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Corporate Marketing Accountability Soft measures of performance give way to hard financial metrics. Ryan Hendricks, Campaignist Inc., January 2009 Marketing
Budgets Guilty Until Proven Innocent Todays business leaders and their
stakeholders have embraced transparency and accountability like never before.
Even the once private realm of salaries, bonuses, and executive perks has
become a front-page courtroom drama, with profits and performance playing the
roles of judge and jury. As a result, financial planners are now applying a
higher level of scrutiny to the budgeting process, with every line item
presumed guilty until proven innocent. Marketing budgets are no longer
under the radar. The once routine annual process of apportioning funds to corporate
advertising and communications has now been put under the microscope of a new
lexicon of business results analytics Marketing
ROI. Senior corporate management teams are asking themselves, their
agencies, and consultants; What is the return on our marketing investments,
and are there more profitable ways to deploy these funds? According to Philip Kotler,
best-selling author of Marketing
Management, measuring marketing returns in terms of profits is the most
critical challenge faced by marketers and businesses today. Getting
better financial measures of the impact of marketing programs is the greatest
challenge facing marketers today. Marketing has been lax in developing
marketing metrics to show what particular campaigns have achieved. CEOs are no
longer satisfied with communication measures of how much awareness, knowledge
or preference has been created by marketing programs. They want to know how
much sales, profit, and shareholder value has been created. Philip Kotler Studies have shown that the
effectiveness of a companys MPM processes is a strong indicator of its ability
to deliver consistent growth in market share, revenue, and profits. Unfortunately
for stakeholders (and fortunately for competitors) the vast majority of chief
executives and their advisors are still in disagreement over how the metrics of
return on marketing investment should work. The good news is that the confusion
will be short-lived based on success in both academic and commercial circles to
define processes and develop systems to assist in the management of marketing
investments. The Science of Marketing Performance Management (MPM) At its core, the science of
Marketing Performance Management (MPM) relies on a detailed knowledge of the
financial implications of each incremental investment in identifying,
understanding, contacting, converting, and cultivating prospects and customers.
In response to widespread interest,
a series of books, seminars, and conferences on the topic of Marketing ROI have
emerged in recent months, helping to broaden the base of understanding of
best-practice approaches to improving the management of marketing investments.
While tools for implementing MPM solutions are just arriving on the scene, the
processes for maximizing results from advertising and communications are
well-documented. Make no mistake, the MPM process is
not for the faint-of-heart. To successfully measure and apply knowledge gained
from advertising and communications to improving the results of present and
future marketing efforts, every executional component of campaigns, from mass
media elements (TV, radio, print, outdoor, PR, etc) to database marketing
(direct mail, email, telemarketing, etc) and face-to-face communications
(direct selling, seminars, trade shows, etc...) must be isolated, tracked,
measured, and compared to alternatives for their individual ability to generate
revenue profitably a daunting challenge for any business. Even the corporate branding team has
become accountable for the sales impact of its investments in generating
awareness, preference, share of voice, share of mind, brand recall, etc...
While the importance of the role branding plays in positioning a company and
its products in the minds of prospects and customers has not diminished, the
communications created for this purpose can no longer avoid the inclusion of
one or more response elements necessary for gauging its contribution to
marketing returns. Regardless of the desired result of the branding investment,
the benefit of adding a toll-free telephone number, website address, or other
contact mechanism, with or without a call to action, far outweighs the cost. Standard
Objections Have Been Resolved The few arguments that commonly
arise from agencies and internal teams are easily resolved when examined from a
Marketing ROI perspective: Argument #1: Response is not the purpose of the ad! Were trying to reposition the
company/product in the minds of the audience not generate inquiries or sales! Resolution: Even a miniscule response base can aid in
comparing how well the positioning message has been targeted and received by
audiences. There is no good reason to avoid learning from the results of communications
intentionally. Argument #2: It
ruins the purity of the creative execution to show a phone number or web address in the ad! Analytics should stay
out of the creative development process. Resolution:
Regardless of the creative genius behind the execution of advertising and
communications elements, its purpose is to enhance the companys ability to
turn prospects into customers. Argument #3: We
learn all we need to know from focus groups! Resolution:
While focus groups can act as a valuable source of information on how target
audiences might respond to marketing communications, they are not a reliable
basis for the knowledge needed to optimize Marketing ROI. There is no longer an excuse for
ignoring accountability for any line item in the marketing budget. Even public
relations investments have not escaped the net of accountability. Steer Clear of Wasted Advertising The solution is to put the processes
in place to identify the best and worst performing mass media, database
marketing, and face-to-face marketing investments. To achieve this, the
matching of investment tactics to target audience media consumption profiles,
the cost of each execution, its response rates, prospect conversion rates,
contact expenses, and even the spending patterns of respondents must be used to
paint a clear picture of the relative profitability of each campaign element.
This final aspect the profitability of customers acquired from marketing
investments, must be analyzed within the proper context of the short- and
long-term revenue streams. Seemingly unprofitable executions might be more
profitable over time due to the spending patterns of acquired customers, than
those that appear more profitable in the short term. Credit card usage provides an
excellent example of this. Most banks and credit card issuers will tell you,
albeit privately, that their most profitable clients are those who either
cannot afford or are unable to manage their finances well enough to pay their
bills on time each month, but who eventually do pay. Therefore, while the
results of an advertisement placed in a local newspaper might appear at first
to have performed worse than a regional publication based on the income levels
of the respondents, shifting budgets away from the local paper would negatively
impact the companys bottom line. Steer Clear of Unproductive Execution In addition to understanding the
relative profitability of each element of the media mix as described above, businesses
wanting to maximize their Marketing ROI need to keep a close watch on the
individual execution tactics used during and following the campaign. Matching
the target audience purchasing profile including their status in the buying
process, their preferences for where, when, and how to pay, is critical to ROI
maximization. If this is done well, the cost and productivity of individual
process elements such as the timing of communications, the tactics and vehicles
used to follow-up on respondents, the contribution of fulfillment materials to
the conversion process, and the success of staff resource and inventory
planning can be optimized, further enhancing campaign returns. An in-depth
understanding of the alignment between audience segments and execution strategy
can often help mitigate poor results from a less than optimum performance by
advertising investments. The path to maximized Marketing ROI
is not an easy one by any measure, but those who want to continue to succeed in
marketing to prospects and customers, ignore it at their peril. MPM in the Context of Enterprise Information Systems Once the above described processes
are in place to maximize Marketing ROI, the next challenge is to pull together
marketing results information from multiple sources. Several existing in-house information systems
such as, CRM, ERP, and other corporate applications each often contain data
required to measure and manage Marketing ROI. While many businesses have become
adept at gathering and sharing information on customers and prospects, sales
force opportunities, suppliers and Inventories, employees and partners, and
customer transactions, pulling all of the pieces together in order to gauge the
financial results of completed marketing investments in order to compare and
rank the performance of individual campaign elements, is still out of reach for
most. Part of the reason for this is that
each enterprise application maintains a different unit of measure at the
individual record level; for CRM, it is the customer record; for ERP it is the
Transaction; for SFA, the Opportunity; for SCM the Supplier; and, for HRM, the
employee. At the same time, all of these
discreet systems contain one or more elements that must be logically connected
to each other in order to be able to properly manage campaign results and maximize
Marketing ROI. The challenge of maximizing
marketing returns increases geometrically when marketing teams are dispersed
over a wide geographic area and when campaigns utilize multiple channels. It
becomes virtually impossible to synchronize marketing investment strategies and
tactics to optimize communications and customer cross-selling opportunities. It also becomes more difficult to
control and consistently implement corporate positioning and competitive
strategies as the challenge of gathering, compiling, and sharing campaign
results quickly enough to extend the benefit to ongoing investments is almost
insurmountable with existing software tools. This means that companies find it
hard to propagate successful marketing investments throughout the company and
stand to repeat mistakes made in the past. Defining the MPM Software Solution In order to lock in the benefits of
implementing Marketing ROI processes and principles throughout an organization
as described above, it is critical to track results using software. To do this,
it is necessary to pull together all of the relevant campaign-related data
collected in the course of developing and executing marketing programs, and
make it available to stakeholders in a format that is useful for strategic,
operational, and analytic teams:
In most organizations, this is
traditionally done using spreadsheets or simple databases from which reports
are generated on a bi-weekly or monthly basis. When analysis of one or more related
elements such as conversion by audience or channel is needed, a series of
ad-hoc queries is usually run by in-house marketing analysts. However, in
todays high-velocity competitive global markets, this approach means that a
significant percentage of marketing budgets are wasted as executional
inefficiencies often cannot be identified until it is too late. Proper
management of the marketing investment process requires on-demand access to the
latest results from any desired perspective, so that marketing teams can shift
underperforming investments to where they will generate the highest profits. Examples of the seven (7) key
results that need to be tracked and likely enterprise systems where they can be
found include:
An effective MPM solution must be
capable of tapping into multiple existing internal and/or external sources
including software for managing customer relationships (CRM), human resources
(HRM), sales (SFA), suppliers (SCM), transactions (e.g. ERP) and other
databases where campaign results data resides and bring it together in a single
application environment that understands marketing and makes it easier for
marketers to:
By deploying a single unified
platform for forecasting, tracking, and mining campaign results, businesses can
ensure the full optimization of investments by geographically dispersed
marketing teams. In short, a companys ability to maximize Marketing ROI
consistently throughout their organization depends on the quality of the
campaign investment process and the tools it has available to steer the outcome
toward higher profits. Integrating
Views of Past, Present & Future Marketing Investments The most complex aspect of managing
marketing investments in enterprises that are constantly advertising and
communicating with prospects, customers, suppliers, and other stakeholders, is
the integration of what is known about previous results with ongoing and
planned campaign investments. This challenge stems from the absence of
aggregated results from past and ongoing campaigns in a single application
environment that is aware of the logical linkages between the multitudes of
elements affecting the outcome of marketing investments. To successfully integrate available
marketing knowledge into an application that provides strategic, operational,
and analytic teams with the tools they need to apply what has been learned in
the past to maximizing returns from present and future marketing investments,
three (3) integrated modular application solutions are needed:
These solutions must also be easily
linked to in-house databases and external research sources in order to ensure
complete and current information on customer and market realities. In summary, advances in the ability
of businesses to manage relationships with customers, suppliers, employees,
partners, and sales channels to a very detailed extent using state-of-the-art
software and hardware solutions means there is no longer any reason why
marketing investments cannot be managed like any other financial resource. Companies that recognize the
importance of integrating accountability into their marketing analytics, and
are willing to meet the challenge of implementing solutions for ensuring
maximum profits and revenues from marketing investments, stand to gain a
significant competitive edge over their competition. Businesses that hesitate
to embrace measures of their marketing performance as a mission-critical
management approach limit their ability to grow market share and profits and
face an uncertain competitive future. Enter content here Enter content here |
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