Shubham magar-5025

Gaurav sawant

CHAPTER 17

MARKETING PERFORMANCE EVALUTION: AN OVERVIEW

The Importance of Marketing for the Success of a Business

The heart of your business success lies in its marketing. Most aspects of your business
depend on successful marketing. The overall marketing umbrella covers advertising, public
relations, promotions and sales. Marketing is a process by which a product or service is
introduced and promoted to potential customers. Without marketing, your business may offer
the best products or services in your industry, but none of your potential customers would
know about it. Without marketing, sales may crash and companies may have to close.

Five Functions That Illustrate the Importance of Marketing

Marketing is an important concept in business and one that several business functions are
affected by. The importance of marketing is always increasing. Marketing is perhaps the most
important component in determining a business’ profitability and success. There are five
functions that clearly illustrate the importance of marketing in a business.

1. Customer

The customers’ needs, wants and demands are what a business caters to. How well the
business captures customers’ attention through marketing its products and services affects
how many customers spend money with the business. Without promotion, the customers do
not know what a business has to offer.

2. Finance

The more effectively marketed a business is, generally the more financially successful and
stable it is. Finances affect how many goods a business can produce, since supplies for
manufacturing cost money and labor does, too. However, without marketing, a business may
have trouble selling its products even if it has the finances to produce them.
 3. Human Resources

Every business needs human resources to serve as labor. Human resources are how the
business makes it products or provides its services. Yet, a business can have a plethora of
human resources, but if it doesn’t have the marketing to capture the customers, the goods or
services won’t sell, so the business won’t flourish.

4. Production

The more products a business manufactures, the more goods it has to sell and the more
potential earnings it has to make. A business can have a warehouse full of products, but
without the marketing to sell them, they are profitless inventory.

5. Competition

As certain goods and services become more popular, more businesses start offering them,
making competition for them keener. Marketing helps make your business stand out so that
customers will prefer to buy from you than from businesses that offer similar goods and
services.

Success Factors in Marketing

• Budgeting

Marketing expenses can range from the very small to the very large, so you need to determine
how much you can afford to spend. Your marketing strategy and budget should be included
in the business plan that you create before launching your business. Having a clear budget
will force you to closely examine how you're spending your marketing dollars.

• Targeting

As a small business, you don't have the luxury of trying to be all things to all people. Identify
what it is about your business that makes you different from your competitors, and gear your
marketing toward those people who would receive the biggest benefit. For example, if the
unique benefit of your business is that it saves time for busy people, gear your marketing
efforts toward busy families
 • Development of Objectives

Marketing can be used to achieve a number of purposes, such as increasing sales, providing
information or promoting a special event. Determine what you want to accomplish through
your marketing efforts and tailor your message accordingly. For example, if you're
advertising the grand opening of your business and your objective is to get as many people to
attend as possible, offer a prize to the first 100 people who arrive.

• Analysing the Competition

Take some time to analyse your competitors. Study their marketing efforts and determine
what appears to be working for them. You'll also gain valuable information about who they
view as their target market, which can help you determine how to position your own
marketing efforts. For example, if most of your competition seems to be targeting a specific
age group, emphasize a benefit of your business that appeals to a different age group to reach
an untapped market.

• Working Your Customer Base

According to the Microsoft Business website, it costs much less to keep an unhappy or
inactive customer than it does to lure a new one. Keep in touch with your customer base by
sending them email newsletters or mailing them coupons toward future purchases. Have your
customers do some of your marketing for you by setting up a referral program where you
reward them for sending new customers your way.

• product

The role of product in the marketing mix is one of the key components that makes the entire
process of connecting with consumers and generating sales possible. Along with price, place,
and promotion, the product provides the ultimate value to the customer and serves as the
entire reason for the marketing effort. When the good or service involved is of high quality
and possesses the right type of features to attract the attention of consumers, the potential for
success is greatly enhanced.

There are several aspects of the product in the marketing mix that must be considered in order
to make the most of this particular component. The function of the product is the most
important aspect. Simply put, if the product does not deliver the functionality that is claimed,
consumers will shortly turn away from the product and no amount of promotion or
competitive pricing will make an impact in the marketability of the good or service. At the
same time, if the product meets or exceeds customer expectations in terms of performance,
there is a good chance that sales of the good or service will progress rapidly. Product features
will also play a significant role in placing the good or service for sale at retail outlets in which
the targeted customers can be found.

• Management by objectives (MBO), also known as management by results (MBR),

is a process of defining objectives within an organization so
that management and employees agree to the objectives and understand what they
need to do in the organization in order to achieve them.

Marketing Performance
The criteria of marketing performance may vary in accordance with different people and
different objectives. In the past, scholars believed that marketing performance can be
measured by growth and profitability. The marketing performance can be measured by
financial outcomes, the outcome of customer feelings, marketing outcomes and the outcome
of customer behaviour. It has been proposed that in addition to conventional accounting
factors such as the sales growth rate, market share and profitability, the satisfaction of
stakeholders should be considered in measuring marketing performance. It indicate that
market share and the perception of product/service quality are the most used performance
indicators in the US, Japan, Germany, England and France.

In addition to conventional financial perspectives, market share and customer satisfaction,

there is influence of brand impact on marketing performance, to understand how businesses
handle product brands. The brand popularity can be direct way to measure marketing
performance. Other criteria, such as the launch time of new products, the quality of new
products, employee training, on-time delivery, the response time for customer complaints and
inventory turnover have also been used to measure marketing performance

The marketing performance evaluation indicators are similar and can be even overlapped.
The marketing performance evaluation indicators into four criteria with 19 indicators, as
shown in Table

Table. Marketing performance evaluation criteria

Criteria Indicators

Financial perspective Sales, Revenue growth, Cash flow, Return on investment

Customer perspective Customer satisfaction, Customer retention, Market share, Brand

popularity, Brand image, Service quality, Goodwill
Internal processes Response time for customer complaints, On-time delivery, Inventory
turnover, Launch time and quality of new products or services
Innovation and learning Employee satisfaction, Employee training hours, Employee
development and advancement opportunities, Turnover rate
 • Market share for evaluation of marketing performance

Market share is a key indicator of market competitiveness—that is, how well a firm is doing
compared to its competitors. It enables them to judge not only total market growth or decline
but also trends in customers' selections among competitors. Generally, sales growth resulting
from primary demand (total market growth) is less costly and more profitable than that
achieved by capturing share from competitors. Conversely, losses in market share can signal
serious long-term problems that require strategic adjustments. Firms with market shares
below a certain level may not be viable. Similarly, within a firm's product line, market share
trends for individual products are considered early indicators of future opportunities or
problems.

Just as survival requires a long-term profit for a business enterprise, profit requires sales. The
task of marketing management relates to managing demand. Demand must be managed in
order to regulate exchanges or sales. Thus marketing management's aim is to alter sales
patterns in some desirable way. They are concerned with maintaining an adequate share of
the market so that their sales volume will enable the firm to survive and prosper. Again,
pricing strategy is one of the tools that is significant in creating and sustaining market share.
Prices must be set to attract the appropriate market segment in significant numbers.
Decreasing price may increase demand and lead to higher market share, though it could also
provoke a competitive response.

Marketers need to be able to translate sales targets into market share because this will
determine whether forecasts should be attained by growing with the market or by capturing
share from competitors. The latter will almost always be more difficult to achieve. Market
share is closely monitored for signs of change in the competitive landscape, and it frequently
drives strategic or tactical decisions. Increasing market share is one of the most important
objectives of business. The main advantage of using market share as a measure of business
performance is that it is less dependent upon macro environmental variables such as the state
of the economy or changes in tax policy.

Market savvy, consumer goods companies have been using market share to determine sales
performance for many years. Companies like Coca Cola and Pepsi Cola, Ford and Toyota or
Bayer and Pfizer routinely buy information from specialist data providers on overall market
size and their own sales performance relative to competing companies in any given product
category. This has not been the case in the fine chemicals industry as business-to-business
markets in this industry were traditionally poorly tracked and defined in terms of size and
competitors’ market share. Nevertheless, the advent of globalization has increasingly
imposed harmonized disclosure standards for commercial transactions on a global scale while
information technology has made it possible to mine databases and extract valuable
competitive information from around the world.

• Direct Response
One of the oldest methods of evaluating whether or not a marketing communication activity,
such as an advertisement or promotion, is working for you is to track the direct response. For
example, if you run an ad with a coupon, track the number of coupons that came in to see if
you received a worthwhile return on your investment. Remember that not everyone who sees
a coupon will use it, but they might still come to your store based on seeing the ad. Modern
coupons consist of code numbers customers use when they place online orders. Have your
staff ask customers how they heard of you when they take phone orders or check people out
at the counter, and ask customers placing online orders to check a box or fill in a field telling
you where they heard about you.

• Website Statistics
One of the latest forms of evaluating marketing initiatives is the use of website traffic
statistics. Your company website should include a traffic statistics package that lets you see
your traffic during a specific time period, telling you where traffic came from, which pages
 got the most views, what keywords people used to find you and how much time they spent on
each page. One of the key differences between a Facebook business page and a personal page
is the detailed traffic stats the business page provides. Talk to your information technology
person about how to access your website and social media site statistics on a daily basis. Use
website statistics to track your traffic during specific promotions or advertising campaigns to
evaluate their effects on your business.

• Surveys and Focus Groups

Conducting customer surveys and target audience focus groups lets you get specific answers
to questions you have about your marketing as well as qualitative information such as
consumer preferences, feelings about your ads and promotions and customer impressions of
your competitions. People might not take the time to answer long questionnaires over the
phone or Internet, so consider serving different surveys to your group. For example, ask half
of your customers only 10 questions and the other half 10 different questions to get a helpful
sample of 20 questions. Use focus groups to ask open-ended questions that let participant’s
volunteer ideas you might not have considered.

• Sales Reports
The more detailed your sales reports, the more information you can generate about your
marketing efforts. Marketing includes creating and promoting your unique selling benefit,
developing your product or service to deliver this benefit, setting the right prices to attract
your target customer, selling in the most effective places and supporting these efforts with
communications. Your sales reports should provide you with information about which
locations account for what percentage of your sales, which products provide your biggest
volumes and profits and how each sales rep is performing.

Metrics used to track marketing performance

Purpose and characteristics of marketing performance evaluation methods:

o When evaluating marketing performance, companies should measure marketing outcomes

from the consumers' points of view, include all marketing activities, measure across a
 continuous time period, and meet statistical and technical criteria required of all measurement
systems.
o To accurately measure the effectiveness of marketing activities, KPIs must
be integrated within the business and management of the company.
o To ensure meaningful comparisons among activities, companies should employ a common
scale, and measurement error must be quantified so that managers can react to changes in
conditions

Advertising Research Foundation

The ARF is an association where practitioners from every avenue of advertising—agency,
academia, marketer, media, and research—gather to exchange ideas and research strategies.

• key performance indicators

considered industry jargon for a type of performance measurement, KPIs are commonly used
by an organization to evaluate its success or the success of a particular activity in which it is
engaged.

• return on investment
Return on investment (ROI) is one way of considering profits in relation to capital invested.

Evaluating Marketing Performance

Organizations use various methods to evaluate marketing key performance indicators (KPIs)
or metrics. Marketing Performance Measurement, Marketing Performance Management,
Marketing Return on Investment (ROI), Return on Marketing Investment (ROMI), and
Accountable Marketing are all metrics that companies use to connect marketing performance
to the financial performance of the organization.

In order for marketing KPIs to be integrated within the business and management of the
enterprise, and ensure consistency and reliability across the marketing mix, they must meet
these minimum requirements:
• Measure marketing outcomes from the consumers' points of view
• Include all marketing activities

• Be repeated over time

• Meet statistical and technical criteria required of all measurement systems

Consistency is Key

Marketing materials can be designed to inform, portray products and services attractively,
and influence purchasing behaviour. The methods for evaluating the performance of, and
responses to, these materials range from simple calculations measuring return on investment,
to tallying the number of visits to a website. Since marketing campaigns are typically
integrated across all channels (e.g., print, email, and social media), these channels are
measured together to understand the overall effect on target markets.
To ensure meaningful comparisons among activities, brands, markets, and time periods,
organizations may employ a common scale to analyze performance metrics. Using different
measurements to evaluate different communications activities, competitors, and markets does
not allow direct comparison and results in lost synergies. Companies using formalized
methodologies continually gather and monitor marketing data to understand where the
marketing plan is strong and where it needs improvement. Long-term observation also brings
true insight about unanticipated changes and "red flags" in the data.
All measurement systems should take into account accuracy, repeatability, reproducibility,
bias, data shifts, and data drifts. Measurement error must be quantified so that managers can
react to changes in conditions, but not to changes due to measurement variation. Independent
organizations such as the Advertising Research Foundation evaluate the validity of
commonly used measurement systems to produce standards and best practices for evaluating
marketing and advertising data.

Source: http://smallbusiness.chron.com, www.boundless.com