There is an old saying, “You can’t manage what you don’t measure”. This statement says it all about the importance of evaluation in a marketing plan. Every marketing plan has a basic outline that includes things such as; a situation analysis, SWOT analysis, a pricing strategy, a point of differentiation, and evaluation of programs among other things. And, unless your business only intends to exist for one year, the evaluation piece may be the most important part as it precludes next year’s plan.
The first questions I ask anyone writing a marketing plan is, what worked in your last plan and how do you know it worked? If a tactic was effective last year, it typically will be as effective next year. But you need to know for sure that the results were generated from that specific action and that action didn’t cost you more than the results generated for your business. From this information you are equipped to make better decisions for a more efficient plan.
There are 4 critical roles evaluation plays in a marketing plan;
1. Investment justification shows you your return on investment for a program. Typically this is more difficult than weighing the amount you spent on a program against the amount of sales increased due to that program. Clouding the cost / benefit comparison is the fact that increased sales may be coming from multiple sources not attributable to you marketing investment. And, some marketing programs are designed to increase awareness or improve brand equity rather than directly impact sales. In these cases, it is important to try to define key performance indicators, or results that lead to sales, and put a value to them prior to actually performing the evaluation. If you can objectively do this, then you can always calculate a cost vs. a benefit.
2. Improve efficiency of programs you intend on repeating. If your evaluation of a program did not show a positive return on investment, it may need adjustment rather than thrown away. For example, imagine you are a restaurant promoting a value entree on a coupon in a local newspaper. That coupon is driving new customers into your store, but the success of the value entree is lowering your average check and causing you to lose profits. The coupon tactic may be worth keeping if you can still drive those customers into your store with a higher priced item. Adjust the offer on the coupon may be the best action.
3. Prioritize programs, or in other words, select the programs that are driving better results. This is a good problem to have. If all of your programs are resulting in positive returns, then use the formula to select the programs returning the best results. Most businesses do not have unlimited resources when it comes to marketing dollars, so this becomes even more important to assure the best overall marketing plan is in place.
4. Public relations are so much more effective when you have a positive story to tell. If a business growth message is important to convey to your customers or investors, nothing is more convincing that cold hard facts. Evaluation allows you to be as specific as you want with your financial results. And in today’s business environment, everyone wants to see financial results.
Evaluation methods can be done in a variety of ways, but the most common include top line measures through sales analysis or market share analysis, bottom line measures through cost and profit analysis or efficiency ratios, or finally awareness and brand improvements through marketing effectiveness rating reviews or key performance indicators. Any of these methods will lend you insight to your marketing plan’s effectiveness.
If you have not given much thought to evaluation, don’t worry, you are not alone. Not every marketing professional wants to be measured. Any thorough marketing plan will have flaws, or less effective programs. Don’t look at them as failures, rather see them as key learning elements that lead to better decision in next year’s plan.