Why do you measure your marketing efforts?
That might seem like a silly question nowadays. In the face of continuing skepticism coming down from the C-Suite regarding marketing spend and what companies are getting out of it, most marketers would say, We measure because we need to show that marketing is actually doing something!
Demonstrating value is certainly a fine reason to measure our actions and their results. But discussing marketing measurement with Jim Lenskold during this week's Marketing Smarts podcast got me thinking that we may be thinking about the purpose of measurement exactly backwards.
The Trouble With Attribution
The problem, in a nutshell, is that our approach to measurement tends to be retrospective. We look at the organization's sales numbers, for example, and then we work backwards to attribute those results to specific marketing tactics. Such attribution generally hinges on ideas like "first touch" or "last touch."
"Even the word 'attribution' tells us," Jim told me, "that there's a potential problem in that we look at a sale and we say, 'OK, what am I going to attribute this sale to? Am I going to attribute it to my first touch? my last touch? Am I going to divide it up?'...But the whole approach is saying, 'It's about credit.'"
Though it is understandable that people looking to justify their existence are concerned about credit, there are at least two problems with that approach.
On the one hand, it never provides you with the whole story.
"In most cases," Jim explained, "marketers are only attributing the sale to one marketing contact, when we build our whole strategic plan and design our whole marketing organization around having all these different contacts that get [customers] through the purchase funnel."
Any complex sales process, such as we frequently find in B2B, involves multiple touches, which means that we will always be missing something when we attempt to attribute a resulting sale to this or that touchpoint. At the same time, we end up venturing down a rabbit hole of endless complexity if we try to weight each individual touch in each individual sales situation to ensure that we are fairly giving credit where credit is due.
From Attribution to Prediction
On the other hand, though a pursuit of attribution may ensure that marketers keep their jobs and even earn respectable bonuses, it essentially misses an opportunity for marketing to prove its true value to the organization, a value that becomes crystal clear as soon as marketing emerges as a reliable predictor of future revenue.
"What we're trying to do," Jim said, "is flip it around and say, 'If I do more or less of this marketing, how much sales can I expect?"
"I want to know," he continued, "that incrementally more or less of any one tactic or one additional touchpoint is going to generate more leads that convert to more sales."
To get at those insights, of course, you need data, and you need to rely on analytic techniques that take account of all your tactics and, indeed, the entirety of your marketing approach. Thanks to marketing automation, marketers increasingly have access to much of the data they've been longing for.
On the analytics front, though Jim believes that some aspects of predictive modeling are "tools that belong in the marketer's toolbox," he also admits that you may need to engage specialized talent to help you. Nevertheless, he is also quick to point out, the insights you will reap from investing in such talent can make that investment well worth it.
"We've got to dig a little deeper," Jim insists, "the answer is not going to just print out on a simple report. But yet we're sitting on all this rich data and...one small step away from leveraging and digging into that and understanding better the real drivers of our sales and leads."
Strategy Is About the Future
As Marketing develops the ability to predict not just tactical but also financial outcomes—in terms of sales volume, revenue per sale, and cost per sale (what Jim calls "the Big Three")—then it moves away from explaining what it did and begins to focus on what it can do. In other words, it turns toward the future.
And when it turns toward the future, it becomes an integral part of the planning process and begins to directly influence strategy.
Which is a beautiful thing.
If you would like to hear my entire conversation with Jim you may listen or download the mp3 above. You can also subscribe to the Marketing Smarts podcast in iTunes or via RSS and never miss an episode!
Jim Lenskold , president of Lenskold Group and author of Marketing ROI, The Path to Campaign, Customer and Corporate Profitability. He runs the Lenskold Group, which offers consulting and implementation services for strategic market planning, marketing ROI, customer profitability management, and marketing innovation.