As CEO, you and your leadership team are personally accountable for the performance and conduct of your company. As a result, more and more CEOs are emphasizing the importance of organizational (e.g. marketing, sales, R&D) performance management throughout the company and often take the lead on optimizing group performance in order to achieve the organization’s key initiatives and objectives. Performance optimization requires metrics, and the data, measurement, alignment and analytical processes, methodologies, and systems. The focus of this article is on marketing performance management (MPM) and specifically how to choose the right metrics for your organization, ultimately enabling your marketing organization to both improve, and prove, the value of marketing investments.
Measuring what matters is key to achieving the ROI of MPM. If marketing focuses on easy to measure metrics, you may get interesting information, but not necessarily the data that fosters better strategic decisions, or enables necessary course corrections. Seth Godin reinforced this message in his post, “Avoiding False Metrics.” He states, ‘making your numbers go up (any numbers–your BMI, your blood sugar, your customer service ratings) is pointless if the numbers aren’t related to why you went to work this morning.’ Applying precious and limited resources to measuring the wrong things is both inefficient and ineffective.
The sheer number of things marketers can measure creates a challenge when it comes to selecting the right metrics. A number of B2B organization we work with now have over 100 measures, ranging from the number of funded marcom projects delivered and events produced, to campaign response rate and number of “leads” generated. Unfortunately, many of these metrics don’t help their CEOs understand how marketing investments are positively impacting the business. Important metrics to measure, whether in marketing or other organizations, are those that provide insight into how well that organization is ‘moving the needle’ for the business outcomes they are responsible for affecting. The key is to select metrics that demonstrate the impact, value, and contribution the function is generating.
For marketing, these metrics should tie in some way to marketing’s ability to acquire, keep and grow the value of customers. For example, how well is marketing:
- Driving share of preference in order to positively affect consideration and consumption, to grow market share
- Influencing share of wallet in order to positively affect customer lifetime value
- Accelerating the adoption of a new product or service to impact market share
For many companies, capturing these types of metrics requires data, process, system, and skill changes. Depending on the current maturity level of your systems and processes, it may not be possible to eat the proverbial marketing accountability elephant all at once. Instead, take one small bite at a time and focus on putting in place the performance management processes to measure what matters.
Use these four parameters to guide your marketers process in selecting the right metrics, metrics that:
- Help you understand why marketing did or did not achieve specific results
- Provide insight into appropriate action or adjustments
- Enable you to propose and test a hypothesis regarding ‘action-effect’
- Empower marketing to prove and communicate value, impact and contribution to business performance
We strongly encourage every CEO to establish a common set of metrics and Key Performance Indicators (KPIs) that measure the effectiveness, efficiency and results of your marketing investments. The more consistent your metrics are across your company, the better you will able to perform an apples-to-apples comparison. Start with outcomes, cascade down to outputs, and end with activities.
Selecting the right metrics enables your marketers to quantify the business impact of marketing’s investments, to determine which channels are the most effective at finding, keeping and growing the value of customers, to reveal marketing’s financial value and facilitate strategic decisions. Find out what CEOs like you expect of marketing’s performance and capabilities: purchase the 2015 MPM Study: A Diagnosis and Prescription for Marketing Performance Management.
© 2015, Laura Patterson. All rights reserved.