by Jim Lenskold
Learn about best practices from highly effective and efficient organizations and the secrets behind higher growth companies as identified in the 2010 Lead Gen Marketing Effectiveness research study.
You can also read the complete 2010 Lead Generation Effectiveness Study.
by Jim Lenskold
Marketing ROI and measurement analysis may be daunting subjects for many. Why, where, when and how marketing is driving financial contribution are valid questions. But, managing marketing profitability is top of mind for every Chief Marketing Officer. Most CMOs understand that a reliable and practical ROI process provides unique opportunity to catapult profit potential, improve efficiencies and effectiveness, and build credibility for the entire marketing team. And clearly the greatest path to increased effectiveness and delivering the greatest return is evident with marketing ROI measurements, financial analysis, and decision support.
The CMO Guide to Marketing ROI is a compelling 16-page editorial that breaks down the critical steps needed to establish a marketing ROI framework. It simplifies complex business issues and offers a practical, pro-active approach to create the culture and capabilities for managing and improving marketing ROI.
The white paper features compelling content, a case study with Kodak, and a practical quick-tip checklist. It also summarizes the marketing ROI framework with an easy to follow flow chart. The paper identifies the big wins with ROI analysis, measurements and applying insights to strategic decisions.
By submitting this form with the Subscribe button checked, you are granting: Lenskold Group, 601 Bangs Avenue, Suite 402, Asbury Park, New Jersey, 07712, United States, https://www.lenskold.com permission to email you. You may unsubscribe via the link found at the bottom of every email. (See our Email Privacy Policy for details.) Your e-mail will be kept private and only used for educational content from Lenskold Group as outlined in our Privacy Policy. By clicking on the link delivered via e-mail to download content, you consent to use of a cookie that will provide you access to all other content without completing the form again.
by Jim Lenskold
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.
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.
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:
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.
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:
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.
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.
by Jim Lenskold
How does your company define marketing ROI? A survey conducted by Forrester and the Association of National Advertisers (ANA) found “a lack of consensus among marketers on how to measure/define their return on investment (ROI) in marketing.” The top choices were Incremental Sales Revenue Generated by Marketing Activities (66%) and Changes in Brand Awareness (57%). Other top choices referred to purchase intentions, attitudes, market share and leads. There is a lack of consistency in the industry, but more importantly the industry is still slow in embracing marketing accountability with measures that have financial integrity.
Is there a right answer to how marketing ROI is defined? If you were to ask individuals how they defined and measured the ROI on their stock portfolio, what kind of responses would you expect? Most investors will not be satisfied if their stock portfolio returns are defined as most popular or most likely to grow. They also won’t be satisfied if they get high growth rates that are more than offset by high commission fees. Bottom line is the return on investment means exactly that – the profits (not revenues) generated in excess of the initial investment, discounted to net present value and shown as a percent of the initial investment.
Even with agreement on the ROI definition at this high level, the quality and success of your marketing ROI processes are dependent on establishing additional definitions for your calculations and measures. Definitions provide consistency, which is especially important for areas where some interpretation or judgment is required.
The marketing ROI process requires definition of:
These are just a few key categories that are part of implementing a highly effective marketing ROI process. This is where errors often exist. Setting definitions requires good planning and is driven by one primary principle – will this drive the right decisions in creating and executing more profitable marketing strategies? Once the standards are set, the same principle is used as the quality check to make improvements.
by Jim Lenskold
There have been a number of webcasts about maximizing the return on marketing investment that fall short of the session topic. One in particular featured very good speakers and was informative. As each person spoke about their marketing programs, the results presented were in the form of response rates, leads generated, revenue generated or enhancement of the customer relationship. These are all important metrics but what about profits generated?
As marketers, we do not always have control or access to sales and profitability data. We often need to assess and decide to implement future marketing programs before actual customer value can be determined. Regardless, there has to be a greater focus on profits generated if marketing is going to contribute to critical corporate objectives and raise its stature within the company. Without analysis of customer value, how can we determine if one marketing initiative generates better customers than another? We’re all aware that roughly 20% of the customers will generate 80% of the profits so we must be looking for quality sales, not quantity.
Here’s a few tips to keep in mind:
Think of marketing ROI as financial intelligence that you must use to guide future strategic and tactical decisions.
by Jim Lenskold
This is the third article in the four-part series on Maximizing Lead Generation Marketing ROI. The other articles in this series include:
Part 1: Lead Quality Counts
Part 2:Insight, Alignment & Action
Part 4: Dashboard Metrics
How do you know if your lead generation program is working and delivering a good ROI for the company? You may be doing some lead tracking to understand conversion rates and customer profitability, which is great. But the sales team will inevitably let marketing know that 1) marketing was just a small step in closing the sale so they deserve the credit, 2) they would have found and closed those leads anyway so there is no incremental value, or 3) the leads are fine but there is just never enough. We need reliable measurements to both prove and improve our marketing effectiveness.
The first two parts of this article series have outlined what is necessary to improve lead quality (covered in Part 1) and how to improve sales alignment for better lead transition, tracking, and sales support that increases the close rates of those leads (covered in Part 2). We’ll now look at the measurements challenges for lead generation as we provide insight into the most common questions lead generation marketers raise with respect to measurements.
Measurements around lead generation are made easier by the fact that once a contact is generated, their interactions and outcomes can be tracked (systems and operational issues aside). But there are also a number of challenges unique to lead generation, which require a closer look at what it takes to get reliable measurements.
Let’s address the most common measurement questions, starting with the basic and moving to more advanced. As you look through these, keep in mind that there are four primary categories of marketing measurement that we can have to assess the incremental impact of marketing: pre-post tracking or trending, market testing, modeling, and surveys.
This match-back challenge can occur when the basic measurement technique is to track from the marketing tactic generating the lead to closed sale. In some companies the sales system does not contain enough detail to link the marketing contact, who may be a recommender or decision-maker, with the buyer, who may be from procurement or another person on the purchasing “committee.” You have a contact that is engaged with your marketing and passed into the sales organization as a lead but your only tracking option is to go to a purchase database and try to make a match.
If you choose to match by contact name, you will under-state your marketing impact since you know many of the buyers listed in the financial system do not represent the full set of decision-makers and recommenders you influenced. But if you match by just company name (as I have seen companies do), you will over-state your marketing impact, especially if you have a reasonable number of large clients with multiple buying groups.
A good compromise for those companies limited to some form of match-back is to match by company name and location. It is still subject to error but gets closer than either extreme. An alternative is to use periodic surveys of your marketing contacts to determine the sales close rate. The survey can also be used as a checkpoint or calibration of your match-back process.
Prospects are typically touched by multiple marketing contacts prior to qualifying as a lead that is put into the sales cycle. In most lead measurements, the last marketing contact gets credited for generating the lead. When most of your marketing efforts are response-oriented, this approach can work fine. Every marketing contact is generating a level of interest and it took that last marketing contact to get a certain set of prospects to become leads. This tracking approach will under-value marketing initiatives that are better at generating interest and boosting the response for other marketing initiatives and it can also over-value marketing touchpoints that pick up leads that would have otherwise come in through other contacts.
The solution is not to allocate credit to multiple contacts but to set up measurements that isolate the incremental impact of specific marketing initiatives. This can be done through market tests when assessing specific tactics, or through modeling when assessing multiple tactics and their interaction effects. Modeling can establish correlations to identify which touchpoints are most influential in generating leads or closed sales.
Note: For a more detailed explanation of options and issues see our archived article “Measuring the Impact of Multi-Touch Marketing.”
The best measure to show the true incremental impact of marketing is market testing using test and control groups. I am generally not an advocate of complete “no-contact” control groups which require eliminating marketing contacts for the purpose of demonstrating the incremental value of marketing because we are typically not trying to prove that no marketing is a viable alternative. While there are some instances where these complete no-contact control groups make sense, more often we will set up control groups that have “business as usual” marketing and sales contacts with the exception of a select marketing initiative(s) that are withheld. Market testing is also very effective to build the case for adding new marketing initiatives.
For lead generation marketing, there are a number of market test measurements that are particularly worthwhile to address your more critical marketing decisions.
For direct marketing, your approach is to withhold specific direct mail or e-mail communications from a random sample control group to determine the incremental lift in generating leads. If the control group nets the same proportion of qualified leads as the test group, it is likely that your other lead generation activities are capturing the opportunities out there. Any lift in the test group over the control group is attributed to your marketing.
Mass marketing tests require a geographic split of comparable markets or regions, matched through careful sales trend analysis. The test markets receive the incremental marketing to determine the incremental lift in quality leads.
The same testing approach outlined above can be used to assess the impact on closed sales rates or average customer value (in addition to lift in leads). This comparison is very appropriate when the sales organization is trying to make the case that marketing is not adding value to the sales process or that the leads generated would have been identified through the sales organization anyway. The analysis should determine if the test group receiving marketing contacts experiences more leads, a higher net close rate, and/or higher average customer value per sale than those receiving no or less marketing contacts. This may require withholding marketing for the select accounts for a long period of time and it is justified when there is an established belief that less marketing is needed. If you set up your tracking to monitor performance changes during the test, you may be able to detect a decline in performance early, at which time marketing can be resumed instead of allowing the control group to hurt sales results.
Keep in mind that measurement success is dependent on having statistically significant sample sizes to minimize the normal variance that might occur if you created the two groups and treated both the same. There are analytic processes that can help set up the experimental design. Also be sure to eliminate possible biases – for example you are better off comparing a portion of each sales rep’s accounts than splitting the sample by account rep when the rep performance may vary.
The addition of new marketing initiatives can easily fit into a market test structure. If the marketing initiative is planned to launch nationally and there is the flexibility to do so, a measure of the initial impact can be obtained through a phased-in launch that occurs regionally. Control groups are set up within the regions launching last. The primary objective of the measurement should be on improving the new marketing initiatives (as opposed to continuing vs. canceling). So the analysis should look deeper than bottom line results for insights such as identifying that the marketing is working with specific target segments or where in the customer funnel the performance is stronger or weaker.
As we addressed in the first two articles of this series, there are often opportunities to improve lead generation effectiveness not by increasing lead quantities, but by either increasing the conversion rates within the sales pipeline or by nurturing leads that were generated but not yet qualified. The ROI analysis can be used to show the profit potential of these initiatives. Market testing is used to develop effective programs on a small scale with minimal budget and then build the case for additional funding.
When marketing organizations are passing leads to external channel partners, there is often a huge gap in tracking that ultimately leads to the challenge identified in our first question above on accurately matching contacts to buyers. There are several measurement approaches specifically for third party relationships which are worth consideration.
1. Set requirements for channel partners to report lead outcomes on a regular basis. Some companies are very successful with this approach, typically because they have good quality leads that the channel partner is willing to work for. In other cases, the channel partner views the customer relationship as their own and will not such disclose details. The goal is to find the win-win that improves marketing effectiveness which is beneficial to both parties.
2. Set up a joint market test. This works well when testing new initiatives. If the channel partner understands that your company needs to demonstrate the value of the specific lead generation investment to benefit both organizations, they may provide enough quality feedback for an assessment (maybe excluding customer details).
3. Use survey research. Survey your leads periodically to measure their final purchase decision. Surveys are also a good opportunity to get detailed information on their funnel progression, leakage reasons, and insight into competitive considerations.
Here is a brief re-cap of how different methodologies can be applied to assess lead generation marketing effectiveness:
In the next and final article of this series on lead generation ROI, we’ll cover lead generation metrics and how these are used to manage your overall performance.
by Jim Lenskold
As marketing budgets get leaner, the pressure is on to deliver more profits. To develop effective strategies for doing this, marketers need clear measurements. Unfortunately, measurements other than ROI are incomplete and can lead to misguided spending and lost profits. The ROI measure can account for all costs and the complete customer value to prioritize marketing investments and maximize profits. Other marketing measurements are merely performance indicators useful in improving the ROI of marketing programs.
The complete article organizes marketing metrics into 3 tiers and outlines how to use ROI metrics strategically. Click on the image to download the PDF of this classic article.
Published in the AMA’s Marketing Management magazine. Used with permission.
by Jim Lenskold
There was once a television series called “Numb3rs.” Based on real cases, an FBI agent taps his math-genius brother who, in turn, uses probability, logic and complex equations to manipulate data and uncover information that helps the duo solve the crime. One brother delivers the disciplined analysis to uncover critical intelligence; the other provides the wisdom that puts the analysis into context. Together, they generate the insight necessary to solve that week’s wrongdoing.
Intuition—the act of knowing or sensing without the use of a rational process—represents our individual experiences blended together to represent what we “know” without understanding exactly why we know it. Everyone has intuition and everyone uses it from time to time, but what role should it play in business and marketing decisions?
Consider the best-selling book Freakonomics by Steven Levitt and Stephen Dubner. Here you have countless insights derived from data analysis that go against conventional wisdom and intuition. The authors apply various forms of econometrics to crunch reams of data into meaningful conclusions: that swimming pools are a greater threat to children than handguns, for instance, and that the decrease in crime rates is driven primarily by the legalization of abortion. As the book implies, there is truth in the data that not only goes against what we might believe, it goes against what we truly want to believe.
In a research study conducted in conjunction with MarketingProfs.com, marketers were asked, “Which best describes your company’s typical approach to launching new marketing campaigns?” Of those surveyed, 47 percent reported that typically “campaigns are rushed to market based on the limited intuition of a few key people.” The other responses included the following:
The responses don’t suggest whether the use of intuition is good or bad, but they reflect the prominent role intuition plays in the decision-making process.
I recommend to CMOs that they use three key principles to create a culture that values both disciplined analysis and intuition. First, make sure to balance strengths in intuition with the analytic and measurement capabilities necessary to uncover the hidden facts about customers, marketing impact and expected outcomes. As a rule, the marketing organization should have business intelligence and analytic experts who regularly interact in a two-way dialogue with their strategic counterparts. That way, the analytic team can benefit from the intuitive input that gives their findings context.
Next, assess the intuitive component of key marketing decisions. Ask yourself and your team what facts would validate or dispute your current direction. You want a culture that is ready to accept data even if it contradicts current beliefs. Understand how your marketing will ultimately lead to the achievement of business objectives and detail what metrics will be early indicators of remaining on track. In the absence of the necessary data, leverage the collective intuition of many qualified individuals with different perspectives, then capture data that will support similar decisions in the future.
Finally, improve your team’s intuition by sharing insight. Intuition comes from experience and knowledge. When you don’t share information about marketing success and failures, you can easily come to the wrong conclusions. Additional measurements and analysis are desperately needed within the marketing discipline. Bring together the analytics and insight to communicate information in the right context.
Companies that are fortunate enough to have a team of researchers and marketing analysts will often find that those individuals believe they are the unheard voice of the marketing organization. Yet these number-crunchers may just hold the key that can unlock huge marketing opportunities.
Can you build the collegial relationships that makes the Numb3rs team so successful? You’ll need mutual respect, an appreciation for a very different mind-set, the ability to listen to information and ideas that may go against either logic or intuition, and the willingness to sit down at the table together when you’ve solved the challenge of the day.
Copyright © 2005, CXO Media Inc., reprinted by permission from CMO Magazine.
by Jim Lenskold
At the end of each year when you head into the gift-giving season, it makes sense to consider what the key people supporting the company’s marketing will value most next year. Here are a few suggestions to get you started.
by Jim Lenskold
Jim Lenskold returns for a second episode in the Hard Corps Marketing Show series to share insights and tips on marketing measurements designed to generate Big Wins that boost marketing effectiveness and ROI. Casey Cheshire of Cheshire Impact Marketing brings his high energy and entertaining interview style to break myths and dig into the untapped opportunities for strategic market testing.
For more episodes of Hard Corps Marketing Show, click here.
