by Jim Lenskold

Why CMOs Need to Instill Better Measurement Discipline…Now

There is no shortage of marketing measurements in most large corporations, yet there exists a significant gap in terms of measurement discipline. Measurement problems exist on a number of levels ranging from basic accuracy and prioritizing what should be measured, to how those measurements align with objectives and how the results are applied. Measurements and analytics are powerful tools that provide insight to improve marketing performance. These serve as the sources for knowledge and facts that shape strategies and guide tactical decisions. Without reliable insights into what’s working and where improvements are possible, marketers must piece together their gut feelings on what makes sense with their informal read on marketing’s influence on customers and sales.

Putting a measurement discipline in place involves going beyond the occasional campaign measurement or results tracking to establish standard processes across the organization. Within many large marketing organizations there are always a few measurement “champions” who recognize the benefits and push to improve their own results with better measurements. However, leadership from the CMO or VPs of marketing is necessary to move this to a discipline that is engrained into the culture of the organization. When measurement discipline is achieved, the organization works more effectively and efficiently toward clear business objectives.

To put you on the path to measurement discipline, I’ll share what it takes to understand current shortfalls, establish a measurement management process, build capabilities, and create the right culture.

Measurement Practice Shortfalls – What’s Missing Today

For most marketing organizations, measurements are an afterthought relative to strategy and campaign development. There are companies that have extremely well-designed measurement methodologies using different forms of modeling, tracking analyses, or market testing. But even these companies typically fall short of their full potential. Based on conversations with well over one thousand marketers over the years, here is how I would summarize the state of marketing measurements in terms of shortfalls and opportunities.

Measurement Shortfalls

  • Campaign results are tracked and reported without drawing any clear conclusion on what is driving results and what should be done to improve results
  • Measurements are inaccurate but assumed to be accurate if positive (marketers using pre-post tracking attribute negative results to the influence of external factors while attributing positive results to marketing)
  • Measurements do not have clear objectives tied to how the information will be used
  • Measurements are primarily designed around tactics and neglect the big picture, strategic performance drivers
  • There is no budget or no practice to measure marketing impact
  • Metrics not tied to financial performance are measured without any knowledge of how (or if) these metrics influence sales and financial contribution

Opportunities from Better Measurement Discipline

  • Plan measurements 6+ months in advance and integrate with campaign plans to prioritize strategic and tactic insights based on potential performance improvements
  • Establish a process to accumulate and retain knowledge on how marketing influences customer purchase decisions
  • Develop standard methodologies and measurement techniques with acceptable accuracy
  • Ensure results are consistently applied to guide strategies and campaign plans
  • Communicate measurement success stories to reinforce the culture and build momentum
  • Design measurements with the goal of assessing outcomes, diagnosing shortfalls, and improving results

Developing the Vision & Process

If you look at the opportunities listed above, you can see why this is a CMO imperative. The measurement discipline elevates the ability to guide the most critical decisions with better precision for greater impact. Marketing organizations manage large budgets that are facing greater scrutiny without the credibility that comes from measurements. CMOs should not be satisfied with measuring marketing contribution but should also demand that the organization demonstrate the ability to act on measurements and improve performance. This is where credibility is earned.

The vision for better measurement discipline starts with the CMO’s expectation that well-constructed measurements concentrated on key profit drivers will provide a competitive advantage when developing strategies and tactical plans. The process requires integrating measurements into key stages of the marketing planning and delivery cycle. The planning cycle should follow this general direction:

  • Set marketing and campaign objectives aligned to business objectives
  • Develop your strategy with ROI scenario planning to improve profit potential
  • Complete a rolling 6-month measurement plan to prioritize measurements and integrate into campaign planning
  • Develop tactical plans with measurements defined prior to execution
  • Execute & measure marketing initiatives
  • Track and analyze results
  • Refine upcoming objectives, strategy, and tactical plans, leveraging insights to improve performance
  • Manage the learning cycle by maximizing the use of measurements and identifying the  next measurement priorities

CMO commitment is critical to success. To achieve new levels of success, the CMO must motivate the team to invest additional effort into measurements and also back that effort with resources. CMOs should empower those measurement champions within the organization to lead the effort and innovate. The payback comes to all in the organization as they understand the value measurements provide in informing their decisions.

As reported in the 2009 Lenskold Group / MarketSphere Marketing ROI & Measurements Study, companies that are outgrowing their competitors are much more likely than companies growing slower than competitors to indicate that they are “using good measurements of marketing effectiveness to prioritize top marketing campaigns” (41% vs. 24%) and “have data, facts, and insights to better guide marketing spend decisions” (44% vs. 27%). The benefits are clear so now the team must map out a path to establish this measurement discipline.

Building Capabilities & Culture

In organizations where measurements are used inconsistently or are not yet running to their full potential, improving measurement discipline must be done in stages. You want to build both capabilities and culture as each supports the other.

Capabilities include providing data access, systems support, and internal or external measurement resources. You have to accept that the process will start with the best available information and, even as it improves, it will never be perfect. Enhancing your capabilities may involve introducing new methodologies such as structured market testing or modeling. You may decide to shift what you measure, putting additional emphasis on more strategic or high priority insights. Or you can add depth to your results analysis, understanding more about segment level performance or diagnosing the weak areas in your customers’ purchase funnel.

Here are actual examples of how companies we work with have improved their measurement discipline:

  • Designed a measurement pilot to assess customer retention strategy
  • Developed the first comprehensive measurement plan for a 6-month mass media and sales channel media blitz and concurrently defined the measurement planning process for future campaigns
  • Established a structured market testing program to assess both strategic and tactical performance drivers
  • Introduced marketing performance modeling to calculate baseline sales and marketing lift from retailers with the ability to forecast sales levels based on marketing plans, expected competitive advertising, and market conditions
  • Mapped out a detailed 4-quarter measurement plan outlining specific measurements and the process for applying results

Regardless of your current measurement practices, a good process for advancing to the next level is through pilot initiatives with select team members. Pilots help senior management recognize the benefits of applying new insights and help the marketing team build confidence and accelerate adoption.

Once new measurements are trialed and accepted, the process can be systematized and infrastructure further improved to take the next step up in capabilities. Measurement success stories must be communicated to demonstrate how measurements offer strategic value and can truly deliver performance improvements.

Following measurement pilots and adoption, the marketing organization must establish a clear process for what gets measured, how, and how often. Remember that is it not important to measure everything. Your measurement objective is to identify actionable insight that can improve future marketing effectiveness and profitability.

To complete the process, the CMO must set the expectation that measurements are valuable and must be acted upon. Good measurement discipline also requires that the CMO encourage sharing of all measured results, both positive and negative, since it is all necessary to guide improvements.

Why Now?

The need for marketing to adopt better measurement discipline has always been important but it has certainly become more urgent in the past year. As reported in our 2009 Lenskold Group / MarketSphere Marketing ROI & Measurements Study, 8 in ten marketers (79%) indicated that the need to measure and report marketing effectiveness has increased in the past year. With current economic conditions, every budget dollar counts and really needs to deliver results. These conditions put pressure on senior executives who then put pressure on the marketing team to show they can impact the bottom line. And realistically, you cannot fully manage and improve marketing effectiveness without knowing what is working and what needs to change.

The other timing consideration to motivate action now is the annual planning process that is just beginning for many companies. Making progress on your measurement discipline requires 1) bringing more measurement and analysis insight into the current planning cycle and 2) planning and budgeting for better measurements in the upcoming year. There may still be an opportunity to inform 2010 planning with either some quick measurements incorporated into current marketing, or running an historical analyses on past marketing.

With tight budgets next year, it could be hard to find budget for measurements and analysis, especially if it has been under-budgeted to date. However, allocating a portion of budget for measurements and analysis can make the rest of the budget more productive and create a competitive advantage for both the current and future years.

Measurement discipline requires time and effort. But once marketing executives make the commitment, the process will gain momentum and continue to evolve as it delivers new insights to guide performance improvements.