Are You Failing Your Employer by Resisting Measurement?
by Merry Elrick, CBC
A recent Wall Street Journal Europe article claims, “Many marketing managers are failing their employers.” (“Ambidextrous Marketing” by John A. Quelch, October 12, 2005) The reason? According to the author, right-brained marketers lack quantitative skills, show little interest in the bottom line, and resist being held accountable.
This is not the kind of article you want your CEO to read.
Yet many marketers are stretched too thin to develop the type of quantitative rigor that belies these accusations. Creating an atmosphere of accountability requires time and budget many marketers don’t have, yet that is what they are charged with today. And they’d better include ROI metrics, because that’s really the only measure CEOs care about.
So how’s a marketer to foster ROI accountability? Here are ten basic steps:
1. Align marketing’s goals with your organization’s goals
I know this one may seem painfully obvious, but ask yourself if every marketing decision you make supports your organization’s business goals. These goals are almost always related in some way to bringing in revenue, increasing short-term cash flows, maximizing profitability or building long-term value.
Maintaining an alignment with business goals requires constant vigilance. If adding a flash intro to your Web site will not contribute to short-term cash flows or long-term value, then why are you doing it? When you’re disciplined to think of programs in light of the return they generate, you’re more likely to have greater returns.
2. Separate business-building marketing communications from brand-building
Yes, yes, brand building does result in new business, ultimately. At some point. And business-building marketing does build the brand too. But try to distinguish between the two for measurement purposes.
The easiest way to do it is by objective: If a marketing program is designed to generate leads to increase short-term cash flows, then you can categorize it as business-building. If it’s designed to create long-term value, it’s brand-building. When you make this distinction, you can begin to track business-building results. (More about brand-building results later.)
3. Create business-building programs that are designed to generate leads
That means encouraging customer and prospect interaction. Actively seek feedback online and off. Induce responses through good old-fashioned offers like free white papers, guarantees or coupons. In other words, begin a relationship with prospective customers.
Of course this is easier said than done, but if you want to create business-building marketing, it’s important to provoke responses. And then capture and maintain that response information.
4. Follow your marketing communications investment
Begin by building response mechanisms into every tactic in your marketing communications mix. And each one should be coded with a unique 800 number, e-mail or URL. Work with your IT department to track online communications. Save room in your budget for training your call center personnel to ask how the inquiry originated. Everything designed to build business must be trackable.
And it’s critical to know every detail of every response generated by your marketing efforts. Make capturing and recording lead data systemic to your organization.
5. Make the VP of Sales your new best friend
S/he already is, of course, because you’ve been working with him/her to create marketing communications that will generate leads for the sales force. Right? But become even better buddies so you can follow-up on those leads.
You have to tie your marketing tactic to the resulting lead and then follow it through to the sale in order to calculate ROI. So you’ll need feedback from your new best friend to let you know when a sale is made. If you absolutely can’t play nicely together, you’ll have to get sales figures elsewhere, like from accounting.
6. Establish a lead qualification program
Another reason to be pals with sales is to find out how they define a qualified lead. What are the parameters of a hot lead versus a warm lead? How do you nurture the leads that are not quite ripe?
If you are investing in marketing that is designed to generate leads, you must know the quality of those leads. And sales can help you develop criteria for what constitutes a quality lead. When you pass along only the best leads and manage the rest, you make the process more efficient.
7. Develop a relevant database
Your company may have any of a number of systems that include lead-tracking modules. Chances are they won’t link your marketing efforts to the leads generated and then to the resulting sales. If not, work with your IT department to develop a database that is relevant to your needs.
You’ll want to know what part of your marketing mix is pulling the greatest amount of leads, how many leads convert to sales, and how much revenue they bring in. You’ll want to know details about respondents and their companies. You’ll want to compare campaigns, and tactics and media for their efficacy. And keep track of your budget versus costs-to-date. And so much more.
If your current system can’t deliver the metrics you need to determine ROI, then work with your IT department, or outsource to someone who can do it for you.
8. Measure ROI, not “click-throughs”
ROI is a financial term. Period. It is not an increase in awareness, market share, click-throughs on your Web site, or even the revenue generated from marketing communications. It is the profits generated over and above the initial investment and expressed as a percent on the investment.
That said, every company seems to have its own standards for defining terms and making the actual ROI calculation. Find out what your company’s standards are. Make the CFO your other new best friend. It will be one less person you’ll need to convince of the credibility of your metrics.
9. Manage your budget as the investment it really is
Once you know the ROI of all the components in your marketing mix, then you can compare to see which programs yield the greatest ROI. You can see what creative is most effective, and which publications deserve to remain on your media list. You can save money by eliminating what isn’t working, and invest more in what is.
Ultimately, you’ll increase your ROMI-return on marketing investment. That’s how powerful tracking your marketing efforts in a database can be.
10. Recognize that not every marketing program lends itself to ROI measurement
Now we get to brand-building marketing, which is more difficult for B2B marketers to measure than business-building. Measuring components of brand equity-brand awareness, customer loyalty, perceived quality-can certainly be accomplished. But if you want to demonstrate ROI of your brand-building marketing, then you have a more difficult task.
Emerging technologies and complex modeling offer some hope. Econometrics, which uses statistical analysis to measure the relationship between different sets of events, is beginning to take hold in the B2C world. But these complex solutions are likely to cost more than an entire B2B budget.
Does this mean we should abandon brand-building marketing? Perish the thought! It just means we may have to convince CEOs of the power of brand in other ways-increased awareness, for example.
We should show ROI when we can. When it isn’t feasible, we must make whatever meaningful measures we can-and embrace the idea of being held accountable.
Merry Elrick is president of DataDriven MarCom, Inc., which provides B2B marketers with full-service ROI metric management.