Is Measurement Too Big a Job For Marketing?

There's a great deal of discussion these days about whether or not the marketing department can be entrusted with measurement of the return on their investments.  Some leading academics are advocating that measurement responsibility should be owned by finance, who have both the technical skills and the objectivity to do the job right.

Seems to me that this would be sort of like having auditors count and hold money because banks shouldn't be entrusted to invest it wisely.

True, most marketers today lack the depth of measurement skills to address the finer aspects of the challenge.  Also true that many are too blinded by the optimism of wanting a marketing program to work that they struggle to be objective in assessing it.  And finally, it is true that over the years, marketeers have developed a bit of a reputation for wanting to build small empires of headcount and budget.  But these are all things of the past (or soon-to-be-past).

I suspect the debate is just that... a debate. Anyone who really understood the craft of marketing would know that there are so many subtleties in planning and measuring marketing investments, only one who has achieved a higher level of understanding can appropriately quantify the risks and rewards.

The question arises from the fact that too many marketers hide behind these subtleties in the belief that they somehow defy quantification.  Wrong.

Everything can be measured. Given the time and resources, it is possible to quantify the economic value created by any type of marketing investment, in any combination, in any circumstance. So while it may be appropriate to argue that there is simply no time or money to develop a reliable quantitative measure, it is naive to say "it can't be done."

In the end, measuring the return on marketing is about the company as a whole gaining a higher level of confidence that its marketing strategies and tactics are having at least the desired effect on the marketplace. The implication is that marketing and finance should be working together to determine when and where costs of building higher-certainty measurement processes are worthwhile, and focusing their collective expertise on those critical questions.

Finance is going to continue to turn up the heat in search of understanding of the payback on marketing.  As marketers, we have two choices:  1) to work with them to inform their perspective on the best ways to do that; or 2), to spend an increasing amount of our time and energy "fighting them off" and baffling them with marketing-speak. In the long run, only option 2 holds the prospect of the CMO keeping their job.

What do you think?  Can marketers be entrusted to measure their own effectiveness and efficiency?  Should the responsibility lie elsewhere?  How does it work in your organization?

Comments

[Frederique]

Yes, I believe marketers can be entrusted to measure their own effectiveness and efficiency. They are the best positioned to do so. Finance does not have clear visibility into or deep understanding of each marketing initiative, and all the different ways a marketer measures the performance of these initiatives. From cost per lead, cost per sale, to attend, click thru and open rates, and ultimately MROI, there is an infinite number of metrics that marketing is responsible for, keeping track of, and measuring. Finance’s interest lies in the balance sheet, the income statement, the financial health and growth of the business. Although close collaboration is needed between Marketing and Finance to establish the budget and manage marketing spend, I don’t think Finance needs to be involved with or would have the context to help measure marketing programs at the level marketing does.

[Chris Kenton]

I think marketers still have a hill to climb in gaining the credibility to regulate their own financial measures. It's not so much an issue of trustworthiness as it is training. Too many marketers still talk about ROI as if it's synonymous with "benefits of success", or misquote technical terms and metrics in ways that reduce their credibility with the CFO. Unfortunately, most business schools are not helping out in this regard, with some schools blocking the introduction of financial classes in the marketing department. I don't think this is a situation where marketers can bridge the gap just by sitting down for a heart-to-heart with the CFO. The CFO has all the leverage, and little incentive to cede ground to marketers, much less educate them. I think this is a situation where marketers need to pull themselves up by their bootstraps, crack some financial books, and start getting savvy about the business finance fundamentals they need to compete for a handle on the purse strings.

One other point. I think the focus on ROI is important, but not sufficient for marketers to gain board room credibility. At the end of the day, the vast majority of metrics that marketers are learning today are internal metrics of efficiency. Streamlining your cost of acquisition is fantastic. But you can be incredibly efficient at winning the wrong customers and leading the company toward a major catastrophe. What financial measures do marketers have today, beyond just measuring last quarter's market share, that help steer the company's market approach?

[Carol]

Thanks, Chris. You have shared an important perspective and highlight a problem many CMOs face. In too many organizations the CFO and CMO (and CFO and Chief Sales Officer) have contentious relationships. I agree that executive officers of a company should have an understanding of financial principles as well as other aspects of a business. In fact, it’s interesting that many marketing conferences are now adding classes about finance (finance for the marketing executive). I also believe, though, that good, supportive relationships across the executive team enable each person to use their particular expertise to help their peers. I believe this collaborative approach is important to long term corporate success. The CFO should consider him/herself as a service to marketing just as marketing often serves sales. In fact, all the different functions of a company have a responsibility to each other. I know that this is not the culture at all companies. But the companies that are most fun to work at, and tend to have long term records of success, foster an environment of trust and shared goals. The "level 5" leadership that Jim Collins espouses and has researched has some relevance to this topic: http://www.jimcollins.com/

[John Dawson]

There is no way that a modern marketing team can ignore ROI in their agenda. However there’s also the question of education. Too many marketing teams want to forget the past or get onto the next big idea - be it a logo redesign or shooting of a new commercial – when planning a new campaign.

Time to get real - if your stated campaign objective is to raise awareness of a product or proposition, you better be sure that a significant link exists between awareness and sales (and I’ve seen strong analysis questioning this very point).

Personally I like the ideas of companies such as Toyota or Diagio who set aside a specific and significant portion of their marketing budgets for test & learn campaigns where they pay a small premium to ensure results are easily measurable. Cost / GRP shouldn't always be the mentality when purchasing media or mailshots. If an agency or marketing team isn't willing to be measured, i'd question their commitment to the organisation they should be representing…. And if the CxO and CMO aren't aligned, one has to fear for the organisation as a whole.

[Todd Zielinski]

I think in today's highly competitive, growth driven markets, if a CMO can not and/or does not have the know how to produce marketing ROI, than that individual will most like not have a position for the long run. I think it's just recently I red an article from Marketing Shepera that said the average CMO's tenure is around 24 months. If that research is accurate, than you have to assume that marketers are having a difficult time linking marketing's direct impact to the bottom line (sales). To me, that's where the core issue lies. Now my background is purely from the B2B side, so my comments cannot really speak to the marketing ROI of a B2C environment. So in my opinion, the highly impactful question is what to measure (not who-as I believe the CMO is responible for their spending activities) and how it correlates to the direct impact of your businesses sales revenue. When looking at the market (whether it be small, medium, enterprise accounts), their is a gap that exists between marketings direct impact on sales. I see the hesitation of many CMO's on what to spend and in what areas. And you can place your bet's that this hesitation stems not only from the marketing and sales departments, but from the highest executives in the company. So how can one provide a repeatable, sustainably marketing infrastructure (process) that has a direct impact on sales revenue which can me measured and improved according to business plan projections/initiatives? If a CMO can solve that constraint, they will make a lot money!