Marketing performance should be measured by results
CMC- InsightExec 16 May 2006.
Marketing is not just about advertising and selling, despite what people may say and write. If marketing is really about anticipating and satisfying customer demand profitably, then it encompasses a lot more than advertising and sales.
There is nothing new in business. Old knowledge is forgotten, rediscovered, and then reissued in different packaging “As new”. Measurement for management had been around for a long time since the advent of “time and motion” studies in the 1930s. Yet Marketing is the last area of business to come under “time and motion” scrutiny. Marketing people often seem to have been reluctant to have their activities measured and monitored as in the other areas of business such as finance and operations.
The general view, is that marketing is more of an art than a science, and therefore not conducive to useful measurement. Marketing, which encompasses all of “business getting” activities of a company in generating profitable revenue, requires considerable investment in money and resources, and is at the heart of every business. It is therefore not good management practice to allow marketing activities to continue without proper measurement of both the investment, and the results. If all marketing is investment, why would companies not want to assess the returns on their money?
Applying measurement and analysis to marketing activities is not something to be avoided, especially by marketers. Increasingly Chief Executives and Financial Officers are looking to ensure that measurement of the return on investment is used across the whole business area, including marketing. For marketers, Measuring Marketing Performance provides an opportunity to give quantifiable proof of the value of their contribution to the business.
A survey in late 2005 by the Chartered Institute of Marketing revealed that just 11 of the UK’s FTSE 100 companies have a Marketer on the main board. If marketing encompasses all the “business getting” activities of a company, it seems strange that it has no Board representation, alongside that of finance and operations in the majority of companies. Perhaps the reason is that Marketing is frequently perceived too narrowly in terms of advertising and sales, and lacking the quantifiable accountability of Finance and Operations, is unable to prove and justify its contribution.
The question that arises is, “Do marketers only understand the individual elements of marketing activity, rather than understanding the management of all the “business getting” activities of marketing as a whole? If Marketers are not able to quantify the contribution of marketing to a business, then their credibility as managers will be insufficient to merit membership of a Board of Directors. As Peter Drucker said, “If you can’t measure it, you can’t manage it”.
Although measurement in marketing is being talked about, it is usually limited to specific marketing activities, advertising, CRM, sales, market share etc. The new ideas of “Marketing Due Diligence,” seeks to link marketing activity with shareholder value. Nonetheless, marketing activity is for one purpose only, which is to generate profitable revenue for the business, meeting the requirements of the business plan in pursuit of the business’s strategic purpose and mission statements.
Every business comprises three elements, shareholders who supply finance, employees who do the work, and customers who supply the revenue. All three elements must be kept happy if the business is to remain in being. Thus Marketing’s responsibility must be to maximize profitable revenue by satisfying customers, and thereby providing profit for the shareholders and salaries for the employees.
Recently, while making a presentation on the case for measuring marketing performance to a regional meeting of the IOD, the question arose, “Was there any common problem in marketing Management?” My perception is that a lot of management especially in Marketing relies on assumptions rather than hard fact. Successful management requires searching questions and factual answers. Marketing in common with other areas of business continues to develop a language of its own.
This in turn encourages people to assume that others understand the terms, but frequently this is not the case. Other people may use the same terms but have a completely different understanding of the meaning. One has only to ask for the meanings of Metrics, Benchmarks and ROMI, to understand the variety of definitions which are assumed to be correct. In 2005 the American Marketing Association and Aprimo Inc. identified no less than six additional interpretations of the term ROI. What is obvious is that if Marketers are imprecise in their terms and definitions it is open to question how they can quantify the contribution of marketing with any certainty.
Marketers are getting better at measuring the performance of specific marketing activities. However, except for specialist response advertising, most advertising campaigns cannot be linked directly to specific sales. Brand awareness, market share and other measures all have a certain importance. Nevertheless, the various marketing activities are not generally independent but are mutually supporting, so that it is not usually possible to ascribe specific marketing actions to specific marketing results.
The job of the Marketing manager is to maximize profitable revenue, while minimizing the costs involved and the assets used. To achieve this, the manager must understand all the activities involved in getting and maintaining business. The manager must ask difficult and searching questions, avoid assumptions, and seek quantifiable proof of performance. The ultimate question is, “Does marketing collectively make a financial contribution to the business in terms of profitable revenue, and can the marketing manager prove that it does so cost effectively?”
© 2006 N.C.Watkis, Contract Marketing Service
Specialists in Measuring Marketing Performance and Return on Marketing Investment.