Audio Version: Facebook Ad KPIs — 15:27

Measuring Marketing Performance

Marketing has come a long way from the days of being known as the arts and crafts department. Once considered an art form rather than a science, the key to today’s marketing success hinges on the marketing manager’s ability to measure marketing performance using marketing metrics. Marketing success also stems from the marketing manager’s accountability for delivering data-driven results.

Estimates indicate that by the end of 2020, we will produce more than 44 zettabytes of data. By 2025, we will have produced over 180 zettabytes (or 180 million gigabytes) of data. Data is like the “new” oil. How we measure that data is like how we process the oil, making it efficient and useful to fuel our marketing initiatives toward better return on marketing investments (ROMI) and improving marketing competitiveness. 

However, few marketing managers can appreciate the range of metrics used to measure the data. Nor do they understand the pros and cons of using one metric over the other. Their lack of understanding metrics leads to measuring data that provides little to no viable information for their marketing needs or direction their organizations should take. Marketers must measure what matters and not necessarily all of the data available to them. 

While measuring what matters is critical to marketing success, what is essential to one firm may not matter to another. For this reason, I have identified several marketing metrics worth measuring that have a universal appeal for almost any marketing process. The metrics below are a good start for measuring marketing performance. However, additional metrics are necessary to measure the essential things that matter to your business goals.

Marketing MEtrics - Hand Sketch of Business man leaning against a question mark.What Are Metrics and Why Do You Need Them?

Metrics are quantifiable measures used to track trends, changes in activity, progress, or characteristics. In almost every discipline — government, business, and science — metrics are used to explain occurrences, determine cause and effect, share findings, and make projections of future events. Metrics require objectivity and make it possible to compare observations across sectors and time horizons. They help promote understanding and collaboration among team members and departments. 

Marketing Metrics

If metrics are quantifiable, then marketing metrics are the measurable touchstones used to communicate marketing activities. In other words, they are the quantifiable values used to demonstrate marketing effectiveness across all marketing initiatives. To better understand marketing metrics, we can split them into four types:

  1. Milestones
  2. Inputs
  3. Outputs
  4. Ratios

Milestones measure performance against a stated goal and apply to almost any marketing initiative. Milestones list and categorize what’s supposed to happen and when it’s supposed to happen. For example, let’s say that your marketing department is in the process of redesigning the company website to improve user experience (UX). Developing the wireframe for the website’s homepage and the due date for the task may be one milestone out of the many on the redesign project.

Inputs  or marketing inputs — are the levels of resources you are putting into your marketing strategy. Inputs are measured to determine if the marketing process is working and at what level. For example, how much money are you allocating to pay-per-click advertising? Are you generating your desired ROMI from your input amount? Hence, money is a resource. A resource can also include personnel, time, and equipment, to name a few.

Outputs measure the results of your marketing initiatives. For example, market share, channel performance, and brand equity are a few measurable outputs.

Ratios are a comparison of two numbers or metric values. In other words, they express the amount of one thing over the other one. The numerator represents ratios over the denominator, expressed as fractions or — more commonly — percentages. For example, a typical marketing metrics ratio is the return on marketing investment or ROMI. 

To calculate the ROMI of a specific marketing campaign, you will need to know the baseline level of business activity. You measure the baseline against the business activity during the time the marketing campaign is running. The result is the profit earned above the regular business activity minus the cost of the marketing campaign.

 

The formula for ROMI:

Baseline Profit = Baseline revenue – Baseline Cost of Goods Sold

Marketing Campaign Profit = Revenue – Cost of Goods Sold

Profit with Marketing Campaign Cost = Profit – Marketing Cost

Campaign Uplift = Profit with Marketing Cost – Baseline Profit

Return on Marketing Investment = (Campaign Uplift / Marketing Cost) x 100%

 

ROMI Example:

Baseline Profit = $50,000 – $45,000 = $5,000

Marketing Campaign Profit = $75,000 – $60,000 = $15,000

Profit with Marketing Campaign Cost = $15,000 – 6,000 = $9,000

Campaign Uplift = $9,000 – $5,000 = $4,000

Return on Marketing Investment = ($4,000 / $5,000) x 100% = 0.8 x 100% = 80%

With the marketing campaign in our example, the firm received an 80% ROMI.

Measuring What Matters

marketing metrics - illustration of business man looking at analytics dashboardMany executives — including marketing managers — tend to measure all the data available to them. The belief is that “if we have the data, then we need to measure it.” Measuring all available data at your disposal is often a waste of time and unnecessary.

Your metric strategy should be focused and not broad. In other words, the secret to selecting the best way and what to measure is what matters most to your business goals. Measuring too much leads to data fatigue; you become distracted from the daily marketing functions, which leads to unexpected or unwanted results. 

I will stress the point one more time; the key to measuring metrics is to measure what matters most to your business goals. To help you determine the right marketing metrics to measure, the three criteria below can serve as a guide.

  1. Align the metrics you measure with your marketing strategies
  2. Act on the data. Establish a high and low number for your key performance indicators (KPIs) and execute a contingency plan once the low or high number hit.
  3. Select metrics that allow you to detect and diagnose problems before they occur. Also, choose metrics for evaluating marketing performance after the fact.

Below are five marketing metrics that every marketing manager should consider when measuring their firm’s marketing performance. Again, the metrics you measure are the metrics that matter most to your business objectives and marketing strategies. The following metrics serve as a general starting point to help you begin taking accountability for your data-driven marketing initiatives. 

  • Market Share
  • Customer profitability
  • Customer lifetime value (CLV)
  • Channel performance

Measuring Market Share

Market share is a metric that communicates how well a business or brand is doing against the competition. Market share analysis helps marketing managers judge their company’s market growth and decline and trends about customers’ competitor selection.

The market share metric can either lead to meaningful or meaningless information for your company or brand. That is, if you are in a market where three or four firms own 90% of the market, you are in a concentrated market. In this scenario, it helps if you track market share. However, if the top three or four firms owned only 5% of the market, tracking market share in the highly fragmented market is a waste of time.

The same holds if you are a small business in a local market. As an example, let’s assume that you are a local bakery. If you calculate your market share nationally, then the market share analysis is meaningless as thousands of bakeries exist across the country. Your market definition is too broad of an area, or it’s a fragmented market. However, suppose you define your market within a 10-mile radius. In that case, calculating market share makes more sense in determining where you stand in the market than your competitors within that same 10-mile radius market.

The three market share formulas worth using are unit share, revenue share, and relative market share.

Unit Market Share Formula

Unit market share compares the units of a product or service sold by one firm compared to all the units sold by competitors in the same market. We express unit market share as a percentage. The unit market share formula is:

Unit Market Share Formula

 

Revenue Market Share

Revenue market share analysis reflects the unit sold prices of one firm to the same units sold by their competitors. Expressed as a percentage, the revenue market share formula is:

revenue market share formula

Relative Market Share

Suppose your business is in a market where the top three or four competitors maintain a large portion (75% or higher) of the market. In that case, using the relative market share analysis is a better marketing performance metric. It’s a better metric because the top competitors are in a concentrated market, meaning there’s better customer loyalty and repeat business from those customers.

However, if the top three or four competitors in a given market share, only 5% of the market share, relative markets share becomes meaningless. 

With a market share so low among the top competitors, the market is fragmented.

A fragmented market indicates no big players in the market. Thus customer loyalty is non-existent. Without customer loyalty, it makes it difficult for marketing managers to grow market share with existing customers. Expressed as an index (I) number, the relative market share formula is:

relative market share formula

Customer Profitability

Marketing MEtrics - man watering money tree illustrationCustomer profitability is the profit your firm earns from serving a customer or customer group over a specific period. It’s important to track customer profitability to understand which customer relationships generate more revenue than others. 

Customer profitability is the difference between the revenues earned and the customer relationship costs for a specific period.

Many executives and marketing managers fall into a pitfall by lumping all customers into one group and calculating customer profitability from that group. Not all customers are equal; therefore, your customer profitability metrics need to reflect the different levels (or tiers) of customers that purchase from you.

For example, in a three-tiered customer system, your top tier is the most valuable customer group to your business. They bring you the most profit.

The second tier of customers is the group’s middle. They are low to middle-profit producers for your company. Most customers within this middle category can increase their spending and move up a tier with more nurturing. Thus they are worth keeping. 

The bottom tier is the set of customers that lose your company money. If you can devise a strategy to get them to spend more money and move them up a tier, great. If not, you may consider charging them more for the products or services or “firing” them all together.  

A useful marketing metric for customer profitability metric is to track repeat customers. Repeat customers can be followed by monitoring the purchase recency rate, the length of time the customer last purchased from you to their next purchase. 

Another metric that is useful with the customer profitability rate is the retention rate of current customers. Both of these metrics can apply to any of your established customer tiers. Suppose there are changes in customer numbers over time. It could signal a problem if the customer numbers drop or success if they increase.

customer profitability formula

customer retention formula

Customer Lifetime Value (CLV)

The customer lifetime value metric is what the customer is worth to the company — in cash — for the customer’s lifetime in today’s dollar. The CLV is a vital marketing measurement because it encourages companies to focus on their customers’ long-term health and not quarterly profits. In other words, it helps marketing managers focus on higher potential customers over customers with a lower value in terms of profitability.

There are many formulas to calculate customer lifetime value. The following calculation is a simplified version for calculating CLV. 

CLV formula

Channel Performance

Illustration of thumbs up and down for channel partner formulaFor firms that work with channel partners, measuring your partners’ success is crucial to your continued relationship. After all, channel partners are an investment that you make with a third-party seller.

A channel partner is a company that partners with a manufacturer or producer to market and sell the manufacturer’s products, services, or technologies. More often than not, channel partners operate as a co-branding relationship with their suppliers, the manufacturer. 

Monitoring their performance is essential to your own firms’ survival. It helps the channel partner find areas of weakness in their marketing or areas of success. If a channel partner consistently underperforms, it may be time to replace them.

To determine channel partner effectiveness, calculate the ROI or the output divided by the input. In other words, divide what you gain from the channel partner by what you spend. Examples include:

 

Total sales/ active accounts

Total sales/sales calls

Gross profit/number of sales reps

 

Takeaway

Marketing has come a long way from the days where one message fits all. Today’s marketing department personnel need to be data-driven to help navigate their firms toward success. The challenge is that data is abundant. Many marketing managers and executives do not know how to use that data or use too much data to render itself useless and a waste of time. Suppose marketing professionals want to be effective and help companies reach their financial and market share goals. In that case, they need to measure what matters. They need first to know their companies’ business objectives, then ask the necessary questions about what types of metrics they need to measure to reach those objectives. The four metrics discussed above are just a start. Perhaps the most common metrics used, but others are equally important to the marketer’s success.

Audio Version — 5:03

Consumers and Website Credibility

image of a computer doodle for website credibility articleIn the 1990s, when graphical browsers graced computers with a way to view websites, web surfers became enamored with the technology and their ability to visit, or surf, websites for information. When businesses began using the digital channel to sell their products, many consumers lacked trust in eCommerce websites. Studies have suggested that a consumer’s intention to purchase online directly correlates with their trust level for a particular website. With over 6-billion indexed web pages (as of 2020), web surfers and consumers have plenty of places they can find themselves online. 

One of the many challenges small to midsize businesses face with digital marketing is projecting credibility through their website. It’s no longer true that if you build it (a website) that “they” (consumers) will come. They may come, but they will not stay, let alone make a purchase from your website if it appears to lack credibility.

What is Credibility?

Credibility is the quality of being convincing or believable. It refers to how trustworthy and legitimate your website looks. Credibility is a primary consideration for consumers and web surfers when deciding to use or make a purchase from your website. Below are nine elements that can help boost your website’s credibility.

Nine Ecommerce Website Credibility Elements

Professional Looking Website
Although it is subjective, websites that appear professional and not appear to be built by an amateur do better in the credibility department. A clean, professional website communicates stability to the consumer; it demonstrates that you have an organized process and are serious about doing business online.

Company Address and Phone Number Readily Available.
Your company address and phone number in prominent places on your website communicates to consumers that real people are operating the business. It also communicates that you are easily accessible.

About Page
Consumers want to see the human side of your business. The “About” page offers insights into your company. It also tells the story about how your company started and its business purpose and goals. In other words, your story. It’s also a good idea to show images of real people working within your company to give the consumer a sense that real people are behind the scenes doing the work.

Authentic Testimonials
Having testimonials is an excellent way to present credentials. It’s social proof that people are willing to buy from your business or visit your site and use your services. Testimonials also provide potential consumers with the confidence that someone else is satisfied with your product or services. Testimonials with names are acceptable. Adding a photo to the testimonial is even better. However, video testimonials are the best way to convey trustworthiness to potential consumers. 

Reputable Sales Channel
For eCommerce websites, having a reputable sales channel helps build credibility. Shopify, WooCommerce, Magento are excellent shopping cart and eCommerce platforms. Pair that with Amazon.com or eBay.com, and you even add more credibility to your eCommerce store.

Associations, Affiliations, Awards
Adding the logos of any association or affiliation or any other organization you are associated with will boost your website’s credibility. The same applies to any awards you may have as a company. All of these show consumers your commitment to your business.

Third-Party Reference or Endorsement Links
Suppose other credible websites endorse you on their website. In that case, it’s a good idea to link to their endorsement of your business. By doing so, it’s an excellent way to assert your credibility without tooting your own horn.

Updated Content
Keeping your content updated is a way to show that your business is active. A news or blog section and even your social media pages that are not regularly updated communicates to consumers that nothing is happening within your business. Keep the content flowing regularly. Developing a content calendar is an excellent way to stay on target.

Error-Free Website
Websites with grammar and misspelled words communicate a site or company that is unprofessional. While many readers may not pick up on the errors, the few that do can cause you plenty of grief. Errors also extend to broken links, malfunctioning online tools, and other parts of the website that underperform your brand’s promise. 

Takeaway

Developing a website is only one part of your company’s digital marketing strategy. To successfully get customers to purchase from your eCommerce website, it must appear credible. Following the nine tips above provide a good starting point. As research has shown, customers that perceive a website as credible will most likely engage and purchase from that website.

Audio Version — 6:41

Is Your Company or Product Leading or Trailing the Competition?

The market share analysis is another tool used as part of the marketing annual plan control and closely related to the sales analysis tool. Market share indicates how your company is doing in terms of unit or revenue sales compared to your competition. However, market share is perhaps the most overused and misused marketing metric. 

Experienced marketers downplay the role of market share or ignore it outright as their processes and ways of measuring success have evolved, making market share analysis irrelevant. However, if the metric is used correctly, in context, and for the right purpose — as with all metrics — then market share is a useful tool for short-term use.

Overall Market Share Analysis

Illustrated pie chart - hand drawn.There are several ways of calculating market share. The most common metric is the overall (or total) market share analysis. The overall market share is the percentage of a market in terms of either unit sales or sales revenue. In other words, it’s the company’s total units sold or revenue generated in comparison to the market’s competitors. 

Understanding the total market share helps marketing managers determine their total market growth or decline and helps them gain insights into trends for how customers make competitor selections. 

Organic sales growth (or the total market growth) costs a company less and is more profitable than the firm seeking to achieve growth by capturing competitor shares. However, losses in market share may signal long-term problems that require the firm to make strategic adjustments to its marketing plan. A company with a market share below a predetermined level may not be profitable, thus not a viable business. Also, firms can use shifts in their product market shares as leading indicators of future opportunities or potential competitive challenges. If a product’s market share dips below a specified level, marketers need to look at various scenarios to determine the cause for a drop in sales. Conversely, suppose sales surge, and the firm gains market share. In that case, this could indicate a problem with the competition or other potential scenarios that require closer analysis.

How Overall Market Share is Calculated

Calculating market share is a relatively simple process. However, gathering competitive data may prove arduous without the proper primary or third-party research data. Assuming that you have this data, market share is calculated in two ways, as mentioned earlier: unit sales and sales revenue.

Unit Market Share is the units sold by a firm as a percentage of total market sales. The formula for unit market share is:

Market Share Analysis - Unit Market Share Formula

Revenue Market Share reflects the price of sold goods. The formula for calculating revenue market share is:

Revenue Market Share Formula - Market Share Analysis

Relative Market Share Analysis — A Better Metric

sketch art of percent signUnlike total market share, which examines the whole market, relative market share analysis measures a firm’s market share related to its largest market competitor. Tracking relative market share over time gives you a benchmark and better understanding of what’s happening between you and your largest competitor. Relative market share allows marketing managers to compare relative market positions across different product markets.

A company or product tied for the lead with its largest competitor in the same market has a relative market share of 100-percent. Anything more than 100-percent indicates a market leader, and less than 100-percent shows the firm behind the market leader. The relative market share can help a company better understand its position or product position in the marketplace with more meaning than the total market share.

Relative market share’s calculation is similar to total market share. Calculated the metric by either the brand’s product units sold or revenue generated. The formula for the relative market share calculation is:

Relative Market Share Formula - Market Share Analysis

Market Share Analysis Challenges and Assumptions

Market Share Analysis Assumption Illustration of two men with question mark.While market share, precisely relative market share, is an excellent metric to measure your firm’s or brand’s leadership or lack of in a given market against competitors. It is not without challenges. Conclusions from market share analysis come with several assumptions. 

First, the assumption that external forces affect all companies in the same manner is often without merit. For example, the U.S surgeon general’s notice the harmful effects smoking has on the body depressed total cigarette sales but did not affect all companies equally.

The assumption that a firm’s performance should be judged against all firms’ average performance is not always correct. The best way to evaluate a company’s performance is against that of its closest competitor. 

The assumption that if a new firm enters the industry, then all existing firm’s market share may drop. A decline in market share does not necessarily mean that the company is performing worse than other companies. Share loss depends on what degree the new firm enters the company’s specific markets.

The assumption that a market share decline is deliberately engineered to improve profits. For example, marketing managers may drop unprofitable customers or products to reduce costs by driving up profits.

The final assumption is that market share can fluctuate for many minor reasons. For example, market share is affected by changes in promotional strategies because a massive promotional sale on a given date affects market share. It may also be affected by social and cultural phenomena like a sales spike for Ocean Spray Cran-Raspberry drink when a video went viral, showcasing a man skateboarding and consuming the beverage.

Summary

Market share is undoubtedly a critical metric to measure. However, marketing managers must throw caution to the wind when using the metric. In other words, marketing managers must use the metric correctly, in context, and for the right reason for it to be a useful analytical tool to guide marketing performance. While overall market share provides a high-level view of where the organization or organization’s product falls compared to the competition in the same market, relative market share is a better indicator of whether a firm or product is leading or lagging behind its closest competitor.

Audio Version — 6:51

The Covid-19 pandemic caught many businesses, specifically B2B firms, unprepared to manage a crisis of its magnitude. Addressing supply chain challenges, customer support, and customer communication proved toilsome, especially for businesses without a crisis communication plan.

Due to COVID-19 and lack of preparedness, many B2B firms found that customers were switching to other suppliers for various reasons. Having a communication plan does not guarantee that B2B customers would stay with their primary supplier. However, it does help reduce the firm’s churn rate if customers receive sufficient and timely communication about how the business manages its operations, employees, and supply chain during a crisis. In other words, communication is crucial in letting your customers know your operational plans to make informed business decisions that reduce the impact of their operations. 

When silence ensues, trust issues develop, and eventually, the customer looks for other suppliers that can help fill the void. Thus, B2B firms need a communication strategy in play when a crisis occurs, regardless if it’s a small crisis or one on a macro scale like the current pandemic.

Crisis Communication

A time of intense difficulty or danger defines a crisis. The Covid-19 Pandemic has proven to be both dangerous and challenging for people, families, and businesses. 

crisis communication illustration of man talking on computer screen.Each firm experiences its crisis and must communicate to its customers differently, based on their current circumstances. For example, a manufacturer’s raw material supply chain may be disrupted and may not produce products for distribution to retail customers. Another B2B firm may experience employees working remotely for the first time and experience technical and organizational logistic challenges. In either scenario, the company’s process is disrupted and may impact customers. Regardless, to maintain trust, keep customer confidence, and continue operating under a crisis effectively, the company must communicate its challenges and plan to manage the situation while still serving the customers’ needs.

There are three steps to take in identifying the crisis before a firm can create a communication strategy. They must understand their unique situation by:

 

  1. Identifying the crisis and controlling the narrative:
    A company must first acknowledge that they have a dilemma. Ignoring or denying a problem may worsen the situation. Additionally, to keep customers, vendors, or possibly the media (for more substantial firms) from creating rumors, the company experiencing the crisis needs to control the narrative of what is occurring so that outside entities do not spread misinformation.
  2. Isolate your crisis:
    1. If your organization is experiencing challenges in one part of the business, isolate the crisis to just that area.
    2. Get ahead of the situation by communicating quickly to employees to keep them from spreading untruths about the company to customers and competitors.
    3. Explain what the company is doing about the challenges and how and when the company plans to solve them.
  3. Manage the crisis:
    Regardless of how small or large your crisis is, if you identified the situation, isolated it, then managing the crisis should be simple. Suppose your organization does not have a Communications Director, as many small to mid-sized B2B firms do not. In that case, you will need to assign the role to someone who can manage the situation, answer questions, and direct communication to outbound channels for customers.

What Should You Communicate to Customers During COVID-19?

Now that you have identified the crisis your firm faces, isolated it to the relevant department or process, and are managing the situation; It’s a good idea to know what customers want to know about how the business is handling COVID-19 or any other crisis. Below are some popular questions customers have about how businesses are managing their operations during the COVID-19 pandemic.

Popular Questions Customers Have About Businesses Handling COVID-19:

  • Explain how the leadership team plans to keep customers and employees safe from contamination if customers are required to visit the workplace or employees must be present at the worksite and are not working remotely.
  • If your organization produces products, specifically food or medication, or vitamins, explain the process of how the organization is keeping the products safe.
  • Identify any potential delays in products or services and how management plans to manage the uncertainties.
  • How is the organization managing any potential outbreaks and staff shortages?
  • What communication channels customers can use to receive updates and contact customer service.

Download five FREE customer crisis communication letter templates!

Click the link to visit the download page.

Channels Used to Communicate with Your Customers

crisis communication illustration - communication channelsTo create the most impact with your crisis communication, you need to determine where and how your customers are receiving your company communication. Do your customers receive a company newsletter? Are they active on social media sites, or do they visit your company website to get their information? You will want to deploy your message over several communication channels, such as your company website and a social media page such as Facebook. If you send out a company newsletter, that would be an excellent place to share your crisis communication.

Here are a few communication channels to consider when deploying your message:

  • Email
  • Social media
    • Facebook
    • Twitter
    • LinkedIn
    • YouTube
  • Company website
  • Newsletter
  • Regular mail
  • Press Releases

Takeaway

When faced with a crisis that impacts your operations, like COVID-19, you would benefit from having a crisis communication strategy. You first want to identify the crisis, then develop a plan to control the narrative so that misinformation does not paralyze your organization. Next, isolate the crisis, meaning localize it to just the impacted area of your business and get ahead by quickly communicating the crisis to employees and how you are handling it to stop any potential rumors. Finally, manage the crisis. If you identify and isolate the crisis, then managing it should be easy.

Once you have accomplished the central parts of crisis management, you will need to select the high-value channels to communicate your message to customers. Communication channels may include but are not limited to email, your website, social media sites, and even regular mail.

Acting quickly, communicating honestly and effectively with a plan may reduce brand damage and keep customers from abandoning your business.

 

Audio Version — 3:52

Sales Analysis

In the article titled The Marketing Control Process for your Business – Explained, I outline what marketing controls are: 

“Marketing control is a process where company management or executives analyze and assess their marketing activities and programs.”

Hand-drawn graph for sales analysis post - Allen StaffordThe marketing control process includes four types of marketing control, they are,

  • Annual plan control
  • Profitability control
  • Efficiency control 
  • Strategic control 

This post focuses on the sales analysis part of the annual control plan. The other three types of measuring tools that fall under the annual control plan include,

  • Marketing share analysis,
  • Marketing expense-to-sales analysis,
  • Financial analysis.

The sales analysis measures and evaluates the firm’s actual sales as it relates to its sales goals. The two types of analysis tools used are the sales-variance analysis and the micro-sales analysis.

Sales-Variance Analysis

A sales-variance analysis is a metric that measures the relative contribution of different internal and external factors to a discrepancy in sales performance. The ability to calculate and identify sales variance is an essential metric to understand so that the firm may address issues in expected sales deficiencies.  

Sales-Variance Example

Suppose a manufacturer planned on selling 2,000 units of Product A in the fourth quarter at $2.50 per unit. The expected total revenue is $5,000. At the end of the fourth quarter, 1,700 Product “A” units sold at $1.95 per unit for total revenue of $3,315. The following calculation shows the price decline in performance versus the price decline due to a volume decreasing. 

Sales-Variance Example Calculation

Variance due to price decline:($2.50 - $1.95) (1,700 units) = $93555.5%
Variance due to volume decline:($2.50) (2,000 - 1,700) = $750 44.5%
$1,685100%

Metrics Analysis

Notice that almost half of the variance is due to a failure to achieve the volume target. The manufacturer needs to examine why sales failed to reach their expected sales volume. Possible reasons may include poor sales performance, lack of sales staff to cover a region, inferior quality product, or weak or no sales promotion activity. 

Micro-Sales Analysis

pie chart for micro-sales analysis articleThe micro-sales analysis examines specific products, sales regions or territories, and other measurable factors that underperformed the expected sales goals. For example, imagine that the manufacturer in our case above sells Product A into three regions. They set their sales goals for region one at 900 units, region two at 400 units, and region three at 700 units for the fourth quarter. However, the actual sales volumes were 800 units for region one, 498 units for region two, and 325 units for region three. Thus, the sales manager notices a 12% sales reduction for region one, a 22% increase in region two, and a dramatic 73% drop in region three sales.

From the data, the sales manager may come to several possibilities. They may conclude that the salesperson in region three is performing poorly, a new competitor entered the market in that region, or the product is priced too high for the market. Other possibilities may come into play as well.

Summary

The sales analysis is just one tool for managing marketing programs. When used to analyze sales volumes, marketers can learn if internal or external factors are to blame for sales volume deficiencies or surpluses. The data collected can help marketers make adjustments to existing marketing programs and incorporate them into new programs in new markets.

Audio Version — 6:34

Understanding the Marketing Control Process

If you are like most small to mid-sized businesses, marketing your company probably includes a basic marketing plan, most likely not written down. You probably have some marketing collateral (brochures) to leave with customers, a website, a social media presence that gets occasional attention, and a sales team. Like a sales analysis performed monthly or quarterly, there may be some control mechanism to determine if you are generating enough revenue to cover costs and earn a profit. If you are like most other firms your size, you are probably falling short of your marketing control process, that is, tools that help you analyze and assess your marketing activities.

What is Marketing Control?

Marketing control is a process where company management or executives analyze and assess their marketing activities and programs. Management then uses the results to make necessary adjustments or changes to their marketing plans. Think of marketing control as the navigation system on an airplane. The pilot sets the course, and the navigation system directs the plane toward its destination. However, due to weather patterns, the plane can drift off course, and the pilot must make adjustments to keep the aircraft on its path, or it can end up in a completely different location. If you are not monitoring your marketing activities and making adjustments along the way, you can end up spending too much money, generating no sales, or both.

For example, if a marketing manager implements a marketing campaign to increase sales for a specific store or product, that manager, or their team, monitors the campaign plan’s progress over a specified amount of time. The amount of time could be one week, a month, or quarterly. The marketing activity could be sales promotions, direct sales for retail floor staff or online ad spend, and conversions on their e-commerce store. If the campaign is not helping the marketing team achieve their established goals based on the team’s analysis, they will make corrections to any one of their campaign’s tactical elements. The process of monitoring and making adjustments to a marketing activity is the marketing control process.

The Marketing Control Process

As with any other business function, there is a process to follow that ensures the marketing control process’s effectiveness. Precisely, the process associated with the annual-plan control (see the explanation of annual plan control below). The process steps include:

  1. Goal setting – What do you want your campaign or activities to achieve?
  2. Performance measurement – How is the campaign performing. What precisely is happening. As an example, are you receiving more conversions on your eCommerce website? Are you generating more sales revenue?
  3. Performance diagnosis – Why is what’s happening occurring? If you are not receiving the projected sales volume, what would you attribute the reason to? What if you are earning more than projected sales? Could it be that your pricing is too low?
  4. Corrective Action – How will you correct the problem? If your marketing campaign performs lower than expected, what changes can you make to fix the issue? Were your goals unrealistic, or did you miss your target marketing?

diagram showing the four seps in the marketing control process by Allen Stafford

4 Types of Marketing Control

 There are four types of marketing control marketing managers can use to accomplish their analysis of marketing campaigns:

  1. Annual Plan Control
  2. Profitability control
  3. Efficiency Control
  4. Strategic Control
Control TypeResponsible PartyControl PurposeApproaches
Annual Plan ControlSenior Managers and Middle ManagersDetermine if planned marketing results are meeting expectations• Sales analysis
• Market share analysis
• Sales-to-expense ratios
• Financial analysis
• Market-based scorecard analysis
Profitability planMarketing managerDetermine where the firm is earning profits and where they are losing money.Determine profitability for:
• product
• territory
• customer
• segment
• trade channel
• order size or basket size
Efficiency controlLine and staff management and marketing managerDetermine marketing expenditures impact by examining and improving the spending efficiency.Determine efficiency by:
• sales force
• advertising
• sales promotion
• distribution
Strategic controlSenior managers and Marketing manager or auditorDetermine if the business is following the best options with respect to markets, products, and channels.• Marketing effectiveness rating instrument
• Marketing audit
• Marketing excellence review
• Company ethical and social responsibility review

Source: Principles of Marketing, 17th Edition. Kotler and Anderson

Annual Control Plan

Annual plan control is responsible for ensuring that the company reaches its financial and other goals. Financials include sales revenue and profits. Using the marketing control process, the marketing management team establishes its monthly, quarterly, semi-annual, and annual goals. Second, they monitor the performance of their goals in the market environment. Third, if any deviations from the objectives exist, management analyzes the problems to determine what and why it’s happening. Fourth, management works to close any gaps between the issue and its goals.

There are four tools for measuring the annual control plan:

  1. Sales analysis
  2. Market share analysis
  3. Marketing expense-to-sales analysis
  4. Financial analysis

Profitability Control

The profitability control is where a company measures its products, regions, customer segments, and order sizes to help decide if they need to expand, reduce, or eliminate any products, services, or territories. The instrument used to determine the profitability measurements is a marketing profitability analysis.

Efficiency Control

Efficiency control’s primary purpose is to use the data from the profitability analysis to educate the marketing staff on the implications of the marketing decisions made for the campaign. 

The profitability analysis may reveal that the firm is earning weak profits on certain products, promotions, stores, or territories. Marketers may face decisions that include determining if there are efficient ways to manage the sales force, advertising spend, sales promotions, or distribution channels.

Strategic Control

The final part of the marketing control tool is strategic control. From time to time, marketing managers should reassess their strategic approach to the market environment. The approach managers use for reassessing the market environment is the marketing audit. The marketing audit is a comprehensive, systematic, and independent examination of a company’s marketing environment. It also includes the company’s marketing objectives, strategies, and activities. The goal is to determine the firm’s challenges and opportunities to recommend a strategic plan of action that helps improve the company’s marketing performance.

Summary

Marketing is not just the arts and crafts department; it’s a control center that analyzes processes and makes adjustments to create efficient processes that yield business results. Without a marketing control process and the analysis tools that accompany the process, your business may lose sales and profits. It is up to the business owner or marketing manager to implement the marketing control process, manage the process, analyze, and make corrections to the strategic marketing plan.

 

Audio Version — 2:11

Marketing in many B2B firms is often lackadaisical at best. However, B2B marketing should not be halfhearted, especially in today’s digital, customer-driven marketing environment. B2B companies that achieve marketing excellence often outperform competitors because they put customers first, create strategic alliances, and are value and outcome-driven.

 

“Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.” – Peter Drucker

 

What is Marketing Excellence?

Marketing Excellence hand drawn illustration of superhero flying over buildingsReaching excellence in marketing is a process of implementing marketing best practices where the firm delivers exceptional value to customers, vendors, and other stakeholders. The Marketing Excellence Review chart below shows the best practices for achieving excellence in marketing. The table also identifies two different marketing performance areas that a B2B company may fall within, poor and good marketing practice.

According to Phillip Kotler, considered the father of modern marketing, organizational management must examine their marketing processes in relation to the review chart. They create a marketing profile based on determining where they think the business stands on each review list line. In areas where the company falls short of excellence, the business leaders can make changes that help the firm become an outstanding player in their industry. 

 

PoorGoodExcellent
Product drivenMarket DrivenMarket Driving
Mass-market orientedSegment-orientedNiche-oriented and customer-oriented
Product offerAugmented product offerCustomer solutions offer
Average product qualityBetter than average product qualityLegendary product quality
Average service qualityBetter than average service qualityLegendary service quality
End-product orientedCore-product orientedCore-competency oriented
Function orientedProcess orientedOutcome oriented
Reacting to competitiorsBenchmarking competitiorsLeapfrogging competitors
Supplier exploitationSupplier preferenceSupplier partnership
Dealer exploitationDealer supportDealer partnership
Price drivenQuality drivenValue driven
Average speedBetter than average speedLegendary speed
HierarchyNetworkTeamwork
Vertically integratedFlattened organizationStrategic alliance
Stockholder drivenStakeholder drivenSocietally driven

 

Takeaway

Achieving excellence is an achievable goal. It requires management to understand where they currently are in marketing proficiency, identify areas for improvement, then develop and execute a strategy to reach excellence.

Peter Drucker, the father of modern management, stated, “Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.” If you are not marketing and not innovating, your competitors will eventually outpace you.

Audio Version — 5:21

Traditional and Digital Marketing are the Same

Here’s an activity to try. The next time you are in the office or socializing with friends, ask them to explain the difference between traditional marketing and digital marketing. Chances are, you will be at the receiving end of either a confused or blank stare. Then, follows either the utterance, “I do not know,” or, more likely, your co-workers or friends try to fumble through an explanation. Side note: this activity will not work effectively on an actual digital marketer or marketing professional in general.

The reality is, there is no difference between the two types of marketing. Yes, you read that correctly. There is no difference between the two types of marketing. Before you start murmuring ill-will toward me under your breath, please read on.

The American Marketing Association defines marketing:

 “as the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”

Before we can create, communicate, and exchange offerings that bring value to customers, we need to “create” a customer. Thus, Peter Drucker, the father of modern management, profoundly stated:

 “Because the purpose of business is to create a customer, the business enterprise has two – and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

Therefore, marketing (and innovation) aims to “create” a customer by creating, communicating, delivering, and exchanging offerings that have value for the customer. The only difference between the two marketing terms — traditional and digital — is the channels used to communicate, deliver, and exchange a firm’s offerings and value to the customer.

What are digital marketing channels? More specifically, what is the definition of digital, and what are the advantages of digital marketing channels over traditional marketing channels?

Digital Marketing Channels Defined and Its Advantages

marketing metrics - illustration of business man looking at analytics dashboardBud Caddell, a digital strategist, defines digital and its advantages for marketers as:

 “a participatory layer of all media that allows users to self-select their own experiences, and affords marketers the ability to bridge media, gain feedback, iterate their message and collect relationships.” 

In other words, digital offers marketers a way to understand their customers’ behavior while giving customers a path to exploring and discovering content they engage with and like.

Traditional marketing and digital marketing are no different from print, radio, or television marketing, all of which are communication channels under the marketing umbrella. Rob Stokes, an author of eMarketing, identifies two fundamental ways that differentiate digital marketing from traditional marketing. 

The two fundamental differences are audience segmentation and measurability, giving digital marketing channels an attractive advantage over traditional marketing channels.

Audience Segmentation

Digital marketing channels allow marketers to precisely and frequently segment audiences in real-time. What this means for marketers using digital media is that they can make changes to their marketing campaigns and strategies almost instantaneously.

Traditional marketing channels would take much longer, if it all, to rival the speed or precise accuracy of digital marketing. Additionally, the cost of targeting and measuring traditional media channels’ effectiveness is expensive compared to its digital counterpart.

Several ways that marketers segment with digital channels include customers:

Measurability

Digital channels also allow marketers to measure a customer’s digital journey, which includes:

  • What they watch. 
  • Which web pages they visit.
  • Their interaction. 
  • Their sentiments toward products and brands. 

Brands can measure the success of a campaign and determine which ones performed better than others much quicker and at a fraction of the cost than traditional marketing channels. 

Summary

Marketing is “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” Firms can achieve communicating their value and offerings through either traditional or digital marketing channels. Thus the two types of marketing are the same in terms of a marketings definition.

However, marketing through digital channels gives the marketer an advantage of accuracy, speed, and reduced costs over its relative, traditional media. The faster pace and accuracy allow marketers to quickly make changes in their strategy, further serving customers more accurately and at an affordable cost. Hence, the difference between the two  types of marketing.

Audio Version — 6:45

To improve your customer engagement strategies, “Ask not how you can sell, but how you can help.”
-Kellogg School of Management

 

Mass Marketing: Marketing from the Past

Customer Engagement Article Hand Sketch of mass media marketingIf you do not have a customer engagement marketing strategy, you may miss out on opportunities to build your brand and grow your business. 

Businesses engaging their customers are actively involved in customer relationship management. In other words, they are improving their brands effectively and quicker by managing their relationships with customers. Companies that operate under the “old way” of marketing are not effective at managing customer relationships and thus miss the mark in gaining valuable custom insights through customer engagement.

The way companies market in the past was a one size fits all strategy. The old way included mass marketing brands to broad segments of consumers. It’s sort of like casting a wide net into the ocean, hoping to catch a few fish, and as we have all heard by now, “hope is not a strategy.” At least I “hope” you have heard that quote.

The mass marketing approach created challenges for brands. Marketers had limited channels for customer involvement if any, and brands had little interest in customer involvement. Direct customer communication was practically non-existent, and marketers missed opportunities to profoundly and intimately engage with their customers’ needs and wants. Also, non-existent with the old marketing method was collecting any customer data or sentiment toward a brand and its products. Firms could not capture those insights that could improve customer service or new product ideas, like Cake pops and Pumpkin Spice latte products that consumers created on Starbucks customer engagement platforms

Customer Engagement Marketing

The internet and mobile devices gave rise to a new marketing paradigm known as customer engagement marketing. Customer engagement marketing nurtures direct and continuous customer involvement in shaping brand conversations, experiences, and community. Customer engagement marketing leads to brands creating meaningful brand stories to make the brand a significant part of consumers’ conversation and life. A great example of customer engagement marketing is the Dove brand.

Dove’s Real Beauty Campaign targets women of all ethnicities and allows them to directly engage via Dove’s social media pages.

Dove’s Real Beauty Sketches campaign, a video depicting how women view themselves and how others see them, launched in 2013 and has received almost 69-million views on their YouTube channel. The campaign video has generated conversations from thousands of consumers that range from positive to negative responses. By allowing consumers a platform to voice their opinions through their social media channels, Dove can gain valuable insights about their consumers and provide a medium for consumers to engage with the brand. Dove’s customer engaged marketing makes the brand a meaningful part of the consumers’ conversation and lives.

What Drives Customer Engagement Marketing?

Ever since Tim Burns Lee created the first graphical web browser in 1991, businesses began populating the internet with their web pages. As consumers started to shop online and social media took root, consumers became better informed about brands. They were more connected and empowered as consumers because they had a platform to voice their likes, dislikes, and opinions about brand products. Social media took away the power of marketing from brands and handed it to consumers. In turn, brands are engaging customers in ways that help forge and share their brand experiences.

Because consumers are more empowered than before, brands need to create market offerings and messages that engage consumers and not interrupt them as they once did with the mass marketing approach. Brands need to listen to customer sentiment and provide feedback as needed. Companies can do so through various customer engagement platforms, such as:

  • Social media sites: LinkedIn and Facebook
  • Microblogs: Twitter and Instagram
  • Video: Youtube
  • Blogs: Your company blog
  • Mobile apps: Most social brands have apps that allow customer engagement
  • Consumer-generated review systems: Yelp

All of the above platforms help brands entice customer engagement on a personal, interactive level.

 

The Key to Customer Engagement Marketing

There is no magic formula for customer engagement marketing. The key is to find ways to enter target consumers’ conversations with engaging and relevant brand messages. Merely posting a random, funny video, creating a social media page, and not staying consistent with posts, or hosting a blog isn’t enough. Marketing managers need to understand their customers and the high target value social sites where their customers congregate.

Offer Real Value

An excellent place to start is to offer customers real value. Rather than providing only product information, create meaningful content that adds value to your customer’s life. For content to be valuable, the brand needs to connect to that content legitimately. Looking back at the Dove Real Life Sketches example, the brand can legitimately connect with the content. Dove produces beauty products, and women buy those products, and the campaign speaks to women about their perception of beauty.

Inspire People

Customers want accurate information and education about brands, but they also wish to be inspired. Airbnb’s Cheers to Ten Years of Hosting video inspires its customers while providing informational content. 

Provide Entertainment Value

A brand can inform and inspire, but it also needs to entertain. The “stickiness” of a brand’s engagement message comes from its entertainment value. The stronger the entertainment value, the more your customer will remember and get engaged. Take a look at Always’ inspiring yet entertainment video for their #likeagirl campaign. They deliver a powerful message that informs, educates, inspires, and entertains.

Be Consistent

You can have the best intentions as a brand, but if you are not consistent in delivering your message, your customers will not engage with your brand. Develop a brand engagement calendar that includes content posting days and times and your company’s communication channels to engage customers.

 

Remember, not everyone wants to engage deeply or regularly with every brand. Successful customer engagement marketing means making relevant and genuine contributions to target consumers’ lives and interactions. For customers that want to engage, you will gain valuable insights. Your content will reinforce your brand story and message for customers who do not wish to engage with your brand.

I can not count how many times I’ve heard members of a firm pitch their company. At trade shows, product presentations, marketing meetings, and other events. It’s the same dull pitch. A company representative gets up in front of the audience, clears their throats, asks how the audience is doing, and proceeds to tell them how great their company is and what they make, sell, or offer as a service. It’s a cacophony of words falling upon deaf ears. 

I recently attended a Chamber of Commerce meeting in Corona, California. After the meet and greet and general assembly, followed the opportunity for new Chamber members to stand up and give their elevator pitch, or in this case, list of what they do, sell or offer as a service. By the third company spokesperson, I had resumed my conversation with a colleague at my table. I lost interest, and it appeared that most of the other attendees had also lost interest in the monotonous pitches. Besides filling time, I do not believe that a single attendee went up to any of the presenting company representatives and asked for additional information. Here’s why the company representatives did not offer any value or solve a customer pain point. Instead, they read a laundry list of why their company is right and what they do.

If you want to be remembered by prospects and customers, you need to do better in your presentation or elevator pitch. Rather than telling your audience how good you are, tell them how your product or service helps solve their pain points. Sell the value of your product or service and communicate that often. Let’s look at a typical company presentation scenario and an improved company presentation that delivers value.

A Typical Company Pitch

“Hi, my name is Bob Gallagher, and I work for Jackson Accounting Service, JAS, for short. How is everyone doing today? Good!. I want to tell you about our company. We have been in business for 40-years and have over 30 offices worldwide. We have over 250 accountants working hard for our clients. We are working hard to meet your accounting needs. If you would like more information, please stop by my table for business cards. I would love to help answer any of your questions.”

The above example does not communicate value, nor does it help solve a customer pain point. It is what I hear too often at events or meetings.

Now, let’s see how we can improve the presentation to demonstrate how we can communicate value and solve a customer pain point.  

Improved Company Pitch that Sells Value

“Hi, My name is Bob Gallagher, and I am the Chief accountant for Jackson Accounting Services. We help customers like you all across the globe cut costs so they can keep earning more hard-earned profits. Our proven and proprietary methods have saved our clients over $500 – Billion over the last 40-years. We are committed to your financial success, and if we cannot save you money or reduce your taxes, we will not charge you a dime for our services.” 

You do not have to be a rocket scientist to see that the second presentation delivers more value, solves a pain point, and offers a guarantee. Furthermore, the latter company pitch generated more business for the company than the first pitch did.

Summary

Give customers and prospects a reason to want to engage in a conversation with you about your company. Your initial company pitch should focus on the value you deliver and how you solve a pain point, not how great you are. Once you hook the prospect, you can tell them all the great things about your company to help close the deal.