It is estimated that more than a trillion dollars are spent each year through marketing activities – and that between 15% and 30% of those dollars are “wasted.”1 That’s right – wasted. Understandably, senior marketing leaders are under increasing scrutiny and pressure to prove the value of their marketing investments – however two of three marketing executives struggle to do so.2
Most would agree that measuring the business impact of marketing can be challenging. However, it’s far from impossible. There are companies that are doing a good job of linking their marketing activities and business outcomes through meaningful metrics – which means that those companies are able to market more effectively than their peers. And this has real business implications, because the ability to do more effective marketing can ultimately deliver a competitive advantage – and potentially more profitable business performance – relative to peers.
This article aims to help marketers better link their marketing efforts and business performance through more meaningful marketing metrics. (Note: this article is not about marketing metrics for their own sake; it’s about metrics to drive business results.) To the end of helping marketers drive business growth through more effective metrics, here are three steps to consider:
- Start with the “where”: align business strategy and marketing strategy
- Assess the “what”: ensure sufficient focus of metrics on business outcomes
- Consider the “how”: use marketing metrics to drive decisions and action
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 the company intends to win in the marketplace) is not as clearly articulated or communicated internally as it could be. And this can lead to misunderstanding and misalignment of priorities and focus.
Here is a suggestion for avoiding that kind of misalignment for the marketing organization. With a clearly stated strategy in hand for the overall business, start by evaluating how well the marketing strategy aligns with and supports that over-arching business strategy by asking yourself questions like these:
- Does the marketing strategy prioritize and target the consumers or customers that are most important to the business and its future growth?
- Is the marketing strategy communicating the core value proposition through a focused brand positioning strategy?
- Is the marketing strategy using the most effective vehicles for reaching the target audience and focusing on the most important geographies and channels to advance the business overall?
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. (Note: for more on prioritizing and aligning strategies in a company, see our post on “strategy essentials” here.)
*Image source: cerasis.com
2. Assess the “what”: ensure sufficient focus of metrics on business outcomes
After assessing the clarity and alignment of the overall business and marketing strategies comes an evaluation of what marketing metrics you’re using. A two-step assessment can help. The first step ensures alignment of your marketing strategy and metrics. The second step identifies which marketing metrics are most closely linked to business performance. The result of these two steps is an identification and prioritization of the best marketing metrics to help drive business performance.
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 which marketing initiatives and activities you are doing and how you are measuring them.
For the second step of assessing your marketing metrics, we offer for consideration the following 2×2 matrix for mapping your metrics to clarify which (and how many) 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 (i.e. purchase, sale), whereas the “end result” column shows metrics focused on business outcomes. And 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 data or calculations.
Why does this matrix matter? Because this matrix 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 and impact of the company’s marketing investments. These “end result” metrics should also serve you well as potential Key Performance Indicators for marketing in general, given their ability to inform business decisions and tell a story of marketing’s impact on business outcomes.
Try this exercise for yourself. Plot your current marketing metrics in this matrix and see how many you have in the “end results” column. Some? None? We find this matrix exercise helpful especially for highlighting when marketing metrics are too focused on tracking activities instead of quantifying results.
*Image source: processindustry.com
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: a) inform decisions versus reporting on the past, and b) are coupled with the business judgment of experienced marketers.
To the first point, marketing metrics become most impactful when they drive decisions and are forward-looking. If you are spending too much (or all of your) 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.
To the second point, 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. “Thinking time” is critical for pushing beyond surface-level meaning to generate robust insights. (Note: for more on how best to generate insights from data, see our post here.)
*Image source: theconversation.com
Conclusion
Marketing can and should play a leading role in growing a business. To help lead business growth (and to avoid potentially “wasted” marketing dollars), meaningful marketing metrics are a necessity for better linking marketing investments and business outcomes. To ensure the most effective marketing metrics, we recommend that you ensure alignment of business and marketing strategies, evaluate your metrics for sufficient focus on business outcomes, and assess how well you are using those metrics to drive decisions and business growth.
Sources:
1 BCG, “No Shortcuts: The Road Map to Smarter Marketing,” 2010
2 “The CMO Survey,” McKinsey, American Marketing Association, Duke University, February 2015
