Case study

An important theme of this case study has been the need to evaluate the results of marketing activities. Various forms of evaluation have been discussed, combining objective measures with more holistic subjective ones. While marketers might be good at measuring certain key indicators, how can you measure the effectiveness of an organization's marketing function?

The Marketing Metrics research project, sponsored among other organizations by the Chartered Institute of Marketing, set out in 1997 to look at realworld marketing performance assessment. It found that only a small minority of UK firms fully assess their marketing performance, despite most thinking that they do so adequately. Nearly all firms compare actual sales with sales targets and there is an increasing focus on shareholder value, but relatively few measure customer value. It seems that few firms assess their total marketing effort. Why don't firms measure performance- Does it matter?

If marketers have been telling their board of directors that marketing expenditure is an investment, not a cost, the board is entitled to see the resulting asset and its valuation. The asset created by effective marketing has often been referred to as brand equity'. The Marketing Metrics research found that about onethird of UK companies had no language for this concept. Of those who did, about half regularly quantify brand equity.

The 1999 Marketing Forum, comprising leading UK marketers, found that those claiming to measure marketing expenditure effectiveness grew from 75 per cent to 83 per cent between 19957, but of those, only 14 per cent, growing to 21 per cent, had measures of brand equity. Part of the problem here is language: some measure brand equity but do not call it that. Some companies may have systems for major brands but not for minor ones. Measuring the concept can be expensive, especially where a firm operates globally.

A number of reasons can be identified why firms may be unwilling or unable to measure their marketing effectiveness:

1. The board is not marketing or customer oriented, with no senior marketing representation on it. Little board agenda time is made available to discuss marketing issues.
2. Determination and effort may be considered more important than objectivity. To use an analogy, the First World War would never have been won if the soldiers had known the scoreit was won by sheer determination.
3. Some company boards believe that accountants should be responsible for accounting for all that matters. Internal measures are interpreted as navel gazing, and are no substitute for measuring sales and market share.
4. Marketers may argue against having their effectiveness measured too closely by pointing out that marketing is the business of the whole company, and so they cannot be held specifically accountable.
5. Marketers are often too busy fighting the next battle and this should take priority over worrying about the last one. Most promotions, for example, have preset targets but only a minority of those are formally compared with results.
6. In reality, the status of a marketer is determined by the size of his/her marketing budget. Size of budget, which can be measured, looks more credible on a CV than subjective outcomes.
7. Marketing effectiveness may be perceived as something essentially unmeasurable and that should be assessed by more subjective feel good' or good news' aspects.
8. Marketers may argue that past experience has shown that marketing expenditure cannot be related to sales and profits, i.e. profit and loss account measures do not work.
9. The environment changes too fast, so results need to be judged by the new realities, not those expected when the plan was drawn up.
10. Creating new measurement systems takes too long. The current marketing team will have moved on by the time it reports.

It is important to note that measuring overall marketing performance is not the same as measuring marketing expenditure effectiveness. Some marketingled organizations, such as Marks & Spencer, have managed with only minimal marketing expenditure budgets. More importantly, the effectiveness of the marketing expenditure budget cannot be assessed without measuring the change in the asset of brand equity.

Brand equity is fundamental to assessment. The results of marketers' actions should live on after the current financial period. Costs today may pay back next year or the year after. Good marketing may or may not affect sales, but it always increases brand equity. There is plenty of evidence of organizations whose marketing is ineffective and who have seen their brand equity diminish. Banks who were once trusted institutions have caused anger among many of their customers through perceptions of overcharging, incorrect debits, and poor communication. One result has been that many customers have shifted their bank accounts and credit cards to supermarkets and other rivals to banks who have achieved high levels of brand equity. Many of these misgivings about banks can be attributed to operational functions, but this only serves to emphasize the point that marketing should be a companywide integrator. Customers may not care who in the bank is the source of their grievance, but the result is the samethe value they place on a bank's brand is lower than it was before.

A diminution of brand equity has wideranging consequences for an organization and can affect its ability to charge a price premium (e.g. the premium charged for CocaCola compared to Sainsbury's ownlabel cola) and reinforces consumers' buying habits.

Building brand equity is the primary marketing function and is likely to be developed by the following:

• Getting top management to empathize with customers, to understand what they value in a brand.
• Having a shared language internally and with advertising and other marketing service agencies.
• Developing a more realistic set of targets than sales.
• Using brand equity as a basis for rewarding managers.

If the maintenance of brand equity is a crucial measure of marketing effectiveness, it might be expected that marketing managers' pay would be related to changes in brand equity. Yet there is little evidence that this takes precedence over more conventional reward systems based on sales and profitability.

CASE STUDY REVIEW QUESTIONS

1. Given the importance of measuring marketing effectiveness, how do you explain the success of apparently intuitive marketers such as Richard Branson?
2. What is the difference between marketing efficiency and marketing effectiveness?
3. To what extent is it desirable, or feasible, to use brand equity as a measure of marketing effectiveness?