Anel Marx

Independent Consultant, Marketing Professional and Entrepreneur

7:20 PM, 16th Mar 2018

Marketing Effectiveness and Efficiency

I have to agree with Peter Drucker, the author of the book The Effective Executive, when he explain the difference between Efficiency and Effectiveness:

Efficiency is doing things right

Effectiveness is doing the right things

In my experience and also advised by Peter Drucker, it is important to focus on EFFECTIVENESS before one can focus on EFFICIENCY.

In my article regarding the implementation of a Marketing Measurement Framework, I lured at the different metrics that make up a measurement framework.

It is important for a Marketing Measurement Framework to have both efficiency and effectiveness metrics. An easy way to differentiate between these 2 kinds of metrics are explained below:

  • When the metric is measuring marketing investment, cost of campaigns, pipeline generation, ROI (return on investment), cost per lead for example, it is EFFECTIVENESS METRICS
  • When the metric is measuring producing or contributing to customer perception, share of preference, share of wallet, budget spend forecasting, on-time marketing activity execution, services delivery SLA (service level agreements) are all examples of EFFICIENCY METRICS

By focusing on effectiveness metrics first, marketing organisations ensure that the right results will be achieved. Effectiveness metrics always need to be aligned with the business objectives. When marketing is showing trusted, positive and impact results, providing and contributing the right insights and information for strategic conversations, the business will start to see the effectiveness and value of marketing.

Marketing are in the spotlight today and need to proof that marketing is participating and contributing to shift the dial of business results. It has no meaning that all marketing processes and service level agreements are executed efficiently but it is not contributing to the business growth and results.

The question may come up as to why marketing want to measure efficiency and effectiveness. I tried to sum it up in 6 points

  1. Improving Marketing Efforts to align with business strategy and objectives
  2. Create a common set of marketing metrics with targets and data to support the objectives
  3. Measure the quality, effectiveness and efficiency of marketing activities (campaigns, events, sponsorship, digital, operations) to achieve objectives
  4. Marketing Measurement is an effective way to connect Strategy, Operations and Execution
  5. A Marketing Measurement Dashboard will enable managers to define expectations and identify business success and gaps that can include resources, plans, policies, marketing calendar, process design (and redesign)
  6. Metrics need to be defined and written in a way to answer the important questions the organization is asking regarding ROI, marketing effectiveness and marketing Efficiency

It is also important to apply some marketing measurement fundamentals when you identify the metrics for a Dashboard or Scorecard

■      Ensure the business objectives and marketing objectives are clearly defined

■      Align marketing metrics with business and marketing strategy and objectives

■      Metrics need to be realistic and measurable

■      Ensure data is available for the metrics

■      Metrics need to simple – select few but impact metrics – 5 key metrics at the maximum

■      Measurement need to focus on quantity, quality and results

■      Measurements need to highlight effectiveness and efficiency

■      Identify the measurement frequency

■      Identify the audience the Measurement Dashboard or Scorecard will be presented to, align the metrics for the selected audience(s)

Below I am naming but a few examples of Marketing Efficiency and Marketing Effectiveness Metrics:

  1. Marketing Efficiency Metrics
  • Customer satisfaction / Loyalty score (Nsat)
  • Customer retention rate/ score ( database universe vs opt-in vs opt-out)
  • Brand awareness score
  • Customer perception
  • Share of preference
  • Budget spend forecast accuracy
  • On-time marketing activity execution
  • Services delivery SLA

2. Marketing Effectiveness

  • Customer acquisition cost
  • Cost per opportunity/lead, number of qualified prospects
  • Cost of campaign
  • Cost per prospect
  • Cost of campaign vs pipeline generated value
  • Customer life time value
  • Net new business % attainment
  • Pipeline generation/demand generation, pipeline revenue conversion

Identifying and implementing a measurement dashboard or scorecard may take a few pilot attempts and a few rounds of tweaking will be required, however the process and end result will lead to a journey of marketing value discovery and numerous healthy executive and operational conversations.

Look out for the series of articles on proposed marketing objectives, Marketing Processes, Marketing Measurement Framework and many more

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