Marketing efficiency versus marketing effectiveness

How do you measure marketing?

I think that marketing should be measured by sales. Whether you use incremental sales, or total sales, or marketing-budget-to-sales ratio, or sales velocity, or some other metric, it all comes down to sales. Market awareness or “propensity to purchase” and other such things are pointless if they don’t ultimately lead to sales.

The difficulty comes in tying specific campaigns to sales. How do you know if the event you ran caused someone to buy when they wouldn’t have otherwise? So most marketing organisations track overall operational effectiveness and/or efficiency.

Fair enough. But I was shown the following chart by a client. It plots IDC's assessment of 99 firms on two scales: how efficient marketing is (vertical scale), and how effective it is (horizontal).

The chart comes from IDC’s CMO programme, Marketing Investment Planner 2008: Benchmarks and Key Performance Indicators, published in September 2007. (You have to subscribe to this service, which I recommend if you want to benchmark your marketing against peers, or purchase the report to see the whole document,).

What does this chart show us? The startling thing about this scatter diagram is the degree of scatter. It looks pretty much random. I’m guessing that if there is any correlation between effectiveness (how useful marketing is) and efficiency (how well marketing is performed) it’s tiny.

For example, the most efficient marketing operation faired no better in its effectiveness than many less efficient operations.

Put simply, how well you do marketing has little effect on how useful marketing is.

Ouch! What we have here is a case of measuring for measure’s sake. It’s a problem I’ve detected with the whole Marketing Performance Measurement (MPM) movement. It’s all very well measuring marketing, but does it actually help?

Focus on marketing effectiveness, measured in sales, and you won’t go far wrong. Efficiency can come later.