Efficiency & Effectiveness

Same, same but different. Understanding the theoretical difference between efficiency and effectiveness, which in marketing practice seem to be so intertwined, is an important element to grasp to utilize the full potential of Operational Marketing Excellence. Not making a clear split between the two is the main cause why so many Operational Marketing Excellence projects have floating, then drifting and sometimes even sinking objectives.

The difference between the business contribution of effectiveness and efficiency, using the words Strategy and Operational Efficiency, has very clearly been described by Michael Porter. Operational Efficiency is a pre-requisite, while strategy is the differentiator for creating competitive advantage. They are equally important, only strategy requires more thought and choice.

Some marketing managers wrongly assume that because strategy requires more thought and choice, it doesn’t make sense for them to focus on operational efficiency, neglecting the first part of Porter’s statement. This attitude has lead to disconnects between strategy and operations. A client of ours in a traffic role (Marketing Operations) sadly described the outcome of the internal Strategy – Operational Efficiency debate as: “Where the head goes the tail needs to follow”. While another client of ours, in a CMO role (Marketing Strategy), described the challenges in regards to the large marketing operations organization as; “I feel like a captain on an oil tanker who is trying to change directions by sticking a hand in the water”. If there is no integrated approach, tails will become paralyzed and boats will hit cliffs.

In our projects we work with the following marketing effectiveness and marketing efficiency basics.

Marketing Effectiveness is how well the marketing output meets the requirements of its end customer. Achieving effectiveness is primarily aimed at the benefit of the customer. Effectiveness measurements are related to words like; External, Media, Campaigns, Offer Market and Customer.

Marketing Efficiency is how well the usage of marketing resources is minimized to create the marketing output. Achieving efficiency is primarily aimed at the benefit of the process owner. Efficiency measurements are related to words like; Internal, Operational, Processes, Organization and Resources.

Effectiveness and Efficiency should go hand-in-hand in any marketing ROI project. In practice most Marketing ROI metrics focus on Results (effectiveness) without looking too deep into the Investment (efficiency) metrics. Do you monitor and steer on internal marketing efficiency KPI’s? Let us know the details.

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Author:Romek Jansen

Chief editor at MarketingGovernance.com. Founder of MRMLOGIQ.

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