CONTENTS

Coupon Redemption and Cheese Purchase Timing

Manager's Viewpoint

Why Economic Analysis in the Evaluation Strategy?

Editor's Notes

Director’s Corner

Selected Readings

Next Meeting

NEC-63 Spring 1996 May 26-27, 1996 Cancun, Mexico Agricultural Commodity Promotion Policies and Programs in the Global Agrifood System

Why Economic Analysis in the Evaluation Strategy?

by Olan D. Forker

In his Manager’s Viewpoint column in the first issue of the NICPRE Quarterly, John Huston, discussed three levels of evaluation: 1) basic evaluation--counting, 2) level two evaluation--attitudes-behavior-demand, and 3) key evaluation--return on investment. In recent discussions with several commodity promotion organizations, I have expanded on Huston’s terminology to put the economic analysis component into perspective. The terminology I have adopted is “counting” for level one, “monitoring” for level two, and “measuring” for level three.

Counting involves the collection of data concerning an organization’s activities. This information is necessary to document what you have done and to make sure you received the services you paid for. This process is similar to an audit. The data collected is a necessary component of an economic analysis, but, obviously not sufficient to determine economic benefits.

Data collected at the monitoring level, to assess changes in the marketplace, is also necessary for economic analysis but, again, by itself is not sufficient for making economic inferences. Monitoring is likely to involve the use of consumer surveys to determine how consumer attitudes and purchase patterns are changing. Information collected by the USDA or some other agency on the commodity’s prices and volume marketed might also be gathered and analyzed to determine if certain program objectives are being met. For example, if an objective is to change the attitude that the commodity is unhealthy to one that it is healthy, a consumer survey conducted over time could indicate if attitudes did in fact change. Or, if the objective is to increase total sales, monitoring changes in sales volume over time is necessary. However, improvements in attitudes or sales volume are not necessarily results of promotion efforts. Many factors affect consumer attitudes and behavior. To sort them all out, we need to move to level three.

Economic benefits to the industry, if any, can only be determined by doing what I refer to as measuring. In the economic analysis of level three, the analyst attempts to determine whether or not the changes observed by monitoring the marketplace are associated with the promotion effort. It is possible that other factors are equally, or more, important in causing changes. How much influence did price have on sales volume? How much did the weather factors that influence yield affect the supply available for consumption? Economic analysis can be very useful in assessing how much of a change, if any, can be directly associated with a promotion activity and how much can be directly associated with other forces operating in the marketplace.

An overall evaluation strategy must include consideration of all three components if economic benefits are to be determined. However, the kind of data collected for level one and two, and the analysis done under level three must be determined by and relate to program objectives. Program objectives coming out of a strategic promotion plan must be stated so that success or failure can actually be measured, and measured in an objective way. It is also important to note that the appropriate number of evaluation levels to undertake, and thus the scope of the evaluation strategy, depend crucially on the size of an organization’s budget.