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Which Metrics Measure Marketing's Impact on Business and Influence Strategic Direction?

by Laura Patterson  |  
September 18, 2007

Various studies for the past several years from the Association of National Advertisers, Frost & Sullivan, IDC, and the CMO Council, among others, have found that CEOs are demanding more accountability from marketing. While most marketers are measuring something, survey results indicate there is room for improvement regarding metrics and the quality of these metrics.

In fact, results from VisionEdge Marketing's 6th annual Marketing Performance Survey found that only 17% of the 136 executives and marketing professional indicated that their CEO would give marketing an A. In addition, this study and others continue to suggest that a gap remains between a company's business goals and the metrics marketing uses to measure their impact on these goals. Companies continue to struggle with the contradiction between priorities and action.

The need and opportunity remains for marketing to improve the linkage between marketing expenditures and delivered results.

"Marketing must improve its value to justify its existence as a centralized function," according to Elana Anderson, a principal analyst at Forrester Research. If we don't make our case and develop and communicate quality metrics, we may find the days of marketing as a standalone department numbered and instead find ourselves absorbed into sales, finance, or some other function.

It's not like this is a new phenomenon. The concept of measuring marketing has been around for a long time. The question is what should we measure and what metrics are best?

In 2001, James Gregory's article in the Journal of Brand Management shared a proprietary model that linked various financial factors and corporate images to stock prices, sales, and market share. Research at VisionEdge Marketing has found that most companies fail to measure such things as cost to acquire, order value, share of wallet, churn rate, brand equity, and other key business variables that marketing impacts. Rather, marketers have a tendency to measure such things as response rate, demo participation, event traffic, number of new contacts or leads, number of press hits, cost per lead, and lead aging.

While these metrics offer some insight into the results of specific programs, they do not link marketing to the business objectives. In fact, our studies indicate that only about one in four marketers measure marketing's impact on the business and nearly two-thirds of marketing plans do not even include metrics.

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Laura Patterson is president and founder of VisionEdge Marketing. For 20+ years, she has been helping CEOs and marketing executives at companies such as Cisco, Elsevier, ING, Intel, Kennametal, and Southwest Airlines prove and improve the value of marketing. Her most recent book is Metrics in Action: Creating a Performance-Driven Marketing Organization.

Twitter: @LauraVEM

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