Econometrics is great.
There’s nothing quite like it for putting a value on your marketing efforts and helping commercially savvy marketers get the most from their marketing investments. And when it comes to making the case for investment, you can do a lot worse than turning up armed with a set of ROIs for your principal activities, derived from a cool econometrics model or two.
But what if ROI isn’t the only thing you’re trying to drive?
Most marketers have a range of objectives for their brands, in addition to pure, financial ROI. Brand health metrics are a common one. Most brands commission some sort of brand health tracking to check that brand awareness, consideration, purchase intent, saliency, affection, trust and so on are all headed in the right direction. These are important as leading indicators of long-term performance, tomorrow’s sales and profit, if you like.
Other examples include:
- Increasingly, we see clients keen to ensure that, as well as efficiency (ROI), their marketing is delivering enough scale (reach) to keep the brand growing (a la Byron Sharp).
- Activities to support trade partners e.g. advertising close to retail outlets or activity at trade shows.
- Product sampling, done to drive trial of the product (e.g. handing out product as railway stations).
In some cases – for example, brand metrics, where consistent tracking data is available – these alternative KPIs can be modelled with econometrics to provide insight on how best to drive them.
Whatever the metric, modellable or not, it’s still important we set goals for every type of activity that we do, for at least 3 reasons:
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Clarity of Purpose
If we force ourselves to set a goal or outcome it helps to clarify the purpose of the task. Why are we sponsoring this festival? Is it to drive awareness, to allow us to entertain trade partners or to change brand perceptions? It can be easy to hide behind marketing speak here. “Oh, that activity is designed to enhance consumer love for the brand.” The key question then is, how will we know if it has done that? Critically, even if we know precise measurement will be difficult, the discipline of creating clarity about why we’re doing something will help us do more of the right things and less of the wrong. And it keeps us honest.
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Alignment with Marketing Objectives
By ensuring every activity has a goal or outcome, we can ensure it furthers our strategic objectives. Try writing a list of all your activities and a separate list of all your objectives. If you do this exercise, you may be surprised at how many activities don’t seem to address an objective and how many objectives have no activities assigned to them.
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Evaluation of the task
Is it worth doing? Some back-of-envelope calculations can be surprisingly helpful here. Suppose our goal is to drive brand awareness amongst 18-25 year olds. How many people attend the festival? How many of them are in our target audience? Of these, how many will notice our brand? 1,000? 10,000? 100,000? It doesn’t have to be exact. Is it worth the cost?
Behold, the Measurement Framework
What we’re moving towards here is a holistic ‘measurement framework’ of which short-term ROI is but one element. Every activity has a primary goal (which may or may not be ROI), and each one is aligned to a marketing objective.
Moreover, these marketing objectives ladder up to the business objectives, providing a clear line-of-sight from the stuff we do on the ground to the impact we hope to have on the things that matter to the business as a whole.
Once this is done, we can track our performance against these objectives. Even more importantly, we can improve our performance by identifying where, perhaps, activities didn’t deliver the expected outcome – why was that, and how can we do better next time?
Practically, much of our work for clients is helping them frame and interpret the model findings we provide to make the right decisions for their brands and businesses, even on occasions, helping them design and implement a suitable measurement framework for their situations.
If you’d like to talk more about what you should be measuring, why and how, do get in touch.
Tom Lloyd
