What is a Baseline: definition, importance, and tips
Although it’s not easy to accurately measure the feedback on your actions, every marketer needs to do so to improve their business efficiency. One of the best ways to start using marketing analytics is to establish a performance baseline.
What is a baseline?
A baseline is an attributed value of everything outside of your marketing efforts, including all costs, sales, or other variables that would have happened anyway. It’s considered to be a fixed point of reference and is used for comparison purposes.
There are the following baseline elements:
External and long-term factors
These factors don’t depend on your current marketing campaigns, such as your brand awareness, your competitors’ production level, and much more. For example:
- Do you already have an extensive brand awareness?
- Do you have loyal customers who appreciate your company and can promote your brand?
- Have your competitors changed the marketing strategy to be more visible in the market?
The seasonal factor depends on the kind of business you have and affects some companies more than others, e.g., the travel industry or the retail sector.
However, it’s important for all marketers to track customer’s purchase trends according to the time of the year, climate, holidays, or other events. Understanding how and when your clients make a purchase can give you a substantial advantage.
This includes factors that can’t be measured in terms of data, such as word of mouth, product reviews, etc. For example:
- How to measure efficiently the internet activity of a person searching for your product when they receive information from a third-party site?
- How does an advertisement affect a person?
- What is the reason the customer comes to you a month later and buys the product?
All of these things must be included for an accurate baseline measure.
Why is a baseline important?
First, identifying the company’s baseline helps you accurately calculate the incremental impact of your marketing efforts. You can track the percentage of your sales growth in general and the percentage of the sales growth you gained because of the new marketing method.
Let’s say your sales increased by 25% in the last quarter. You can use baseline modeling to measure this improvement accurately and define that, for example, 15% of the sales growth came from a new marketing campaign launched in that quarter. This is a great benefit to justify your marketing plan.
Second, it helps you understand and explain fluctuations in product sales caused by external factors without marketing intrusion. For instance, you may define to what extent your competitor influences the revenue. By establishing a baseline algorithm, it will be much easier for you to explain the highs and lows in sales, even if your budget is the same.
How to set an effective working baseline?
Now since you are aware of the benefits, it’s necessary to establish a unique and well-organized working baseline according to your business. To do this, you should take into account the following basic factors:
The baseline should be dynamic. Considering mean values only will lead to the expected results, and you will have no external factors pointing to “jumps up” or “falls” in sales. This means that changes in customer behavior will also go unnoticed.
The baseline should be inclusive. Consider every conversion made, not just those made by the customers who were attracted to your marketing. Without this data, it’s impossible to determine the baseline.
The baseline should be integrated into all attribution calculations. Ignoring this, your marketing attribution is no longer valid. With the precise baseline, you can get new information about your marketing channels and identify conversion sources.
Wrapping it up
Sales may increase or decrease even though your marketing spending stays the same. Baseline helps analyze this change by considering other factors that don’t depend on your marketing activity. Therefore, setting a baseline is vital for every company to fully understand the gradual value of their marketing.