Marketing Poorly Measured – But Solutions Exist

“Marketing is poorly measured…” learned students of Saudi Arabia’s Madinah Institute for Leadership and Entrepreneurship in a recent webcast presented by Neil Bendle, PhD, Associate Professor of Marketing at Ivey Business School and Advisory Council Chair of MASB, the Marketing Accountability Standards Board.

They were also told, “…you can help change that.”

Neil Bendle Ivey Business School

Neil Bendle

METRIC ABUSE

Bendle said that marketers often abuse metrics, like when they refer to the “bottom line” (profit) when they’re really talking about the top line (revenue). “We can’t build marketing’s credibility with incorrect metrics and dubious assertions.”

One example of marketing metric abuse is subtracting acquisition costs, which are “sunk costs,” before reporting Customer Lifetime Value and using this number for decisions in respect to current customers.

Another occurs on social media when “likes” obtained through spending are equated with organic likes. “People like because of an affinity. Social media usually reveals, but does not create, the affinity.”

To select the proper metric, marketers must understand what each metric does and think through a metric before adopting its usage. Models such as WAITA can help with the analysis.

To standardize terminology, Bendle recommends the Common Language Marketing Dictionary.

WHAT IS GOING WRONG WITH EXTERNAL REPORTING?

Recent corporate takeovers highlight problems with external reporting for marketing. While brand building is designed for long-term benefit, it is treated immediately as an expense. This violates the accounting concept of “matching” because costs are charged in an earlier period than benefits are received.

Treating marketing as an expense leads to assets not being consistently valued. Many marketing assets built in-house are never valued at all. Purchased assets are often retained on the books at historic cost yet many marketing assets built in-house are never valued at all. Not valuing these marketing assets contributes to a major difference between the market value of a company and its book value. “The way financial accounting deals with marketing is an illogical mess.”

TAKING CONTROL

There is limited flexibility in external accounting, but Bendle suggests that marketers take control of internal reporting. Since the rules from bodies like IASB explicitly do not interfere with internal accounting, marketers are free to adopt any approach that gives them the information they need to be effective.

One approach is “marketing accounts,” which are designed to record the value of the assets marketing actions create. Using “expected value,” their aim is to aid in managerial – not investor-based – decision making.

View the WEBCAST PRESENTATION here and read more from Professor Bendle on his Marketing Thought blog: neilbendle.com.

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