The Power of Marketing Metrics: Proving Marketing s Value to the Organization

Transcription

1 The Power of Marketing Metrics: Proving Marketing s Value to the Organization Laura Patterson President & Author laurap@visionedgemarketing.com About VisionEdge Marketing Experienced Practitioners Founded in 1999 and headquartered in Austin, TX, VisionEdge Marketing, Inc. serves more than 100 customers, and counting. VisionEdge Marketing, Inc. is a data-driven and metrics-focused marketing firm that specializes in improving marketing performance and creating competitive advantage designed to attract, secure and retain profitable customers. Services Include: Marketing performance management Marketing and sales alignment Product and strategic marketing Pipeline re-engineering Professional development Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 2 Page 1

2 Session Objectives The State of Marketing Budgets 1. Clarify the value of measuring marketing 2. Identify best practices in marketing measurement, accountability and analytics 3. Create measurable marketing objectives 4. Establish performance targets 5. Formulate a set of marketing measures that will serve as the foundation for your dashboard Need the math behind the creativity. John Seifert, Chairman- CEO of Ogilvy & Mather North America According to Forrester, Forbes Insights and other more marketers expect budgets to stay the same or improve in 2011 with ONE CAVEAT justify the spending, prove the effects of marketing campaigns, and demonstrate program success or risk losing budgets. (Forbes Insights) focus on measurable program elements that are designed around business objectives (Forrester) CMO Survey and Forbes Insights indicate increased emphasis on accountability will persist Change in marketing spend in 2011: CMO Survey.org Brand Buildng Customer Relationship Mngt New Service Introductions New Product Introductions Internet Marketing Spend Traditional Advertising -5% 0% 5% 10% 15% Measuring Marketing s Value : CMO Survey.org 11% 15% 14% 2% 21% 37% Evaluate Impact of Marketing Stock Market Performance Revenues Costs Customer Retention Brand Value Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 3 Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 4 Page 2

3 Break the Never Ending Cycle What s Driving Accountability Perhaps the greatest risk is that without a perception of accountability and value, CEOs and CFOs will make sweeping, arbitrary decisions about cutting expenditures which ignores the relationship between marketing spending to effectiveness and produces a short-term focus leading to limited success. Need focus to go from outputsfocused to outcome-focused Deeper scrutiny by executives Shifts in our marketing strategy toward more easily measurable approaches Launch of new products or services Shifts in marketing strategy to new media Addition of new tactics to our marketing program Changing client/consumer behavior Internal financial pressures Current economic climate Desire to remain competitive 0% 20% 40% 60% 80% Don't know Not at all To a small extent To a large extent Forbes Insights July 2010 Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 5 Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 6 Page 3

4 Struggling to Demonstrate Marketnig s Value Despite Numerous Tools First Marketing Measurement Conference ORSA/TIMS Special Interest Conference on Market Measurement and Analysis 1980 Business Objects 1990 Siebel Salesforce Eloqua Google Analytics Web Analytics Marketing Analytics Webtrends ImmediateFX LeadGenesys Vtrenz 1993 Alterian Raddon Integrator Marketo SM VEM MPM Study Pre-1990 BI Tools Cognos Hyperion CRM Goldmine Sage Software/ACT 1992 Campaign Management Unica PR Metrics Vocus 1996 Cymfony 1998 Aprimo NetSuite 2000 Harland Manticore Telligent MarketingPilot Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 7 Banking SW Jack Henry Marquis Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 8 Page 4

5 CMO Challenges - Measurement Demand for Accountability Remains High Unica Survey 2010 Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 9 Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 10 Page 5

6 Marketing ROI Top Climbs to #1 A Decade Plus of Talk CEOs reveal that "enhanced return on Marketing investment is a top priority for Marketing. (ARF) Don t make the grade: Only 17% of CEOs would give Marketing a A. (VEM) 34.9% of CEOs give marketing a C grade, only 9.6% of CEOs give marketing an A grade, 8.4% give marketing a D grade. (CMO Council) Still a Priority: 59% consider measuring Marketing performance to be a top-three priority for their company. Accountability top priority for 66% of senior Marketing executives (ANA) Can t Get No Satisfaction: Only 9% somewhat satisfied with their company s ability to set and monitor Marketing Metrics (VEM) 48% felt that CEOs believe that their organization s ability to measure marketing performance was only marginally effective. (VEM MPM) Dissatisfaction With Metrics Continues: 96% of marketers tracking 1-20 metrics and 76% say metrics are not useful in decision making (Mktg Leadership Roundtable) Top Priority Still: CMOs under pressure to demonstrate value; ROI major issue in 2008 (B-B Mag) Anderson Analytics Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission Top Priority 66% rank Accountability as Chief Concern (ANA) Measuring effectiveness is second most important priority (ANA) 66% of business executives say marketing analytics and metrics are marketing s greatest need (Booz Allen) Lack of Satisfaction: Only 21% of 319 respondents rate themselves "satisfied" or "very satisfied" with Metrics capabilities (CMO Council) Measurement Challenged: Over half (51%) say that difficulty in measuring performance a key reason for pressure on Marketing department (ANA and Booz Allen Hamilton) Still Don t Make the Grade: 2009 only22% of CEOs give Marketing an Measurement Measurement A (VEM MPM) Challenged: Challenged: Fewer than 1 in 10 say their Marketers remain Marketing is only organization is completely effective at marginally or somewhat MPM (Lenskold) challenged to effective at measuring Effectiveness (Deloitte study of over 460 Measurement Challenged: 30% of 200 CMOs rank MPM most significant challenge (Aberdeen) measure value and ROI, <50% use marketing executives) Top Priority Still: analytics (Alterian, Still a Priority: Connect Marketing to Financial n=1545 ) 54% of survey Consequences (Aberdeen) participants say measuring marketing performance is one of their top 3 priorities Proving ROI critical (Red Herring CMO Summit) Need to show impact on purchasing (B-B Outlook 2009) Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 12 Page 6

7 Two Impediments Need Performance Management VEM MPM 2010 the process of measuring progress toward achieving key outcomes and objectives in order to optimize individual, group or organizational performance. The top challenge for marketers remains to better quantify and measure the value of marketing programs," in spite of improvements in accountability over previous years. CMO Council's 2008 Marketing Outlook Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 13 Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 14 Page 7

8 Best Practices Marketing Organizations Transforming into a Performance-Driven Marketing Organization Have a set of measurable performance standards, a pointed focus on outcomes, and clear lines of accountability. They are performance-driven outcome-based. 1. Align and link marketing to business outcomes 2. Embrace a culture of accountability 3. Adopt a measurement framework that establishes clear standards of performance and metrics 4. Create a performance measurement system based on data and analytics 5. Use data and performance targets to drive continuous improvement and to hold the entire system accountable for performance. 6. Apply analytics to facilitate factbased decision making 7. Align resources, policies, and practices 8. Add the right skills, systems and tools 9. Track and report results against performance standards Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 15 Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 16 Page 8

9 Six Action Steps The Best-in-Class Employ Align and Link to the Business Measure Adopt a Metrics Framework Set Measurable Marketing Objectives Report Select Outcome based Performance Targets Action Step 1: Align to Business Outcomes 1. The Starting Point - serve as the foundation for everything that follows A consequence, result, effect How the organization will measure success 2. Start with the business decisions that need to be made 3. Identify all key business outcomes Indicate what constitutes success for the organization in the CEO s words 4. Select those that marketing can impact Understand to what degree Marketing is expected to move the needle Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 17 Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 18 Page 9

10 Why Companies Invest in Marketing Three Marketing Roles Point the Way Understand the market and customers Develop and execute a strategy to create preference and consideration that enables the organization to Acquire more of something Acquire it faster Acquire it cheaper Otherwise, might as well just put more feet on the street Need to demonstrate we are getting the job done The purpose of a business is to create a customer. - Peter Drucker 1. Find Profitable Customers/Consumers The process of acquisition New customer acquisition net new business 2. Keep Profitable Customers/Consumers The process of retention/renewals 3. Grow Profitable Customers/Consumer The process of increasing the value of your customer franchise and brand - Cross-selling Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 19 Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 20 Page 10

11 Our 3 Roles Enable Us to Move 3 Business Needles Direct Line of Sight: Outcome to Tactics Ladder Use Outcome-based Mapping Find/Secure Profitable Customers Acquisition Market Share Keep Customers Penetration Lifetime Value Grow Customer Value Monetization Brand/ Customer Equity A process that ensures marketing is aligned to business outcomes A technique for creating a common vision and shared language for improving business results A Map is a step-by-step description of the actions taken by marketing personnel Direct line of site between a specific set of activities to produce a defined set of outcomes presented in a visual format. Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 21 Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 22 Page 11

12 Action Step 2: Performance Based Marketing Objectives Output-Based vs. Outcome-Based Budgets 4 Criteria: Realistic Measurable Time specific 25% of existing customers will adopt new XYZ product within 6 months of launch Increase referral rate of existing customers by 40% by YE2011 Hypothetical but all too common marketing budget cannot link investments to results Aligned and consistent with the organization s priorities Improve customer advocacy score by 10% by YE2011 Contribute 25% of the qualified new opportunities quarterly with a 70% or greater conversion rate confidence Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 23 Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 24 Page 12

13 Action Step 3: Metrics Accountability requires Metrics- Which Example Best Represents What You Track? Metric: A metric is a standard unit of measure Business - Standards of measurement by which efficiency, performance, progress, or quality of a plan, process, or product can be assessed Tracked Trial Rates Measured Adoptions Rates Focused on Category Growth rate Tracked everything Web Press Hits Measured Awareness Tracked Pipeline Contribution Focused on Lead ROI Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 25 Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 26 Page 13

14 Illustrating the Importance of Selecting the Right Metrics Measuring Activity vs. Outcomes Adopt a Metrics Framework Outputs Outcomes Predictive My friend Joe runs 5X/week Outcome- Based Leading- Indicators Business Outcomes Market Share Category Ownership Lifetime Value Adoption Rates Likelihood of Outcome Share of Wallet Rate of Growth: Market Share of Preference Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 27 Activity- Based Operational Counting Media Mentions Ctm visits Click Through Rates Site Visitors Demo Downloads Efficiency Apps/branch Campaign ROI Program: People Ratio Cost/Billing Dollar Program spend/headcount Program/Total Spend Awareness: Demand Ratio Marketing Spend:Revenue Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 28 Page 14

15 Strategic Metrics Tie Marketing to the Business Action Step 4: Setting Performance Targets Our Job Points the Way to the Metrics Difficulty in setting targets are one of the most common problems for marketers Performance Targets Turn the Wheel 5 Market Share Indicators Share of Preference Share of Voice Share of Distribution Rate of Customer Acquisition Rate of Growth:Market 4 Lifetime Value Indicators Purchase Frequency Share of Wallet Advocacy/Loyalty Tenure 5 Customer/Brand Equity Indicators Price Premium Net Advocate Score Customer Franchise Value New Product Acceptance/ Adoption Rates Product Margins Need to make sure the measures and the targets selected are relevant to the objectives and outcomes Targets are a tool to help improvement, not an inflexible mechanism that guarantees change or results Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 29 Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 30 Page 15

16 The Merits of Setting Performance Targets 10 Attributes of a Good Performance Target Targets help to drive performance improvement Initiate a discussion about priorities Help to define an agreed direction Bring focus Assess effectiveness better Facilitate faster adjustments Improve alignment 1. Indicate a Range of Performance 2. Assigned Time Frames 3. Measure the Result Intended 4. Non-biased 5. Numerical 6. Based on quality reliable and consistent data 7. Measured against a baseline 8. Unambiguous 9. Verifiable 10. Attributable Activity/Output Vs. Outcome-Based Performance Targets Produce 1 webinar/month (run 5X/week) Secure participants/webinar (run 30 mins 5X/week) Acquire qualified leads/webinar (achieve 8 min/mile pace for 5K) Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 31 Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 32 Page 16

17 Action Step 5: Marketing Measurement Leverage Analytics Marketing Measurement: The act of measuring or the process of being measured. Measure: Dimensions, quantity, or capacity as ascertained by comparison with a standard. Measurement, to be accepted and actively supported, should be viewed as an integral part of everyone's job. It must become an accepted part of the organizational culture. It should be clearly understood and accepted that everyone is expected to take an active role. The ability to drive actionable insight from data Analytics are critical to: Facilitating better and faster fact-based decisions Linking the results of marketing programs to customer consideration, preference, loyalty, share of wallet and the financial results these outcomes produce. Establishing some degree of accuracy the outcomes that can be achieved from the relationships, products, services, and processes Need to: Add more analytic staff in marketing Initiate modeling Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 33 Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 34 Page 17

18 Data and the Performance-Driven Marketing Organization Performance Driven-Marketing Organizations Embrace data - See Data as the foundation for success Get the best data possible and use it in a pre-defined, unbiased way Install and use a data management system Create and maintain a data inventory Data is the new creative. - Stephan Chase, Marriott Rewards Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 35 Action Step 6: Report Accountability by its very nature means Reporting Monitoring and reporting results enables fact-based decisions Metrics and KPIs (key performance indictors) are the building blocks for creating a dashboard Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 36 Page 18

19 What is a Dashboard? A Marketing Dashboard A multidimensional view of data and their interrelationships Executive dashboards provide summary views of data and alert users to values that are significantly above or below expectations Only work if they are tied to a structured action process It must do more than just measure, needs to be used to foster decision making A dashboard is a visual display of the most important information needed to achieve one or more objectives; consolidated and arranged on a single screen so the information can be monitored at a glance. Stephen Few, Information Dashboard Design (2006) Has all the necessary dials and gauges to tell you where you are, where you re going and at what speed along with indicator lights that illuminate at the first sign of a problem Enables organizations to measure, monitor and manage business activity using both financial and non-financial measures Provides an overview marketing objectives, and real-time insight on progress toward each objective Shows how marketing is moving the needle Assesses what is and isn t working Fosters decision making is actionable Provide sa unified view into marketing s value Enables better alignment between marketing and the business Categories for the Marketing Executive Dashboard 1. Customer Acquisition and Retention 2. Customer Advocacy and Value (LTV, Margin, Loyalty, Share of Wallet) 3. Customer Equity 4. Product Innovation and Adoption 5. Competitive Positioning/Market Value Index (share of preference, rate of growth) 6. Show me the Money Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 37 Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 38 Page 19

20 Metrics Correlate to Dashboard Levels Crossing the Finish Line Three layers to the marketing dashboard: Executive level Strategic level monitors and measures performance against business outcomes and marketing objectives Operational level Marketing management tracks performance of core marketing strategies and processes Tactical level Functions and individuals analyzes performance at project or activity level as they relate to the first two Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 39 Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 40 Page 20

21 Success Factors: Skills, Processes & Tools, Culture Take the Next Step on Your Journey Skills & Training Solutions to the problems of marketing accountability and creating a ROMI culture begin with training (ISBM) Processes, Systems, Tools Culture Create, reward and live a measurement culture Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission Conduct an audit to identify alignment, data and process gaps 2. Assess the crucial skills marketers need and provide training 3. Identify and add the right talent, systems, and tools to help automate marketing processes and improve marketing performance 4. Leverage best practices and company insights for continuous improvement opportunities 5. Create and adopt a performance measurement and management strategy, system and framework that aligns marketing with the business outcomes 6. Engage the leadership team and form strategic partnerships with an extended team of finance, IT, sales, service, etc. 7. Create and align processes, policies and practices that insure the linkage between marketing programs and business results 8. Design and select metrics and clear standards of performance that enables marketing to measure its impact, effectiveness, efficiency and value 9. Create a multi-level dashboard to report performance and results in real-time to facilitate course adjustments and foster decision making - make it an iterative and collaborative effort Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 42 Page 21

22 Thank You and Questions Metrics in Action: Creating a Performance Driven Marketing Organization Workbook: It's More than Money on the Line: Creating Metrics to Measure Marketing s Effectiveness, Impact and Value Both are available at Improve Your Probability for Success VisionEdge Marketing. VEM Proprietary. Not for reproduction or redistribution without written permission. 43 Page 22