By Ed Pierce, Fleet Industry Marketer
Last month, we identified the Productivity Conundrum: While improved marketing effectiveness is our goal, quantifying effectiveness is difficult given its role as an adjacency to goods and services, rather than to their production.
Still, there are some possible steps we can take to develop better measures of marketing productivity. This month, we will look at two of them.
The first approach is summarized by Jagdish Sheth and Rajendra Sisodia, who state that any measure of productivity improvement for a prospective marketing initiative must include the value of the effort (both customer acquisition and retention).
Customer Acquisition and Retention
The measure for acquiring customers consists of the revenue attributable to marketing actions that bring in new customers, divided by the costs of those actions, adjusted by a Customer Satisfaction Index (CSI). The measure of customer retention calls for changing the ratio of revenue/cost for existing customers by a Customer Loyalty Index (CLI), which addresses customer “churn.”
The marketing initiative’s overall productivity is a function of the weighted combination of both customer acquisition and customer retention.
A related approach for measuring marketing productivity of different marketing initiatives is to focus on improvement in the value of “market-based assets,” according to Rajendra K. Srivastava, Tasadduq A. Shervani, and Liam Fahey in their book, “Market-Based Assets and Shareholder Value: A Framework for Analysis.”
Redefining Market-Based Assets
The authors suggest that marketers should redefine a company’s market-based assets — customer relationships, channel relationships, partner relationships as well as relational and intellectual assets.
Using this approach, a marketer projects the effects that specific marketing budget expenditures will have on the collective value of these assets and the subsequent impact on customer acquisition and retention. They presume that enhancing market-based assets increases shareholder value by accelerating and improving cash flow.
Several interrelated research projects on brand equity, customer satisfaction, and strategic relationships also demonstrate significant value for companies and their shareholders.
Next month, we will look at some additional measures of marketing productivity and wrap up this important topic. I invite you to contact me with topic suggestions or comments – Phone: 610–585 0801, email me at [email protected].
