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Measuring and Optimizing Marketing Efficiency
“If you can't measure it, you can't manage it”.
Rudy Giuliani
“Only marketing executives laud a 2 percent return as a success”.
Larry Dobrow
Measuring and Optimizing Marketing Efficiency
• The first problem is that no matter the sum enterprises invest in marketing
initiatives, most marketing departments often don't know what the return is,
nor do they know how to optimize their spending. That's where the strategic
use of marketing optimization technologies can make a difference in
understanding and enhancing customer value.
• The second problem is a bit more general: is marketing rather a science than
an art? And this question is the key to whether marketing efficiency is
measurable or not.
Measuring and Optimizing Marketing Efficiency
Can you measure the impact of your product development on your bottom
line? Can you measure the impact of every sales call on the bottom line?
Reality is that a company’s bottom line is impacted by too many variables.
In response to a recent IDC survey, only two out of the ninety companies
surveyed had overall marketing ROI measurements, and these two were
companies with over $10B in sales.
Measuring and Optimizing Marketing Efficiency
In the timeframe, many of the variables are going to continuously change the economy, the product, the number of references you can provide – to
name just a few. And no way can a sale be directly attributed to a specific
marketing activity.
This may however work when you sell online, but in an environment, where
the sale cycle is 6-18 months long, there are likely to be multiple marketing
activities that contribute to each sale.
Measuring and Optimizing Marketing Efficiency
Does it mean you have to give up measuring your marketing?
Not at all.
Define Measurable Goals
Measuring and Optimizing Marketing Efficiency
At Cisco, every employee is compensated based on measurement, but the
measurement is not the company’s bottom line but rather customer
satisfaction rating.
Cisco measures customer satisfaction because its management has a vision
that ties it to long-term bottom line results. Do they have the mathematical
formula to prove it? Maybe by now they do, but probably not when they
started. The same type of vision is what is needed to develop for your
marketing.
Measuring and Optimizing Marketing Efficiency
To define meaningful goals, you have to define your own Marketing Impact
Model. This model translates your vision of how marketing will impact the
bottom line into measurable metrics.
Eran Livneh suggested a model that is concerned with the level of permission
established with company’s target customers. For each marketing activity one
or more of the following can be measured:
Measuring and Optimizing Marketing Efficiency
• Capture: how many new target customer permissions have been established
as a result of the activity?
• Maintain: how many target customer contacts have responded to this specific
communication?
• Upgrade: how many target customer contacts have responded in a way that
gives you permission to take the dialogue to the next level?
• Cost: what was the cost of each of the above?
Measuring and Optimizing Marketing Efficiency
Every activity can be measured. But it is also true that some activities are
more measurable than others.
Measuring and Optimizing Marketing Efficiency
• Define clear measurable market impact goals.
• Estimate the expected and desired market impact of each activity.
• Prioritize your budget based on estimated results and cost per market impact.
• Diligently measure whatever you can. Direct all traffic to your website and
use separate landing pages and tracking codes for each activity and source of
market impact.
• Estimate whatever you cannot measure directly; imperfect measurements are
still better than no measurement at all.
Measuring and Optimizing Marketing Efficiency
From time to time, you should go back and revisit your goals and the
marketing impact model. Are these goals still valid? If you’re doing a good job
growing your own permission list, you should be shifting more of your
activities and your budget from capturing permissions towards maintaining
and upgrading them. As a result, you should also see your overall cost of
marketing going down.
Like any management function, managing marketing is neither pure science
nor pure art. It requires experience and knowledge to set the vision and the
measures to make it a reality, combined with the process and the patience to
learn and adjust.
Measuring and Optimizing Marketing Efficiency
Questions
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