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Difficulty of Measuring Marcom Effectiveness: Notes

The document discusses measuring the effectiveness of marketing communications (marcom). It explains that marcom's objective is to affect sales volume and revenue. Return on marketing investment (ROMI) measures whether marcom generates a reasonable revenue return. While most marketing executives agree on the importance of measuring effectiveness, it is difficult due to obstacles in identifying metrics, getting agreement on measures, gathering accurate data, and determining the exact effects of specific marcom elements. Marketing mix modeling uses statistical techniques to estimate the effects of different advertising, promotion, and other marcom activities on sales volume.

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Anshul Sharma
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38 views

Difficulty of Measuring Marcom Effectiveness: Notes

The document discusses measuring the effectiveness of marketing communications (marcom). It explains that marcom's objective is to affect sales volume and revenue. Return on marketing investment (ROMI) measures whether marcom generates a reasonable revenue return. While most marketing executives agree on the importance of measuring effectiveness, it is difficult due to obstacles in identifying metrics, getting agreement on measures, gathering accurate data, and determining the exact effects of specific marcom elements. Marketing mix modeling uses statistical techniques to estimate the effects of different advertising, promotion, and other marcom activities on sales volume.

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Anshul Sharma
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5/20/2021 IGNITOR Student

:…… behavior is, of course, a customer-based concept (i.e., customers buy, or purchase products
and services). From the marketer ’s standpoint, desired behavior from customers corresponds
to sales volume and revenue, with revenue representing the monetized equivalent of sales
volume (i.e., volume X net price : revenue). Looked at in this manner, marcom's objective is
NOTES
ultimately to affect sales volume and revenue.
The effect of marcom, or of its specific elements such as advertising, can thus be gauged in
terms of whether it generates a reasonable revenue return on the marcom investment. This
idea of return on investment, which is well known to anyone who has taken a basic course
in accounting, finance, or managerial economics, is referred to in marketing circles as return
on marketing investment (ROMI). In a world of increased accountability, it is imperative
that marketing people in all capacities, including marcom practitioners, demonstrate that
additional investments in, say, advertising yield returns that meet or exceed alternative ap-
plications of corporate funds. Chief executive officers (CEOs) as well as chief marketing offi-
cers (CMOS) and chief financial officers (CFOS) are increasingly asking,"What's my ROME?”
The vast majority of marketing executives consider the measurement of marketing perfor-
mance an important priority, and marketing academics along with practitioners are actively
involved in devising ways to measure marketing performance so as to achieve financial ac-
countability for marketing actions.an Two primary motivations underlie this increased focus
on measuring marketing performance, as explained in the following quote:

First, greater demands for accountability on the marketing function fiom the CEO, the Board,
and other executives mandate a greater focus on measurement. For a CMO to truly command
an equal seat at the executive table, a CMD must define and deliver quantitative measurements
for the corporation. And these metrics must he clearly and convincingly commanicated to the
appropriate audiences. A second, perhaps equally important driver is the imperativefor a CMO
to get better at what they do. As the budget battles become morefrequent and uncomfortable, a
CMC) can make marketing a more qfïective organization only by measuring and understanding
what is working and what isn’t.31

Difficulty of Measuring Marcom Effectiveness


Though most marketing executives agree that measuring marketing performance is critically
important, at the present time relatively few organizations are doing a sophisticated job. This
is not because marketing executives are uninterested in determining what aspects of their
marcom efforts are or are not working most effectively; rather, the problem resides with the
difficulty of measuring marcom effectiveness. Several reasons account for this complexity:
(1) obstacles in identifying an appropriate measure, or metric, of effectiveness; (2) compli-
cations with getting people throughout the organization to agree that a particular measure
is the most appropriate; (3) snags with gathering accurate data to assess effectiveness; and
(4) problems with determining the exact effect that specific marcom elements have on the
measure that has been selected to indicate effectiveness.

Assessing Effects with Marketing Mix Modeling


To understand and appreciate the nature and role of marketing mix modeling (MMM), let's
return to our example of the automobile marketer that increased its marcom budget for a
particular model by 25 percent over the previous year's budget. To advertise and promote the
brand, the following marcom tools were used: (1) advertising via TV, magazine, and online
media; (2) sponsorship of a professional golf tournament along with several other sporting
and entertairunent events; and (3) use of an attractive rebate program to encourage consum-
ers to buy now rather than later.32
Each of these activities can be thought of as individual elements constituting the brand’s
marcom mix. The issue that marketing mix modeling addresses is this: what effect did each
of these elements have in affecting this automobile model’s sales volume in a prior period?
sans… Marketing mix modeling employs well-known econometric statistical techniques (e.g., mul-
36 Material tivariate regression analysis) to estimate the effects that the various advertising, promotion,

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