The
difference between Sales and Marketing is the very first thing you learn at
B-School. Philip Kotler taught us that Marketing is about creating value for something, and Sales about the
realization of that value.
However,
what none of us learnt at B-School, and possibly still grappling with, is how
do you measure the effectiveness of Marketing? Sales is the most
straightforward thing to measure, but Marketing seems to be measured basis the
whims of the marketer themselves.
Most
organizations use something called Brand Equity where they define a bunch of
parameters for the brand and track the scores against them basis responses from
consumers. Writing that itself sounds like hogwash.
With Digital
Marketing, you can quantify the effectiveness of Marketing a little better, but
even the KPIs like CPM, ROMI, Conversion Costs etc are only related to a
specific campaign, and does not differentiate between the legacy, penetration, usage
or recency of the brand.
One
seemingly straightforward manner to measure Brand Equity was once narrated by
Nitin Paranjpe at Unilever, where he said the exact price difference between
the average value of the category and the price the brand is capable of
commanding, is the Brand Equity for the Brand.
While this
is possibly the closest to measure the effectiveness of marketing with irrefutable
data, since there is measurable currency involved, just like in Sales, is there
any other way to measure the effectiveness of marketing?
One possible
option could be the Turnover contribution of all the non-core business of a Brand.
For
example, in the case of Harley Davidson, 12% of its overall Turnover comes from
accessories like Helmets and Jackets linked to the Harley Davidson Brand. These
may be a distraction from the core product of Harley Davidson, their bikes, and
possibly the least profitable as well. But the fact that consumers are so loyal
to the brand that they spend on these accessories, shows the strength of the
Harley Davidson brand.
The
earphones, charging cables and phone cases of the iPhone could define the Equity
for Apple, where consumers may purchase these even if they don’t have an
iPhone, which only shows the strength of the Apple brand.
The caveat
to this option is that the very premise behind the existence of any brand is to
grow its business, and the way to grow business is to bring in more users
(courtesy Byron Sharp from Why Brands Grow), and therefore every brand, Apple
included, is always looking to democratize their offerings, so that more users
can buy into their core products and services.
Anything outside
of this is simply a distraction that does not help grow the business. Apple for
example will grow by creating a cheap iPhone that more consumers can purchase
rather than selling phone cases!
However, if
a Brand is on the journey to build loyalty and not grow penetration (I know
Byron Sharp and all of his lackeys will vehemently disagree this to be the job
for any brand at all), then it is possible to use this specific metric of
non-core Turnover contribution to measure the Equity of the Brand and therefore
the effectiveness of Marketing.
Take a
luxury brand like Louis Vuitton for example. Maybe they don’t really care about
getting more users and are losing significant value to counterfeits. But if
their sole purpose is to build loyalty on the brand, then this form of measurement
may indeed have some merit.
What do you
think about this this form of measuring Marketing?
Are you
aware of any other ways to measure Marketing with irrefutable data?
