Marketing budgets seem to be under pressure… again. We’ve observed that marketing is often one of the first places companies look to make cuts in an attempt to boost the bottom-line. Driven by the need to prove the value of marketing investments, many leaders have launched metric-related initiatives. However, many such initiatives fail to live up to their goals and are paid scant attention by marketers with overloaded dashboards.
Want to get it right? Here are some principles to aid in the successful design of a marketing metrics program:
Measure outputs and not just inputs. There was a recent article in Ad Age in which the CMO of Kimberly-Clark was advocating the need to reassess the “working” to “non-working” dollars ratio. We agree with his point, and furthermore would advise that it is not enough to only measure inputs. Tracking where marketing dollars are spent (impressions, reach, traffic, etc.) or the efficiency with which those dollars are spent – are both representations of marketing input. Measuring just the inputs is like keeping an eye on a sport team’s efforts and activity rather than on the scoreboard. What matters ultimately is the impact that marketing has on demand generation and profitability.
Focus on a small but meaningful set of metrics. Many well-intentioned metric initiatives seem to drift into oblivion because they are designed by committee and have dozens of metrics in them – certainly more than anyone can pay attention to, let alone take action against. A recent Fortune 100 company we worked with had 34 metrics in their marketing dashboard. Granted, they have a diverse set of businesses and markets, but 34 might be overkill.
Build and refine a causal model. Marketing metrics often swing from an extremity of either measuring inputs or focusing solely on financial outputs. What is usually missing, and much more powerful, is a causal model that explains the linkage between the two. Typically, the logic for building this causal model is that marketing influences customer attitudes (e.g. awareness, preference, loyalty, etc.), which in turn influences customer behavior (e.g. trial, average price paid, share-of-requirements, etc.). It is this customer behavior that we monetize as financial outcomes. This causal model is the backbone of an effective marketing metrics program.
One example of this is to use the impact of marketing on the quality of the sales funnel as a focus for measuring the financial implications of marketing’s efforts. While actual outcomes are often more in the hands of the sales team, marketing has a role to play in getting them leads and also helping improve the effectiveness and efficiency of the sales efforts – i.e. improving the quality of the sales funnel. The quality improvement of the sales funnel can actually be measured in dollars and can become the foundation of a Marketing ROI model.
Plan for total measuring capabilities (tools, surveys, skills, etc.) and use in decision-making. More often than not, a significant portion of the investments in marketing metrics is on the “hard” stuff of metrics - data and dashboards. Yet often the break-point is in the lack of adoption, poor skills in using the metrics for decision-making, or unclear linkage between the metrics and the process in which they are to be used and other such “soft” factors.
Marketing metrics have always been important, but are likely to become even more so with the slew of new digital channels and marketing tactic options. However, it is wise to approach them on a more programmatic basis to ensure that they have the transformational impact on your organization.
