The Marketing Consortium

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?

What Marketers Can Learn From the Political Pollsters

Driving home the other night, I heard a political analyst on one of the news radio stations explaining how the Republicans were moving some big money out of some US Senate contests and into others, while Democrats were doing the same.  Some of the races they were pulling money out of were considered "safe wins" with only a week of campaigning left.  Others were forecast to be lost causes where more TV ads weren't likely to turn the tide.

I found myself marveling for a moment at the confidence they must place in their polling techniques to develop such levels of certainty about outcomes before the first votes are even cast.  But when I really thought about it, their certainty isn't wizardy, it's just the science of commitment. 

Political organizations have been doing polls for well over a century now.  And to their credit, they've done two things right along the way: always updating their technology; and cataloging their knowledge.  Think about it for a minute. They're masters are adapting to the latest technologies - from telephones to televisions to internet samples.  They learn fast through repetition and quickly iterate to a sound understanding of how to read the bias and variance in each tool.

But more importantly, they're great students of history.  They keep poll results going back decades and constantly update the analysis of the historical perspective so they can find any possible parallels between today's races and victories or losses they've suffered in the past.  Their knowledgebase is both expansive and accessible. And next to a charismatic, articulate candidate, it's their biggest asset.

So what can we learn from the pollsters about enhancing marketing measurement and predictive ability? Well for starters, we should learn that you CAN get very confident in the predicitve value of survey-based research if you have the right methodologies and stick with them long enough to understand the underlying variances and biases in the answers. Regularly comparing reported intentions to actual behavior patterns, even amongst a broad and anonymous population, can identify predictable levels of difference between the two, in effect providing a perfectly predictive mechanism for anticipating future behavior. That sense of history provides a significant competitive advantage that simply cannot be copied.

Second, we can probably learn that even in these days of amazing analytical tools, survey research is critical to our understanding of what works and why. This suggests that we should reconsider the role of the chief researcher in our marketing organizations and ask a few simple questions, like: what questions do we need this person to help us answer? What is the economic value of higher levels of certainty in the answers we get? What resources do we need to give them to permit them to achieve their mission? Do we have the right person/people in charge of this critical function - not only technically competent, but strategically saavy and organizationally influential? And are we willing to commit to consistently improving our research month by month to get closer to understanding and prediciting things we can't see in consumer/customer behavior?

It stands to reason that if marketers are as committed to learning from survey research as the pollsters have been, we too might have the informed confidence to move large sums of money from losing efforts to more promising opportunities in time to win.

What do you think? Is research able to play a role like this in your marketing organization?

How Analytics Often Miss The Mark

Does your organization use a marketing mix model or some other sophisticated analytical tool to assess the overall return on your marketing investment? 

If not, you may want to learn a bit more about them. They are wonderful tools for understanding which components of your tactical marketing plan have been driving sales, and which less so. The benefit is an ability to tune or optimize your tactical mix to achieve better results for every dollar spent.  In fact, a recent study by the Marketing Leadership Council found that these analytical methods can often help identify 5% to 25% of total marketing spending as unproductive, and suggest ways to reallocate it to achieve much greater impact in the marketplace.

But if you're already using mix models, be careful.  Based on our observations in working with several dozen Global 1000 companies, 8 out of 10 marketers using mix models today are using them in dangerously incorrect ways.

Not that the math is wrong.  And most of the time the analysis itself is sound. No, the problem lies much more in the conclusions they are drawing from the model outputs.

Case in point... One multi-billion dollar global marketer whose brand we all know and love has a fairly sophisiticated mix model that helps them understand exactly how much "incremental" revenue is being produced each year due to the marketing and advertising tactics, and thereby calculates an "ROI" on the marketing spend.

So, what, you're probably asking, is wrong with that?

Simple.  There's no consensus around the company outside the marketing department that the calculations are valid.  Consequently, there's no agreement that the ad spend is truly driving "incremental" results at all, or that the ROI caluclations are valid. Finance wasn't consulted when the model was constructed, nor was Sales.  In their eyes, the model was conceived as a means to "justify" the marketing budget. It is, to hear Finance tell it, riddled with "rediculous assumptions" of how variables relate to one another and completely overlooks critical factors such as channel contracts and long-term pricing agreements.

In short, the model, despite its techical sophistication, has little to no organizational credibility. It does nothing to build alignment on resource effectiveness or settle the endless debating that undermines productivity and forces the expenditure of disproportionate amounts of energy fighting internal battles versus marketplace battles.

But the real crime here is that, given the chance to participate openly in making the initial assumptions required to build the model, representatives from Finance, Sales, or Operations may have been willing to agree that the very same assumptions were in fact reasonable. Yet since they were excluded from the exercise, they were put in a position right from the start to view the results with cynicism instead of healthy skepticism.

The moral in the story is that analytics, as powerful as they are, rarely are built on perfectly objective and complete data.  Assumptions are critically important in closing gaps in knowledge certainty.  And whereever you have assumptions, you put credibility center stage. Building and maintaining that credibility is an organizational challenge, not a mathematical one.  The two have to work hand-in-hand, or the analytics do nothing to help the company consolidate knowledge and move forward.  The debate just rages on in a different direction.

What's your expereince been with analytics and organizational credibility? How do you ensure that your models will be both technically sound and embraced by key decision influencers outside of marketing? 

Looking for ROI

Over the past few weeks, we've had some terrific dialogue online here.  It's been a pleasure to track along with the excellent commentary and the insightful feedback from the readers. Now I suppose I get a turn under the microscope of the blogosphere. So I'll try to start provocatively...

I've been building marketing measurement and accountability processes for Global 1000 companies for a few years now.  We've worked in virtually every industry group - from telecom to retail, financial services to industrial, software to packaged goods.  Some come to measurement with great eagerness and anticipation.  Others enter kicking and screaming, with fear and trepidation.

Interestingly, there's no correlation between industry and preparedness.  Financial service marketers, with their great depth of data on customers, are no more ready to measure marketing impact than retailers.

Nor is there any correlation between size and sophistication. Despite the fact that they have all the requisite tools and resources, some of the worlds biggest marketers struggle the most with measurement. And not always for reasons relating to bureaucracy.  Most often, it's lack of alignment between influential people WITHIN marketing that dooms their efforts to failure.

But there is a seemingly strong correlation between culture and the adoption of marketing accountability.  I'm not speaking about a culture of "accountability" (althought that helps) as much as I am a culture of collaboration.  In fact, our experience suggests that the single greatest predictor of sound insight into the payback on marketing investment is a collaborative relationship between marketing and finance. Period.  If the two are working together, clarity emerges quickly - rooted in the mutual understanding that assumptions need to be made and properly stakeholdered around the organization.  But if the two are working at odds, stalemate occurs. Marketing has "models" that clearly show the huge ROI on their investments.  Finance drives trucks through the holes in the logic and/or math, undermining their credibility.

I suppose the key learning is that, as a marketer, you can unilaterally develop the world's most sophisticated measurement tools, and still die a cruel death on the stage of quarterly budget cuts.  Chances are you'll always be missing some elements of data in your arguments that will force you to either adopt techniques which ignore those "blind spots", or make overly-facilitating assumptions. Bottom line: there's no such thing as a bullet-proof business case for marketing investment.

True, many of the finance people we interact with struggle to break free of "cost accounting" mode, which has an unfortunate tendency to cause them to seek the immediate payback from every investment.  But they are surprisingly adaptable to other ways of looking at issues of marketing payback IF they are consulted collaboratively, and not just presented with 100 page powerpoint summaries of the latest readings from the marketing mix model, supplemented with detailed brand awareness and consideration scores from 14 countries.

Until marketing and finance (and sometimes sales) can align on what is knowable/measurable, there is always a natural suspicion that something's being left out. This suspicion is often interpreted by us marketers as a slap at our personal integrity.  But in reality, it's just sound conservative skepticism intended to keep the CEO and CFO from going to jail.

For this reason, I would argue that it is the role of marketing to take the lead in bridging the gap.  The marketers understand the subtleties of their craft much better than the finance people ever could.  Consequently, it is their role to share knowledge and "teach" (versus "sell") - even in the face of that healthy skepticism. And in the pursuit of answers to the difficult questions that inevitably emerge, both disciplines come to a richer understanding of what is knowable and how to get at the priority unknowns. This is the necessary foundation of trust which, in the short term, creates a bridge to action in the face of business uncertainties.

So what's your experience been?  Have you found particularly effective ways of engaging finance in a productive dialogue on marketing effectiveness and efficiency? Or are you struggling to relate to them in a meaningful way?  Let's hear some of your suggestions for how to make more progress in measuring marketing's impact on the bottom line.

Welcome Patrick LaPointe!

Welcome Patrick LaPointe, Managing Partner at MarketingNPV, as our guest moderator!