The Accountability Evolution Marketers Turn to Metrics to Boost Their Strategic Value

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1 in association with: The Accountability Evolution Marketers Turn to Metrics to Boost Their Strategic Value As organizations continue to respond to the uncertain economic environment by tightening their purse strings and demanding accountability from their executives, marketing departments are finding themselves under increasing pressure to justify their spending, prove the effects of their marketing campaigns, and demonstrate program success or risk losing their budgets. Other issues, including the desire to remain competitive, internal and external economic challenges, a rapidly evolving media landscape, and changing customer behavior, also contribute to marketers view that measurement and accountability hold an essential place in marketing strategy. To shed more light on this topic, Forbes Insights, in association with MarketShare Partners, a provider of crossmarketing optimization software and analytics, conducted a survey of U.S. marketing executives focusing on the topic of measurement and accountability and how marketers are approaching it as they look to quantify and demonstrate the impact of marketing. The current landscape Despite the recent economic roller coaster, companies are not cutting back on marketing. To the contrary, three quarters of marketing executives who responded to the survey noted that they expected their marketing budgets to stay the same or increase in their fiscal year, with fully one-third expecting an increase. Even as budgets maintain or even increase, measurement is not taking a backseat to the overall campaign development process. In fact, it is just as important as the campaign itself; marketers focus is split equally between the importance of the big idea a core theme guiding all marketing initiatives and programs and developing accountability metrics, at 48% and 49%, respectively. (Fig. 1) Figure 1: What attribute is most important to marketing strategy? Tools and metrics that measure ROI and ensure accountability for outcomes Other 2% 5% 4% 40% 48% Interestingly, marketers with budgets of less than $1 million favored metrics (58%), whereas marketers beyond the $1 million threshold felt that having a big idea was more important (58%). With budgets protected or growing, proving the wisdom of how those budgets are used remains a strong priority. 58% A core big idea that guides all of our marketing initiatives 38% 49% 58% Budget $1 million + Budget less than $1 million Total Copyright Forbes

2 It is also interesting to note that the marketing department shares a significant portion of the responsibility for marketing accountability, one that only increases as budgets go up. More than half (55%) of total respondents noted that the CMO is ultimately accountable for marketing effectiveness within their organization, a proportion that increases to 71% for those with marketing budgets greater than $1 million. When the buck stops at the CMO, he or she has significantly more incentive to prove ROI on marketing programs. Measuring effectiveness may not only prove they re spending smartly, it may even have the side effect of solidifying the CMO s seat at the executive table. In this way, measurement and accountability programs may be doing double-duty; 40% of respondents said one of the biggest drivers for developing marketing measurement and accountability programs was to justify spend to senior executives. However, a far higher percentage 65% wanted to make marketing more strategic within their organization. (Fig. 2) As the average tenure of the CMO is a scant 28.4 months according to Booz & Co. (compared to 75.6 months for the CEO), CMOs want to prove their strategic effectiveness. Aligning measurement to the changing business climate The rules of doing business continue to change rapidly, and marketers need to adjust to the shifting terrain. As organizations continue to feel the effects of an uncertain economy and the accompanying financial concerns, seismic shifts in the media environment, and changing customer behavior they are seeking new ways to maintain their edge and remain nimble. Indeed, keeping up with rivals appears to hold strong influence over changes marketers may be making to their analytics programs; it holds more sway than, even economic issues. Perhaps marketers simply want to measure their own progress against that of their competitors, or perhaps they want to benchmark their own success against others to ensure they are grabbing their share of the growth in the anticipated economic upswing. Whatever the reason, marketers cite the desire to remain competitive (65%), the current economic climate (55%), Figure 2: What issues drive development of your marketing measurement and accountability programs? Make marketing more strategic and impactful within the organization 71% 63% Senior executives demand some justification for the money we re spending 56% Improve marketing team accountability 35% 33% Increased competitive pressures 27% Financial pressures 25% 30% Changes in consumer behavior Need to improve business planning Need to guide product development 8% 25% Need to improve advertising agency relationship and effectiveness 6% 8% 23% 21% 26% 24% 30% 30% 40% 65% Budget $1 million + Budget less than $1 million Total Copyright Forbes

3 internal financial pressures (52%), changing customer behavior (50%), and addition of new marketing tactics (49%) as the top issues driving changes in their needs for analytics. (Fig. 3) Figure 3: To what extent are the following driving changes in your needs for marketing effectiveness analytics? Desire to remain competitive Current economic climate Internal financial pressures Changing client/consumer behavior Addition of new tactics to our marketing program Shifts in marketing strategy to new media Launch of new products or services Shifts in our marketing strategy toward more easily measurable approaches Deeper scrutiny by executives To a large extent To a small extent Not at all Don t know Additionally, an increasingly complex media landscape makes it even more important for marketers to track their spending; shifts in marketing strategy to new types, technologies, and formats of media (43%) represent another area with significant effects on measurement analytics. Because of the rise of social media, search, and mobile, there is increased competition for consumers attention. Marketers know they need to adjust their allocations to better reach their customers and they need better tools to know how. Measurement in practice: the implementation gap The use of metrics to prove marketing ROI has certainly made inroads with marketers. The majority (68%) of marketing executives in the survey affirmed that they have analytics in place to measure effectiveness and ensure accountability a proportion that increased to 85% for those with marketing budgets over $1 million. (Fig. 4) At the same time, while marketers are measuring, many are not following a formal approach; 56% of respondents reported having formalized systems in place to measure effectiveness and ensure accountability (compared to the previously noted 68% who said they use some type of metrics to do so), while 71% of those with budgets of greater than $1 million reported a formalized approach significantly lower than the 85% who have analytics in place. (Fig. 5) This may be changing. One third of respondents said that they planned to have formal measurement systems in place in the future, while one in five respondents with marketing budgets greater than $1 million said the same, suggesting that nine in 10 marketing executives will have some sort of formal measurement system in the foreseeable future. Measurement methodologies Marketers are benchmarking against a set of goals established at the outset of a program to measure success. When asked how to determine the overall success of a marketing program, 45% cited that a set of metrics or goals established at the onset of a program was the predominant way in which success was benchmarked, a percentage which climbed to 50% for those with larger budgets. At the same time, just 29% of respondents (18% of those with budgets of less than $1 million and 35% of those with larger budgets) benchmark results against those of previous, similar campaigns. This suggests that previous initiatives may not come into play when planning or evaluating the success of a new campaign, a practice that may serve marketers well in light of the current market volatility and continuing media evolution. Results from past campaigns simply may not be comparable to those taking place in the current environment, and past outcomes can t reliably predict the future. Copyright Forbes

4 Figure 4: Do you have analytics in place to measure effectiveness and ensure accountability of outcomes of marketing programs? Figure 5: Do you have systems in place to measure effectiveness and ensure accountability of outcomes of marketing programs? Budget $1 million Budget $1 million Budget less than $1 million Budget less than $1 million Total Total Yes No, but we plan to do so in the future No, but we have in the past No, and no plans to do so Yes No, but we plan to do so in the future No, but we have in the past No, and no plans to do so Sales and revenue are the top methods of measuring the success of a marketing program, but expectations for brand impact grow with budgets. In keeping with the internal financial pressures to justify marketing spend and demonstrate ROI marketers report experiencing, measurement s role appears to be proving the impact of marketing on the bottom line. Nearly six in 10 respondents (59%) use lift impact on sales volume and revenue to measure the success of their marketing programs; more traditional, customer engagement-oriented metrics such as cost-per-acquisition and brand awareness trailed distantly at 42% and 41%, respectively. At the same time, it s noteworthy that marketers with $1 million-plus budgets are likelier to use a different set of success metrics than their smaller counterparts. Two thirds (67%) cited lift impact on sales volume and revenue as their top metric for success compared to 55% for those with smaller budgets, while 52% pointed to top of funnel metrics such as brand awareness and favorability, compared to just of those with smaller budgets, and 42% track impact on brand equity, compared to 23% of smallerbudgeted marketers. This may suggest that as marketing budgets go up, so too do goals for the power, scope, sophistication, and strategic impact of a marketing program. Marketers may not be satisfied with the tools they currently use to implement and execute their measurement programs. A gap exists between the use of specific measurement resources and respondents satisfaction with them. Respondents measurement programs are overwhelmingly managed with internal resources (86%), followed by third-party data and tools (58%), external professional services (35%), and distantly by full outsourcing (14%). (Fig. 6) At the same time, respondents were not as likely to believe that the measurement resources met or exceeded their needs. Three quarters of respondents felt that internal data met or exceeded their needs compared to 92% that currently used it or had done so in the past. (Fig. 7) This may indicate that there is room for improvement in approaches and tools to track measurement. Continued organizational and cultural evolution could be needed to support and deploy these new approaches. Online metrics and customer surveys remain the top measurement approaches, likely due to their ease of quantifying impact. Online initiatives were the most popular programs to be measured; three of the top four measurement approaches currently in use measurement of online search marketing (64%), measurement of online display marketing (48%), and measurement of online social media marketing (43%) focus on digital marketing. This is hardly surprising, as it is generally much easier to quantify online outcomes. At 60%, the second-most popular approach was customer surveys, another easily quantifiable method. Marketers with budgets greater than $1 million reported using a much wider array of measurement approaches in Copyright Forbes

5 Figure 6: What resources do you use to measure marketing programs? Figure 7: How satisfied are you with these measurement resources? Internal data Internal data 86% % 4% 6% 19% Internal teams Internal teams 74% % 7% 10% Third-party data 58% Third-party data % Internally developed tools 52% % 57% Third-party tools Third-party tools 46% % 18% 11% External professional services 35% 16% External professional services % Fully outsourced Fully outsourced 11% 14% % 24% I currently use I plan to use in the future I have used in the past Exceeded my needs Met my needs Did not meet my needs significantly higher percentages than those with smaller budgets likely due to the fact that they have more money to invest in measurement, as well as having a higher likelihood of employing marketing tactics across multiple media platforms and outlets. Senior-level support for measurement is high, but communication with the C-suite could improve. While marketers are quick to note the importance of measurement programs and the pressure from senior executives to implement measurement strategies, many admit that communication falls short. Despite the fact that 75% of respondents said that they always begin each marketing initiative with a clear, quantifiable goal in mind, and 67% admitted that senior executives insist on metrics for measuring ROI and effectiveness, just 56% said they have a good system in place for communicating the impact of marketing investments to the C-suite. Copyright Forbes

6 Conclusion Overall, marketers of all sizes know that they need to be accountable for their programs, and having the right tools to measure effectiveness is a core part of their charter. Not surprisingly, marketers with larger budgets (and most likely bigger brands) are spending more to measure since they have more at stake. CMOs are being asked to prove their effectiveness every day to their CEO and CFOs. They know they need the data to prove their team s impact on the bottom line not only to justify their budgets but to demonstrate their strategic importance and status as a valuable, effective resource within the organization. The question remains whether they are doing this effectively. There still seems to be a gap between the number of marketers that are simply employing some analytics and those that are implementing formal measurement programs suggesting that many marketers are taking an ad hoc approach that may be failing to capture the complete picture or accurately demonstrate the value of marketing program. Additionally, a lack of clear communication with senior executives about program outcomes despite their strong support for metrics and accountability points to the need for a more formalized, better organized system for quantifying and communicating marketing ROI within the organization. As financial, competitive, economic, and consumer pressures continue to mount, and the media landscape continues to evolve, marketers may want to take a second look at their accountability programs to make sure they are being used to their fullest potential. Methodology The survey was fielded online between February 9, 2010 and April 1, 2010 among 103 senior marketing executives. Half of respondents (50%) had marketing budgets of great than $1 million, 39% had marketing budgets of less than $1 million, and the remaining declined to specify their marketing budgets. 60 Fifth Avenue, New York, NY Copyright Forbes