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Did it work? Tracking tips for marketing campaigns.

Are your direct mail pieces affecting your organization's bottom line? Do your brand-awareness campaigns influence sales levels? Did the sales promotion you ran last month impact your market share? Sales and marketing staff should ask themselves these questions on a continual basis to help them evaluate the value of their marketing campaigns. To evaluate the results of its campaign and determine needed changes for future plans, marketing staff must answer the following four questions:

* What did we want to achieve? What were our goals and objectives with this plan?

* What happened?

* Why did it happen?

* What should we do about it for future campaigns?

By asking these questions, staff can determine if the goals and objectives of the campaign were met, and if not, why not. If the desired results were not accomplished, an evaluation must be conducted to make appropriate changes. Some items to consider: Were the goals realistic? Did the campaign reach the desired target market? Did the competition launch a similar campaign at the same time? By pinpointing the discrepancies between the desired and actual outcomes, the marketing department can fine-tune its next campaign, and better the potential for profitable results.

Methods to track the results of a marketing campaign can range from evaluating market share to determining the return on marketing investment (ROMI), to calculating customer acquisition costs. Firms have a variety of tools by which they can monitor the impact of their marketing campaigns.

Market share and penetration rates

Determining the market share and penetration rate before and after a campaign is important to successfully track results. Market share is the percentage of total sales in a given market. This also can be measured in unit sales or purchasing units, such as people. For example, if ABC Telecommunications has 225,000 customers out of a total market of 1 million, then ABC has a market share of 22.5%.

Penetration rates also can be used to track the results of a marketing campaign. For example, incumbent and competitive local exchange carriers (ILECs, CLECs) can determine their long-distance penetration rates by dividing the number of their long-distance customers by their total number of access lines. By identifying this number before a marketing campaign is launched, a telco can determine how the campaign influenced its market share and penetration rate during the campaign.

Operating ratios

The purpose of this ratio not only is to gauge the results of a campaign, but also to compare the performance of the company from one year to the next with industry standards or with competitors. Two of the main ratios are:

Gross margin percentage: The gross margin percentage is gross profit divided by net sales. This margin shows how much is left from net sales once the costs of the goods have been taken into account. By increasing this margin, the net profit also will increase, if the costs of the goods and expenses don't drastically increase. This margin is an important tool for measuring the effectiveness of a marketing campaign. For example, if ABC Telco generates $250,000 in net sales and $100,000 in gross profit, then the gross margin percentage is 40%. After changing vendors for its long-distance service, and implementing a direct mail campaign, ABC increases net sales to $275,000 and gross profit to $115,000. These actions caused the gross margin percentage to increase by 1.8%, to 41.8%.

Net profit percentage: To calculate the net profit percentage, divide net profit by net sales. This figure demonstrates the actual net profit as a percentage of net sales. Increasing this percentage should be a goal of any organization, regardless of industry. For example, if ABC Telco has a net profit of $25,000 and net sales of $300,000, then the net profit margin is 8%. After implementing a newspaper ad campaign and altering its distribution channels, the net sales increased to $350,000 and net profit increased to $35,000. These increases cause the net profit percentage to move up 2%, to 10%.

Response rate: Monitoring the response rate of sales promotions, such as coupons and free offerings, is another means of tracking the success or failure of a marketing campaign. Sales personnel and customer service representatives need to be aware of these promotions, and a tracking program should be designed and implemented so that data can be gathered and evaluated.

Response rates to newspaper, television, radio and other ads also can be tracked by gathering information from consumers when contact and sales are made. A CLEC in Kansas recently offered its customers a dollar off of their next bill, if they returned a market research survey that the company included in that month's bill. The response rate to the promotion was 87%. Using this method, the company gained valuable information about both the effectiveness of this type of promotion and its customer base.

Unit sales

Tracking the change in unit sales before and after implementation of a campaign is yet another way to measure effectiveness. Prior to the launch of a campaign, the previous levels of unit sales should be identified and documented, so a comparison can be completed after the unveiling.

Return on marketing investment (ROMI)

To understand the dynamics of ROMI, marketing expenditures must be seen as investments. Guy R. Powell, in his book, Return On Marketing Investment--Demand More from Your Marketing and Sales Investments, explains the value of using ROMI to evaluate and monitor marketing campaigns: "ROMI is defined as the revenue (or margin) generated by a marketing program, divided by the cost of that program at a given risk level. The ROMI hurdle rate is defined as the minimum acceptable, expected return of a marketing program at a given level of risk."

For example, if ABC Telco implements a marketing program that costs $100,000 and generates $500,000 in new revenue, then the ROMI for that marketing program is 5.0. This means that for every dollar spent on the marketing program, the company generated five dollars in new revenue.

Four basic elements must be considered when calculating ROMI: expenditures or investment, returns, risks and hurdle rates. "As with any investment, the projected results (returns minus costs) must exceed a certain investment hurdle rate for a given level of risk," Powell writes. Marketing campaigns should have a higher expected return than internally focused, less risky investments, such as new equipment. ROMI enables marketing departments to make better decisions about where and how the company's marketing budget is invested.

Marketing budgets and cost per customer acquired

Marketing performance is measured by calculating the cost per customer acquired. This can be completed only after the marketing plan and budget have been implemented, and the results have been identified in terms of business generated.

For example, ABC Telco uses several means to reach its target market, including a newspaper ad, a billboard and a brochure. Each piece of marketing collateral includes ABC's 800 number, plus a special extension number, so the response rate and cost per customer can be calculated. Once the campaign has been implemented and the results identified, the cost per customer can be calculated by dividing the total cost of the campaign by the number of units sold or sales completed.

The newspaper ad that ABC Telco ran for a week cost $20,000 and generated 1,500 sales, which means there was a $13 acquisition cost per customer. ABC also implemented a telemarketing campaign that cost $100,000 and gained 5,000 sales, so the cost per acquisition was $20.

These tracking tactics are beneficial for the evaluation of marketing campaigns and for future planning purposes. Every organization has limited resources to extend and needs to find the best ways to use those assets.

By monitoring marketing efforts, telcos can identify and use the most effective means by which to increase sales and boost the bottom line. The challenge now is to take these monitoring tips and apply them to your organization.

More Resources

Principles of Marketing, by Gary Armstrong and Philip Kotler, Ninth Edition, Prentice Hall, Upper Saddle River, N.J., 2001

The Market Planning Guide, by David H. Bangs Jr., Fifth Edition, Dearborn Financial Publishing, Chicago, Ill., 1998

How to Really Create a Successful Marketing Plan, by David E. Gumpert, Inc. Publishing, Boston, Mass., 1994

Return on Marketing Investment--Demand More from Your Marketing and Sales Investments, by Guy R. Powell, RPI Press, Atlanta, Ga., 2002

Essentials of Entrepreneurship and Small Business Management, by Thomas W. Zimmerer and Norman M. Scarborough, Third Edition, Prentice Hall, Upper Saddle River, N.J., 2002

When Art Meets Science: The Challenge of ROI Marketing, www.strategy-business.com

Tiffany Hancock is regional marketing director for WRLD Alliance Long Distance, a wholesale long-distance, calling card, toll-free and Internet accelerator provider to rural telephone companies [www.wrldalliance.com]. She can be reached at tiffany@wrld.net.
COPYRIGHT 2004 National Telephone Cooperative Association
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Author:Hancock, Tiffany
Publication:Rural Telecommunications
Geographic Code:1USA
Date:May 1, 2004
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