There is no shortage of marketing measurements in most large corporations, yet there is a significant gap in measurement discipline.
Measurement problems occur at several levels, ranging from basic accuracy and prioritizing what should be measured to how those measurements align with business objectives and how the results are applied.
Measurements and analytics are powerful tools that provide insight for improving marketing performance. They serve as the sources for knowledge and facts that shape strategies and guide tactical decisions. Without reliable insights into what's working and where improvements are possible, marketers must piece together their gut feelings on what makes sense with their informal read on marketing's influence on customers and sales.
Putting a measurement discipline in place involves going beyond the occasional campaign measurement or results tracking; it means establishing standard processes across the organization.
Within large marketing organizations there are usually a few measurement "champions" who recognize the benefits of and push to improve their own results with better measurements. However, leadership from the chief marketing officer (CMO) or VPs of marketing is necessary to move measurement to a discipline that is ingrained into the organization's culture. When measurement discipline is achieved, the organization works more effectively and efficiently toward clear business objectives.
To put you on the path to measurement discipline, I'll share what it takes to understand measurement-practice shortfalls, establish a measurement-management process, build capabilities, and create the right culture.
Practice Shortfalls—What's Missing
For most marketing organizations, measurements are an afterthought compared with strategy and campaign development. Some companies have extremely well-designed measurement methodologies using different forms of modeling, tracking analyses, or market testing. But even those companies typically fall short of their full potential.
Based on conversations with hundreds, if not thousands, of marketers over the years, I would summarize the state of marketing measurement in terms of shortfalls and opportunities:
- Campaign results are tracked and reported without drawing any clear conclusion on what is driving results and what should be done to improve results.
- Measurements are inaccurate but assumed to be accurate if they're positive (marketers using pre-tracking and post-tracking attribute negative results to the influence of external factors and attribute positive results to marketing).
- Measurements do not have clear objectives tied to how the information will be used.
- Measurements are primarily designed around tactics and neglect the big-picture, strategic performance drivers.
- There is no budget or practice in place to measure marketing impact.
- Metrics not tied to financial performance are measured without any knowledge of how (or whether) these metrics influence sales and financial contribution.
Opportunities from better measurement discipline:
- Plan measurements more than six months in advance and integrate them with campaign plans to prioritize strategic and tactical insights based on potential performance improvements.
- Establish a process for accumulating and retaining knowledge on how marketing influences customer purchase decisions.
- Develop standard methodologies and measurement techniques with acceptable accuracy.
- Ensure results are consistently applied to guide strategies and campaign plans.
- Communicate measurement success stories to reinforce the culture and build momentum.
- Design measurements with the goal of assessing outcomes, diagnosing shortfalls, and improving results.
Developing the Vision and Process
If you look at the opportunities listed above, you can see why this is a CMO imperative. Measurement discipline elevates the ability to guide the most-critical decisions with better precision for greater impact. Marketing organizations manage large budgets that are facing greater scrutiny without the credibility that comes from measurements. CMOs should not be satisfied with only measuring marketing contribution; rather, they should demand that the organization demonstrate the ability to act on measurements and improve performance. That is where credibility is earned.
The vision for better measurement discipline starts with the CMO's expectation that well-constructed measurements that concentrate on key profit drivers will provide a competitive advantage when developing strategies and tactical plans. The process requires integrating measurements into key stages of the marketing planning and delivery cycle. The planning cycle should follow this general direction:
- Align marketing and campaign objectives to business objectives.
- Develop your strategy with return on investment (ROI) scenario planning to improve profit potential.
- Complete a rolling six-month measurement plan to prioritize measurements and integrate into campaign planning.
- Develop tactical plans with measurements defined prior to execution.
- Execute and measure marketing initiatives.
- Track and analyze results.
- Refine upcoming objectives, strategy, and tactical plans, leveraging insights to improve performance.
- Manage the learning cycle by maximizing the use of measurements and identifying the next measurement priorities.
CMO commitment is critical to success. To achieve new levels of success, the CMO must motivate the team to invest additional effort into measurements and also back that effort with resources. CMOs should empower those measurement champions within the organization to lead the effort and innovate. The payback comes to all in the organization as they understand the value that measurements provide in informing their decisions.
As reported in the Lenskold Group/MarketSphere 2009 Marketing ROI & Measurements Study, companies that are outgrowing their competitors are much more likely than companies growing slower than competitors to indicate that they are "using good measurements of marketing effectiveness to prioritize top marketing campaigns" (41% vs. 24%) and "have data, facts, and insights to better guide marketing spend decisions" (44% vs. 27%). The benefits are clear; teams must therefore map out a path to establish measurement discipline.
Building Capabilities and Culture
In organizations where measurements are used inconsistently or are not yet running to their full potential, improving measurement discipline must be done in stages. Both capabilities and culture must be built, since each supports the other.
Capabilities include providing data access, systems support, and internal or external measurement resources. You have to accept that the process will start with the best available information and, even as it improves, it will never be perfect.
Enhancing your capabilities may involve introducing new methodologies such as structured market testing or modeling. You may decide to shift what you measure, putting additional emphasis on more-strategic or high-priority insights. Or you can add depth to your results analysis by learning more about segment-level performance or diagnosing the weak areas in your customers' purchase funnel.
Here are examples of how companies have improved their measurement discipline:
- Designing a measurement pilot to assess customer-retention strategy
- Developing the first comprehensive measurement plan for a six-month mass-media and sales-channel media blitz and concurrently defining the measurement-planning process for future campaigns
- Establishing a structured market-testing program to assess both strategic and tactical performance drivers
- Introducing marketing performance modeling to calculate baseline sales and marketing lift from retailers, with the ability to forecast sales levels based on marketing plans, expected competitive advertising, and market conditions
- Mapping out a detailed four-quarter measurement plan outlining specific measurements and the process for applying results
Regardless of your current measurement practices, a good process for advancing to the next level is through pilot initiatives with select team members. Pilots help senior management recognize the benefits of applying new insights and help the marketing team build confidence and accelerate adoption.
Once new measurements are tried and accepted, the process can be systematized and the infrastructure improved to take the next step in capability.
Measurement success stories must be communicated to demonstrate how measurements offer strategic value and deliver performance improvement.
After the measurement pilots and adoption, the marketing organization must establish a clear process for what gets measured, how it's measured, and how often. Remember that it is not important to measure everything: Your objective is to identify those insights that can improve future marketing effectiveness and profitability.
To complete the process, the CMO must set the expectation that measurements are valuable and must be acted on. Good measurement discipline also requires that the CMO encourage sharing of all measured results, both positive and negative, since all results are necessary to guide improvements.
The need for marketing to adopt better measurement discipline has always been important, but it has become more urgent in the past year.
As reported in the Lenskold Group/MarketSphere 2009 Marketing ROI & Measurements Study, 79% of marketers indicated that the need to measure and report marketing effectiveness has increased in the past year. With today's economic conditions, every budgeted dollar counts and needs to deliver results.
Those conditions put pressure on senior executives who then put pressure on marketing team members to show they can improve the bottom line. And, realistically, you cannot fully manage and improve marketing effectiveness without knowing what is working and what needs to change.
Another consideration to motivate action now is the annual planning process that, for many companies, has just begun. Making progress on your measurement discipline requires (1) bringing more measurement and analysis insight into the current planning cycle and (2) planning and budgeting for better measurements in the upcoming year.
There may still be an opportunity to inform 2010 planning with either incorporating some quick measurements into current marketing or running a historical analysis on past marketing.
With budgets already tight for next year, it could be hard to find the resources for measurements and analysis, especially if they have been underbudgeted to date. However, allocating a portion of the budget for measurement and analysis can make the rest of the budget more productive and create a competitive advantage for the current year and future years.
Measurement discipline requires time and effort. But once marketing executives make the commitment, the process will gain momentum and continue to evolve as it delivers new insights to guide performance improvements.