FORUM: WHY THE HEAT IS ON TODAY'S MARKETING EXEC: A NEW BOOK EXAMINES MEASURING A BUDGET'S VALUE

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When the Association of National Advertisers surveyed members last year, it found their No. 1 need was figuring out how to measure brand equity, and how to calculate a return-on-investment for marketing expenditures.

The ANA commissioned Don E. Schultz, professor of integrated marketing communications at Northwestern University's Medill School of Journalism, and Jeffrey S. Walters, president of Targetbase Marketing International, to write a book on the topic.

The result, "Measuring Brand Communication ROI," will be released this week at the ANA's annual conference in Laguna Niguel, Calif. This is an exclusive excerpt.

Don't tell me about tomorrow! How much did we make today?" This seems to be the mantra of top managers in businesses all over the world. The focus of many organizations has changed-from the easily determined "top-line measures" of sales, volume and share-of-market to "bottom-line measures" of profits, return-on-investment, economic value assessments and return on employed assets.

Much of this new orientation toward profit or return has come from the increased external, investor-related requirements of the equity market ... Where the organization might have relied on loose measures of marketplace effectiveness, or even executive "gut feel," today investments demand measurable, demonstrable results for all organizational activities.

TODAY'S WISH LIST

More effective and reliable measurement and evaluation tools for marketing, marketing communication and advertising often top today's organizational wish list . . .

Managers have found that traditional marketing and communication evaluation and measurement techniques simply don't satisfy the needs of investors, top management or even themselves . . .

Financial focus has shifted from estimating or calculating sales, volume and turnover to controlling costs and improving financial returns on operations and activities.

This change of management focus has led to the development of new organizational financial evaluation tools and techniques such as activity-based and cash-flow accounting and economic value assessment. In too many cases, marketing and marketing communication managers have been blissfully unaware of-and often unknowingly impacted by-these financial management changes. These concepts and approaches are now top management's ways of measuring the impact and effect of marketing and marketing communication . . .

The implementation of these new financial and management tools has given many organizations a much better understanding of what works, what doesn't, what can be reduced or controlled, what is redundant, and what can be improved throughout the organization-except in marketing and marketing communication.

LEVERS TO PUSH

From a management standpoint, leaders in most reasonably sophisticated organizations have a much better understanding of what they can do, what levers to push, and what can be done to improve their operating situations. While many solutions are still short-term in focus (i.e., trying to manipulate the bottom line to obtain desired quarterly results), many organizations are better run and better managed than they were just 10 or so short years ago-except in marketing and marketing communication.

Unfortunately for many marketing and communication managers, the development of these organization-wide measurement tools and techniques has increased the scrutiny of marketing and communication activities and investments.

Marketing and marketing communication have long been viewed in the organization as more of an art than a science. Unfortunately, this approach has been condoned, encouraged and even advocated by marketing and communication practitioners. While in the past this positioning served the marketing and communication managers well, sadly, this likely will not be the case in the future.

MARKETING: ART OR SCIENCE?

It is this "art" versus "science" polarization that often creates organizational conflict and concern about marketing and communication. While the organization has become more proficient at determining value and value-drivers in manufacturing, processing and distribution, few top managers have had much success relating these concepts to marketing, particularly to brand communication and advertising activities.

Compounding this lack of acceptable marketing and marketing communication measurement capabilities is the rapidly growing investment that marketing managers are requesting .*.*. Today, management and investors want marketing and communication managers to justify the initial investment they make or request and they also want verification of the returns which these investments can or should provide.

The question being asked is, "What are we getting for our money?" Unfortunately, many marketing and communication executives can't answer that question, or the answers they provide are in "marketing-speak" rather than "management-speak."

"Marketing-speak" refers to output or marketing expenditures; "management speak" refers to outcome or revenue. As a result, in many organizations, marketing and advertising are under attack by top management and the financial advisers who allocate corporate resources.

ELIMINATE FUNDING?

Top management is asking, "If marketing and communication management can't show, demonstrate or estimate returns to the organization, funding either must be dramatically reduced or perhaps even eliminated."

That's logical managerial reasoning, given the successful experience they have had with measuring, controlling and justifying manufacturing, operations, human resources, logistics, distribution systems and other functional areas over the past several years. The problem of marketing and communication measurement and evaluation of return-on-investment is not likely to go away.

Both external and internal challenges drive the need for new marketing and communication measurement techniques. Before describing these challenges, the most difficult question must be answered, i.e., what are we measuring? For that, we need some definitions.

"Brand communication" encompasses all forms of communication, actions and activities that influence and impact the relationship between the customer and the brand. Thus, the concept of how the organization communicates with its customers is expanded and enhanced.

No longer is brand communication simply what the organization develops, delivers and pays for. Instead, it is what the customer and prospect receives about the brand from whatever source . . .

BRAND COMMUNICATION

Further, brand communication includes all aspects, elements, activities and functions of the brand, including product performance, distribution, placement, advertising and customer service. These comprise the customer's physical use, perception and understanding of the brand as a product or service. It is these elements that define and differentiate one product or service from another.

Thus, brand communication includes the product or service itself and the packaging, distribution channel and media communication and beyond.

Some may argue that this is the definition of marketing itself. However, brand communication, in our definition, goes beyond [the] familiar 4-P approach of product, price, place and promotion. It also includes the internal elements which make up the brands: manufacturing, logistics, customer service, employees, investors and stockholders.

Activities that influence the acceptance and purchase of products and services are not limited to just the measurable, media-delivered, marketer-controlled activities of the past. Instead, communication can come from anywhere and be delivered by almost any type of activity, including recommendations from friends, a story in The Wall Street Journal and shelf placement in the store.

It also can come from an innovative ad during the Academy Awards or the manner in which customer service answers the telephone. The problem is, it is increasingly difficult to differentiate and distinguish which of these has the most influence or effect on the customer, consumer or end-user. Commonly, they all do in some way or another.

SYNERGIES

For the moment, we'll use brand communication in the broadest sense: all elements that communicate the value of the brand to the customer or prospect through any method or technique . . . The problem in today's complex and multifaceted marketplace is that the elements often can't be separated. They work together. They are related. There is synergy among and between them.

That is part of the reason our present measurement systems don't work and can't work today or into the 21st century. They weren't designed for a complex, communication-rich, interactive environment.

That's why we need new approaches and new concepts in order to provide some reasonable evaluation of how we are investing our resources and what we are

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