How does a building materials manufacturer prove effectiveness of marketing activities?

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I had the pleasure of meeting with a prospective client yesterday and the discussion centered largely on how to evaluate marketing effectiveness. 

The prospect is asking himself:  So, how does a building materials manufacturer prove effectiveness of marketing activities?  My general rule is that while you can base performance on industry standards – like click-thru or conversion rates for e-marketing campaigns – the best way to measure is based upon your own organization’s prior campaign performance.   “Yes,” responded Mr. Prospect, “but what if we don’t have any prior metrics?”  Not a problem, say I.  Today’s the day we start measuring!

For every advertising campaign, direct mail, emarketing initiative and trade show, we begin with setting baseline goals.  These are realistic, objective targets for the expected number of responses, number of leads generated and number of sales made.  We must also include a baseline measure for brand awareness.  Every marketing activity generates some brand awareness, let’s hope!  So, we need to decide what percentage of the total campaign expense we are willing to assign to brand equity.  For clients that don’t have a number in mind, I generally use the following percentages as a starting point:  For tradeshows, I recommend that 35% of the expense be allocated to brand equity; for advertising & PR, I use 70%; and for emarketing I use between 25% and 35% depending upon the nature of the campaign.  The actual numbers that you choose are largely irrelevant, as long as they are agreed upon by marketing, sales and finance.

So, Mr. Prospect and I work through an example.  He has his largest building materials industry trade show coming up in late January.  He’s comfortable with allocating 35% of the trade show expense to brand awareness.  We assume he’s going to get 750 inquiries (e.g. people coming through the booth) and of those 400 will prove to be viable leads.  They generally close about 20% of their leads and the average sale is $2500. Our baseline for revenue creation specifically from this one show is $200,000.  Total cost to participate in the show is around $100K.  So, we take our $100,000 less $35,000 (that we’re allocating to brand awareness), leaves us with $65,000 in expense and an ROI of 207%.  Schweet!

This is just the first step in a series of baseline calculations we will use to measure Y1 performance – every subsequent year we can measure against the prior year’s activity.  Mr. Prospect nods enthusiastically.

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