All marketing should generate effect. That’s a given. But defining effect and measuring it is often done wrong. Understanding the difference between “effect” and ”effectiveness”, and the consequences each leads to, is one example that is crucial to optimize your investments in marketing.
For marketers, effect and effectiveness are fundamentally different concepts:
- Effective is about the results achieved
- Efficient is about how we utilize our resources in achieving that
If marketing produces the desired results, then it’s effective. Only then should we begin asking whether it can also be done more efficiently.
The risk of doing this in reverse is serious. Anyone who’s ever seen an econometric analysis knows that the majority of a brand’s revenue comes from what’s known as base sales – revenue that occurs because customers know the brand and its offerings. Only a small portion of income can be directly linked to specific marketing efforts. So, stopping marketing would initially only have limited impact on revenue. From a pure cost-efficiency perspective, the result will look fantastic: a 100% reduction in cost yields only a marginal revenue drop short-term. The ROI figure looks magically good, but it’s the first step towards a long-term disaster.
Here is the paradoxical conflict between campaign ROI and actual effect. If we focus on maximizing ROI, we tend to pick the lowest-hanging fruit – but we fail to take care of the rest of the garden. To use an old metaphor: we hand out discount coupons to people already walking into the pizzeria to buy pizza.
When we talk about effect, we need to take a more holistic perspective. When someone asks, “What should we measure when we measure effect?” – the answer is not one metric, but several. Because we’re not only running a business today – we also want customers tomorrow, next week, and next year.
Measuring short-term effects of campaigns are rather simple. For future revenues, we need to assess the strength of our brand in terms of awareness and preference – or better put:
- What makes customers choose us?
- Why might someone who hasn’t chosen us yet do so in the future?
In other words, we need insights into market structure and the drivers behind purchases – so we can develop a stronger and more profitable offering and communication that builds our brand.
In coming posts we will discuss how to find the drivers behind purchases and a systematic approach to measure effect. Older posts you will find in earlier blog posts. More will follow.
If you are eager to know already know, just reach out to ulf.vanselius@comprend.com
Curious about effect? Sveriges Annonsörer has developed a fantastic tool called “The effectiveness system” which you can download here: https://www.sverigesannonsorer.se/branschinitiativ/effekt/effektsystemet/