Measuring Your Way to Market Insight

Measuring Your Way to Market Insight
Strategy+Business, Mar 09
Leslie H. Moeller and Edward C. Landry
Unable to evaluate the effectiveness of spending on promotional events since the sheer number of events was daunting, and each brand ran its promotions in its own way it wasn’t long before the need for a more rigorous analysis of the return on investment in the campaign were felt. A global distributor of wines and spirits finally imposed this rigor by creating a database of event cost information and requiring a simple breakeven analysis for any proposed event.The results turned out to be an eye-opener.
This enabled the marketers to understand how much volume each event would have to deliver to make financial sense, a basic business case analysis allowed them to gauge their spending.
With the explosion of media and more complete data it is possible to accurately quantify the return on marketing spend (also known as marketing ROI). All that’s lacking is the sophistication needed to gain insight from analytics, and the will to use that insight — not just in the marketing function, but in the company as a whole.
An ongoing study by Booz & Company and the Association of National Advertisers (ANA) reveals that ROI analytics and consumer insights (many of which are derived from analytics) are the two capabilities that marketers identify as the most important to develop.
However, relatively few marketers have mastered them in spite of their interest in analytics. Our own conversations with senior marketing executives suggest that perhaps one in 20 has fully developed analytical prowess. In order to build this capability, the starting point has to be data. Marketers must first learn how to identify and collect the data they need. There are two broad categories: financial data and customer response data.
• Financial data comes in two varieties. The first is data pertaining to the cost of the event and the second is financial data, profitability data which includes much of the information that companies use to calculate their margins, such as the selling price, variable cost of goods sold, and other variable costs such as shipping.
• Customer response data is also of 2 types. The first is self-reported data, information that customers provide about themselves and the second is behavioral data which can be observed or recorded and is most often based on transactions, collected at the point of purchase from scanners at cash registers; from retailers, dealers, and distributors; and from a variety of other sources.
Very often, marketers are unaware of the data that is available to them.
There is no single approach that is always the best choice to meet the various constraints that marketers face in the real and often chaotic world of business but if used properly, all of them can produce viable answers for marketers. However, first step for marketers is to develop analytical prowess to learn how to identify and collect the data needed to establish ROI, the second step is to understand the analytical options and how to choose among them.
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