It's estimated that more than 1 trillion dollars are spent each year on marketing, and that 15 to 30 percent of those dollars are wasted. That’s right, wasted. Understandably, marketing leaders are under increasing pressure to prove the value of their marketing investments. When two of three marketing executives struggle to do so, how can you demonstrate the value of your marketing efforts through more meaningful marketing metrics?
Answer: Provide metrics that better link marketing efforts and business performance. Here's how to do that in three easy steps:
1. Start with the “where”: align business strategy and marketing strategy
Always begin with the business, and specifically, where the overall business intends to go. All too often, the over-arching strategy for the business (i.e. how we intend to win in the marketplace) is not as clearly articulated or communicated internally as it could be. And this can lead to misalignment of priorities and focus.
To avoid that kind of disconnect, start by evaluating how well the marketing strategy aligns with and supports the company’s over-arching strategy by asking yourself questions like these:
- Does the marketing strategy target the audience that is most important to the business and future growth?
- Is the marketing strategy communicating the core value proposition through a focused brand positioning strategy?
- Is the marketing strategy prioritizing the most important geographies and channels, and reaching the target audience through the most effective vehicles?
The rationale for these questions is that we must begin with a clear understanding of the business that marketing will support and advance if we are seeking to better link marketing investments and business outcomes. Put simply, metrics follow strategy.
2. Assess the “what”: ensure sufficient focus of metrics on business outcomes
After confirming alignment of the overall business and marketing strategies comes an evaluation of what marketing metrics you’re using. A two-step assessment can help.
- For the first step, we are looking for alignment of marketing strategy, initiatives, and metrics. Our goal is to ensure that our marketing initiatives are the right ones to fulfill our marketing strategy and that our marketing metrics are the right ones to measure the success of those initiatives. Hopefully, this review will confirm that your marketing metrics are measuring what matters most. Alternatively, this review might surface opportunities to recalibrate.
- For the second step, we offer the following 2x2 matrix to clarify which (and how many) metrics are squarely focused on business performance.
Adapted by Denneen & Company from “Marketing Metrics,” M. Stanko and M. Fleming, Ivey Publishing, 2014
Here is a brief explanation of the matrix: Reading it vertically, the “intermediate” column shows metrics focused on activities that precede a business transaction, whereas the “end result” column shows metrics focused on business outcomes. Reading horizontally, the “internal” row shows metrics that involve internal data or calculations like costs, whereas the “external” row shows metrics that do not require that internal information.
Why does this matrix matter? Because it illuminates which types of metrics you are employing – and whether you have a sufficient focus on metrics linked to business outcomes. This is not to say that “intermediate” measures are not important – they are – but a company’s CEO and CFO will be laser-focused on the “end result” metrics as proof points of the value of the marketing investments.
3. Consider the “how”: use marketing metrics to drive decisions and action
The final step that we recommend is assessing how you are using your marketing metrics – because metrics are most effective when they inform decisions versus reporting on the past, and are coupled with the business judgment of experienced marketers.
First, marketing metrics become most impactful when they drive decisions and are forward-looking. If you are spending too much time looking backwards to demonstrate responsible “stewardship” of your marketing budget, then something likely needs to change. Meaningful marketing metrics should help drive decisions, action, and growth.
Second, marketing metrics require the judgment of thoughtful and experienced marketers – because people make decisions, not data. Consider whether you have the right people involved in the discussion of marketing metrics and outcomes – and also consider whether people have sufficient time to really think about what they are seeing or hearing.
Marketing can and should play a leading role in growing the business. To do this, meaningful marketing metrics are critical for better linking marketing investments and business outcomes. To ensure the most effective marketing metrics, align the business and marketing strategies, evaluate metrics for sufficient focus on business results, and assess how well the metrics are driving decisions and business growth.
1. BCG, “No Shortcuts: The Road Map to Smarter Marketing,” 2010
2. “The CMO Survey,” McKinsey, American Marketing Association, Duke University, February 2015
This blog post has been contributed by Ben Cohen, Vice President at Denneen & Company.
Ben Cohen is a Vice President at the growth strategy consultancy Denneen & Company, where he heads up the Consumer Practice and does brand and marketing strategy work with clients including ExxonMobil and Johnson & Johnson. Connect with Ben on LinkedIn and follow him at @strategic_brand.
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