Measuring marketing performance
Michael Valos canvasses leading marketers about the ongoing challenge of measuring marketing performance.
This article is from a series that attempts to highlight issues marketers need to address to achieve more influence in the C-suite. The contents of the article are intended to aid marketers in addressing a common criticism levelled at marketing, which is that it is an intangible discipline that doesn’t always show value, compared to the allegedly more ‘tangible and value producing’ functions such as production accounting and finance.
This article comprises senior executive insights into dealing with this challenge as well as drawing upon a number of studies and articles over the years that have attempted to get to the heart of the issue. The issue of social media and digital marketing is a further consideration. It would appear to add complexity to the already problematic measurement issue.
One school of thought is that social media and digital footprints of customers – in cyberspace in conjunction with sophisticated databases and marketing analytics – provides more tangible correlations between marketing initiatives and desirable consumer behaviours. However, another school of thought is that interactions within social media platforms are particularly difficult to correlate with positive consumer outcomes and, as a result, some marketers are finding it harder to make the business case for social media relative to traditional media.
What is the best way to measure marketing performance?
Customer acquisition versus customer retention approaches
Sifat Bhatia, marketing director, Western Union Business Solutions, describes the alignment within the marketing performance measurement approach of Western Union. It reflects the ideal that strategic and tactical measures are integrated and support each other. “At Western Union, the marketing team’s KPIs and goals are tied to the company revenue objectives. Every activity is measured to determine the direct or influenced impact on revenue.”
Another aspect of the Western Union approach is your ability to reconcile different objectives.
“For new customer acquisition, metrics include tracking the number of qualified new leads and the conversion rate of leads to customers,” says Bhatia.
“The impact of lead nurturing activities can be measured by tracking improvement in the length of the sales cycle. From a customer retention and loyalty perspective, measures include NPS, the number of customer referrals, incremental revenue generated during a campaign period, year on year customer growth and customer engagement through email open and click-through rates.”
Sharing accountability for performance measurement
Scott Gunther, national manager, customer and partner experience, IAG Commercial Insurance, introduces the idea of comparison with previous performance as a basis to develop learnings that inform future expenditures and initiatives.
“The best way to measure marketing ROI is to ensure you understand the prior period performance and use that as your baseline. We then set KPI targets for each initiative, and continually compare performance to prior periods to see uplift. It’s a joint accountability of our strategic and channel marketing functions, and our customer and sales analytics functions.”
Another aspect of this approach is involvement of strategic and tactical functions. This facilitates appropriate goal setting and a more sophisticated understanding of deviations from performance measures when they occur. If conducted in the right way, it allows buy-in and acceptance of key stakeholders.
Educating the C-suite to facilitate execution and performance measurement
“The core responsibility of marketing is to grow brand equity for the organisation,” says Mike Harley, managing director, XPotential Australia New Zealand.
Harley has wide experience in senior marketing director roles and currently provides services to a number of blue chip companies. This gives him a global perspective on the topic. His comment reinforces other comments about the need for alignment and stakeholder buy-in.
“While there is no one best measure of marketing effectiveness, by establishing with the board and CEO the brand’s role in delivering the organisation’s strategy, and from this how marketing effectiveness will be measured, we can ensure that the marketing team’s objectives and activities are aligned with the rest of the business and create value.”
People process and technology
The increasing role of marketing technology is highlighted by Mitchell Mackey, marketing director, Ansell. However, to leverage the types of technology highlighted by Mackey, development of processes, culture and skills is necessary.
“If you are operating in a B2B environment, you will need an integrated front-end business technology platform supported by engaged people and aligned processes.
“This means a CRM platform married with a marketing automation tool, an enterprise-grade website content management solution and a sophisticated, business-driven analytics application.
“Ideally, your CRM is also fully integrated with your ERP system, enabling you to understand what’s happening with your recurring revenue. Without these tools, plus the right people and the processes, you cannot effectively measure your contribution to the business in these terms.”
Lessons can still be drawn from Mackey’s insight for B2C marketers.
What are the major challenges that hinder the measurement of marketing performance?
Diversity of stakeholders and customer touch points
“The greatest barrier to creating effective marketing metrics and ensuring they are achieved is in getting alignment and commitment to the agreed goals, both within the marketing team and its partners, as well as across other functions in the business,” says XPotential’s Mike Harley.
“This has become more difficult given the multitude of engagement touch points with customers, often through areas of the business where marketing is not in direct control and the complexity of external partnerships in place to deliver brand building activities, often with competing objectives.” While these challenges appear daunting, the flipside is that if you address these issues you achieve a competitive advantage of effectively measuring your marketing budget and initiatives.
A measurement culture is a disciplined culture
“There shouldn’t ever be any hindrance to measuring marketing ROI – it’s got to be part of your discipline and DNA,” says IAG’s Scott Gunther. “But the results don’t always have to be quantifiable; they can be qualitative too. Likewise they can be direct and indirect returns. Getting this discipline across all marketing stakeholders in your team is key.”
Gunther builds on Harley’s point regarding the importance as well as the difficulty of achieving marketing performance measurement culture.
Cross-functional collaboration in developing and implementing performance measurement
According to Western Union’s Sifat Bhatia, “A major roadblock can be lack of collaboration, alignment and communication between functions like marketing, sales and finance. The finance team or a similar function can be very helpful in creating the right measures, especially in cases where it is hard to track the direct impact of marketing on revenue.
“In addition, there can also be a lack of clarity and transparency around why an initiative is being rolled out, what is being measured and how it impacts the overall business.” As mentioned earlier, the latter point affects buy-in.
The role of context in measuring marketing performance
In examining marketing performance measures, the issue is how general or universal performance measures can be within the marketing discipline. Even a measure such as market share can be misleading;
e.g. high market share of low value customers versus low market share of high value customers? Which is more profitable? Which segment leads to more cross-selling opportunities? Bhatia raises the issue of context. “Different metrics can be used depending on the
type of organisation and activities. Whichever metrics are selected, however, it is important to ensure that they support the key goals and have a strong focus on ROI.” In other words, the most appropriate measures are a function of many things, including industry sector and product category, source of differentiation, category dominance and stage of product life-cycle etc.
The disconnection between job descriptions and the essence of marketing
Chris Khor, managing director of Chorus Executive, provides another perspective on this discussion. Being a senior marketer recruiter, she needs to reconcile how organisations specify marketing roles with the capabilities and traits of candidates.
She identifies an inconsistency in terms of how companies are asking for innovative, strategic and creative marketers; however, their position descriptions focus sometimes solely on financial metrics. While achievement of budget, forecast and market share growth are critical measures of success, it leaves little room for creativity or innovation.
“Forward-thinking companies are starting to include a metric for failure, understanding that without the acceptance of failure, true innovation cannot occur,” she says, reminding us of the question, ‘Is marketing art or science?’
Maybe marketing needs less metrics, and performance evaluation should focus on big picture outcomes and innovative breakthroughs? To use an AFL analogy: a side can lose the tackle count, but win the game. Success is really about outcomes.
Do other members of the C-suite really appreciate what type of measures lead to marketing outcomes? Do they need education on the tactical measures or do they need to be educated that strategic outcomes can be achieved without too great a focus on tactical metrics.
As I said at the outset, measuring marketing performance has always been contentious and unfortunately there are some marketers at one end of the continuum who force-fit quantitative metrics on to marketing relationships that are too complex to be accurately quantified or, alternatively, are one of those marketers who ignore any attempt to deduce correlations between marketing initiatives and consumer attitudes and behaviours.
I suggest the marketers that are somewhere between will outperform them in the long run and make wiser budgeting decisions, in addition to proving the value of marketing to their organisation’s C-suite peers.
Mitchell Mackey, marketing director at Ansell, provides a checklist of the speedbumps in culture, structure, leadership, processes and technology that can limit successful marketing performance measurement:
- Poor leadership,
- a failure to give more than lip service to the reality that the customer experience is the decisive differentiator and is, in reality, the new marketing,
- limited vision,
- ineffectual change management,
- traditional IT,
- business abdicating to IT,
- conventional sales and marketing misalignment,
- siloed organisational structures, and
- an IT-driven approach to analytics generating reports minus the actionable insights.