Have you ever walked in your Managers office and being questioned about the effect your marketing campaign had on the sales of product of the company. There is a high probability that you partially justified about the impact your marketing activity had on the sales. If you are one of them, I will give you an explanation in next few minutes.
Just as chefs asses the quality of their dish by smelling and Tasting the food. Similarly metrics such as Financial, Behavioral, Memory, Customer Profile, Marketing activity and Physical Activity are vital tools that are utilized by Marketing Managers to evaluate the effect of their Marketing Campaign or asses & guide their Marketing Actions.
Hefty amount is spent by Marketing institutions on developing various metrics for managers , Managers don’t realize the fact that these tools are technical in their approach but they fail to produce any relevant information. Reason for their lack of delivery can be attributed to parameters measured in a wrong way (Sharp 2013,p. 81).
A) Return on Investment
Concept of ROI is very popular in marketing and is referred as percentage return on marketing activity. In other words it can be described as returns from the campaign minus the cost of the campaign divided by the cost of the campaign.
Real purpose for any marketing campaign is to maintain the market share. Through ROI we are measuring the extra sales, it is not possible to determine the returns from any ongoing campaign. Hence , managers should avoid using the ROI while measuring the performance of the marketing Activity.
In Nutshell, associating a marketing activity with the use of revenue can end up companies viewing short term opportunities and missing out long term opportunities. ROI is for evaluating one time capital Project.” Is Marketing an one time Project?” The answer to this question is no. Since Marketing Expense is an necessary evil and technically is an expense and requires time to time intervention.
In an era , where Marketing activity is more complex these days when compared with older times, it is not worth investing time to evaluate how effective it is if it can not be measured.
B) Profit Margin
Another regularly used Metric, which is describes as how much the firm earns from these sales after deducing the direct sales of manufacturing or providing the service. When we say Profit Margin of 30 Percent , it means that 70% of sales revenue in Production cost and 30% contributes to fixed cost and potential future profits(Sharp 2013,p. 87).
If profit margin for a product or Service is reducing, it tells us that the brand is losing its competitiveness in the market. Since it is calculated without including sales and adverting cost. we can not determine how profitable any business operation is. But we can get an overview about how much money can be spent on marketing of a product or a service of a particular brand(Sharp 2013,p. 88).
If profit Margin is very small , there is no room for further price reduction for the product in the market , hence marketing managers should look for marketing strategy such as increasing Brand awareness, customer satisfaction & service Quality and increase their physical presence by increasing their shelf space in supermarkets and opening brick and mortar stores.
There are specialists who claim to have the capacity to evaluate circumstances and end results with pinpoint exactness. In this way, for supervisors its more vital to abstain from committing one of the greatest errors of something is easygoing when it isn’t or missing the genuine cause through and through. When we utilize ROI as a measure, Marketing division tasks are demonstrating higher ROI, But number of Companies are losing piece of the overall industry and painfulness decays.
Profit Margins to some degree help Marketing Managers to assess what methodology will work. It is ideal to build an exploratory configuration around our advertising exercises with the goal that we can have a superior thought than our adversary about what truly causes what and what works.
Furthermore, Marketers can consider opting for Revenue to Cost Ratio which describes about money generated for every dollar spent in Marketing. Since Marketing cost includes Display ad Clicks, media spend, advertising agency fees and Pay per Click spend . Hence It is easy to understand and Apply when Marketing cost and Revenue generated is used via Revenue to Cost Ratio.
- Colias, M 2015, GM Claims Victory Even As Its Market Share Slips, Automotive News, retrieved 31 JULY 2016, <http://www.autonews.com/article/20151012/OEM/310129962/gm-claims-victory-even-as-its-market-share-slips>.
- Leone, C 2016, What Is A Good Marketing ROI?, Webstrategiesinc.com,<http://www.webstrategiesinc.com/blog/what-is-a-good-marketing-roi>.
- More, R 2009, HOW GENERAL MOTORS LOST ITS FOCUS – AND ITS WAY, Iveybusinessjournal.com, retrieved 31 July 2016,< http://iveybusinessjournal.com/publication/how-general-motors-lost-its-focus-and-its-way/>.
- Sharp, B. (2013) Marketing Metrics Marketing: Theory, Evidence, Practice. Oxford University Press, Melbourne, Australia.
Student Name- Sapransh Jaipuria
Student Id- 215354693