Hierarchy of Effects: Monitoring and Maximizing Your Marketing Efforts

The hierarchy of effects is:

Marketing term for the sequence of five steps a consumer passes through from the initial exposure to a product or advertisement to the purchasedecision: (1) awareness, (2) interest, (3) evaluation, (4) conviction, and (5) purchase.

 

Why we should care about the hierarchy of effects

Recently, I wrote a post suggesting that measuring ROI is stupid given the hierarchy of effects necessary to drive purchase behavior (among other reasons).  As you look at the model to the left, you can see that assessments of ROI only capture the last in a chain of events leading to sales.  Assessing marketing efforts based solely on ROI assumes the other stages in the hierarchy of effects are unimportant in achieving future sales and that couldn’t be farther from the truth. Ignoring the impact of your marketing efforts on each stage of the hierarchy of effects is lazy, short-sighted, and will likely lead to inaccurate decisions.

In fact, you can find inaccurate advice given all over the internet and in books simply because sales can’t be tracked to specific marketing actions. A study by Foresee, for instance, shows only 1% of website visits are motivated by social media.  This data is used to argue that firms are wasting their time and money on social media.  What isn’t measured in this study is the enormous impact of social media on creating brand awareness — not only that, but social media creates positive affect.

Social media drives consumers far down the hierarchy of effects by creating liking, preference, and conviction that the brand is “for them” based on the engagement of their friends with the brand.  To ignore the impact of marketing on the hierarchy of effects is senseless.

How to take advantage of the hierarchy of effects

Monitor

Monitoring the effect of your marketing actions on phases in the hierarchy of effects will help you make informed decisions.  For instance, you can monitor mentions of the brand across social media and record these as favorable or unfavorable mentions — favorable mentions create brand awareness and may create liking, preference, and conviction (which can be assessed using traditional market research to measure changes in attitudes).

Maximizing Decisions

Tracking how marketing actions change the level of awareness, liking, preference, and conviction also helps improve your decision-making.  Marketing actions creating large changes in the level of these cognitive or affective stages should be used frequently, marketing actions creating little or no change in the level of these stages should not be used again.

Generating Sales

Despite my feelings about assessing ROI alone, its still valuable to map the increase in sales as part of the hierarchy of effects.  An important consideration in this assessment is tracking how earlier elements in the hierarchy of effects translate into increased sales.  That’s because consumers can back up in the funnel and fail to move all the way down to the purchase stage. That’s not good. Consumers can also flow out of the funnel (as if it were porous).  Hence, while all stages of the hierarchy of effects are important, consumers must be drawn from stage to stage all the way to the purchase stage.

If too many consumers are either getting stuck at one point in the funnel or flowing out of the funnel altogether, there’s a problem.  Maybe there’s a communication problem, maybe a product problem, or maybe there’s an influencer out there complaining loudly about the brand.  While the hierarchy of effects model won’t help you figure out what the problem is, it will tell you there IS a problem and tell you at what phase the problem arises — which makes identifying the problem easier.  If consumers are aware of the brand, but fail to migrate to the liking stage– maybe the communication they’re getting isn’t doing a good job of pointing out the benefits of the brand to them, for instance.

Extending the hierarchy of effects

While I’ve shown the traditional version of the hierarchy of effects model, that’s not the end of it.  Based on modern interpretations of the role of marketing, the hierarchy of effects needs to be extended to include:

  1. Repeat purchase
  2. Loyalty
  3. Advocacy
  4. Evangelism

I’ll save this topic for a subsequent post.

 

Questions???? Comments??? You’re always welcome and encouraged to share you’re perspectives.

 

 

You might also like:

Marketing Research: What’s Your Part Worth?

 

predictive analytics maximize ROI
Using conjoint analysis, companies can now answer that question.

 

Most products consist of a variety of features and benefits.  The perennial question is: how many features to add to your product? Guess wrong and you lose sales — either by over-engineering your brand or not giving customers enough of a reason to by your brand.  Part worths, the outcome of conjoint analysis, tell firms how much consumers are willing to spend for each feature they’re considering adding to their brand.  Part worths also tell a firm if consumers are willing to exchange one feature for an

other.

How Conjoint Analysis Works

  1. A brainstorming session (or sessions) develop ideas for new products — hopefully building on customer needs with the idea of solving a customer problem.
  2. Ideas are related to evaluate fit with the firm’s competitive advantages, its market opportunities,
    etc.
  3. Top innovative ideas are fleshed out so they have a degree of concreteness — identifying features and benefits consumers are most likely to want in the new product.
  4. Bundles are built — each bundle differs from the next bundle by one feature.  These bundles don’t have to be physically created, this is simply a tool for consumers to envision a new product.  The bundles do not have to be feasible either.
  5. Data is collected on how members of the target market rank each bundle.
  6. Data are analyzed using SPSS, SAS or some other statistical package.  The statistical package creates output containing the part worth of each feature of the bundle.
  7. Now, is the time to re-evaluate the bundles since only those that are physically feasible can be created.

Marketing Research – an Example

Lets say you were an automobile company interested in creating a new car.  You might brainstorm features based on existing options, as well as market research with consumers to identify unmet needs in existing cars.  Remember, at this point we suspend our need for reality and worry about how to create the features after we determine which features consumers want most.  Let’s say you end up with this list:

  • Electric power
  • Gas power – high MPGs
  • Hybrid drive
  • Autopilot car
  • Leather seating
  • Cloth seating
  • heated seating
  • Burl wood finish
  • Teak finish
  • Pearl inlaid finish
  • … the limit is your imagination

Now, we create bundles

1. Electric, leather, teak

2. Electric, leather, Burl

3. Electric, leather pearl inlay

4. Electric, cloth, teak

5. Electric, cloth, Burl

6. Electric, cloth, Pearl inlay

7. Electric, heated seating, teak

8. Electric, heated seating, Burl

9. Electric, heated seating, pearl inlay

So, with 3 features, 3 levels of each feature you would have 27 bundles.  Each bundle would also need a price associated with it — and this price needs to reflect a realistic price based on the cost of providing the features contained in the bundle.

Problems Implementing Conjoint Analysis

  1. Conjoint designs are relatively complex and may be difficult to implement if there are a large number of proposed features, levels of features, or both.
  2. The cognitive load on consumers evaluating the bundles is high.  For this reason, often individual consumers may only rank a subset of the total number of bundles.  If not accomplished correctly, the resulting data is useless.
  3. Consumers often have difficulty envisioning products or features and assess a value to each.  This is especially difficult for features they’ve never encountered before or that they haven’t used.  Features based on technology they don’t understand can also cause them to reject options as being unrealistic.
  4. Consumers have a hard time evaluating their response to features situated within a social context.  For instance, what is the value of having a feature similar to one valued by members of their social group?  What is the emotional worth of having a feature desired by your family? etc.

 

You might also like:

Marketing Strategy Last Week and Upcoming

listeningAs I normally do on Sundays, this post will recap marketing strategies and social marketing topics discussed in my blog over the past week, updating the information provided in the blog with comments posted here or on Facebook.  I also like to take this opportunity to propose topics for next week.  As always, visitors are encouraged to comment and suggest future blog posts and I try to accommodate these suggestions.  I’m also looking for guest bloggers who have expertise in marketing marketing strategy, innovation, social media, etc to bring new perspectives to my visitors.  My goal, as always is to build community not sell you something.

Recap of Marketing Analytics

Last week I attended the SPSS Predictive Analytics workshop in Washington DC.  It was a great program and I provided an overview to the new marketing analytics I learned in my blog on Wednesday.  I followed up on Thursday with a post on 5 reasons why you need a Listening Post, which is a great tool for marketing strategy as it tracks brand mentions to allow you to monitor consumer attitudes toward your brand.  As a result, I got some more suggestions for ways to track online conversations — one called a Conversation Index is based on a book by Brain Solis.  These were suggested by Terry Ebaugh, who is a very knowledgeable and forward thinking operations architect at AOL.  Although not trained in marketing or marketing strategy, he’s really jumped on the social media bandwagon and reads on these topics voraciously.  He also suggested another site to see a listening post, although its limited to Twitter

The second topic in marketing analytics was using the new SPSS Direct Marketing Module as a tool to do social network marketing more strategically.  Although the folks at SPSS haven’t really embraced the notion of social media, the tool they’ve developed can be used very effectively of managing social media marketing strategy, as laid out in my post.

Marketing Strategy for a Bad Economy

On Tuesday, I discussed some issues covered in a special issue of the Journal of Business Research I’m co-editing with Wes Johnston, from Georgia State University.  This special issue discusses the marketing aspects leading to the current global financial crisis and some suggestions where marketing concepts might be used to strengthen the economy, speed the recovery, and contribute to eliminating future economic slowdowns.  I’m still looking for reviewers for papers submitted to this special issue so please contact me if you are interested.

Is Social Media a Joke?

On Monday, I weighed in on a discussion going around the Marketing and Communication group of LinkedIn as to whether social media is a joke.  My own feeling is that social media is here to stay, but must be used strategically as part of an overall marketing strategy to be successful.  Its really spammers who misuse the tactic who are the joke, not the tool.

“Ask a Marketing Expert” and NEW CHANGES

Ask a Marketing Expert is growing from week to week, with new folks dropping in every week with questions. However, we seem to have some logically issues with matching attendance of questioners and answerers.  For instance, I often see several marketing experts sitting on the sidelines waiting to have a question, then when questions are entered later, there’s no one there to answer the questions.  Thus, I’m changing the hours of operation to NOON to 2 PM (EST).  This will hopefully result in a more active discussion.  If you can’t drop in between those hours, feel free to ask your question as early at Thursday afternoon and come back later to see the answers.  If you’re a marketing expert, feel free to answer questions later, as I post the entire conversation in an archive on this site.  I’ll even go back to update the archive if the answer is entered several days later.

This weeks topics dealt with FOCUS GROUPS and whether they were valuable tools for marketing research.  The consensus is that they can be valuable, depending on the question addressed and how the focus group is conducted.  This contradicted the impression the questioner received after a webinar on the topic, so I think our answers helped him.

The next question was on a listening post.  I referred to this in my post of Thursday, so I referred the questioner to that. Any additional comments on this question would be highly appreciated.

The final topic was a podcast from the Harvard Business Review on internal consumers and generating innovation.  It was interesting and some attendees enjoyed the discussion of leadership by the presenter.  However, others felt the podcast rehashed old material and didn’t add much.

Topics for Next Week

I’ll finish discussing new applications I learned at the SPSS Predictive Analytics workshop.  Specifically, I’ll discuss updates to SPSS version 17 and new Text Analysis software they’ve developed.  I’ll also discuss a session I attended on Cognos software, which, while not part of SPSS, is another IBM company and had several session at the workshop.

I’ll also be discussing the use of newsletters as a marketing strategy tool.  It will be part of my regular Thursday feature of the TOP 5 list.

So, please come back to read about these topics and make comments here or on my Facebook regarding topics you’d like to see covered, tools you’d like to have considered for review here, or to apply to be a guest blogger.

Its important to note that my comments regarding SPSS or IBM are my own and I am not compensated in any way for discussing them here.

You might also like:

“Ask a Marketing Expert” for September 10

Yesterday saw some great conversation from a few newbies to our marketing exchange.  One topic was on focus groups as a market research strategy and the other introduced us to a Communication Index and other tools for communication in social networks.  I also shared a link from Harvard Business Review containing a podcast on leadership and innovation.

Here’s a transcript of the conversation for those who missed it:

Angela Hausman Ask a Marketing Expert begins soon. If you already have a question, feel free to leave in now and someone will be back later to answer it. If you’re ready to answer questions, pop back later (or I already have a question from yesterday — things don’t get busy until around noon. Pop in and out to see how its going. … Its all right here — on my wall.

Remember, its FUN … its FREE … its FRIDAY

See More

Yesterday at 9:01am · · · · Share
    • Angela Hausman

      Here’s a question posted yesterday. He’s coming back today to see how you answered it. Cheers.

      Eric Davis Hmmm. I just was in on a webinar that got me thinking. Focus groups. Why do some experts see them as a waste of money? What is their… “better” alternative that achieves the same, if not better, qualitative and more efficient results? I hope I said that in a manner that made sense. I have not had lunch yet (sugar low)See More

      Yesterday at 9:03am · ·

    • Angela Hausman

      Terry Ebaugh Brian Solis recently released a book titled Engage. In his book he talks about using the Conversation Prisim to map the Social Media landscape. He then uses listening to create a Conversation Index that can be used as a benchm…ark for comparisons and insights. I found this technique useful in preparing a Social Media St…rategy document (this is only one minor piece of the document). SWOT analysis proved to be fairly easy after going through this exercise. My question is: What are some other techniques used when listening and what are the benchmarks established?
      See More
      The Conversation Index
      www.briansolis.com
      I admire the work of Valeria Maltoni. Over the years, we’ve shared our individual ideas and vision for discovering, monitoring, and measuring relevantSee More
      Yesterday at 11:53am · ·

    • Michael S Minor Any method (including focus groups) generates a set of problems. An advantage: group dynamics, participants dialog with each other, and the “give and take” produces new insights. Disadvantage: group dynamics. More-talkative speakers tend to monopolize the conversation and “lead” the less-vocal participants.

      Yesterday at 12:16pm · ·

    • Angela Hausman

      This isn’t about focus groups, but fits our “Ask a Marketing Expert” series. What do you think after listening to this podcast?

      Angela Hausman via Harvard Business Review: This fits very well with “Ask a Marketing Expert” I encourage you al…l to listen.
      The New Era of Empowered Employees – HBR IdeaCast – Harvard Business Review
      bit.ly
      Business bloggers at Harvard Business Review discuss a variety of business topics including managing people, innovation, leadership, and more.See More

      Yesterday at 2:03pm · ·

    • Terry Ebaugh I have participated in focus groups where individuals were observed one at a time to give their thoughts on a product. The advantage is not worrying about group dynamics. The disadvantage is cost and time. I suppose there is still a place for this type of testing. In the Internet Space I think a A/B testing or A/B…Z testing is cheaper and one can have a larger test group. Web Analytics are one way to see how the test group uses the product but I think Web Analytics and a carefully crafted survey are better.

Terry Ebaugh Brian Solis recently released a book titled Engage. In his book he talks about using the Conversation Prisim to map the Social Media landscape. He then uses listening to create a Conversation Index that can be used as a benchmark for comparisons and insights. I found this technique useful in preparing a Social Media St…rategy document (this is only one minor piece of the document). SWOT analysis proved to be fairly easy after going through this exercise. My question is: What are some other techniques used when listening and what are the benchmarks established?

See More

I admire the work of Valeria Maltoni. Over the years, we’ve shared our individual ideas and vision for discovering, monitoring, and measuring relevant

Yesterday at 11:50am · · · · Share · See Wall-to-Wall · Flag
    • Angela Hausman

      I’ve looked at some of the stuff from the site and it looks interesting. I’ve ordered the book. I’d also be interested to see how you incorporated it into a social media SWOT because its not intuitive from what I’ve been able to understan…d.

      Listening is a critical aspect of marketing and branding; social networks have simply given us a vehicle to listen in on conversations that have always occurred in private. Also, these conversations are more pervasive.

      A good listening post is the first step — gathering the types of information discussed from the conversation prism regarding your brand, etc, then indexing it. But, this data is difficult to deal with since it is unstructured. So, you need something to convert it to structured data, such as a text analysis program. You can then plot problems and solutions. I discussed this in my blog yesterday and will continue the conversation over the next few posts — http://www.hausmanmarketresearch.org/.

      Sometimes, it takes more than indexing, tracking, and benchmarking to do effective listening. Sometime you have to ACT. A good example is a student who complained on a company’s facebook fan page and was contacted the next day to resolve the problem. I’ve looked at a product produced by Parature for funneling facebook comments to individuals within the organization. So far, I’m not truly impressed plus its limited to facebook.

      We (Hausman and Associates) are developing a listening post and would be very interested in having some Beta testers for the product once its ready. We’re also interested in hearing suggestions regarding desired features for such a product.See More

      Yesterday at 12:32pm · ·

    • Terry Ebaugh You might want to look at http://hy.ly/ too

      Yesterday at 1:25pm · ·

    • Angela Hausman

      Take a look at this. I think you’ll enjoy.

      Angela Hausman via Harvard Business Review: This fits very well with “Ask a Marketing Expert” I encourage you all to listen.
      The New Era of Empowered Employees – HBR IdeaCast – Harvard Business Re…view
      bit.ly
      Business bloggers at Harvard Business Review discuss a variety of business topics including managing people, innovation, leadership, and more.

Angela Hausman via Harvard Business Review: This fits very well with “Ask a Marketing Expert” I encourage you all to listen.

bit.ly
Business bloggers at Harvard Business Review discuss a variety of business topics including managing people, innovation, leadership, and more.

Yesterday at 2:00pm · · · · Share
    • Terry Ebaugh This is a good podcast. I liked Groundswell. I still need to read Empowered and Open Leadership. My stack of books to read just keeps growing!

      Yesterday at 9:23pm · ·

    • Angela Hausman Mine too. Maybe we can discuss some of this to save the read.

      Yesterday at 9:33pm · ·

    • Thomas Leigh Like recycled rock and roll…this stuff keeps going round and round…ad nauseum!

      5 hours ago · ·

    • Angela Hausman Yes, otherwise we would have nothing to write about.

You might also like:

The Social Media Joke

Recently, there’s been a heated discussion on the marketing and communication board of LinkedIn based on  the premise that social media is a joke.  The group is mixed as to whether social media is a valid marketing strategy or a modern version of the Emperors New Clothes.

The fatal flaw in this argument is the notion that somehow social media, or by extension, social networks are to blame the tool either being beneficial or a joke.

In fact, social media is simply a TOOL of marketing strategy and it is the PEOPLE who use it who are either a valuable extension of marketing strategy or a joke, not the tool itself.

Social networks are online tools that allow users to share aspects of their lives, from the important to the mundane.

The rise of online social networks has been attributed to the decline of communities in the “real” world.  Large numbers of people were attracted to these virtual communities, including more that 500 million on Facebook alone.  People started sharing more than pictures of their families and events and started sharing attitudes toward the things in their lives, including the products surrounding them.  Occasionally, when people shared product information or attitudes, they went viral — affecting the behavior of a large number of people in a short period.

This online behavior enticed marketers to consider how they might harness the power of social networks in support of their brands.

So far, everything was going well.  Unfortunately, once several companies talked about their success in using social networks to make their message go viral, everyone wanted in on the game.  And, supporting every econometric theory since before Adam Smith, once people believed they could make money through viral marketing, droves of people flocked to social network marketing.  This is where the problem began.

Translation: its not the tool that’s bad its the people using the tool.

When someone uses a hammer and hits the nail badly, do you blame the hammer or the hammerer.

When someone uses a hammer to attach a cabinet to the wall and it falls, do you blame the hammer, or the hammerer.

This is the equivalent of blaming social media for being a joke — its the operator who is a joke.  The tool works just fine when used in the right way for the right job.

The second part of the argument is that its not real because you can’t measure it.

Certainly, its difficult to assess the success of your social marketing strategy — there’s no denying it.  You can measure number of fans, number of followers, etc, but what impact does this have on your bottom line.  But, couldn’t you say that of almost every form of marketing communication?

How do you assess the success of your advertising? Recall? Awareness? Do these translate to your bottom line? Maybe; maybe not.  Its just as unclear whether these tools have some ability to affect your ROI as social media.

So, do you just throw up your hands and stop all forms of marketing communication? Of course not.  That makes no sense at all.

You might also like: