Imagine that you just invested in a marketing promotion and sales have picked up significantly over the prior month.
Now your marketing vendor has come back with another promotion that is as good as the first.
You look at your bottom line and determine that the increase in sales more than paid for the cost of the marketing program.
So renewing is a no-brainer, right? There are a few things to consider before signing up for another investment.
Were the increased sales you realized a result of the marketing program or an improvement in economic conditions? Maybe the improved sales were caused by a warming trend in the weather, driving more people to be out in your area.
Maybe the business next door ran a promotion that increased traffic to their store and you realized some increased business as a result.
Or, maybe there is a cyclical element to your product's sales that is starting to show effect.
There are a number of outside influences at any time that could be impacting your sales, negatively or positively.
In order to know for sure if your marketing program drove results you must try to isolate it from outside influences.
This is done by measuring the difference in sales (or any measurable success factor you are trying to improve with the marketing program, a.
k.
a.
Key Performance Indicator) from a base time period to a test time period against a comparable benchmark in the same time periods.
Measuring a base and test time period defines the business environment before the marketing plan and after, assuring you are measuring the affects of implementing the program.
And comparing to a like benchmark within the same time periods helps to isolate results from outside influences because both your measure and the benchmark exist in the same environment and are being influenced by the same conditions.
Once you are able to identify a Key Performance Indicator (KPI), a base and test time period, and a relevant benchmark for your KPI, then you can calculate the impact of your program by comparing the movement of your KPI and the benchmark from the base time period to the test time period.
If your KPI movement was greater, then you have a positive impact that can be measured and valued.
If your KPI's movement is smaller than the benchmarks, then you have negative impact, or a failed marketing program.
To illustrate the proper method of marketing program measurement, refer to the following example.
A small clothing shop promoted winter hats in February by featuring hats in their local coupons.
They want to know if the coupon effectively increased sales of hats.
Since this store has only one location, they need to use a comparable product within the store as a benchmark.
Gloves are similarly priced to the hats and have a history of comparable sales to hats.
In January, the base time period when nothing was promoted, the store sold 500 hats.
They sold 550 hats in February, the test time period when hats were featured on the coupon.
The store realized an increase of 50 hats in the test time period.
Meanwhile, the store sold 750 gloves in January (base time period) and 875 in February (test time period), an increase of 125 without a promotion on gloves (benchmark).
Since the increase of hats sold from January to February (50) was less than the increase of gloves (125), we can't say that the promotion was effective.
The increase on sales of hats may be attributed to increased traffic flow due to better weather in February or any number of other reasons.
But when we isolate the promotion from outside influences, we can see it was ineffective.
This type of analysis may or may not describe the total picture of what happened with this promotion, but it does tell us that we need to look closer and make adjustments to the promotion.
Using fact based data is the first step to making better decisions on your next marketing program.