Marketing metrics are key for business growth
It is estimated that more than a trillion dollars are spent each year through marketing activities – and that 15%-30% of those dollars are “wasted.”1 That’s right – wasted. Understandably, marketing leaders are under increasing pressure to prove the value of their marketing investments. However, two of three marketing executives struggle to do so.2
This article aims to help marketers demonstrate the value of their marketing efforts through more meaningful marketing metrics – metrics that better link marketing efforts and business performance. Here are three steps to consider.
#1: Start with the “where”: align business strategy and marketing strategy
Always begin with the business, and specifically where the overall business intends to go. All too often, the over-arching strategy for the business (i.e. how the business intends to win in the marketplace) is not as clearly articulated or communicated internally as it could be. And this can lead to misalignment of priorities and focus.
Here is a suggestion for avoiding that disconnect for marketing. Start by evaluating how well the marketing strategy aligns with and supports the company’s over-arching strategy by asking yourself questions like these:
- Does the marketing strategy target the audience that is most important to the business and future growth?
- Is the marketing strategy communicating the core value proposition through a focused brand positioning strategy?
- Is the marketing strategy prioritizing the most important geographies and channels, and reaching the target audience through the most effective vehicles?
The rationale for these questions is that you must begin with a clear understanding of the business that marketing will support and advance if you are seeking to better link marketing investments and business outcomes. Put simply, metrics follow strategy.
#2: Assess the “what”: ensure sufficient focus of metrics on business outcomes
After confirming alignment of the overall business and marketing strategies comes an evaluation of what marketing metrics you’re using. A two-step assessment can help.
For the first step, you are looking for alignment of marketing strategy, initiatives, and metrics. The goal is to ensure that the marketing initiatives are the right ones to fulfill your marketing strategy, and that your marketing metrics are the right ones to measure the success of those initiatives. Hopefully, this review will confirm that your marketing metrics are measuring what matters most. Alternatively, this review might surface opportunities to recalibrate.
For the second step, the following 2×2 matrix can help to clarify which (and how many) metrics are squarely focused on business performance.
Adapted from “Marketing Metrics,” M. Stanko and M. Fleming, Ivey Publishing, 2014
Here is a brief explanation of the matrix. Reading it vertically, the “intermediate” column shows metrics focused on activities that precede a business transaction (e.g. purchase), whereas the “end result” column shows metrics focused on business outcomes. And reading horizontally, the “internal” row shows metrics that involve internal data or calculations like costs, whereas the “external” row shows metrics that do not require that internal information.
Why does this matrix matter? Because it illuminates which types of metrics you are employing – and whether you have a sufficient focus on metrics linked to business outcomes. This is not to say that “intermediate” measures are not important – they are – but a company’s CEO and CFO will be laser-focused on the “end result” metrics as proof points of the value of the marketing investments.
#3: Consider the “how”: use marketing metrics to drive decisions and action
The final step is assessing how you are using your marketing metrics – because metrics are most effective when they inform decisions versus reporting on the past, and are coupled with the business judgment of experienced marketers.
First, marketing metrics become most impactful when they drive decisions and are forward-looking. If you are spending too much time looking backwards to demonstrate responsible “stewardship” of your marketing budget, then something likely needs to change. Meaningful marketing metrics should help drive decisions, action, and growth.
Second, marketing metrics require the judgment of thoughtful and experienced marketers – because people make decisions, not data. Consider whether you have the right people involved in the discussion of marketing metrics and outcomes – and also consider whether people have sufficient time to really think about what they are seeing or hearing.
Conclusion
Marketing can and should play a leading role in growing the business. To do this, meaningful marketing metrics are critical for better linking marketing investments and business outcomes. To ensure the most effective marketing metrics, align the business and marketing strategies, evaluate metrics for sufficient focus on business results, and assess how well the metrics are driving decisions and business growth.
Sources:
1 BCG, “No Shortcuts: The Road Map to Smarter Marketing,” 2010
2 “The CMO Survey,” McKinsey, American Marketing Association, Duke University, February 2015
