, Swedish, quite expensive. You can see that’s different from BMW which are in similar price brackets.
    .
  4. Do you have a favourable or unfavourable impression of this brand? How would you rate it on a scale of 1 to 10, 10 being excellent?
    .
    This question deals with the situation where a brand may be well known and have a clear position in the mind of the potential customer but where the impression isn’t as good as you’d want it to be.

In theory, the better your brand name is known and the clearer the positioning it has, and the more favourable the impression of the brand, the more successful the brand based marketing should be, eventually leading to higher sales revenue.

Measuring Direct Response Marketing

The entire premise of direct response marketing is that it should lead to a measurable response from target customers. This then lets you test different elements within the marketing message and, over time, find the headlines, offers, prices etc that generate the best responses.

I recommend you ask people who make contact with you two questions:

  1. How did you hear about our business?
    .
  2. What encouraged you to contact us today? This may be a result of your marketing promotion or it may be due to the buyer’s own situation.

Keep a record of their details and then track whether they convert to become customers, and if they do, how much their initial spend and profit on that sale is, along with the revenue or preferably profit generated over various stages of the relationship.

It’s a mistake to assume that a marketing method that generates the most responses also generates the most customers and the most profit. Some methods can produce much better quality leads than others.

It’s a good idea to use response codes in your direct marketing promotions. You would ask the customer to quote a unique reference to gain access to a particular offer so that you know the make-up of the marketing message.

Eg if you’re testing three headlines and two different prices, you have six options which you could code C01, C02… to C06 where:

  • C01 is headline 1, price 1
  • C02 is headline 2, price 1
  • C03 is headline 3, price 1
  • C04 is headline 1, price 2
  • C05 is headline 2, price 2
  • C06 is headline 3, price 2

To make things even easier, you could directly code the numbers  where the first number refers to the headline option and the second number refers to the price option, making them C11, C21, C31, C12, C22 and C32.

Once you track the results of sending 100 letters out for each to a random list of targeted customers you may find the results are:

  • C11 – 6 responses
  • C21 – 2 responses
  • C31 – 4 responses
  • C12 – 9 responses
  • C22 – 3 responses
  • C32 – 7 responses

You can then analyse this to see that:

  • Headline 1 has 15 responses (6 + 9)
  • Headline 2 has 5 responses (2 + 3)
  • Headline 3 has 11 responses (4 + 11)
  • Price 1 has 12 responses (6 + 2 + 4)
  • Price 2 has 19 responses (9 + 3 + 7)

This suggests that the winning combinations are Headline 1 and Price 2. However because you’re probably trying to maximise profit rather than sales, you’d need to determine the profit implications since it’s likely that Price 2 is lower than Price 1.

Can you see how capturing this information helps you to improve your marketing? If your numbers are small, you might want to repeat the test, dropping the lowest performing headline to see if the next set of results are consistent. If so, you know which is the best performing combination and you can use that going forward and test another alternative.

An alternative to using response codes is to use a unique telephone number in each promotion or to send enquiries to a different webpage url or email address.

Tracking The Cost Of Your Marketing Activities

Your accounting system will normally be set up to analyse the different types of marketing expenditure you have – advertising, website, direct mail etc – but you can keep more extensive details in the accounting records or offline.

If you’re advertising in several different newspapers or magazines, you need to track these different responses. Again you can include a reference to the source in the code reference turning C11 into C111 or C11EM if letters help you remember that EM is the Evening Mail local newspaper.

This time you’re interested in the cost per lead and cost per customer (perhaps by type) to help guide your advertising expenditure.

Imagine you have two local newspapers, one very local (perhaps the town or city) and one for the region.

Newspaper 1 costs £1,000 for a particular sized advertisement.

Your response tracking shows that it generates on average 50 responses, 40% of whom turn into customers.

That’s £20 per lead and £50 per customer.

Newspaper 2 costs £2,500 for a similar sized advertisement.

Your response tracking shows that it generates 100 responses, 60% of whom turn into customers.

That’s £25 per lead and £41.67 per customer.

On a cost per lead basis, newspaper 1 looks like the better proposition but in terms of cost per customer, newspaper 2 is better.

Beware Of The Hidden Cost… Time

Analysing money paid to suppliers of marketing is easy but you shouldn’t ignore the issue of your time as well.

The return on your time is an important concept and I get irritated when I see marketing techniques like social media and search engine optimisation and content marketing as advocated because they are FREE.

They are only free if your time is of no value to you. Otherwise, there is a cost in terms of what else you could be doing.

It can be helpful to track the time it takes you to for your social media activities, to write new marketing copy or to develop content like this blog article.

Put a value on that time and factor that into your thoughts about the best ways to market your business.

Measuring Your Internet Marketing

A big advantage of Internet marketing is that much of what happens can be tracked through Google Analytics on your website, through Google Adwords and other pay per click systems and through social media engagements.

However you can lose sight of the main objectives – to increase sales and profit.

That happens when you put too much emphasis on measures like:

  • The number of visitors to the website.
  • The click through rate for keywords and PPC advertisements.
  • The number of Facebook likes or tweets.
  • Ranking in Google for keywords.

Remember these are the means to the end and not the end in itself. There is plenty of useful and interesting information you can get from tracking your Internet marketing but you can also go around and around analysing it all until you get confused.

The Ultimate Aim Is To Improve

Since I qualified as a Chartered Accountant, I am comfortable with numbers and have an affinity with statistics and graphs but I get very frustrated when information is NOT used to support or change decision making.

The main improvement method is summarised in the Stop Start More Less Process.

  • Stop doing things that aren’t working or try to improve them.
  • Do less of the activities that give you a moderate return but are important to have some kind of presence.
  • Do more of activities that are working well and give you a good return on your investment in money and time.
  • Start doing activities that look like promising opportunities but know that, because you’re tracking the results of you’re marketing, you’ll be able to identify whether, in future, you need to stop, do less or do more.
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