By Mayer Becker, MarketSphere
The Role of Marketing Operations in the Measurement of Marketing ROI
This year for the first time since the annual study began in 2004, the Lenskold Group’s Marketing ROI and Measurement Study included questions on marketing operations. This new information can prove helpful to marketing leaders who want to create and empower a marketing operations staff to improve the “business” of marketing – managing resources, systems, and processes that make marketing more successful. A marketing operations department in turn can champion and facilitate a “measurement mindset” within marketing that will help the Chief Marketing Officer (CMO) achieve strategic advantage through marketing ROI-based decision-making. This article introduces five ways marketing operations can support and improve marketing measurement capabilities.
The results of the 2009 Lenskold Group / MarketSphere Marketing ROI and Measurements Study show that companies with marketing operations in place are twice (11% vs 5%) as likely to be high performing companies, i.e., companies who report having highly effective and efficient marketing. Those companies with dedicated marketing operations, while reporting a broad range of responsibilities, indicated overwhelming responsibility for marketing project management (83%) and marketing governance, i.e., budget and finance (73%). As well, firms with marketing operations are more likely to have dedicated marketing analysts, versus firms without marketing operations (45% vs 17%). These are just a few indicators of why the presence of a dedicated marketing operations team improves measurement capabilities.
From Cost Center to Profit Center – Marketing In Transition
Marketing operates an underlying “supply chain” of ideas and content whose purpose is to deliver the right information through multiple communication channels to the right target audience at the right time. The supply chain produces a combination of programs that address new customer acquisition, sale of products, customer retention and customer service, or enhancement of the company’s brand and reputation. Each discipline of marketing relies on its own tools, insights, strategies and creative to manage its part of the supply chain, operating independently to accomplish assigned objectives. In addition, because marketing is historically a cost center, transparency into how the marketing budget is spent is low.
With Sarbanes-Oxley (and similar laws internationally) and other pressures to increase transparency, marketing has come under increased scrutiny. The difficult economic conditions of recent years bring a renewed focus on spending every dollar wisely, and for the greatest return. Boards of directors and business leaders recognize that they must treat marketing differently, especially because it is one of a company’s largest expense categories.
As a result, the CMO has the imperative to demonstrate marketing’s value like any other company investment. Marketing now has among its mandates the responsibility for delivering free cash flow from a combination of increased effectiveness of programs, and improved efficiency of operations. To accomplish this, executives must treat marketing as a profit center. Over sixty-five percent (65%) of firms responding to the Lenskold Group study said, “…their CEO/CFO’s are making greater demands than last year to show ROI as part of securing budgetary resources for marketing efforts.”
The Move to Improve Operational Efficiency
There is a new focus on marketing operations, or operational efficiency, according to a study conducted by the CMO Council, and sponsored by global software company Alterian. Sixty percent (60%) of survey respondents said the transformation of their marketing operations is an essential area of focus, regardless of company size. Fifty percent (50%) said they consider “marketing operational effectiveness” one of the least developed aspects of their organization. Marketers themselves, schooled and experienced in their area of specialization like advertising, direct marketing, promotions or public relations, realize their shortcomings in trying to master operational issues while at the same time delivering on the traditional mandates of marketing – brand, product and innovation, life cycle revenue management, and being the voice of the customer.
Adding to the challenge, marketing is much more complex than ever before and is required to respond in hours to market conditions, as well as operate 24×7 in a global market. With the internet now a thriving sales and communication channel, the business never closes. In response to pressures both internal and external, marketing executives are recognizing the need for a central function to manage resources, systems and processes. This central function is marketing operations — fifty-nine percent (59%) of respondents in the study say they have a dedicated marketing operations team or person.
The Role of Marketing Operations – Best Practice Approach
Because marketing operations is an emerging discipline, many CMO’s struggle with how best to define its mission. Ideally, the leader of this team is an operations executive, preferably with PMP (Project Management Professional), Six Sigma, or relevant operations management experience. As well, the head of marketing operations serves as chief of staff to the CMO, managing a staff of professionals who own and operate the department’s processes and project management, oversee its finances and governance, and provide shared services (i.e., creative, production, agency management, procurement, traffic) and technology support to the rest of the marketing organization.
Marketing operations should manage the “business of marketing,” to allow other marketers to concentrate more fully on their respective functional areas. This alleviates the project management and financial reporting burdens from marketers, for example, leaving the brand team the time and resources to develop programs that enhance the brand and drive market awareness.
Promoting Marketing Measurement and ROI Analysis
With responsibility for financial governance, marketing operations is the logical entity to champion and facilitate a “measurement mindset” within the marketing department, in five important ways.
1) Ensure alignment of the marketing budget, and marketing activities, to corporate and departmental objectives. Marketing operations works with the leadership team during the budgeting process and aligns budgets with measureable objectives. Its planning and oversight ensure that the marketing investment portfolio supports only those measurable objectives (with slight exceptions where may be a strategic reason to fund other programs, such as research into new communication channels.) Then, throughout the financial year, Marketing operations monitors alignment and performance in cooperation with finance.
2) Provide the tools for measuring and reporting marketing performance. Marketing operations provides the automation and technology infrastructure to support the department. Key to gathering data for mROI calculations is a marketing resources management (MRM) application for connecting budgeted and actual spending with activities, tasks and related objectives. Another important tool is a business intelligence and reporting platform that collects data from many sources, including the general ledger and the procure-to-pay application, and delivers information through dashboards and reports, alerts, drill-downs and “what if” analysis.
3) Establish the framework for measuring marketing performance and calculating ROI. A marketing organization must first decide what it wants to measure. Marketing operations leads development of key performance indicators (KPI’s) from the collective customer, financial and operational data as a first step in creating a framework. As an organization evolves to more fact-based decision-making, additional layers of analysis, including marketing ROI (mROI) analysis of each program will become the standard. Marketing operations manages the mechanics of measurement, performs the mROI calculations, and publishes them along with other relevant metrics and KPI’s.
4) Translate between the languages of marketing and finance. The languages of the two departments are fundamentally different, with marketing accustomed to talking about the long-term value of a customer, or the cost of acquiring a new customer. Finance, on the other hand, has a shorter-term focus on line-item budget performance and quarterly results. Marketing operations interprets marketing metrics in a language familiar to finance and operates a “marketing dashboard” to facilitate translation between budgets, marketing activities, and accomplishments.
5) Create the environment for a “measurement mindset.” Acceptance for fact-based mROI analysis will not just “happen.” Marketing operations, in its financial governance role, should construct and maintain an environment that allows marketing leaders to better use marketing metrics and analysis. Over time and in tandem with the deployment of a technology infrastructure, training and change management, the marketing organization will adopt a “measurement mindset” and use mROI as a key measure to guide decision-making.
Marketing is more complex than ever, and under increasing pressure to be more transparent and demonstrate the value it contributes to the organization. Companies are creating marketing operations teams to focus sharply on achieving operational efficiencies, “to do more with the same, or less.” Combining responsibility for project management, systems infrastructure, and financial governance, marketing operations is the logical entity to create the framework, tools, training and environment that facilitates measuring and reporting the value received from the investment a company makes in its marketing.
Mayer G. Becker is a practice director with the MarketSphere Enterprise Marketing practice, a consultancy focused on marketing operations, and improving the “business” of marketing. For more information, contact Mayer at 312-357-4405.