No standards of measurement:
One of the greatest challenges that the industry faces is the lack of consensus about how the effectiveness of marketing should be measured. In July 2004, Forrester Research conducted a survey of 54 members of the association of national advertisers (ANA) who were asked for their definition of marketing ROI. 70% of those surveyed said gaining agreement on the definition of ROI was somewhat/very difficult. Moreover, 78% cited measuring the sales impact of marketing as somewhat/very difficult.
Since how well a campaign works depends on so many different factors including the product, the company, the competitors’ actions, the overall state of the economy, government regulations etc., it is difficult to quantify how much the campaign itself adds to the outcome. Moreover marketing affects Sales in the short run as well as in the long run and can also lead to increases in brand equity. While it may be possible to identify and measure the short term incremental sales due to a marketing campaign, it is more difficult to estimate the long term impact arising from that campaign and virtually impossible to figure out the brand equity that results from it.
In practice, most measures only take into account the short term gains from marketing which means that marketing returns are often underestimated. This can lead to underinvestment in media spending which in turn may have detrimental effects on long term profitability and brand equity.
-- by guest contributor Pat Bhattacharya, Managing Principal, Thinkalytics
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