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8/14/2019 ANA Marketing Accountability Bench Marking Report 2005
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ANA Marketing AccountabilityTask Force Findings
October 8, 2005
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Table o ContentsPurpose and Background ................................................................................................................2Summary and Conclusions ..............................................................................................................4Approach and Methodology .............................................................................................................5Accountable For What .....................................................................................................................6The Culture o Accountability ...........................................................................................................9Denition and Types o Metrics ......................................................................................................Metrics Maturity Model ..................................................................................................................3Emerging Characteristics o Current Best Practice .........................................................................6Metrics Are Not Enough ................................................................................................................2About EMM Group, Inc. ................................................................................................................23Contact Inormation.......................................................................................................................23Bibliography: Marketing Metrics Resources and Reerences ..........................................................24Appendix ......................................................................................................................................26
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Background
In a January 2005 ANA survey o senior
marketers, accountability was listed as their
number one issue. Work in this area has
been and is a key initiative o the ANA and to
respond to the concerns o its members, the
ANA convened a marketing accountability
task orce. The purpose o the task orce was
twoold: () to review current best practices
used by ANA member companies to improvetheir marketing accountability; and (2) to
provide a practical catalog o accountability
metrics used by industry practitioners rom
which marketers may choose those appropriate
to their unique situation.
Twenty ANA member companies participated
in this task orce and we are indebted to them
and their representatives or sharing their
accountability experiences, their organizational
issues, successes and challenges. The act thatcompanies o this caliber and people suering
rom permanent calendar-overload took the
time to participate is testimony to the urgency
and timeliness o the subject. We thank the
ANA Board o Directors, currently chaired by
Jim Stengel, Global Marketing Ocer, Procter
& Gamble, or their invaluable input into this
project.
Lastly, the ANA thanks Gordon Wade, FoundingPartner o the EMM Group, or his tenacity,
enthusiasm and skillul leadership o this task
orce.
We hope this report contributes to making
marketing more accountable so that
consumers and customers have an enhanced
sense o value, protable brands may fourish,
shareholders may be enriched and marketing
proessionals may see their chosen proession
recognized or its irreplaceable contribution toour economy and culture.
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Every other unction is held accountable
or its return on investment. No longer
can marketing expect a ree pass
rom management and shareholders.
Marketing is competing with every other
unction in the company or a limited pool
o shareholder dollars. I this unction
alone cannot or will not prove its relativeeciency, management will not keep
eeding the beast.
Management has no other place to
turn or additional savings. Every other
unction has been six sigmaed and
TQMed into ghting trim. Management
believes the supply chain has no more
slack. Management believes operations
are wound tight. The view rom the corner
oce sees the marketing unction as thelast grape with any juice let unsqueezed.
Marketing can be measured more
precisely today than in the recent past.
The confuence o a torrent o data,
powerul hardware and agile sotware
has totally changed the measurement
environment. Marketing can no longer
claim with any credibility that its
eectiveness cant be measured. Relatively
precise results rom new marketingalternatives such as the Internet, have
ed managements desires to understand
the relative eciency o all marketing
expenditures. Ignorance o the law o ROI
is no longer an eective deense.
.
2.
3.
Study participants reveal several trends that have coalesced tocreate intense interest in marketing accountability
Marketers know they cannot ulll their
role as drivers o growth and as satisers
o consumer needs unless, and until, they
prove the worth o their unction.
Marketers are beginning to understand
embracing accountability has its rewards
as well as challenges. With the appropriatemetrics rom a robust accountability
initiative, marketers can now optimize
expenditure choices across the entire
spectrum. Instead o wondering which hal
o last years expenditures were wasted,
marketers can determine how to make
virtually all o next years dollars count.
The ocus on accountability has an ethical
aspect. Many marketers understand
that marketing unds arent theirs.They understand these unds belong to
shareholders who have a right to expect
more proessional stewardship o their
unds.
Lastly, some marketers are beginning
to abandon the historic deense that
marketing is an art which cannot be
measured, only appreciated, like a ne
wine or an evocative perume. The modern
marketer is beginning to see marketing asa process with measurable inputs and
outputs producing reliable, repeatable
results. The process approach which
revolutionized the supply side has nally
come to the demand side.
4.
5.
6.
7.
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Accountability is more dependent
upon corporate conviction than upon
algebra on steroids. Create a culture
o accountability.
Marketing should aggressively
embrace the responsibility or the
short-term ROI o its expenditures
and go beyond to demandaccountability or nurturing brand
equity, the single most valuable asset
o any company.
Measuring marketing ROI can be
done with signicant accuracy but
it takes process, determination, and
money. No magic bullet exists but
the capability to measure upwards o
90% o what most companies spend
on marketing is available today.
Superior metrics will not in-and-o-
themselves deliver superior marketing
results dened as robust brand equity
leading to volume and prot growth.
Metrics are a thermometer, a simple
but powerul diagnostic tool. No one
was ever cured by a thermometer
and marketing will not be cured
by metrics. The cure demands
a rigorous end-to-end marketingprocess within which metrics play the
same critical role they played in Dr.
Demings total quality reormation o
the supply side.
Summary and Conclusions
Every business vertical, indeed every
company, will have unique metrics
dependent upon what management
expects marketing to deliver. Start
by understanding managements
strategic expectations o marketing,
and then measure that.
A best practice metrics prolehas emerged along with a metrics
maturity model. Each company
should measure itsel against this
prole and maturity model.
Although a precise map remains to
be delineated, the view rom dierent
peaks on the analytical landscape
clearly shows the way to the land
o superior nancial outcomes goes
through brand equity and leads tobrand loyalty. Once bound to a brand
by a combination o brand experience
and emotional benets, consumers
are willing to reward brand owners
with higher margins or each
individual purchase occasion, oten
or a lietime.
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This project began with a sharing meeting o a
group o companies held at Procter & Gamble
in September, 2004. The meeting revealed the
diversity o practical challenges aced by dierent
verticals. An especially obvious dierence was
that between business to business (B2B) and
business to consumer (B2C) companies. The
key driver o dierence among the verticals is the
availability o reliable, granular, malleable andrelevant data. Some verticals, such as consumer
packaged goods and consumer nancial
services, are awash in a tsunami o data. For
them, the challenge is merely organizing the
data upon powerul sotware platorms permitting
sophisticated analytics limited only by the
analysts imagination. Other verticals had unique
sources o data and unique expenditure options
enabling and requiring unique metrics.
For that reason, beginning in May, 2005,we invited a diverse group o companies
representing numerous verticals in both
B2C and B2B, to join the ANA marketing
accountability task orce. The companies who
chose to participate, were a diverse group which,
taken together, oered a 360 degree view o
the opportunities, challenges and alternatives to
enhancing marketing accountability.
We asked the companies to ll out a short
survey primarily to orient the study organizerstowards areas o specic interest. Then we
had conversations with representatives o
the participating companies to clariy our
understanding o the state o accountability.
Ater these conversations, we collected internal
scorecards as well as other internal documents
relevant to the subject.
Then we searched the Internet to identiy
white papers, monographs and journal articles
dealing with the broad subject o accountability.
Suce it to say that this subject has generated
lots o interest rom a broad variety o industry
participants ranging rom various marketing
trade organizations, academics, consulting rms
and more than a ew practitioners. We have
included some o the more helpul articles in thebibliography o this report. Where we can identiy
a specic original source or a concept or idea
(like net promoter score) we have provided
specic attribution. We readily acknowledge
that the overwhelming percentage o the
concepts have emerged over the years rom the
work o countless pioneers and practitioners
too numerous to identiy and in most cases
anonymous.
One thing is certain, the work in this studydraws rom many sources, most importantly the
contributions o the participating companies. We
wish to acknowledge them all even i it must be
done as a group rather than individually.
Approach and Methodology
One group who deserves special mention is thethird-party marketing services providers such asresearch houses, advertising agencies and the like.These proessionals oten lead the way in developingnew techniques to measure accountability and ROI.Two rms specically were quite helpul, MarketingManagement Analytics (MMA) and the AdvancedTechnology Group (ATG) o the media buying giant,Mindshare. Each group was careul to sit through theirvast experience, remove any client specic detail andthen summarize their ndings or our study team. Wedeeply appreciate their help.
It should go without saying that the authors o this summary
report accept accountability or any errors in act or conclusion.
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Accountable For What
Much o the discussion around marketing
accountability is ocused intently around ROI or
ROMI, the return on marketing investment. This
ocus, some would say obsession, refects an
understandable desire or a one-number metric
that puts marketing on the same evaluative
standard as all other business expenditures.
The reasoning goes that i marketing can
provide reliable standard ROI gures or eacho its expenditures, top management will then
be enabled to deploy capital eciently among
the various competing demands or corporate
resources such as buildings and grounds, capital
equipment, research, operations, and marketing.
The problem with the ROI ocus on specic
marketing line items is that these expenditures
aect a very small percentage o the companys
volume even in the short-term. For most
companies in almost every vertical, marketerscould spend zero dollars over the next twelve
months and the company would still generate
sales rom what the analysts call carry over or
base line. The table below shows that or most
companies the expenditures being measured
eect about 20 to 25% o next years sales and
the carryover is 75 to 80% or more. Whats this
so called carry over? Whos accountable or that?
During our discussions with the participating
companies, one o the representatives put the
question quite artully: I know that this years
expenditures aect only a small portion o next
years sales. I know that we have carryover.
What I want to know is how much each short
term marketing expenditure contributes to
long-term carryover.
The technical answer to her question is
contained in the box below:
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For what should marketing be accountable?
For the short-term response to this years
expenditures? Or or something qualitatively
dierent and more undamentally important? Is
there something o permanent value or which
marketing is responsible beyond the short-term
return on a ew line items in the budget?
The table below attempts to provide ananswer by looking beyond the annual income
statement to shareholder value as measured
by Wall Street. For most companies, total
shareholder value could be deconstructed into
three components:
But she is actually asking a more proound question:
() the book value o the corporation, the hard
assets such as buildings, capital equipment
and cash; (2) the adjusted net present
value o this years prots and then (3) the
dierence between those two amounts and
the total value o the company represented
by share price multiplied by the number
o shares outstanding. That dierence or
most companies turns out to be a airly largenumber, something in the range o 35 to 50%
o total shareholder value.
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is responsible (or should be responsible) orunderstanding consumer needs, acilitating
development o critical unctional and
emotional attributes and positioning the brand
with consumers.
So when critics and colleagues demand that
marketing be accountable: a air retort is
accountable or what? The answer should be
that marketing is accountable or eciently
building long-term brand equity.
Thereore, any marketing accountability
project has to respond to the returns on short-
term expenditures but even more importantly
or the eect that any marketing expenditure
has upon those perceptions o the brand that
drive the rational and emotional loyalty to a
brand that we oten perceive as brand equity
As marketers we should accept the
responsibility or prudent investment o this
years budget while reminding management oour responsibility or building long-term brand
equity, a responsibility o ar greater value to
the shareholder.
Economists call that large somewhatmysterious value by several names: things
such as intangible value, market eects or
good will. Some call it brand equity because it
represents the belie that investors have in the
long-term prot-generating value o the brand
behind the stock ticker symbol. Whatever one
calls that dierence number; everyone agrees
that it is tied to an expectation driven by a
series o rational and emotional belies about
the uture perormance o the company. One
might even suggest that it is related to thecarryover a company will get in the absence
o any short-term marketing expenditure. Its
the loyalty the company has earned with a
core group o customers who preer the brand
because o the value stored in their minds rom
positive brand experiences, impressions and
promises.
The question remains, who owns this enormous
component o shareholder value, or equity?
Certainly the CEO is ultimately responsible oroverall shareholder value but marketing can
and should accept a major responsibility or
that intangible because it is marketing which
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The Culture o Accountability
Metrics, and the accountability they imply,
create problems in all unctions within all
company cultures. Metrics and marketing
is an especially volatile mixture because
the marketing unction has had ew metrics
in the past and other metrically dense
unctions within the company are deeply
suspicious about marketings sudden oxhole
conversion to the discipline o metrics. Addin the assumption within marketing itsel that
metrics are directly connected to personal
compensation and career advancement then
one has the recipe or major cultural push
back.
Nothing emerged quite so clearly rom our
discussions with study participants as the
cultural impedimenta associated with metrics
and accountability. Indeed, several participants
voiced the opinion that unless a companycreated a culture o accountability, no amount
o analytical artice would succeed. Marketers
must WANT to be measured, must embrace
accountability or even the most artully
designed metrics program will ultimately ail.
According to study participants, three
conditions seem essential to creating this
culture o accountability:
Leadership rom the top. Unless top
management demands accountability
and helps resolve disagreements among
competing approaches to accountability,
the culture will reject metrics or simply
reeze in place. I management is unhappy
with the pace o cultural accountability, the
rst place to look is the mirror;
Inclusivity. Metrics can not be successully
deployed by or within one unctional
silo. By their very nature, metrics have a
transunctional intercompany signicance.
Unless various unctions within the
corporation such as nance, operations,
business inormation and HR are aligned,
the entire edice o metrics will collapse;
and
Process. The key to creating culturalbuy-in is an inclusive process that creates
condence in the numerical accuracy
and relevance o the metrics as well as
their perceived airness and comparability.
Please see the brie discussion in the inset
box regarding a metrics process on the next
page.
.
2.
3.
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() it aligns the marketing
metrics with other
corporate stakeholders in
the larger accountability
culture thereby enhancing
marketings credibility
within the company; (2) it
ocuses the company onmanagements expectations
or the marketing unction;
(3) it ties marketings
metrics into the larger
business planning process
so that the company
provides the resources
which are required to meet
the expectations embodied
in the metrics; and (4)
it mandates sharing omarketings progress with
the larger internal corporate
stakeholder group thereby
providing visibility to
marketings contributions.
Using metrics developed
rom a sub-process such
as this to knit together a
larger end to end marketing
process is one o the
principal hallmarks o a
best practice marketing
unction.
The chart below outlines a metrics development and embedment process.Following a process such as this accomplishes several critical objectives:
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Defnition and Types o Metrics
In any discussion o a complex subject, some
conusion is introduced by the use o words
which understandably have dierent meanings
to dierent people. This requires that we
occasionally stop to dene terms which are
regularly used in any accountability discussion.
Words such as measure and metrics have two
have importantly dierent meanings.
A measure is a one-number act such as 00
miles or 5 gallons. A metric is almost always some
combination o measures that permit an analysis
or a conclusion. For example, I drove 00 miles
and used 5 gallons o gas thereore I got 20 miles
per gallon. 20 miles per gallon is a metric. I I
paid $3 per gallon or that gas, my cost per mile
(another metric) was 5 cents. With this data I
can benchmark the eciency o other cars, o
types o gas and perhaps even o personal driving
styles.
Many dierent kinds o metrics exist. One type
is an input metric. In marketing, a well known,
requently quoted metric is the cost per thousand
viewers o a specic media buy. e.g. we spent
$20 per M target viewers. This is a classic input
metric.
A second type o metric is an intermediate
metric, a calculation along a stream o inputs
and outputs which measures some sort o resultbut not an ultimate result. Awareness metrics
are classic intermediate metrics. We know that
investment A generated more awareness than
investment B and that has some value. What
we dont know is the eect or outcome o that
awareness on behavior. That takes us to the third
type o metric, an output metric.
A classic output metric produced by market
mix modeling is that or every one dollar invested
in night network TV, a brand generated $2.50 in
incremental prot or an ROI o $2.50.
Another caveat relates to the time period
represented by the metric. Most are remarkably
short-term in nature, even though everyone
recognizes that many marketing expenditures,especially advertising, may attract a new loyal
customer who creates a stream o prot or
decades. To counterbalance the renzied ocus
on the immediate, an understandable response
to Wall Streets incessant demands or quarterly
earnings, some marketers are beginning to
develop metrics around the lietime value o
consumers and customers. This is a useul and
revealing concept except in a ew industries
where purchase cycles and decision processes
negate its value (e.g. power generation dynamos).
Another denitional distinction involves attitudes
versus behaviors. The purpose o marketing is
changing attitudes. The purpose o changing
attitudes is changing behaviors. Not surprisingly,
metrics come in two favors, those that measure
attitudes and those that measure behaviors. Most
non-marketers (such as CFOs) preer behavioral
metrics, an understandable bias. Most marketers
spend lots o time looking at various kinds o
attitudinal metrics because they believe thatattitudes drive behaviors, another understandable
bias.
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Much o the exciting, breakthrough work inmarketing metrics today is being done at the
rontier where attitudes transorm into behaviors.
Sophisticated analyses measure which attitudinal
drivers change brand preerence and link to a
purchase change. From there, it is a ew short
steps back up the marketing value stream
to identiy which investments change which
attitudes the most ecaciously.
Some o our study participants are enabled to
do this today primarily because o the elicitousconvergences o attitudinal and behavioral data
rom identical sources.
Just as some metrics address attitudes and
other behavior, metrics also occur at dierent
points on the marketing value chain. One o the
objectives towards which marketers are graduallyadvancing is identiying key metrics or virtually
every marketing decision rom customer insights,
where all successul marketing begins, to some
o the more ephemeral areas o endeavor such as
public relations and product placement in a TV
show.
One intriguing variant o this longitudinal
search or metrics that interconnect across a
demand creation chain is the identication o
purchase decision unnels in industries such aspharmaceuticals, insurance and autos. In these
industries, marketers are looking at each level in
the purchase decision unnel to tease out the ROI
o marketing eort to see which alternative works
more eciently at each level in the purchase
decision process.
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Metrics Maturity Model
We speak o accountability as i it were a state
o being much like hypnosis. Accountability
is actually a journey which has many stations
along the way. When evaluating your companys
unique location on the journey, marketers may
nd it useul to review the emerging metrics
maturity model show below.
That model has our major axes:
Data;
Analytics;
Culture, and
Process embedment. Each deserves a brie
discussion.
.
2.
3.
4.
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Data Accountability implies quanticationand quantication implies data, most
desirably time series data, permitting
sophisticated analytics. Data is so basic that
it becomes a critical actor in determining
how accountable any marketer can
be. One o the major problems or many
marketers, especially B2B marketers is
the paucity o data directly connecting
marketing expenditure to a shit in attitudes
or behavior. This inhibits the development o
accountability. But there is light at the end othe tunnel. The Internet is now enabling the
capture o survey data at levels o granularity
previously not aordable. This oers
marketers, especially B2B marketers a new
way to capture the data needed to create
metrics and establish their accountability.
At the other end o the data spectrum
are companies with astounding levels o
transaction data captured at the level o
the individual customer. In these ortunateverticals, this data becomes o enormous
value when it is mounted upon a sotware
platorm permitting manipulation through
one o the online analytical processing
tools (OLAP). These tools enable a level o
analysis only dreamed about as recently as a
decade ago.
Metrics and Analytics The confuence
o masses o time series data, powerul
computer hardware and agile sotwarehas enabled a revolution in analytical
sophistication. Unortunately many
marketers have not advanced past the use
o virtually useless marketing input data
(e.g., cost per 000 impressions down
0% versus last year!). At the opposite
end o the spectrum are companies with
.
2.
market mix analytics embedded in real-timemarketing spending models permitting rapid
changes in marketing spending by target
consumer and marketing element. Some
are experimenting with advanced analytical
techniques such as agent based modeling
that permits the use o non-time series data
and oten uncovers emergent behaviors
not revealed by conventional multi-variant,
market mix modeling.
Still urther out are marketers trying tomeasure the value o new permission based
media, the relative engagement value o
one medium versus another and the ROI
o emotion versus rationally-based ad
copy appeals. Some o these issues are
in their early stages o understanding but
creative marketers are making progress in
all these areas. (Please see below or a brie
discussion o engagement.)
Engagement Metrics
Marketers are attempting to develop metricsaround engagement, the capability o a marketinginvestment, most typically an advertisement osome type, to capture and retain the attention o aconsumer in a avorable manner. Many academicand commercial third parties are addressing thissubject primarily because o the concern over wastedad investment against todays harried, multi-taskingconsumer. Work in this area, some o it by an ANAcommittee, is on going and will unquestionablyevolve over time.
At present, the most mature approach toengagement seems to be one developed by a thirdparty commercial rm located in Nicosia, Cyprus,Integration-imc. Their model develops engagementmetrics around brand experience points andbrand experience shares which appear to havesome predictive value. We have not included theirmetrics in this paper because they are proprietary toIntegration-imc.
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Culture We spoke above about theculture o accountability in which marketers
not only expect to be measured but demand
it. In these cultures, accountability is so
deeply ingrained that an attempt is made
to measure virtually all expenditures with
metrics recognized company-wide. At the
other end o the spectrum are companies
where metrics are owned by Finance or
created intermittently according to standards
separate or each SBU or operating
location. In these immature organizations,metrics becomes part o a game aimed at
avoiding serious accountability. Between
these extremes are organizations who
struggle to establish air and sustainable
metrics understood as such by all the key
departments across all SBUs.
Process Embedment A key to creating
a culture o accountability is a process that
enrolls key members o the organization
3.
4.
to develop air measures which can besustained over time. In the immature
organization, no metrics process exists.
Individual departments or even managers
create measures without attaining the
organizational input rom experts in nance,
IT, operations and market research who
are oten critical to the development o a
serious metrics eort. By contrast, mature
organizations have a robust metrics process
which involves key stakeholders and takes
pains to integrate marketing metrics intoan overall balanced corporate scorecard
approach which gets wide visibility across
all SBUs and unctions. A critical objective
o the process is to provide marketing
metrics with the same credibility that is
accorded metrics in operations, nance and
manuacturing.
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Emerging Characteristics o Current Best PracticeShown below are the emerging characteristics o current best practice.
A culture o accountability We have
discussed this above but it is so basic it
needs to be re-iterated here. Best practice
companies embed accountability into their
culture. Leadership must demand it and
marketers should welcome it.
An inclusive process Another basicand complementary characteristic o
accountability. A top-down endorsed,
inclusive process insures metrics that are
more credible across the all unctions within
the company.
Metrics tied to strategic expectations
Metrics must be tied to managements
expectations about marketing and to
company strategy. I management expects
marketing to build brand equity thenmeasures that. I delivering sales prospects
is important, measure that. I increasing
the lietime value o customers is important,
measure that. Do not try to build a dashboard
with ty dials and dropdowns. Focus on what
management expects rom marketing. Please
see the Appendix to this report or a catalog o
metrics by strategic intent.
Measures o marginal productivity
Optimizing marketing ROI requires marketersto measure not only the average ROI o an
expenditure but also the ROI o the last dollar
invested behind marketing vehicle A. Unless
marketers understand the slope o the yield
curve by expenditure type, one cannot know
the point at which expenditure must be
shited rom vehicle A (e.g., TV) to vehicle
B (e.g., magazines). Third-party providers
understand this issue well and are prepared
to address it.
Optimization modeling The calculations
on marginal ROI developed by what
is commonly reerred to as market
mix modeling is necessary to drivemathematical models that optimize
marketing spending. These sophisticated
sotware enabled models are oered by
third-party providers but many companies
create their own using o-the-shel
sotware or licensed proprietary sotware.
These models represent a quantum leap
in marketing eciency and are correctly
viewed as one o the two or three major
developments in the history o marketing.
Experimental design This relatively new
testing design protocol enables marketers
to optimize an individual marketing
program (such as a direct mail campaign)
which may have dozens o independent
variables producing thousands o potential
combinations. Using proven mathematical
techniques, experimental design enables
marketers to winnow down a eld o dozens
o variables to the small combination o
alternatives that produce the optimal result.
Lietime value o a customer Many
measures o marketing ecacy tend to
be short-term in nature i.e., the revenue
generated over the next 2 months by a
specic expenditure. Given the unortunate
ocus on short-term results rom Wall
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Street, such myopia is to be expected i notdesired. But, consumers have needs which
sometimes last or decades and thereore
some brand owners nd it desirable even
necessary to compute the lietime value o
a customer. This measure helps companies
calculate how much to invest to convert a
customer to a brand. A longer-term ocus
casts a more avorable light on conventional
advertising which oten shows a negative
ROI in the short-term but a positive ROI
when that advertising is given credit orthe long-term revenues generated by a
loyal customer attracted by the advertising.
Lietime value measures are particularly
valuable in many business verticals such as
nance, insurance and CPG. By contrast, this
calculation probably has little value in some
long purchase cycle categories (e.g., power
generators). In most instances, however, the
LCV calculation is worth the time it will take
practitioners to develop a set o assumptions
and accounting conventions necessary toproduce the measure.
ROI down a transaction unnel Many
practitioners, especially those in considered
purchase categories such as automotive,
insurance and pharmaceuticals, have
identied a purchase-decision pathway or
decision unnel, through which the consumer
traverses on the way to a nal decision. These
leading edge practitioners nd dierent ROIs
o eort at dierent stages in the decisioncycle and dierent response to dierent
marketing interventions at the same stage in
the cycle. This discovery raises a larger related
question regarding the ROI o expenditures in
the overall marketing process prior to these
relatively transparent expenditures on specic
media. For example, everyone recognizes
the value o a consumer insight thatprovides a proound competitive advantage.
How do we determine the ROI o our
market research expenditures? Packaging
expenditures? Promotional signage at retail?
Sales collateral?
Factors contributing to brand equity
enhancement and market share growth.
Many marketers use brand tracking
studies to ascertain perceptions o the brand
across a battery o emotional and unctionalbenet characteristics. Leading-edge
marketers have gone beyond to understand
what actors are driving brand equity, brand
preerence and market share. They then
design their marketing plan to change the
attitudes and behaviors around the actors
driving overall brand equity and brand
share.
The chart below shows how one marketer canprove that increases in brand equity are directlyassociated with increases in brand share. Thismarketer is able to deconstruct equity into variouscontribution to preerence drivers and ocus eorton the unctional and attitudinal elements whichare associated with increasing equity and share.
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Brand equity and brand loyalty links tobrand protability and shareholder value
Marketings most important long-term
responsibility is building brand equity.
Thereore the discussion o accountability
oten leads to a discussion o the relationship
between the ROI o building brand equity,
its eect on protability and ultimately
on shareholder value. This subject has
generated numerous academic studies over
the past decade. A particularly interesting
study was conducted by Stern Stewart, thedevelopers o the Economic Value Added
metric or nancial analysis. In this study,
Stern Stewart linked economic value added
to aspects o brand equity using the Brand
Asset Valuator model o Y&R.
No one study answers these questions
denitively but our review has identied
pieces o a mosaic such as the Stern
Stewart study which clearly suggests higher
brand equity drives brand loyalty which inturn produces higher margins and greater
shareholder value. Some leading edge
marketers are ocusing on developing loyalty
metrics to help them understand the ROI
implications o moving customers up rom
one lower level cohort on a loyalty ladder to
a higher level cohort or the relative eect o
one marketing investment against cohort A
at point B etc.
Major areas o challenge As a part o ourstudy, we asked participants what issues
were particularly vexing to them. Some have
been mentioned elsewhere in this document,
others are new. Heres a quick enumeration
and response based on data collected rom
participants and third-parties such as research
providers.
The link between long-term brand equityand the ROI o specic expenditures
We have discussed this above but
two other data points need to be added.
Several third-parties provided evidence
that it is possible to deconstruct the
short- and long-term eects o various
marketing expenditures, i.e., which
expenditure seem to build longer-term
equity and which seem to degrade
it. Without endorsing a method or a
supplier, suce it to say that this can bedone. To no ones surprise, these studies
indicate that advertising expenditures
are more associated with building
long-term strength while various price
expenditures may be more ecient
in the short-term but tend to degrade
equity longer-term.
Data Availability This is by ar the
most universal and rustrating problem
inhibiting accountability especially inmany B2B verticals. In these verticals,
companies oten lose track o their
product in a complex supply chain
replete with third-party distributors. In
these situations, marketers have one
basic alternative get clean data rom
a new source outside the value chain
and build metrics around the new
data. This means collecting customized
data either rom direct interviews or
rom one o the relatively new Internet-based panels. This costs money but
the alternative is to keep spending
money year-on-year with no idea o
the relative worth o expenditure A
vs. B. Any management team that is
demanding marketing proves its worth
should have some logical diculty in
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denying a request or research unds tomeasure that worth. Many companies
are understandably enamored with the
simplicity and apparent power o the net
promoter score metric. We would simply
point out that one must expend some
research unds to develop this metric i it
isnt being provided within some existing
brand tracker.
Integrated Marketing Campaigns (data
clarity) Many marketers report
problems in deconstructing the eect o
individual components o an integrated
campaign involving the use o multiple
simultaneous marketing channels or
investments. From a technical analytical
perspective, this is a common challenge
to third-party analysts and one which they
can eectively address.
The most dicult challenge is when thesecomponents o an integrated campaign:
(a) Occur perectly co-terminously so
that analysts cannot use variations in
timing as an analytical lever; or (b) When
one o the elements o a campaign is so
small that the natural variations in the
data simply overwhelm the reading o
a component comprising, or example,
3% o an overall campaign. Under
these circumstances, analysts can applycertain advanced techniques to provide
perspective but by ar the most desirable
path is to prepare or analysis by creating
test and control groups. The willingness
to create test and control panels is a
leading edge indicator o a culture o
accountability.
The chart below demonstrates an analysis o anintegrated campaign by MMA. The chart shows therelative contribution o each element o the campaignand goes beyond to estimate the synergy traceableto the combination o elements, i.e. the incrementaleect o the combination above that generated by theindividual elements. In MMAs experience; synergy isrelatively small in most integrated campaigns.
Innovation et al Some participants
mentioned diculties in developingmeasures or specic strategic
responsibilities o marketing. For
example, one participant mentioned that
management wanted marketing to lead
innovation so her department needs to
advance a metric that would provide insight
into their perormance in this regard.
Still others cited competitiveness as a
marketing responsibility or which metrics
were being sought, customer centricity
was still another responsibility or whichsome marketers were looking or metrics.
This need relates directly to one o our
principles o best practice, identiying
managements strategic expectations
o marketing and developing metrics to
express progress or lack thereo in the
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targeted responsibility. In the appendix tothis report we have started the compilation
o metrics by strategic intent so that
marketers may begin the process o
choosing a metric or set o metrics to meet
their managements expectations.
The chart below shows the standard ormat
used to present metrics by strategic intent.
For example, i management determines that
marketings strategic intent is to increase the
overall lietime value o the customer base at thelowest cost in marketing $s, this metric oers
a way to measure marketings success. This
approach rewards marketing, especially the
advertising component or attracting customers
who contribute prots or years. It also rewards
selling more product to current customers or
trading current customers up to higher value
products.
Linking metrics to planning A persistent challenge or all marketers is
linking metrics to the broader process o
marketing planning. Too many marketers see
the development o metrics as an end unto
itsel and have not realized that metrics are
a component o an overall more advanced
marketing process. This, in turn, presents
virtually all marketers with a major challenge
because they have no well-dened marketing
process. Thereore even i they have the
metrics, they are thoroughly bamboozled bywhere and how to use them other than to
mount them on a dash board and duck.
Several marketing service companies are
providing a partial answer via very sophisticated
computer models that incorporate market
mix modeling ROIs into real-time budgeting
models. These sotware-enabled models
represent a major breakthrough but they deal
more with the tactical aspects o marketing and
do not address the more strategic end-to-endmarketing process beginning with consumer
and customer insights.
Metrics Defnition Template
MarketingEciency LCV/ annual marketing cost
Denition/Calculation
LCV Current yr LCV yr last yr / mar-keting $s current year
Source o data Syndicated panel data, companysales records and marketing budgetdata
Calculation ortechnique
Compute the aggregate lietime valueo customers in ranchise, subtractlast years value. Divide the dier-
ence by annual marketing costs
Verticals whereappropriate
Valuable across many verticals, B2Band B2C
Problems orconcerns
Requires sophisticated calculationregarding customer loyalty decaycurve. LCV not universally appropri-ate
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Metrics Are Not Enough
Metrics are not an end unto themselves.
Metrics play the same role in marketing that a
thermometer plays in medicine. Although it is a
powerul diagnostic tool, a thermometer alone
has never healed anyone. Metrics alone wont
save marketing. But metrics can be a powerul
ingredient in an integrated regimen that can build
brands, drive customer loyalty, and grow volume
and prots. That overall regimen is a holisticmarketing process that starts by gaining insights
into the customers deepest needs and moves
down an orderly path to which each preceding
step serves as input to the next and all are driven
by insights, metrics and best practice marketing
content.
The process approach described above is
standard, even required, in virtually every
other business unction except marketing. The
extraordinary improvements in supply sideproductivity are directly traceable to the broad
scale embedment o process advocated by Drs.
Deming and Juran. Despite the proven value
o process, marketing remains strangely, some
would say shameully. averse to process. One
thing is certain, the same management that today
is demanding metrics will start demanding a
serious marketing process tomorrow.
Get ready.
In the meantime, use the catalog o metrics
in the appendix to identiy or suggest an
appropriate approach or your situation. Start
by asking your management to identiy theirstrategic expectations o marketing. I its trial,
choose some trial generating metrics, etc. At
most companies, management has several
expectations o marketing ranging rom building
brand equity to generating trial, spending dollars
eciently and building a stronger more capable
marketing resource. Thats why most practitioners
will want to build a balanced scorecard o
complementary metrics.
To acilitate the building o a balanced scorecard,we have labeled the examples by strategic intent.
The appendix contains more than 50 dierent
metrics that address dierent strategic intents.
We hope these samples provide useul input as
you assemble you scorecard.
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About EMM Group, Inc.
EMM Group is the creator o and world leader
in enterprise marketing management, the
marketing transormation that combines process,
best practice marketing content, metrics and
technology to build strong brands that drive
growth.
Our mission is to embed the discipline o
enterprise marketing management at thoughtleading companies in every business sector
around the world.
Our approach is detailed in our book, The New
Marketing Mission, How Process, Metrics and
Technology Can Unleash Growth.
Contact Inormation
Gordon Wade, Founding PartnerPh: 53.608.946
E Mail: [email protected]
Chris Charyk, Metrics Practice Partner Leader
Ph: 78.929.348
E Mail: [email protected]
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Bibliography: Marketing Metrics Resources and ReerencesHere are articles, Web sites, and Blogs we ound helpul when preparing this report.
Articles:
Coming Up Short On Nonfnancial Perormance
Measurement, Ittner & Larcker, Harvard
Business Review, 2003
This article makes a compelling case or the
power and importance o causal modeling
in the creation o non-nancially orientedmarketing metrics, such as consumer
attitudinal states.
Brand Portolio Economics, 2002 Mercer
Management Consulting white paper
This article describes a ramework or brand
portolio management, and outlines an
analytical approach or assessing brand equity
and its impact on consumer buying behavior
The Power o Brand Delivery, McKinsey
Consulting position paper, 2001
This paper provides a helpul overview into the
use o choice-based analytical approaches to
understanding the drivers o brand equity, as
an important initial step in the design o brand
equity metrics.
Customer Satisaction, Cash Flow &
Shareholder Value, Gruca & Rego, 2003 MSI
Working Paper Series
This article summarizes a study examining the
impact o customer satisaction on operational
cash fows. The report attempts to quantiy
the impact o customer satisaction on the
magnitude and variability o uture cash fow.
What Value Marketing? A Position Paper on
Marketing Metrics in Australia
2004 paper documenting ndings rom the
Australian Marketing Institutes Marketing
Metrics project. The paper outlines a
ramework or marketing metrics, and
documents the most commonly used
marketing metrics in various areas. Much o
the ramework material is derived rom Tim
Amblers 2003 edition o Marketing and theBottom Line.
The One Number You Need to Grow, Frederick
Reichheld, Harvard Business Review, 2003
Reichhelds classic article outlines the
justication, calculation, and appropriate
interpretation o the elegantly simple and
powerul Net Promoter metric.
The Value o Strategy Decisions, 2005
Advanced Competitive Strategies articleThis article provides a simple yet powerul
approach to quantiying the impact o
alternative strategic initiatives, an approach
that is worth consideration in the evaluation
o assessing the potential impact o marketing
initiatives.
Measuring Marketing Eectiveness and Value:
The Unisys Marketing Dashboard, Miller &
Ciof, 2004 Journal o Advertising Research
article
A comprehensive description o the design
and implementation o a marketing metrics
dashboard at Unisys Corporation, with
particular emphasis on the critical corporate
cultural change management issues that need
to be addressed.
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Metrics or Linking Marketing to FinancialPerormance, Srivastava & Reibstein, 2004
Marketing Science Institute working paper
A detailed overview about the current state o
academic attempts to link marketing activities
and nancial outcomes
Exploring the Brand Value-Shareholder Value
Nexus or Consumer Goods Companies, Kerin
& Sethuraman, 1998 Journal o the Academy
o Marketing Science article
An important academic study exploring the linkbetween brand value and shareholder value.
Getting Real About Customer Lietime Value,
Werner, 2003 Marakon Associates paper
A detailed exploration o the Customer Lietime
Value (LCV) concept and its importance in
understanding marketing importance
The Customer Lietime Value Concept & Its
Contribution to Corporate Valuation, Bauer,
Hammerschmidt & Braehler, 2003 Yearbook oMarketing and Consumer Research
A detailed exploration o the use o CLV and its
linkage to company shareholder value.
Economics Git to Marketing, 2003 Mercer
Consulting Journal article
This article provides a useul introduction to
the use o the analytical technique o choice
modeling to the assessment o brand equity.
Predicting the Unpredictable, Bonabeau, 2002Harvard Business Review article
An introduction to the marketing modeling
technique known as agent-based modeling
(ABM), which oers the potential or delivering
unique insights into the nancial and brand
equity implications o marketing investments.
How the Pursuit o ROMI Is ChangingMarketing Management, September 2004
Journal o Advertising Research article
This article describes a ramework and set
o criteria or successul implementation o
marketing ROI (ROMI) programs
Promotion Eectiveness: More Important Than
Ever or Consumer Products Companies, 2005
AMR Research article
This article proposes a new set o metrics to
understand promotions eectiveness, ocusingon key supply chain dynamics.
Processes and methodologies or creating a
global business-to-business brand, 2002 paper
by Randall Rozin
The author o this paper is the Global Manager
o Branding and Marketing Communications
with Dow Corning Corporation. He provides a
comprehensive ramework or brand building
in the B2B arena, complete with thoughts on
appropriate metrics.
Online Panels: The New Frontier o B2B
Research, Richard Thornton, UK Director,
Market Research, Ciao GmbHBIG Annual
Conerence, May 2005
This paper summarizes recent European
research into the benets and potential
limitations o using online customer panels
or B2B customer attitude assessment. Good
summary o the issues and considerations
involved.
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Web sites:
www.marketingnpv.comMagazine/website covering topics in the overallarea o marketing ROI
marketingtoday.comGood source o current news articles pertainingto marketing accountability and ROI.
www.themeasurementstandard.comA magazine/site (ree content with registration)oering surprisingly actionable and specicarticles devoted to media metrics.
www.msi.org/msi/publications.cmPublications site or the Marketing ScienceInstitute (MSI) many metrics-related whitepapers available here
www.cmomagazine.comMagazine/website with intriguing and uniquecontent, and a reasonably active blog. Goodeditorial integrity, as evidenced by theirdistinguishing vendor whitepapers rom other
content.
www.marketingpros.comLots o academic-oriented marketing metricscontent, some pearls among the more theoreticalpieces.
www.brandnance.comSome unique brand valuation and brandscorecard white papers on this brandconsultancys site
www.bettermanagement.comThis site contains several articles on the subjecto corporate perormance management withspecic applications in marketing and marketingstrategy
www.brandchannel.comInterbrands site oering unique white papers onthe assessment o brand equity
www.btobonline.comSite/magazine devoted to the broad area o B2Bmarketing, including some pragmatic and helpulB2B metrics articles.
www.marketingadvocate.comSite devoted to B2B marketing techniques,technologies and processes. Good collection orelevant white papers on a wide variety o B2Bmarketing and technology topics.
www.marketingsherpa.comContent and paid download site devoted tomarketing ROI and related topics good uniquecontent
Blogs:
blog.startwithalead.com/weblog/public_relations_pr/One o the better blogs devoted to B2Bmarketing topics, with a particular emphasis onpublic relations metrics
decker.typepad.com/
General marketing blog with some uniqueperspectives and entries on creating a culture omarketing ROI
www.buzzmetrics.com/blog/The ocial blog o BuzzMetrics, a word-o-mouthresearch and planning rm, and co-oundero the Word o Mouth Marketing Association(WOMMA). Unique refections on the disciplineo word-o-mouth marketing and the societal andbusiness impact o consumer-created content.
www.morningstarmultimedia.comProessional services marketing blog whichmany entries devoted to the discussion omarketing ROI
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Introduction to the Appendix(Appendix to ANA Marketing Accountability Task Force Findings)
The work o the ANA Marketing Accountability
task orce was twoold: () to review current
best practices used by ANA member
companies to improve their marketing
accountability; and (2) to provide a practical
catalog o accountability metrics used by
industry practitioners rom which marketers
may choose those appropriate to theirunique situation. This need relates directly
to one o the task orces principles o best
practice - identiying managements strategic
expectations o marketing and developing
metrics to express progress or lack thereo in
the targeted responsibility.
Current best practice suggests that metrics
refect the strategic intent which a companys
management has or its marketing unction.
I management expects marketing to buildbrand equity then measure that. I delivering
sales prospects is important, measure that. I
increasing the lietime value o customers is
important, measure that. With this principle in
mind, the appendix that ollows groups metrics
by strategic intent.
Every company and every vertical is dierent.
Thats why the appendix includes several
metrics under each strategic intent. These
unique metrics represent dierent ways
which study participants responded to their
managements request or accountability about
a specic strategic intent they attribute to the
marketing unction.
The appendix provides a method o calculation,
likely data sources and the types o verticals
or which this metric may be appropriate. We
do not claim this list is exhaustive. We expect,
indeed we hope that this starter list will inspire
users to develop dierent but more appropriate
metrics or their company.
This appendix represents but a beginning. We
welcome comments, questions and additionsrom every marketer.
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Innovation
Defnition/
Calculation
Source o
data
Calculation or
technique
Verticals where
appropriate Problems or concerns
$ sales Sum o sales oproducts/services/retail locations < 3yrs old
Internal Com-pany sales
Simple addition.Results comparedto previous year
Virtually universal Simple, broadly applicable,practical measure
% o $ salesrom innova-tion
Sum o sales oproducts/services/retail locations 2 years.Identiy # advancedin grade. Calculate% advancement
Broadly appropri-ate or virtually allverticals
Must be used aspart o battery obalanced score-card metrics. Com-pared to industrynorms etc
Turnover A balanced score-card includingturnover amongemployees< 2years, amongemployees ranked
superior, amongmiddle manage-ment tier
Internal com-pany records
Identiy separatedemployees placewithin measuredgroup, derive %.Compare over time
Broadly appropri-ate or virtually allverticals
Needs to beplaced in perspec-tive o vertical andtracked over time.Rationale behindturnover needed
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Public Relations
The somewhat ephemeral nature o the publicrelations unction has led to a renzy o metricsdevelopment. Several highly competent industrygroups have developed approaches worthy o study.As one o our study participants pointed out, theirony o all these eorts to justiy public relations isthat everyone intuitively agrees about the power andcredibility o an artul PR campaign. Nonetheless,
it remains challenging to disaggregate the eectso PR rom many other company activities. Thisis especially true because many companies leanhardest upon PR to mitigate the negatives o someexternal untoward event. The elonious attempt topoint the nger at Wendys is a classic example othe challenges o creating PR metrics. The chartbelow oers some creative metrics shared with us.
Public Relations
Defnition/
Calculation Source o data
Calculation or
technique
Verticals where
appropriate
Problems or
concerns
AVEs (advertisingvalue equivalent)
The conversion onon paid mediamentions intothe equivalent oadvertising grossrating points
Third party dataproviders
Capture o impres-sions by mediatype and then theirconversion into theequivalent o paidgross rating points
Many verticalsand productcategories
Dicult to ascertainquality o mention,context, messagedelivered or aect onmessage recipient.A classic inputmeasure
Target StakeholderResponse
Attribute rankingamong selectedstakeholders(Industry thoughtleaders, media,shareholders, etc)
Brand trackertype survey
Survey research otargeted stakehold-ers on key industryand company at-tributes
Many verticalsand productcategories
Requires properselection o respon-dents and surveytechnique
Critical articleresponse
The percentageo major industryarticles espe-cially those with acritical viewpointwhich contain thecompanys detailedresponse
Internal tracking Identiy all majorarticles in key pub-lications. Computepercent containinga specic responserom the company
Many verticalsand productcategories
Requires denitionsregarding majorarticle and companyresponse. Does notmeasure cred-ibility or impact oresponse only abilityto respond
Response tospecic eort
# or % o visits onwebsite to speciccommunication to
targeted constitu-ency
Web trackingsotware
ID respondents toE-mail campaign tospecic constitu-
ents with targetedmessage. Calculate# targets or %responding in sug-gested manner (e.g.visits to website)
Many verticalsand productcategories
Does not measureeect o message inchanging attitudes
only eectiveness indriving target to webpage
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Public Relations
Defnition/
Calculation Source o data
Calculation or
technique
Verticals where
appropriate
Problems or
concerns
Attitude changeamong target
in attitudesamong test andcontrol target audi-ence
Web trackingsotware
ID respondents toE-mail campaign tospecic constitu-ents with targetedmessage. Measureattitudes pre andpost among test andcontrol
Many verticalsand productcategories
Requires careulselection o test andcontrol groups
Media impactindices
Index o impactincluding # ostories, quality,tonality etc
Proprietary mea-sures rom thirdparties
Third party syndi-cated sources applyproprietary selectionand evaluation
metrics
Broadly availableor virtually allverticals
Generally do notmeasure eect oroutput o PR eortonly inputs or inter-
mediate metrics orqualitative measures
Attribute owner-ship among targetaudience
Ranking on mo-nadic 5 point scaleo key strategicattribute amongselected targetaudience
Survey research Select targetaudience. Identiyattribute to measure.Use simple metriclike 5-point monadic
Broadly availableor virtually allverticals
PR eort not onlyinfuence on re-spondent rankings.Research mustocus on attitudestied more closely toPR activities
Awareness o goodworks
Awareness amongselected respon-dents o compa-nys good works
Survey research Select targetaudience. Establishunaided and aidedawareness o com-panys involvement
in specic cause orresponse
Broadly availableor virtually allverticals
Awareness does notnecessarily translateinto improved at-titudes
Attitudes amongthose aware ogood works
Ranking on brandtracker amongthose aware/un-aware o companygood works
Brand Tracker orsurvey
Identiy activityto measure. Usesimple metric like5-point monadic.Compare aware ver-sus unaware respon-dents to isolate valueo good works
Broadly appropri-ate or virtually allverticals
PR eort not onlyinfuence on re-spondent rankings.Research mustocus on attitudestied more closely toPR activities