MARKETING PERFORMANCE MEASUREMENT
Marketing performance measurement is part of (business) performance measurement, a field that aims to support strategy execution by creating insights in company performance. Even though performance measurement is often associated with the evaluation of employees, it is in fact a broader, multidisciplinary and cross-functional discipline that covers all areas and layers of an organization (Marr & Schiuma, 2003; Eckerson, 2006). Performance measurement can be described as “a series of organizational processes and applications designed to optimize the execution of business strategy” (Eckerson, 2006, p. 30) and is part of the organizational planning process. This planning process ideally exists out of four steps:
- check, and
- act (Deming, 1982; Walton, 1986).
Business performance measurement focuses on the third step. In order to observe the quality of strategy execution and to identify areas for improvement, the organizational processes and applications used to determine the performance cover a wide range of activities, like data collection and analysis, performance assessment, and intervention design to improve performance.
Marketing performance measurement aims to assess “the relationship between marketing activities and business performance” (Clark & Ambler, 2001, p. 231). Herein marketing relates to all activities conducted to stimulate, facilitate, and accelerate sales (Lee et al., 2000; Alsem, 2007). Effective marketing practices result in success with winning and retaining customer preferences, which supports the achievement of long-term goals (Ambler & Kokkinaki, 2002). In this process marketing should not be conceived as a separate function within firms, but as shared responsibility of the business as a whole (Drucker, 1954; Grönroos, 2007).
Marketing performance measurement focuses on assessing:
- how well customer preferences are won and retained,
- to which extend that contributed to the stimulation, facilitation, and acceleration of sales, and
- how that impacted overall firm performance.
Marketing performance evaluations can in these processes contribute to the following four functions:
- annual-plan control,
- profitability control,
- efficiency control, and
- strategic control.
The first and last function differ from each other in the sense that annual-plan control attempts to evaluate if planned results are realized, while strategic control strives to assess if the best market, product, and channel opportunities are pursued (Kotler & Keller, 2006).
Theories on marketing performance measurement are organized around two streams, which evolved along with the marketing perspectives. These two streams are;
(1) marketing productivity measurement and
(2) marketing audit (Morgan et al., 2002).
The marketing productivity paradigm deals with determining the efficiency by which inputs are transferred into outputs, while the marketing audit school of thought tries to determine the quality and effectiveness of the marketing inputs (Sheth & Sisodia, 2002; Alsem, 2007).
Models of Marketing Performance Measurement
Some marketing performance measurement models include the following:
The marketing actions model
A Global model for determining how marketing actions influence customer behavior and financial performance is proposed by Gupta and Zeithaml (2006). The model shows how marketing actions induce customer perceptions, which subsequently influences behavior. These customer actions eventually are responsible for the firm performance. The model is visualized thus:
Conceptual model to determine the impact of marketing actions:
Source: Gupta & Zeithaml, 2006, p. 719.
According to this model, marketing performance measurement systems should use two types of customer metrics:
(1) Perceptual measures: attempts to measure the influence of marketing on the black box in consumer behavior, which is assumed to predict future customer behavior based on hypnotized relationships. Examples of perceptual metrics are: customer perceptions, customer attitudes, intentions to purchase, loyalty, service quality, commitment, perceived value, and trust.
(2) Behavioural measures: cover actual purchase decisions and behavior, and measure customer acquisition, retention, up-selling and cross-category purchases. Insight in such information can be used to make decisions about which customers to acquire, programs regarding customer retention, and cross-selling initiatives.
The relationship marketing model
Based on an analysis of the three streams within relationship marketing, Bush et al. (2007) propose a conceptual model for measuring marketing productivity from a relationship marketing perspective. This framework proposes that marketing efforts result in customer responses in terms of satisfaction, trust, commitment, and loyalty. These responses can be valued by means of two types of market-based assets that contain a reservoir of not yet exploited potential revenues: (1) customer equity and (2) brand equity. By capitalizing on these assets companies are able to enhance their cash flows, or improve turnover and profitability Rust et al. (2004). Such improvements in firm performance are expected to enhance firm value in terms of shareholder value and market capitalization (Bush et al., 2007).
The marketing productivity chain
Another conceptual framework to evaluate marketing performance is proposed by Rust et al. (2004), which is presented in figure below. These authors offer a conceptual chain-of-effects that is not only linked to marketing actions, but also to the overall state of the firm. In this model strategy relate to the strategic and tactical (marketing) plans, which usually deal with business growth and renewal. Tactical actions focus on the execution of marketing initiatives to realize income and short-term growth.
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