MEASURING PERFORMANCE IN MARKETING

One of my intellectual mentors, John Kenneth Galbraith, whose ancestry is good Scottish Calvinist, in a newly published essay argues that major corporations are run by their managements largely for their own benefit, and without public control or oversight. If he is right, sooner or later the public, the consumer, or those that represent them, like the New York Public Prosecutor (District Attorney, currently in vigorous pursuit of the senior management of Enron Corporation), may demand an accounting and some system of oversight. In an increasingly competitive environment, new members of the European Community will be aware of the need to adapt their management skills not only to the standard set by best practitioners, but also to the need for public accountability. Michael Thomas

In the field of marketing, the best global players are providing very tough competition.They invest large sums of money in marketing and brand building, in distribution and in distributor support.Smaller and newer players in this global game must learn fast.Marketing management in all companies must know how to measure the "success" or "failure" of marketing management initiatives, and to demonstrate their own 'marketing productivity'.I define 'marketing productivity' as an input-output analysis focusing on efficiency measurement -the relationship between inputs and outputs, and effectiveness measurement -relating outputs to outcomes, the achieving of ends and objectives of marketing management actions.
The diagram below illustrates the inputoutput matrix.
This article draws attention to the importance of the capabilities of the new member states of the European Union and public accountability under increased competitive pressure.Among the topics dicussed in the paper are the role of global marketing players and the concept of measuring marketing, in which three levels of measurement are distinguished.A model is presented in which marketing measures are applied toward measuring and creating value, the main elements of which are brand building and brand development.
In recent years, the problems of measurement in marketing have been addressed, and new tools are already available.The balanced scorecard, customer satisfaction measures, activity based costing are now reasonably well understood, and ways to measure the quintessential marketing asset -brand equity -have made considerable progress.The Balanced Scorecard [Kaplan and Norton 1996] is well known and widely used: I can highlight some of the challenges we face.
It is important to differentiate three different levels of marketing activity measurement.
1) Marketing at the company wide level 2) The functional activities conducted by professional marketing managers 3) The budgetary and control function in the costs charged to marketing.Why is measurement in marketing important?Management is about creating value and controlling the resources applied to the process of creating value.Control theory focuses on the efficient implementation of marketing strategies, output-based controls focus on bottom line results.
Let me illustrate the focus of my remarks by suggesting a set of measures that every company should desire to have: Measures of effectiveness in market selection.Is my company in the right markets?Do these markets show evidence of sustaining profitable growth?
Measures of profitable growth.Do I have evidence that we can secure top line sales growth (revenue building) and manage costs effectively?
Market shared trend.Can I demonstrate cost cutting and growth market share?
Measures of Product and/or service quality (did I get what I wanted?) Measures of delivery/timeliness quality (did I get it when I wanted it?) Measures of cost effectiveness (did I get it at a price that, when combined with the previous two, created a perception of high value?) Measures of employee morale (is my organisation stable and growing in capability?) Are my people engaged in improving customer satisfaction and value in a systematic way?
Measures of employee safety and health Picture 1: The Balanced Score Card (am I demonstrating commitment and concern to my people about their importance to the organisation?)These questions reflect both the viewpoint of the manager defining his own tasks and at the same time try to address the questions that any intelligent stockholder or would-be investor would want answered.I cannot address all of the questions posed in the previous para-graph, what I propose relates to the marketing-oriented questions -the market drivers.

HOW DO WE MEASURE THESE MARKET DRIVERS
The challenge we face is to measure the value added drivers created by the processes for which marketing management has responsibility.

Financial perspectives
"How do we look to our shareholders"

Customer perspective
"How do customers see us"

Internal perspective
"What must we excel at?"

Innovation & Learning
"Can we continue to improve and create value?" Picture 2: The value added drivers created by the processes I will only comment on one component of the model, though it is probably the crucial component, namely the Brand Development Process.

The Brand Development Process and Brand Strength Performance
That brand development holds the prospect for creating brand equity is uncontested.The challenge is to develop measures that capture these values.In the world of global competition, I would argue that brand value, its nurturing and management, is a key to competitive success.We must attempt to measure the process.
The following measures are relevant: Brand market share Distribution/price index Brand awareness index Perceived quality Perceived value Brand personality Price premium (relative price vs. market average) Satisfaction/loyalty measures Brand value.These measures should illuminate the brand development process, define precisely the corporate brand position (either solus or as a sum of individual brand performances) and measure the level of customer satisfaction associated directly with the brand.
The issue of Brand Valuation is currently a very lively issue.There is still concern that the debate is too narrowly focused, too concerned to develop a system compatible with the current accounting practices.The purpose of this paper is not to address this particular issue in detail.We need to develop a set of performance measures that illustrate the complexity and multi-faceted nature of brand performance, that illustrate the web of dependency effects.
The importance of the brand valuation debate cannot be over-emphasised, since the appearance on the balance sheet of a brand value will be the first step toward recognition of the validation of the asset value created by marketing management, even though in the eyes of traditional accountants brand value is an intangible asset.
I will not enter into a detailed discussion of where the debate is taking us.I have provided some useful references.
What I intend to do is to provide information about current practice.Research by the Marketing Leadership Council (USA) in 2001 reported on current practice in the USA.The following data may provide a snapshot of current practice.
This table shows the wide variety of measures in use, with each sector averaging 21 measures in use.The report states that there is continuing pressure for improved marketing metrics to demonstrate the financial impact of marketing.
Marketing Managers in the New Europe face a stiff learning curve in these matters.I would suggest that the new environment requires mastery of at least these measures: Marketing Management is a profession, and one requirement for the future of the profession is that members are financially literate and able to debate on equal terms with the ac-counting profession.If you believe, as I do, that the marketing function in a business is the only real creator of value and that the value added created by marketing is the source both of customer satisfaction and company profit, we must be good at measuring the efficiency and efficacy of what we do and manage as the best in the business.If we can achieve this, we may be able to face our critics and reply to the accusation that we run our companies only to enrich ourselves, with no concern for customer satisfaction and consumer welfare.
The company and its suppliers share the same strategic vision.

Manufacturing strategy
Manufacturing's strategic role is explicitly recognised.
Manufacturing investment is determined by explicit reference to market needs and competitive strategy.
Source: "Manufacturing -the Marketing Solution", The Chartered Institute of Marketing, 1995.
Market trend Market share Major brand trends Customer retention success New products/services in last few years Unit volume trend (per cent) as a percentage of sales R & D as a percentage of sales Capital expenditure as a percentage of sales Marketing expenditure as a percentage of sales Distribution trend (percent).I provide in an Appendix my view of the topography of marketing excellence.