The challenge of how to prove Marketing’s value continues to hound CMOs. We find that Marketing leaders if not careful can fall into two common measurement traps. Jim Nail, principal analyst at Forrester Research, is quoted as saying that “Measurement continues to be the hardest task in managing marketing.” The research supports the premise that companies committed to Marketing measurement tend to be better at delivering profitable revenue growth. Determining the right metrics for Marketing can be a daunting task in a world where what we can measure is nearly infinite.

The challenge at many large companies is getting historically decentralized Marketing groups to agree on a common set of metrics. A number of years ago, the article Metrics Revolution, in CMO magazine wrote, “Welcome to the new world of marketing metrics, one that requires a more strategic perspective of marketing effectiveness, presented in ways that the CEO and CFO can understand.” In this article a group of CMOs, who clearly understand the increasing value of metrics as validation that marketing is a strategic player in any organization, shared their challenges of Marketing in a world ruled by ROI.  

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A survey by the Association of National Advertisers (ANA) and Forrester Research highlighted the challenge in striking terms: 78 percent of the respondents said measuring the sales impact of marketing was difficult, and most couldn’t even agree on the definition of ROI. Only measuring Marketing ROI is a trap. Just using ROI as a metric is not an effective measurement tool for Marketing because the value of relationships, attitude, brand awareness and reputation are just as important. And tracking sales leads, market share and CPM for example, don’t provide the big picture senior managers are now seeking. The world of Marketing metrics is changing and as such a more strategic perspective of marketing effectiveness is required. 

We advise that your metrics focus on capturing customer perceptions and behaviors that can be used to monitor change in long-term customer value. These kinds of measures will help in creating strategies for improving customer relationships and loyalty. Other metrics should include key performance indicators that are predictive of future performance and brand health, and insight about why strategies are or are not working.

Two Marketing Measurement Traps

There are two common traps Marketers fall into on their measurement journey.

• The first is starting with the tools of the trade rather than the objectives for developing metrics. Reverse these. Start with the business outcomes and find ways to measure these and your metrics will be more meaningful to the executive team.
• The second is measuring too many things. You need to prioritize. Rather than implement a series of random metrics that just end up with you measuring the activity, focus only on those metrics that allow you to measure your impact on the outcome. Think about focusing on metrics that measure marketing impact and predictability. Consolidate your marketing around one set of metrics. Every marketer in the organization should use the same scorecard. This will help you eliminate a lot of wasted effort.

Once you tie your metrics to the company’s overall outcomes and link these to a set of strategic goals your first step should be to examine your current performance against these metrics so you have a benchmark. For example, if lifetime value is a key metric, you will need to understand your current customer retention, satisfaction, share of wallet, and referral rates so you will have a starting data point. If a key business initiative involves launching a new product, then it will be important to establish new product success metrics around new product introductions such as product line vitality and higher gross margins.

Marketers, to be an equal partner in any business endeavor, we need to bring something to the table. We need to be able to measure and validate our contribution. Learn more about Marketing Accountability.

FAQ:

• The first trap is starting with measurement tools or available data, rather than aligning metrics with business objectives. Begin with desired outcomes, then determine the right metrics.
• The second trap is measuring too many things. Prioritize metrics that directly reflect Marketing’s impact on business outcomes and use a unified scorecard across the organization to drive focus and eliminate wasted effort.

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