Are Financial Metrics Used In Marketing Measurement Overrated?

Shane Sutton 213555376 Suttonshane

Another way of putting this is, is marketing being overrated to say that it influences financial metrics. Marketing does influence financial performance but to what degree it does is probably definitively immeasurable.  In a businesses ROI, Return is measured by the change in profit. A businesses profit can change for many non-marketing reasons such as the changes in the economy, customer preferences, product quality. So how can you measure the change in profit directly attributable to marketing.

Marketing according to Iacobucci 2012 p3 is defined as “an exchange between a firm and its customers”. Thus a broad definition denoting marketing is a lot more than just advertising. Therefore we look at what financial metrics are available to measure the effect of marketing.

Lamest and Brady contend that marketing is losing its importance. They quote Webster JJ (2005) ”a major reason for this …is marketing’s inability to illustrate its contribution to business success”. One way of rectifying this is to use metrics to show marketing has the ability to point out that it does in fact create shareholder value.

By the way  according to Chambers Australia’s advertising spend is going to increase from $12.9Bn in 2014 to $16.4Bn in 2019. With that big of a spend marketing is very important and a big cost to businesses who partake (some would say it is an investment of the business). So there will be $16.4Bn worth of expenditure marketers will have to justify to the CFO & CEO. Thus marketing remains very important.

Marketo.com say to “Use metrics that matter to the CEO and CFO….in today’s economy CEOs and CFOs care about growing revenues and profits”.

Such financial metrics to use would be those discussed by Ambler and Roberts being ROI, Discounted Cash Flow, and Return On Customer. Ambler and Roberts find many objections to using these metrics and contend one better way is to measure the intangible marketing asset (brand equity).

Let’s take a look at ROI, Return On Investment which is measured by:-

Change in Profit/Investment. Change in profit attributable to the marketing spend. Investment equals the marketing spend. Given the broad definition of marketing, everything the company does is marketing related. This therefore implies any change in profit is attributable to marketing.

What does a company do when they sign a sports star or celebrity to wear their products? Would Nike have done an ROI when they signed Michael Jordan back in 1984?  I do not think so. Yes they would have done some homework to ensure they would get a good payback.

Today a business would be indebted to crunch some numbers in order to sign up a sports star or celebrity. Nike for instance can definitely say marketing has improved company performance, but the question still remains to what degree has marketing affected financial performance.

Does the average consumer buy products because they have been endorsed by a sports star, celebrity or do they just go into a store and buy what fits, is comfortable and looks good. This is something which seems to get lost in the metrics. One thing the average consumer does know is that every time they hear of a sports star, celebrity endorsing a product, is that they have to pay more for their goods to pay for the endorsement.

No doubt there are consumers who do buy goods because they are endorsed by a sports star, celebrity but to what degree this happens is once again immeasurable. As long as the revenues and thus profits increase everyone assumes it relates to the endorser.

Srinivasan and Hanssens in their paper Marketing and Firm Value do contend “If marketing’s contributions were readily visible in quarterly changes in sales and earnings, the task would be simple”. They also go on to say “much of good marketing is building intangible assets of the firm, in particular brand equity, customer loyalty and market-sensing capability”.

This backs up the difficulty in measuring marketing contributions to profit as against non-marketing contributions. Intangible assets, the main one being brand equity, gets mentioned in lots of literature. The only thing is that Intangible asset measurement is very subjective and difficult to measure. Intangible asset valuation is a difficult area for the accounting fraternity, so to measure the effect of marketing on brand equity increases this difficulty.

In the end the financial metrics will get used, but I still believe the true effect of a marketing event on financial performance is immeasurable.

References

Ambler Tim, Roberts John H., Assessing marketing performance: don’t settle for a silver metric. Journalof marketing management. 2008, Vol. 24 No. 7-8 pp 733-750

Chambers, Pippa, Adnews, 15 June 2015.   http://www.adnews.com.au/news/australia-set-for-16-4-billion-ad-market-worth-by-2019

Iacobucci Dawn, Marketing Management, 2012 South-Western, Cengage Learning

Marketo.com – The Definitive Guide to Marketing Metrics & Analytics

https://au.marketo.com/definitive-guides/marketing-metrics-and-marketing-analytics/

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BMW Compares Audi

BMW Compares Audi. Shane Sutton 213555376 (Username suttonshane)

Comparative advertising occurs infrequently, so what happens when it does occur. In a comparative advertisement the advertising brand also mentions the name of a competitor brand. Would this in fact confuse the viewer, or would it make it clear than the advertising brand is indeed a better option than the competitor.

BMW have compared their Series 3 318i Sedan with Audi A4 Sedan. In the advertisement they show the BMW handling in wet weather to be far superior to that of another vehicle. Whilst they do not mention Audi specifically they do mention the words “one of our competitors” and show the Audi logo.

According to Iacobucci (2013 p 149) Comparative advertising “Why would you bother to advertise for the competition? If you’re the little guy with a new brand, you might mention the big brand in your ad to gain an association with…the market leaders brand”. However BMW is a bigger player in their market segment than Audi so what is their gain by mentioning Audi.

A slightly different take on comparative advertising is that by Investopedia.

http://www.investopedia.com/terms/c/comparative-advertising.asp

Investopedia stated “Comparative Advertising – A marketing strategy in which a company shows how its product or service is superior to that of its competitor by comparing the benefits and costs”. This is the example taken up by BMW where it shows its vehicle to have superiority over Audi.

BMW Series 3 and Audi A4 compete for the same market. Audi A4 is more expensive starting around $70,000 while the BMW Series 3 start around $60,000.

Looking at August 2016 New Car Sales (graph below) BMW (13th position) is just ahead of AUDI (14th position).New car sales figures August 2016

Looking at this graph, the premium car market segment Mercedes Benz is ahead of BMW which is slightly ahead of Audi.

So what motivates BMW to mention Audi in an advertisement. It obviously thinks it has a superior car as demonstrated in the advertisement. Considering the reach and frequency they were seeking in their campaign they obviously wanted to drive home the message that BMW is safer in wet weather conditions than what an Audi is. Did they need to mention Audi or could they just have shown how safe their car is (non-comparative ad).

When considering comparative advertising you have to ensure you are comparing like for like. Take the issue of Woolworths and their car insurance advertisement of 2012 when they compared the cost of their premiums to other insurers. http://www.millsoakley.com.au/is-the-end-nigh-for-comparative-advertising/

Law firm Mills Oakley reporting on the case questions whether the end of Comparative advertising is nigh. The problem with Woolworths advertisement according to ASIC was that is was misleading as the premiums Woolworths were comparing were not like for like. Rather than contest the issues in court, Woolworths withdrew the ads.

Therefore in this case BMW would have to ensure they were comparing cars that were like for like. This would entail ensuring they were similar sized cars, similar power, tyre wear, condition and age of car.

A noted point of difference between the two vehicles is that BMW is a rear wheel drive whilst Audi is a front wheel drive. However this is not mentioned in the advertisement.

According to Nelson Ireson, Senior Editor at The Car Connection. http://www.thecarconnection.com/news/1074585_audi-a4-vs-bmw-3-series-compare-cars

“BMW and Mercedes Benz are the luxury-segment front-runners, lately, Audi has been gaining on them.”

Therefore it can be considered that BMW, wary of Audi gaining on them, is trying ways to get market share off Audi. To do this they have picked on one aspect of the vehicle, that being better stability in wet conditions. To do this though it must consider if there are other aspects of the vehicle which are subservient to Audi’s vehicle. Thus if Audi is superior in some way could they not just repeat the favour and do a comparative advertisement showing their superiority over BMW.

Given that any publicity is good publicity would Audi welcome the mention by BMW or would they go into public relations mode and try to defend their brand. Audi have not hit back with a comparative advertisement of their own instead concentrating on non-comparative one-sided argument type of advertising.

BMW have been audacious in this instance and for the moment it appears to have kept their sales above those of Audi. We eagerly await the next instalment of the premium car market segment stoush.

 

References

The Car Connection News http://www.thecarconnection.com/news/1074585_audi-a4-vs-bmw-3-series-compare-cars

Iacobucci, Dawn. Marketing Management, Cengage Learning 2013

Investopedia http://www.investopedia.com/terms/c/comparative-advertising.asp

Mills Oakley – http://www.millsoakley.com.au/is-the-end-nigh-for-comparative-advertising/

New Car Sales Figures  http://www.caradvice.com.au/476959/new-car-sales-figures-august-2016/

 

MYER and The Giving Registry

August 7th, 2016 SuttonShane

MYER have created The Giving Registry – Are program to donate goods to women who have been displaced due to Family Violence in conjunction with The Salvation Army.

http://www.buro247.com.au/culture-lifestyle/news/myer-launches-the-give-registry-to-help-victims-of.html

What Marketing processes – Segmentation, Targeting and Positioning have been utilized in this instance.

Family violence has a history since families begun, but now it continues to gain more prominence in the media. Politicians, celebrities all claim to highlight this matter in order to help victims, as well as, rid society of this evil issue.

The marketing campaign involves MYER customers buying a household item for themselves, then buying the same item a second time and donating the second item to women who have been displaced by family violence. MYER will also donate the same good to the charity involving The Salvation Army.

http://www.salvationarmy.org.au/en/News-and-Media/Latest-News/Myer-Launches-The-Give-Registry/

Segmentation the art of defining a particular part of the market to which our product or service would be appealing, suitable to the consumer and profitable to the business. Which segment of the market would MYER have depicted when putting the campaign together. Considerations would have included demographics- maybe gender, income, geographics – locations of MYER stores, attitudes towards family violence, knowledge of family violence issues. Would a decision on the market segment come from as Iacobucci D, 2013 (p 34) suggested “a managerial top down ideation or from a customer based needs assessment”. MYER considering the contentious issue of family violence is donating goods up to the value of $475,000.

MYER The Giving Registry Advertisement

Targeting is selecting a particular segment to market to. MYER is in the sector of retail goods thus considered a particular strength of theirs. The prospect of getting consumers to donate retail goods would be within their domain. Would it be a good corporate fit would have to be considered. The corporate fit of being involved with the more media prevalent family violence issues and partnering with The Salvation Army organization. Obviously with such a campaign MYER would de wanting to extend its appeal to current non-customers of theirs. External opportunities and threats would need to be considered. Opportunity appears to be first to market with this concept hopefully to bring in new customers to the MYER brand and appeal to loyal existing customers. Threats would be for the competition to do a similar campaign, maybe with a different charity slant which may entice new MYER customers back to competitors. The other if loyal, repeat MYER customers were lured to competitors.

Other opportunities and threats, which are external, are how this campaign is perceived by consumers. Will they see it as a community service of MYER aiding women affected by family violence or will consumers view it adversely as MYER trying to increase its brand on the back of women who have been victims.

Positioning – where to position this campaign in respect to the 4Ps of Product, Price, Place and Promotion. Price is straightforward as it is up to the consumer how much the value of a product they wish to donate. Thus it can appeal to the wealthier customer who can choose a high value, high quality gift or a less wealthy consumer who can choose a lower value good to donate.

Place is interesting as the Myer Giving Registry has to be done in store. There is no mention of online customers being able to donate. Thus MYER is trying to increase foot traffic in their retail outlets.

Promotion has seen MYER place advertisements on Social Media with Facebook in particular being adopted. The Salvation Army website is also prominent with articles about The MYER Giving Registry.

Place – MYER has also elected to distribute all goods to The Salvation Army and to bear all costs, such as transaction costs, associated with donations.

Whilst the marketing concepts of Segmentation, Targeting and Positioning have been considered I must mention the alternative view. Wright M (1996) when writing about  Mitchell V (1995) article purports “that underlying assumptions are usually false no matter what sort of segmentation and targeting is attempted”. Basically Wright (1996) was limiting the applauded effects of Segmenting.

In conclusion, MYER must have summed the opportunities to be involved with The Salvation Army, the support of women affected by family violence and the benefits to their Corporate Social Responsibility. As a program the donation of $475,000 worth of goods plus costs associated   with distribution of donations MYER would not be making a profit. However considerations of Corporate Social Responsibility and the general positivity around the MYER brand supporting women affected by family violence must have proved beneficial.


References

http://www.buro247.com.au/culture-lifestyle/news/myer-launches-the-give-registry-to-help-victims-of.html

http://www.salvationarmy.org.au/en/News-and-Media/Latest-News/Myer-Launches-The-Give-Registry/

Iacobucci Dawn, (2013) Marketing Management. Cengage Learning, USA

Wright Malcolm (1996) The dubious assumptions of segmentation and targeting. Management Decision, MCB University Press.

Author Shane Sutton 213555376