48 Reading: Evaluating Marketing Results
No marketing program is planned and implemented perfectly. Marketing managers will tell you that they experience many surprises during the course of their activities. In an effort to ensure that performance goes according to plans, marketing managers establish controls that help them evaluate results and identify needed modifications. Surprises occur, but marketing managers who have established sound control procedures can react to unexpected results quickly and effectively.
Marketing control involves a number of decisions—one is simply deciding which function to monitor. Some organizations monitor their entire marketing program, while others choose to monitor only a part of it, such as their sales force or their advertising program. A second set of decisions concerns the establishment of performance standards—for example, market share, profitability, or sales. A third set of decisions concerns how to collect information for making comparisons between actual performance and standards. Finally, to the extent that discrepancies exist between actual and planned performance, adjustments in the marketing program or the strategic plan must be made.
Once a plan is put into action, a marketing manager must still gather information on the effectiveness of the plan’s implementation. Information on sales, profits, consumer reactions, and competitor reactions must be collected and analyzed so that a marketing manager can identify new problems and opportunities.
Return on the Marketing Investment
Increasingly, the single most important evaluation measure is the return on the marketing investment (or marketing ROI). Earlier in this module, we learned that strategies define how an organization can best use its resources to achieve the mission. Measuring return on the marketing investment helps marketers understand whether their use of resources is yielding the most effective results.
Let’s look at an example of marketing ROI.
Example: Marketing ROI
A retail store launches a campaign to increase online sales. The firm tracks the cost of setting up the online campaign, promotion costs, costs of the images and designs for the promotion, and staff time used to implement the campaign. These are the investments. Let’s say the total marketing spending on the campaign is $10,000.
Next, the store tracks a range of metrics, including how many people view online promotions (page views), how many people click on promotions (click-throughs), and ultimately the number of resulting sales. Thanks to the campaign, the company sees an additional $100,000 in sales.
The marketing ROI can be calculated by taking the revenue generated ($100,000) and dividing it by the cost of the marketing budget invested ($10,000). In this case, the marketing ROI for the retail store’s online campaign is 10.
Marketing ROI does not only focus on sales generated. Marketers may talk about spending per new customer acquired, increases in the lifetime value of th