Measuring Marketing Magic

Marketing remains one of the elusive frontiers for performance management. For years marketing performance measurement (MPM) vendors have been working both sides of the aisle -- the CFO and the CMO -- in an attempt to define and measure marketing's magic and graft onto the marketing department the same fiscal discipline imposed throughout the corporate structure.   

For the last eight years VisionEdge Marketing has been surveying MPM issues and their 2009 report entitled, "Closing the Gap Between Marketing and Business" concludes that 

1. Marketing still has a long way to go to align with the business it supports and measure performance
2. Marketing departments still lack the skills to run themselves like a business
3. When  the marketing department measures; its not measuring the right customer-centric stuff.

You can get a 20% discount on the full report by clicking here.

These are sobering conclusions especially in a recession when every dime of marketing spend is under intense scrutiny by corporate and brand bean counters looking to hold back every marginal idea and expense. It also reinforces the stereotype of marketing guys as frisky kids masquerading as grown-ups in charge of the fun factory and accountable to no one. 

In practical terms, it seems obvious, at least to me, that the 23 month average CMO tenure documents the fact that CMOs are not playing the game as CEOs and CFOs see it. Few have invested in dedicated marketing operations people, essentially a COO for the marketing department, and even fewer have bought MPM packages or vendor services. And while a CMO's ears glaze over with the first mention of so-called "best practices" nobody is really happy with what gets measured or how they figure out how money spent by marketing impacts on the objectives of the business. 

What has caught on are dashboards. There are lots of them ranging from simple graphs to dramatic colorful eye-candy. But these devices are more show-and-tell than useful gauges of business success. Intended to be a "connection between marketing and business which facilitate fact-based strategic decisions", they are more CYA than FYI. The proof of this is that in spite of the dashboards, few top decision-makers see a clear correlation between money spent on marketing and advertising and sales or profitability goals. Herein lies the challenge -- connect the dots convincingly with enough data and intellectual rigor to withstand questions from the finance folks. 

What gets counted is political. Marketing guys count inputs. Finance guys want them to count outputs. There is also a bias toward counting the sexy acquisition programs rather than the under-loved and lower key retention programs which have a much more predictable impact on sales and customer satisfaction.

Since these are not new issues, I quizzed VisionEdge co-founder Laura Patterson , a serial entrepreneur who learned her marketing and measurement stripes in 14 years of service as a marketing executive at Motorola. Laura believes that CMOs need to build-into their consciousness and their tables of organization "a culture of accountability that's native to marketing." Rather than fear measurement marketers have to think about what they are trying to accomplish and craft measurement methods at the same time they craft big ideas.

Laura argues that this orientation starts with looking at the marketing activities that drive business value rather than simply measuring activity. If marketing programs are tasked to find, sell and retain customers, measurement must demonstrate how they did it or didn't do it and take a stab at explaining why. In her experience CFOs are less interested in exactly hitting the numbers than in marketing guys thinking and planning for results using a disciplined process which includes advance planning and post-campaign measurement. Among her clients, Laura reports a huge shift in perception when marketers create a process and set performance targets at the same time that they develop messaging and campaigns.

For top management, in Laura's view, measuring performance versus plan is table stakes for efficient operations and control. Marketers have to plan for expected results measured in business terms -- leads, revenues, share or market, margin contribution or repeat customers. Measuring the efficiency of the production process or the cost-per calculations of media efficiency are secondary. 

Bottom Line: The C Suite yearns for CMOs to tun the marketing department like a business. The 2009 Survey shows we're not even close.