Marketing Metrics - The Old and The New

As the year comes to an end it is a good time to ponder what is old and what is new. My previous post focuses on what is new, looking at some of the top marketing trends for 2008. Today I want to make a brief comment about making the distinction between the old and the new.

I read an a recent article in Chief Marketer which discusses "a new way to allocate marketing resources". The article focuses on an excellent description of an approach that suggests three key stages of marketing optimization: 1. Campaign optimization, 2. Contact optimization (using predictive analysis on your customer data to optimize communication over a business cycle), and 3. Market Mix optimization (correlating sales data with marketing efforts across the enterprise). The approach outlined makes sense, but is it really new? Haven't marketers been pursuing the Holy Grail of market mix optimization for more than 40 years? The theoretical approach isn't new. It's old. What is new is the advancement of technology, allowing more sophisticated databases, data anaysis and insight development. The theory and the stages aren't new, our improving capabilities to achieve them are.

Top 10 Marketing Trends - Another List for 2008

Everyone's got to have one. Here's mine. It's brief.

In no particular order, watch these trends in 2008:
10. Mobile Marketing. We're still in the experimentation mode. Look for more advanced promotional marketing, and movement beyond the test and learn stage. Cellfire has been doing some cool promotions - I tried it just to prove to my teenagers that I could download a coupon on my cell and get a free burger...

9. Green. Continued enthusiasm for a green world. See earlier post on Sustainability and the Spiral of Expectations.

8. Creativity. It's time to get creativity back in our marketing programs. Not just great creative (the art) but creativity as marketers, bringing new approaches and ideas to the market. There's so much untapped potential with the capabilities marketers have today versus just a few short years ago. Let's make s--t happen!

7. Investment Thinking. Marketing measurement is ready to hit the mainstream and move beyond lip service. Of course, this is a theme of this Blog so of course I believe this to be true. It's not that creativity doesn't matter - it matters a lot. But as a means to an end, and the end must be measurable.

6. Mass Is Dead. We've all heard it. It's true. The writer's strike, if it lasts, will be the proof. No one will miss network or even major cable shows after a while.

5. Direct is Alive. Online or offline, direct connection with consumers is where the action will be. The ability to converse with your customer in a 1:1 opt-in world is like finding a haystack full of needles.

4. Integrate. Integration of marketing processes into the selling process. Integration of all marketing element from strategy through execution, across media, web, promotion, packaging, etc.. It's all about marketing systems. Connect the dots so it all makes sense, then measure every step.

3. Narrowcast. Such a cool trend. Micro-media networks are like micro-breweries. You may not always like the taste, but you have to experience them. Look for targeted messaging to grow rapidly as networks expand and begin to appear in places you've never thought of -- how about your local bank or dry cleaner?

What, no #2 or #1? I told you I'd try to keep it short. And leaving out #1 and #2 might spark your own creativity. What else will happen in 2008?

Maximize Marketing Investment By Understanding Tool Interactions

[Click the Image above for a Larger View.]

I’ve previously discussed the importance of aligning CMO goals with CEO objectives to maximizing return on marketing investment for the organization. Now, assuming the CMO has ensured alignment, the challenge remains to maximize the marketing mix to deliver on those goals. Maximizing marketing return on investment requires a deep understanding of the often elusive interplay between marketing variables. Whether you define you marketing toolkit as the traditional 4 P’s or as a more comprehensive kit of tools, do you understand how they work together? Understanding the interaction between variables can allow the marketer to enhance the overall return of the marketing investment spend by combining efficiencies with effectiveness. The less the guesswork about the interactions, the lower the inherent risk of any selected set of tactics.

A simple interaction grid shows that the 4 Ps impact one another. Not very helpful, though.

A deeper analytical staircase grid structure provides deeper insight and challenges the marketer to ask the questions appropriate for each cell of the grid. For example, in the grid above (click the image above for a larger view), let P1= Product. Column 1, Row1 is the intersection between Product/Product. Evaluate this cell by asking all of the traditional Product marketing questions to determine if the product is optimized to meet customer needs and profitability requirements. Let P2=Price. The cell below, Column1, Row2, reflects the interaction between Price and Product. Here, the marketer asks questions about the tradeoffs between product features and price points. Are there high end product opportunities? Are there opportunities to introduce lower priced products with a different set of features or services? Let P3=Place. Column1, Row 3 addresses the interaction between Place and Product. Are all products in the portfolio sold in the same channels? Do product features differ by channel?

Note that the questions in each cell can be modified to address situations and challenges specific to any business. By completing the grid with the questions relevant to your business you have a dynamic set of marketing questions to be addressed. Then, assess your ability to answer the questions in each cell. You will quickly determine the degree of knowledge that you have about the performance of the key elements of your marketing mix. Where the data is insufficient and a gap exists, further research may be warranted. Your ultimate goal is to understand the mix tradeoffs to maximize ROI against the marketing goals which are aligned with the business objectives of the CEO.

Note that while this example used the “4 Ps”, the same interaction analysis can be conducted against a deeper list of marketing tools, and it is a simple steps (but a lot of effort) to evaluate interactions at a deeper level with any given element. For example, you might construct a similar interaction analysis against each major element of the Promotion mix, evaluating the impact of print media and sponsorships or between coupon discounts and trade marketing.

Outlive the 23-Month CMO Hurdle.

In an earlier post MarketingWitz notes a report that CMOs are short-lived, lasting 23 months on average. Marketing Witz: Marketing Executives are Short-term. How can Markerting survive? Are CMOs performing that poorly across the board or are they just performing the wrong role? Return on the marketing investment is as much a function of defining the return as measuring the investment. If the CMO is measuring return on the role differently than the CEO then the inevitable turnover will continue.

As CMO, do you view your role to be the prinicpal driver of profitable new growth via new customers and increased sales among current customers? Do you define your role as steward of the brand, enforcing brand positioning and brand communication consistency? Do you view your role as advisor to various constituencies across the organization? Are you the face of the company with the media? If you answered "yes" to most or all of the these questions you are in good company with other CMO's. But CEOs are likely to view the first question as the only truly meaningful measure of marketing return. The other functions are simply marketing approaches to help deliver on the objective of increasing sales and profits. Measuring marketing results based on increased brand awareness or level of internal brand consulting activity is merely an internal marketing process metric while delivering increased sales and profits is the focus of the CEO. Be sure your CMO objectives are clearly defined and in line with the goals of the CEO, and outlive the 23 month hurdle.

Brand Paradigms Harming CMOs?

There is a very thought provoking article recently published on Brand Channel, titled "The End of the Master Brand" which challenges the core paradigms that brand marketers have used to organize thinking about brand portfolios for the past 20+ years. Going beyond a critique of brand architecture as we know it and a suggested alternative way to view portfolios, the article suggests that the forced structure of brand architectures alienates marketers and may inhibit marketers from gaining a seat at the C-Level strategic table. Do you agree? I think that may be going a bit far, but it certainly raises an interesting question about whether force-fitting paradigms is harming strategic marketers, and we know that average tenure of CMOs is remarkably short. Linking those two thoughts - perhaps there is more here than meets the eye.

How to Maximize Competitive Intelligence

There is a simple thing you can do as a marketer to generate greater return on investment from your market research and competitive intellegence efforts. Marketers spend countless hours optimizing research methodologies, survey questions and analytics (rightfully so, too.) Competitive intelligence can come from many sources, extending beyond formal research to include press tracking, and even simple hearsay from the sales force. So what's the single most powerful thing you can do to improve return? Create an organized central clearinghouse to capture the information. Great insight results from crossing data points from multiple sources. Market analysis indicates Competitor X may be boosting short term sales, HR hears that a key executive from Competitor X may interviewing in the market, and your Regional Sales Manager say the CFO of Competitor X golfing with the President of Competitor Y. Acquisition or merger? You'll need to learn more, but clearly there is a situation to be explored, and only by crossing these points of information are you able to gain the insight. So...create a central repository of competitive information (paper or digital) and review it often.

Good competitive intelligence reads: Society for Competitive Intelligence, Primary Intelligence

Tale of 2 Books - Marketing Metrics

I read two books this month, both focused on metric marketing issues. The first was "Return on Marketing Investment" by Guy Powell. The second book was "Measure What Matters" by Laura Patterson of Vision Edge Marketing. While both authors share a common goal of guiding CEOs and CMOs to measure marketing more effectively to achieve desired outcomes, the two authors approach the topic in decidedly different manners. Powell argues that marketing investment should be evaluated like any other business investment - calculate the expected return on various marketing investments and compare the returns against defined hurdle rates. Apply high hurdle rates for more risky investments such as advertising versus more known marketing tactics such as direct marketing. While Powell's approach is logical and the quantitative model mathematically correct, he fails to fully address an effective way to set hurdle rates or how to effectivey define expected returns on new marketing efforts, other than to say that the hurdle should be higher for higher risk or less known programs.

In comparison, Patterson breaks the role of marketing into three core performance areas that link to business objectives: acquisition, retention, and monetization. She then proceeds to offer specific marketing metrics for each area that can be measured to determine how marketing programs contribute to these fundamental objectives. I particularly like her reference to those metrics that measure business output versus those that measure marketing activity. See my earlier comments about process v. results marketing metrics.

Both share the goal of linking marketing to business results. Patterson's book is an easier read and will be more palatable to most marketers. Powell's book is more academic and by it's very nature feels more like your Finance 101 text, yet offers relevant thinking. Read both and see what you think. Both believe in my favorite line, "Facts Find Funding"(sm).

iPhone Marketing

It will be interesting to follow the marketing of the iPhone and competitive products over the coming months. I took at look at the iPhone more than once this past week, including the first evening that it went on sale. Lots of great features, although my wife calls it just another gadget. It's pricey, but it should be as a first entrant. Is is really a first entrant? I think so. The combination of multiple functions with the level of integration and the new functional features is enough to consider it new. Pricing should be at a premium to capture the demand. Scale is essential, but there has been enough (too much!) pre-launch hype to generate significant early adopter demand. Over time, will Apple bring price down to compete with other new entries? Perhaps, but I wouldn't expect that any time soon. The partnerships created between wireless providers and software developers to create competitors will also be an interesting strategic marketing scenario to watch as it unfolds.

Retail Banking Shows Us How To Brand in a Commoditized Industry

By the way, there are lots of similarities between the issues faced by the commercial printing industry and the issues faced by the retail banking industry. Retail banking is just further ahead on the curve. Banks went through a period of years in which retail banking became viewed as a commodity and “all banks are alike” so “just give me the best rates”. As much as banks tried toaster giveaways, nothing worked. As much as banks screamed “we provide great service”, nobody listened. Only in the past couple of years have banks learned that with an integrated rebranding effort they could attract new customers. In their world, they began to distribute banking access to smaller retail outlets closer to their retail customers (which is why there seems to be a bank going up on every corner!) and they began to use their retail space as selling space...that is, as a store (not just a waiting line with ropes and maybe a few chairs to wait in). Today, a contemporary bank is fully branded with visually integrated sales materials, site layout, building design and furnishings, logos, signage, advertising, and programmed digital communications in the bank - all geared towards selling and cross-selling. While retail banking is a far cry from industries such as commercial printing, it does demonstrate that the future is bright for traditional industries that can embrace technology , leverage branding concepts and adapt to changing customer needs not only in the services they sell and production processes, but also in how they communicate. Successful banks are moving away from the threat of commoditization. It can be done in other industries facing commoditization.

Segmentation and Niche Marketing

An excellent article in the most recent issue of Adveritsing Age http://adage.com/cmostrategy/article?article_id=117005 summarizes a study by Booz Allen Hamilton that contains an interesting and compelling insight about the evolution of market segmentation. Using the statement that niche marketing is about narrow not small, the important concept is that traditional marketing segmentation looks for commonalities within a diverse group of consumers, while the philosophy today is to look for differences within a common group. Think about that for a moment. Instead of seeking common features among a broad base of consumers to define a segment, today marketers look at a common group of consumers and look for differences (niches). These niches represent comfort zones of consumers. Marketing to these consumers in ways that appeal to these zones makes the brand a part of their lives and lifestyles. Rather than trying to make a broader brand appeal to number of sgements by communicating in different ways, make the brand appeal deeply to a specific niche within a common group. Thought-provoking.

Sustainability and Spiral of Expectations

The "Greening" of consumable products will be subject to the same spiral of expectations described on Marketing Witz.
Marketing Witz: Marketing Witz: Spiral of Expectations. As companies race to make Green claims, consumers will increasingly expect performance in the area of environmental performance and sustainability. What today appeals to companies as a claim of competitive advantage will be but a cost of entry claim tomorrow. As consumers are increasingly educated on the issues surrounding sustainability, companies that pose by making inflated claims will be caught in the glare of consumer headlights. Companies must think and act at least one to two iterations ahead (or more!) of the curve. If a company chooses to make compelling envrionmental product claims, they must also make claims at the company level (How can the brand be environmentally friendly and support sustainability if the corporate entity cannot?) Forward thinking businesses will be aware of the spiral of expectations as applied to environmental consumer issues.

Marketing Executives are Short-term. How can Markerting survive?

A recent issue (June 2007) of Business 2.0 has a short but notable article that states that the average tenure of a CMO among the Fortune 100 is 23 months. We've all seen the turnover among some of the most senior marketing executives in the country over the past few years, but 23 months average tenure seems to be particularly brief.

Why be concerned? It stikes me as being a very limited period for marketing initiatives to turnover and be tested. Sure, a new CMO needs to come aboard and have immediate impact. However, in many organizations marketing programs are locked in 6-9 months before the programs launch. So a new CMO has 3 months to craft a new approach in order for the programs to hit the market within a year. A year later and the CMO is gone. Is this really sufficient time to implement, learn, revise, and execute? It certainly doesn't allow time to cycle through the learning to make adjustments.

Marketers must adjust to this new reality. Perform now or die. It makes sense to demand performance, and marketers should certainly be held accountable for results. But we run the risk of driving marketing programs back to the short-term discounting behaviors that we all strive to avoid. After all, price-cutting to gain volume is as old as marketing. It may boost short-term numbers but it's a long-term death spiral. Marketers are human (really!) and behavior will tend toward the path of least resistance - and that means short-term promotional behavior.

How to Ask Naked Questions - Marketing Smarts

Naked Questions. It sounds a bit risque, but it's not. Marketers must always ask the 'naked questions' when formulating marketing strategy if they want to achieve solid marketing ROI. The term comes from Aesop fable in which the emperor wore no clothes. Remember the child who calls out "The emporor isn't wearing any clothes."? For marketers, defining sales and marketing strategies means asking the core questions about the business drivers without making assumptions that management already knows the answers. Often, the business has built a set of assumptions that define the way it operates. Those assumptions become so ingrained that senior management assumes the assumptions are fact based. Marketing ROI cannot be achieved if strategy is based on unproved assumptions. A "Naked Question" asks a fundamental question about the business that exposes management assumptions.

What are some of the "Naked Questions" that marketing strategy should ask? The basics might include: How does the company make money? How does the company generate positive cash flow? Who are the key stakeholders in the business and what defines their success?

My favorite is to ask what business the compnay is really in. Traditional banks and credit unions are in the financial services business, but today many will tell you they are in retail. Are the airlines in the transportation business or are they in a customer experience business? Dell may be in the computer hardware business, but they thrive on being a retail service business. Ad agencies are traditionally in the business of creating advertising and placing the advertising in the media (and earning repeated income from the ad based on promoting higher media spending). That model is largely a dinosaur. Ad agencies (who still call themselves that) are in the marketing strategy business and increasingly focus on adding value by helping clients define marketing strategies will deliver sales and marketing ROI. (Note that in the old model the ad agencies didn't focus on sales measurement so much as they focused on media spend levels to drive cash flow).

So....always look for and ask the Naked Questions. It's fun, and you might learn something about the business.

How to Think of Sports Leagues as Brands

Sports leagues as Brands have changed dramatically over the years. It's interesting to consider the major sports leagues as competing brands chasing the dollars spent by sports fans across the country, and internationally. The National Hockey League has struggled for years to grow out being a distant fourth to the NFL, NBA, and MLB. Truth be told, it's actually a distant 5th because NASCAR has been a high growth brand for many years and continues to gain loyal consumers (fans). The NFL is a share leader while the NBA has seemingly declined from being a shining star. The NBA has let its brand equity slide by allowing its product image to become tarnished. The NFL has been on the verge of the same thing. MLB has its struggles maintaining a strong brand equity as it faces the imminent prospect of Mr. Bonds hitting #755.

As you sit and enjoy your next game on TV, consider the strength of league as a brand.

Marketing Witz: Spiral of Expectations

Marketing Witz: Spiral of Expectations

Spiral of Expectations

I've spoken often on the topic of the "Spiral of Expectations" in marketing and customer service. My use of the phrase evolved from the "Rational Expectations" theory of economics. As it relates to marketing, it is intriguing to note that consumer expectations continually spiral up. We've all seen it. We all do it. Once a company offers better service, better prices, faster delivery, extra toppings, larger quantities, fresher ingredients, bigger guarantees (and on and on) we come to expect that level of performance from all companies. Not only from other companies in the same category, but from companies in other categories. If Hertz can check me out and process payment right at my car without a visit to the counter shouldn't the airlines be able to scan my ID as I board without my ever needing to stop at a counter or gate check-in? If the grocery store lets me use self checkout for my convenience (is it really for my convneience?) shouldn't I be allowed to self-scan at Lowes or Home Depot ( I can). I can't wait for the day when I can self-serve at the dry cleaner rather than wait for the clerk to search for shirts (which always seem to be at the other end of the automated hanger rack).

As marketers, we need to be aware of what is happening in the lives of our customers across all categories, not just our own. Consumers don't segment their lives into our product categories. We shouldn't set our service expectations by our category definition. It's a trap.

Is Search Media Buying (and SEO) Revolutionary?

I saw a recent article that discussed the changes than SEO is bringing to way media is planned and purchased. There is a bit of a dichotomy here - a seeming conflict about whether there is a an evolution or revolution occuring. On one hand, search (has anyone notices that "search" has become a noun??) changes the dynamics of the media environment for advertisers. The key is that the media can now anticipate the interest of a consumer and place the ad at the most opportune moment based on behavior (as the writer of the article, Chris Copeland of Outrider said, "seeing the field before we act"). It is revolutionary. At the same time, it is really only an evolution of the same predictive intent that media buyers have pursued for generations. Advertising in the World Series issue of Sports Illustrated because the content attracts male consumers 18-34 (or whatever) based on readership surveys and subscription data is just a more primitive attempt to anticipate reader inclination to accept and notice a Ford truck/Miller beer/Gillette razor ad. This more primitive model has been the model for over 50 years and is still controls the process for 95%+ of all media buying.

The search model would seem to be a more precise, more responsive method of anticipating the intent of the user. Evolutionary for certain, better for certain, but I wonder about whether it is revolutionary. The revolution will occur when the degree of predictiveness that can occur with online search is truly leveraged over into other media vehicles. (For example, when tv allows the advertisier to deliver custom spots into households based on the household demographics and which member of the household is watching a particular program. Cable is certainly moving in this direction.)

One final thought. The art and science of the search experts needs to be packaged and communicated to the marketers of brands in a way that takes the process out of the "black box" perception. The more the client marketer understands how search works and how it helps, the more they will be willing to invest, experiment and learn. Ask any traditional media planner/buyer and they will tell you that the best clients are those who truly understand the media planning buying processes and can work together with them to create great media solutions. Search (as a Noun) is still in its infancy relative to a marketers real understanding of the process and potential benefits.

Marketing Performance and Sales Incentives Should Relate

It may be just as important for marketing programs to provide measurable incentives to sales teams and employees as is it is to have measurable metrics for consumer response to promotional programs. Does the sales team know what is expected for effective implementation of a program or how proper product placement at retail will be evaluated? Is the compensation system set up to reward the proper behavior? The sales team will respond when they understand the objectives in a clearly communicated manner, and understand WIIFM (what's in it for me). They will respond more rapidly and effectively when there is a clear line of site between their day to day performance metrics and the promotion objectives.

The obejctives and metrics for the implementation team, usually a sales team, must be clear and measurable. Even better if the incentive compensation, either cash or non-cash, is immediate. By immediate, this means that the award for the behavior is linked as closely in time to the performance. Think about it, wouldn't you like to be paid for a job well done as soon after the task is performed as possible, rather than waiting for a possible year end bonus?

Marketers sometime fail to integrate their metrics with the internal processes of the organization, especially the selling systems and procedures. By coordinating with the internal processes the marketing team can generate greater overall support, be viewed as team players, and more readily achieve their business objectives.

Marketing as Art and Science

An analogy that I've used with younger marketers is one that is worth considering.

I love art, especially painting and sculpture. Marketers love to debate whether marketing is an art or a science. The pendulum seems to swing back and forth over time. Ultimately, I suggest that marketing is both art and science. Science measures the impact of the art. Scientific thinking also guides the rigor of marketers as they apply a defined process, and iterate learning cycles to fine tune tactics and maximize performance. Art applied gracefully to strategic thinking leads to breakthrough concepts, which can power any strategy to higher levels.

Marketing students often ask how brand marketers today determine which tactics to use. After all, it's become a cluttered consumer environment exploding with consumer messages. A story is often told of Michaelangelo approaching a block of stone and creating a magnificent scultpure (think of the David). Michaelangelo reportedly says he simply removes everything that does not belong in the final creation. Marketers can apply this thinking. The more clear the marketing vision and the more defined the strategy, the clearer the tactical decision becomes. Remove those tactics that do not fit with strategy and the result will be a clear approach to the tactical solutions.

Marketing metrics: Process vs Progress Measures

It is amazing to see how often business owners, salespeople, and marketing professionals confuse process with progress, especially when it comes to evaluating the success of a marketing initiative.

One important distinction in the use of marketing metrics that should always be made clear is the difference between process metrics and progress metrics. What does this mean? Process metrics report on either activity generated by the team (e.g. we’ve spent six weeks building the marketing site for the promotion and the will be ready to launch in five days), or on actual consumer behavior change within the total selling cycle. Think of the latter as progress moving consumers or B2B purchasers through the buying cycle, perhaps from an initial prospect to a qualified prospect. Progress metrics are more tightly tied to the business results, and are generally more readily interpreted by those outside the marketing organization. Inquiries generated, sales produced, number of existing customers cross-purchasing the new product line, are examples.

The line between process and progress metrics is not always perfectly clear. For example, increasing the number of qualified customers may be a process metric when viewed as part of the complete customer relationship cycle. In a business with a clearly defined historical conversion rate, this can be treated as a progress metric (really, qualifications x conversion = sales).

When considering measurement of marketing program results, give consideration to the choice of metric to be used. Both process and progress metrics are valuable tools. It is important to understand the distinction, if only to maintain the rigor of your thinking. The closer you can get to measuring progress versus process, the stronger your evaluation of the program.