You are the chief executive of your institution, or perhaps you are the marketing or advertising director.

It happens with some degree of regularity: You are sleeping peacefully, dreaming your favorite dream. You're on the beach in Kauai. A gentle breeze rustles the palms. The sky is a bright blue. Suddenly a huge dark cloud drifts across your dreamscape. The cloud says, "The advertising ... is it working?"

You wake up in a cold sweat. Your bank's marketing and advertising budget is a huge line item. In some banks it's exceeded only by net interest expense, compensation, and occupancy. And you don't know if it's working. You don't know how to measure it. You've got mainframes, minis, desktop microcomputers, and mortgage calculators. But you don't have an ad calculator, because there is no such thing.

If you're the CEO, you are in a cold sweat because of the huge expense at a time when close cost control is imperative. If you're the ad director, you wake up with a start, knowing what the boss is thinking.

There are ways to sleep easier, which I have gathered over 30 years in marketing and advertising: 13 years at Procter & Gamble, America's premier advertiser; 10 years at two Top 10 agencies handling the accounts of Hilton Hotels, Taco Bell, and American Medical International; and almost 10 years as senior vice president and director of marketing and advertising at H.F. Ahmanson & Co.'s Home Savings of America.

The first step in measuring the effectiveness of advertising is agreeing on what you expect it to do. Goals and objectives should be defined and nailed down in your institution's advertising plan before the start of the fiscal year. In the same plan you should also commit to how you will measure achievement of these goals.

Ask yourself what goals of the institution are important and can be affected by advertising, and measured.

This is a critical question because there is so much misunderstanding about what advertising can do. It can't sell a loan. It can generate a lead for your sales force, but the ultimate fate of the loan is in the hands of your pricing committee, salespeople, and underwriters.

Can advertising bring in deposits? Yes, if you are priced right, serve customers well, and are reasonably healthy. Advertising can create an awareness and an image that will make people more likely to do business with you. But if your systems and your service are not competitive, you can't expect a few ads to fill the gap.

Here's what you can legitimately expect of advertising, why it's important, and how you can measure it.

*Building awareness among desired target audiences. People won't do business with Acme National Bank if they don't know Acme exists. Most advertising plans identify awareness as a key objective. It can and must be measured via annual tracking studies. Note, however, that awareness comes not only from advertising, but also from branch presence and visibility, positive and negative press coverage, and word of mouth.

The best result is "top of mind" awareness, which is measured by recording what respondents answer when asked, "Can you name any financial institutions here in St. Louis?" That question is usually followed by a second question, which elicits a figure called "total awareness." For this, the interviewer goes through a list of all the local banks to find out if the respondent has ever heard of them. It's not unusual for a bank to have 35% top-of-mind, or unaided, awareness, and 80% total, or aided, awareness.

*Shaping attitudes toward or perceptions of your institution. It's not enough for the community to know there is a bank out there called Acme. They've got to know something about it, what it stands for, why it's better and different from the competition. This too should be measured in the annual tracking study.

Understanding what the public thinks about your bank is priceless in developing the kind of image that builds huge, unshakable businesses. I've seen it work and helped to make it work. It's what allowed Ahmanson to grow by $4 billion in deposits during the height of the savings and loan crisis while the industry as a whole lost $55 billion. You can change the way people think about you.

*Motivating your employees. Good advertising for a service business motivates the employees who see the advertising over the shoulders of their customers. The right advertising gives them pride in their bank as well as a better understanding of what's expected of them. Employee attitudes, and the impact of advertising on them, can also be measured.

*Generating leads. The ultimate goal of retail advertising is to generate leads, to make the phone ring, to build traffic and thus build sales. Leads, traffic, and sales can all be tracked and measured with varying degrees of accuracy.

The caution is that in virtually all cases except for direct response advertising, the role of advertising stops when the lead is turned over to the sales force. Your ability to correlate the effect of advertising with actual sales begins to diminish as other factors come into play: competitive pricing, the competence and motivation of your sales force, your underwriting guidelines, and so on.

Measuring incremental return on advertising investment is a good business school exercise, but it can be a bit like measuring a baseball pitcher's total effectiveness with nothing more than a speed gun. It doesn't tell the whole story and can seriously mislead you.

The noise of advertising in America is deafening. Advertising Age estimates that 1995 domestic ad spending will be $159 billion. How in the world can your budget break through?

You must assume you need to spend at a certain level just to be heard. Media thinkers today believe a TV message needs to be seen by a viewer three to four times before it even has a chance of penetrating.

So don't expect to run an ad once or twice and see measurable results. If that is your expectation, you'll hate your advertising. How much is enough? It depends on your market. It's an answer you need expert help in determining. But be advised that the amount you spend on advertising has a definite impact on your ability to measure its impact.

In summary, you can and should measure advertising. You just need to be realistic about what you are measuring to sleep well.

Mr. Winston, a former marketing and advertising director at Home Savings of America, is principal of Winston Consulting Group, Palos Verdes, Calif.

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