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Opinion: Measuring marketing spend

Encouragingly, it seems that clients are holding their nerve and heeding the lessons of previous downturns.

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The maxim that brands who continue to invest in a downturn always fare better once the economy recovers seems to be guiding those who hold the purse strings.

Indeed, they have recognized that once you strip back every possible expense, you only have two choices -- to slash marketing and sit still until the storm is over (and hope your brand still exists) or go to market and stay front of mind.

However, one factor that has shot up the agenda like never before is measurability. Yes, marketing directors acknowledge that they must continue to invest in marketing activity.

But they want to understand how that investment delivers.

Too often, measurement is a process added in at the end of the activity by an agency looking to justify their existence.

I believe it should be the bedrock of a marketing strategy, and should be conducted for the short term (on a campaign by campaign basis), in the medium term (on customers sales results) and finally, in the long term (looking at the brand's overall value).

But how do you interrogate your marketing activity and ensure it is performing cost-effectively?

The number of channels used to talk to consumers has multiplied, so how do you compare them and find a common benchmark?

Here at the Indicia Group, we have developed 5 separate layers of marketing and media measurement that should be applied to every marketing channel.

Cost per contact

Cost is possibly the most straightforward measure. All you are measuring is how much it costs you to contact each individual customer through that channel.

How much does each mailer cost you?

What kind of OTS are you expecting from the Ad campaign, and what does that translate to in terms of cost per person?

Relative performance versus competition

This is where you evaluate your brand in the context of the market.

How does your brand compare to competitors? Is its share of the market growing as a result of its marketing activity?

Marketing Performance related to sales

This layer of measurement should incorporate sales performance for each campaign and media channel, and classic measures such as RFV.

Disentangling the various strands as to which activity caused which effect on sales can often best be elucidated through econometric modeling.

Attitudinal Change

Has the activity changed the way prospects or existing customers think about your brand?

Has it helped drive awareness of crucial brand values?

This measure helps you see the story beneath the hard sales figures, and understand how your brand is perceived.

Customer Value

Finally, measuring customer value means you can understand the difference between a consumer who picks up your product because it is on offer, and those that are actually loyal to the brand.

It also allows you to take factors such as customer satisfaction which is a forward looking measure, unlike sales, which is reflection of activity that has happened.

There are those that argue that comprehensive marketing measurement is still the holy grail, such is the degree of diversity between channels and the ways they can be benchmarked.

But applying these five layers of measurement to your individual campaigns and long term strategy can help you get closer to a deep understanding of which channels are paying for themselves, and which constitute unnecessary expenditure in these challenging times.

This should all ultimately build into a picture of Return on Marketing Investment, and, of course, that's something that will even convince the finance director.

David Perkins, CEO,  Indicia Group

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