How to measure marketing effectiveness with irrefutable data

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?