Marketing Accountability and Metrics

What is Marketing Accountability?

Foryears,corporatemarketershavewalkedintobudgetmeetingslikeneighbourhoodjunkies.
Theycouldntalwaysjustifyhowwelltheyspentpasthandoutsorwhatdifferenceitallmade.
TheyjustwantedmoremoneyforflashyTVads,forbigticketevents,for,youknow,getting
outthemessageandbuildingupthebrand.Butthoseheadydaysofblindbudgetincreasesare
fastbeingreplacedwithanewmantra:measurementandaccountability.

DianeBrady,withDavidKiley&BureauReports
BusinessWeek,13December2004
Marketersareinthespotlightlikeneverbefore,withCEOsandCFOsandevenotherdirectors
demandingmoreaccountabilityanuneasydisciplineformany(ifnotmost)marketers.Inthe
absenceofsuchaccountability,nowonderthemarketingbudgetisthefirsttogetcutwhenthe
goinggetstough!
Asnumbersrepresentthelanguageofbusiness,marketersneedtoadoptamorequantitative
approachtothedevelopmentandimplementationofmarketingplansandassociatedactivities.
Theyneedtobeabletoexplain,justifyandwhereappropriate,supportwithnumbers,their
plansandtheirprogresswhatsbeen,isbeingorisgoingtobedoneandwhy,how,when,by
whomandwithwhatresults.

Welcome to the world of Marketing Accountability!

ItsahottopicandgettinghotterifresearchcarriedoutbytheCMO(ChiefMarketing
Officer)CouncilintheUSistobebelieved.AMarketingOutlookSurveyinvolving350top
marketersidentifiedtheTopChallengestheyfacedin2007(%agreeing)as:
1.
2.
3.
4.
5.
6.

Quantifyandmeasurethevalueofmarketingprogrammesandinvestments48.3%
Improvetheefficiencyandeffectivenessofthemarketingorganisation38.7%
Growcustomerknowledge,insightandconversation33.7%
ImprovetheallocationandROIofmarketingspend28.4%
Extractgreatervalueandprofitabilityfromcustomerrelationships24.2%
Increasecredibility,influenceandperceivedvaluewithseniormanagement23%

And,ofcourse,Nos.15deliverNo.6somethingmarketersdesperatelyneediftheyaretobe
consideredhighperformancepartnersinprofitgenerationandshareholder/stakeholder
returns.

McGrawHill2010PrinciplesandPracticeofMarketing6eDavidJobber

Defining High Performance

AccentureandTheMarketingSocietyrecentlyjoinedforcestoconductaseriesofinterviews
withsomeoftheUKsmostpreeminentmarketingexecutivesacrossallindustriesinorderto
shedlightonthestateofmarketingmeasurement(Jackson,B.,Spooner,J.&Ingleton,R.,
MeasuringUp,Accenture,2006).
Theresearchspecificallysoughttounderstandtheimportanceofmarketingmeasurementto
thesecompaniesbusiness;theprocesses,systemsandresourcestheseorganisationshavein
placetogaugemarketingperformance;andtheimpactthatmarketingmeasurementishaving
onoverallbusinessperformance.
Theresearchfoundthathighperformershad3broadcharacteristicsofmarketing
measurement:
1. Highperformersliveameasurementculture.Theyplacemeasurementatthecentreof
theorganisation,withmarketingmeasurementaboardroomagendaitem;they
acceleratetheirlearningthroughasystematicprocessoftestandlearn;andthey
effectivelyshareandutilisemarketingmeasurementinsightsandbestpracticesacross
theorganisation.
2. Highperformersinvestintherightskillsandcapabilities.Theyrecruitanddevelop
individualstobuildaconsistentbaseofmarketingknowhow,analyticalskillsand
commercialperspective;supportthemarketingfunctionthroughstrategicpartnerships
withanextendedteamoffinanceandresearchspecialists;anduseappropriate
technologiestohelpthemanalysecriticaldata.
3. Highperformersmeasureintelligentlyandcomprehensively.Theyoperateaclear
measurementstrategyalignedtobusinessgoalsandoutcomes;andtheymeasurewhat
mattersprovideditscosteffectiveandactionable.
Theresearchalsouncovered3goldenrulesofmeasurement:
1. Measurewhatmatters,notwhatyoucancutthroughtheclutterandfocusonwhat
reallymatters
2. Onlymeasureifitsactionableemphasisonneedtoknowratherthanniceto
know.
3. Onlymeasureifitsworththecandleestablishcostvbenefitandtrytogetmorefor
less.

Back to Basics Marketing...

Ontheonehand,itsinteresting,andontheother,verydisturbingtonotethatalloftheCMOs
TopChallengesfor2007areinfactcontainedwithinoneofthemostwidelyusedintheUKat
leastdefinitionsofmarketing...

McGrawHill2010PrinciplesandPracticeofMarketing6eDavidJobber

Marketingisthemanagementprocessresponsibleforidentifying,anticipatingandsatisfying
customerrequirementsprofitably
CIMWebsite(cim.co.uk)2007
Sothe(really)badnewsisthatwerealreadysupposedtobedoingiti.e.measuringprofitability,
asformostmarketers,theultimategoalismakingmoremoneyandthereareonly4or5ways
tomakemoremoney:
1.
2.
3.
4.
5.

Morecustomers
Buyingmoreproducts
Moreoften
Athigherprices
And/orwithlowercosts

Back to Basics Metrics

Sowhatweneedinordertomeasuremarketingperformanceisacollectionofkeymarketing
metricswhichenableustodeterminewhetherornotwereachievingtheabove.
Metricsaresimplymeasuresmarketerscanandshouldusetoassessboththeefficiencyand
effectivenessofboththeirstrategicandtacticalmarketingefforts.
Itsusefultodifferentiatebetweenstrategicandtacticalactivitiesandmetrics.Strategic
relatestotoplevelstrategiesandobjectiveswhicharebroadlycustomer(and/ormarket)
related,forexample,morecustomers,buyingmoreproducts,moreoften,customersatisfaction
(readdelight),loyalty,commitment,profitability,willingnesstorecommendand/orsearchor
perhapsevenwaitastheproductisnotinstock,Illwaituntilitis,ratherthanbuysomething
elsetruecommitment!Whereas,tacticalrelatestotheactivitiesweundertakeinorderto
achievethestrategicobjectivesandmetrics.Generally,theserelatetomarketingmixactivities
andcovereveryaspectofthemixfromproductand/orservicequality,throughmarketing
communicationstoconvenienceandtangible(physicalevidence)parameters.
AsDruckerpostulated,efficiencyisdoingthingsrightwhereaseffectivenessisdoingtheright
thingsandweneedtodothisatboththestrategicandtacticallevelinordertodelivertheright
outcomes.Doingthisreligiouslyandconsistentlyinawhathowfashion(whatdowewantto
achieveatthestrategic/customerlevelandhowshouldwegoaboutdoingthis(i.e.withwhat
implementedinwhichway,inotherwords,whatdowewanttoachieveatthetacticalleveland
howshouldwegoaboutit...)enablesobjectivestocascadeorwaterfallthroughthewhole
organisationtranslatedintoobjectives,tasks(what),processes(how)andmetricsateverylevel
(directors,manager,staffanddepartments).
So,allthetime,werequestioningandhopefullydeterminingthewhat,why,howetc.of
everythingwedowillthisgettherightresult?(effectiveness)andarewedoingthisinthe
mostappropriate,productiveandcosteffectiveway?(efficiency).Suchquestionslieatthe
heartofawelldesignedandoperationalmarketingaccountabilityapproach.

McGrawHill2010PrinciplesandPracticeofMarketing6eDavidJobber

Letshavealookatthisinalittlemoredetailbylookingatacoupleofexamples,onelinkedto
increasingsales,theothercustomersatisfactionbothofwhichrepresentstrategicobjectives
withassociatedmetrics.
Intheformer,wereusingadvertising(thetactic)inordertoachievetheultimateobjective
(increasingsales),sohowmightweassesstheefficiencyandeffectivenessofouradvertising?
Tokeepitsimple,letsassumewererunningadirectresponsepressadvertisement.Intermsof
assessingadvertisingefficiency,wedperhapsexaminereachi.e.reachingthemaximumnumber
oftherightpeopleinourtargetaudience(forthelowestcostideally)orperhapsGrossRating
Points(calculatedbymultiplyingreachwithfrequency).Asforadvertisingeffectiveness,its
simply...,yes,sales!
Ifwewereinterestedinassessingourcustomerserviceperformance(akeydeterminantof
customersatisfactionandpotentiallyloyaltyandcommitment),thenumberofcallshandledper
hourmightgiveusanindicationofourefficiencyorproductivity,whereasthepercentageof
issuesresolvedfirsttimemightbeagreatmeasureofcustomerserviceeffectiveness.Asit
happens,thistacticalmetrichasamajorstrategicimpact(whichitselfismeasurableinternally)
researchbyTARP(www.tarp.com)andothersconsistentlyshowsthatservicerecovery
excellence,suchasresolvingissuesquickly,resultincustomersbecomingmoreloyalthanifthey
hadnthadanyissuesinthefirstplace!

Why is Marketing Accountability Important?

Theimportanceofmarketingaccountabilityandassessingtheefficiencyandeffectivenessofour
marketingeffortsshouldbesoobviousthatonemightdescribeitasacommonsense
approach.However,asweallknowandironically,commonsenseisnotthatcommon!
Letshavealookatwhatsomemeasurementgurushavetosayaboutnumbers,metrics,
measurementandknowledge...

Whenyoucanmeasurewhatyouarespeakingabout,andexpressitinnumbers,you
knowsomethingaboutit;butwhenyoucannotmeasureit,whenyoucannotexpressit
innumbers,yourknowledgeisofameagreandunsatisfactorykind
WilliamThomson(LordKelvin)PopularLectures&Addresses,189194
Inaneconomywheretheonlycertaintyisuncertainty,theonesuresourceoflasting
competitiveadvantageisknowledge
IkujiroNonaka,HarvardBusinessReview,NovDec,1991
Ifyoucantmeasureit,youcantmanageit,whatgetsmeasured,getsdoneand
metricsmotivate!
RobertKaplan&DavidNortonTheBalancedScorecard,1996
...everymetric,whetheritisusedexplicitlytoinfluencebehaviour,toevaluatefuture
strategies,orsimplytakestock,willaffectactionsanddecisions
JohnHauser&GeraldKatzMetrics:YouareWhatyouMeasure,1998

McGrawHill2010PrinciplesandPracticeofMarketing6eDavidJobber

So,measurementisveryimportant!Atafundamentallevel,weallhavelimitedresourcesand
competingcallsonthesescarceresources,hencetheneedtoknowwhetherwearedoingthings
right(efficiency)anddoingtherightthings(effectiveness).
Inadditiontotrackingpast,presentandfutureperformanceandmoreproactively,wellchosen
metricscanhelpmarketersdiscovernewinsights(throughdataanalysesormorespecifically
customeranalytics),aiddecisionmakingandsubstantiateimprovementand/orinvestment
recommendations,predictfuturetrends,stimulatethecreationofnewinitiatives,objectives
andtargets,evenvalidateorchallengeexistingassumptionsand/orrulesofthumband
establishReturnonMarketingInvestment.Thesewillbediscussedlater.
Therealvalueofmeasurementcomesfromlearningandtheactionwhichfollowsit!Thiscan
buildconfidenceandevenhelpmotivatepeople(directors/managers/staff)toachievespecific
objectives.
Alloftheabovewillimprovethecredibility,influenceandperceivedvalue(CMOChallenge6)
ofbothmarketersandmarketing.Somuchmorepositivethanmarketingaccountabilityand
worstofallmarketingcontrol!

How marketing accountability can be achieved

Anticipatingmoreandmorequestionsalongthelinesofwhatexactlydowegetinreturnfor
oursubstantialexpenditureonmarketing?,howsuccessfulwasthatlastdirectmail
campaign?,shouldwedomoreorfewerevents?,whatsthelinkbetweenPRactivityand
sales?,shouldwespendmoreondirectmarketingnextyear?,whatistheROIofour
website?...,itsnotaquestionofwhethertodeploysomeformofMarketingPerformance
MeasurementSystembuthowtodoit.

Marketing Performance Measurement System (MPMS)

Putsimply,aMPMScomprisesacomprehensivesetofmarketingperformancemetricsthat
enablesinformedmarketingdecisionstobemadeandactionstobetakenbecauseitquantifies
theefficiencyandeffectivenessofpastmarketingactionsthroughtheacquisition,collation,
sorting,analysisandinterpretationofappropriatedataandthegenerationandreportingof
marketinginformation(basedonanexcellentdefinitionofaPMSinThePerformancePrismby
Neeley,AdamsandKennerley)

McGrawHill2010PrinciplesandPracticeofMarketing6eDavidJobber

The Performance Pyramid

Orgainzational
objectivese.g.
sales&profits

CustomerSpecificObjectivese.g.
salespercustomer,customer
servicelevels

MarketingActivitiese.g.productdevelopment,personal
selling,advertising,pricing,distribution

Startingatthetopofthepyramid,wehavetodefinetheorganisationskeyobjectiveswhich
normallyincludegrowthinsales,profitsandwhereappropriate,TSR(totalshareholderreturn).
Theremayalsobeotherstakeholderobjectivesatthisleveli.e.peoplewhohaveavested
interestinwhattheorganisationdoesandhowitdoesite.g.internalcustomers(itspeople),
localcommunity,media,suppliers,intermediariesetc.,withawinwinemphasis.
Atthenextlevel,wehavecustomerspecificobjectives.Thisiswheremarketing(andother
functionssuchassalesandcustomerservice,forexample)havetodeliverinorderforthetop
levelobjectivestobeachieved.
Atthebottomlevel,wehavelotsofexamplesofwhatmarketersdoinordertodeliverorhelp
othercolleaguesand/ordepartmentsdeliverprospectsandcustomers,trial,adoption,loyalty
andcommitment.

Identify Key Drivers

Theplacetostartthemetricsjourneyisatthetopofthepyramid.Idevenrecommendre
visitingCIMsdefinitionofMarketingandthe4or5waystomakemoremoney,asthisgetsthe
focusoncustomers,valueandcompetitiveness,forexample.Thiswillhelpdeterminethekey
valuedriversinourindustrywhichitissensibletobothdefineindetailandmeasureclosely.

McGrawHill2010PrinciplesandPracticeofMarketing6eDavidJobber

Measure What is Measurable

Intermsofgettingstarted,measurewhatsmeasurablee.g.directmarketingisbydefinition
measurable...
Thedistributionofproducts,informationandpromotionalbenefitstotargetconsumers
throughinteractivecommunicationinawaythatallowsresponsetobemeasured.
DavidJobberPrinciplesofMarketing(6thedition2010))
Directmarketingincludesactivitiessuchasdirectmail,directresponseadvertising,telesales,
catalogues,directsalesanddigitalmediasuchaswebsite,email,blogs,IDTV,mobile
SMS/MMS,RSS,SEM(SearchEngineMarketing),viral/eWOM(WordofMouth)andwikis.
Astonishingly,researchundertakenbythemarketingconsultancyProphet,foundthatlessthan
halfoftherespondentsmeasuredtheirdirectmarketinginanyway,whichisnotonlyalmost
incredible,butmustbeborderingoncommercialnegligence!(Seethe2006/2007Stateof
MarketingStudy(www.prophet.com).

Some Idea is Better than No Idea!

Intermsofindirectmarketing,activitiessuchasadvertising,branding,pressrelationsand
publicity,events,sponsorshipetc.,itisimportanttogetsomeideahowthesecontribute
towardsthebigpicture.Intheabsenceofaneconometricmodel(astateofthearttechnique
whichcan,inprinciple,isolatetheindividualimpactofandsynergiesbetweendifferent
elementsofmarketingactivityonsales),simplecommonsensequestionstonewcustomers
suchashowdidyoufindus?shouldbe(butarerarely)used.Surveys,trackingstudiesand
othertoolsandtechniquessuchastheuseofcontrolgroups(wherewecanmeasurethe
responseofspecificgroupsexposedtosome,allornomarketingactivity,todeterminewhether
theresadifferentandstatisticallysignificantresponse)canallgiveussomeidearegarding
whetherandhowthingsareworking.

Metric Definition Template

Heresasimpletemplatefordefiningyourmetricsormeasuresandyoullfindoneprepared
earlierforguidance.Completionisbestdoneinteams(includingindividualswhohaveastake
init!)andgenerallytakesabout1520minutes,butcantake30or40minutes,tocomplete.

McGrawHill2010PrinciplesandPracticeofMarketing6eDavidJobber

MetricDefinitionTemplate

Examples

Measure:

Customercomplaints

Purpose:

Tounderstandwhichaspectsofwhatwedocausescustomer
dissatisfactionsothatwecanimproveourservice

Relatesto:

Theneedtosatisfycustomersandretaintheircustom

Target:

Reduceourcustomercomplainratiofrom5%to1%nextyear

Formula:

Numberofcustomercomplaints
_________________________x100
Numberofcustomerordersinperiod

Frequency:

Tobemeasuredandreviewedquarterly

Whomeasures?

EmmaBarnes,QualityManager

Sourceofdata:

Thecustomercomplaintssystem

Whoactsonthedata?

EmmaBarnes,QualityManager

Whatdotheydo?

Analysecomplaintsbykeyprocess,ensureprocessmanagers
analysethecause(s)andapplycorrectivemeasures

Notesandcomments:

Needtoremindstaffoftheimportanceofrecordingcomplaints
onthecustomercomplaintssystemsothatallcomplaintsare
capturedonthesystem

AdaptedfromNeely,AdamsandKennerley(2002)ThePerformancePrism,FTPrenticeHall

Sample Metrics Strategic

Customer...
Customersatisfaction,Commitment,Delight,Acquisition,Retention,Churn,Advocacy,Referral
(orwillingnessto);NetPromoterScore(PromotersDetractors,FrederickReichheld);Loyalty;
CLTV(CustomerLifetimeValue);Profitability;SOW/SOT/SOS(shareofwallet,throat,stomach);
ROC(ReturnonCustomerPeppers&Rogers),CPA/CPL/CPQLDS/ACPO(costper
acquisition/lead/qualityleaddeliveredtosales/allowablecostperorder);AverageOrder/Basket
SizeandValue;BrandParameterssuchasequityandvaluation;Marketshare(volume/value);
WillingnesstoSearchorWait;Complaints,Suggestions,andThankYous.

McGrawHill2010PrinciplesandPracticeofMarketing6eDavidJobber

Sample Metrics Tactical (Marketing Mix)

Product/ServiceQuality;performance;sales/margin/profit;reliability;responsiveness;share;
suggestions;newproducttrial;adoption;marketsuccess;cycletime(concepttolaunch);
awards...
PricePerceivedVFM(valueformoney);elasticityofdemand(responsivenesstoachangein
priceelastic=responsive,inelastic=unresponsive);relativetocompetition.
PromotionMarketingcommunicationsefficiencyandeffectiveness(e.g.advertisingreach
efficiencyandrecallorresponseeffectiveness;awareness/salienceunprompted/prompted;
shareofvoice;costperthousand(CPM)...;publicrelationsqualityofexposure(+ve,ve,
neutral,position...);advertisingvalueequivalents(AVE);webtraffic;leadsgeneratedperevent;
personalsellingSales(volume,value,margin...);leadconversion;customerdevelopment;
salespromotiontakeup;channelparticipation;samplesdespatched;couponredemption;
directmarketingresponse;clickstream;clickthroughrate(CTRwebsite/email);conversion.
PlaceAvailabilityinchannel,%ontime/intact/completedeliveries;onlinevoffline;channel
integrationandusage;channelconflict;channelcommitment;channelperformance.
PeopleSatisfaction(internalcustomers),commitment,delight,acquisition,retention,churnor
staffturnover;loyalty;advocacy;referral(orwillingnessto);profitperemployee;employee
development(e.g.trainingdays);suggestions;complaints;absenteeism.
ProcessAdministrativeefficiencyandeffectiveness(e.g.billingerrorsandhandling
complaints);recoveringservicefailures;onandofflineactivity(webstats&analytics);SLA
(ServiceLevelAgreement)performance
PhysicalEvidencePerceivedqualityofpeople,premises,equipmentsuchascomputers,
website,collateral(allofwhichareparticularlyimportantinservicemarketingenvironments).

Return on Marketing Investment (ROMI)

Thisisaveryinterestingphenomenoninthatvirtuallyeverymarketerisawareofthetermand
broadlyunderstandsthebasicprinciplebehindtheconcept.However,itappearsveryfew
certainlylessthan20%knowhowtodoit.Prophetresearchfoundthat84%ofrespondentsto
theirstudyadmittedthatROMIwasnotwellunderstoodintheirbusinesses.ROMIhaseven
beendescribedasTheHolyGrailofMarketing!
Returnonmarketinginvestment(ROMI)canbemeasuredinanumberofways.Bywayof
introduction,weshallexamineonemeasureasgivenbythefollowingformula:
ROMI=NetMarketingContribution

MarketingExpenditure

McGrawHill2010PrinciplesandPracticeofMarketing6eDavidJobber

Netmarketingcontributionisdefinedasthedifferencebetweentotalrevenueandtotalvariable
costs.Theadvantageinusingsuchameasureisthatitencouragesmanagementtoregard
marketingexpenditureasaninvestmentratherthanacost,whichisnomeanachievement(see
TimMatanovich(2000)ValueMeasuresintheExecutiveSuite,MarketingManagement,Spring,
pp3541).
Bybeingabletoshowthereturnonmarketinginvestment,marketingmanagersareinabetter
positiontoseekfuturefundssincepastinvestmentshavebeenjustified.Anexampleisgivenby
SimonThompson(thenHondasmarketingdirector)whoaskedanaudienceatamarketing
conferenceifanyonehadaninfinitemarketingbudget.Nooneraisedtheirhands.Hethen
claimedthathedid.Why?Becausehewasabletoshowthereturnonhismarketing
investment.Hewasabletodeterminetheincrementalupliftincarsalesfollowingthe
innovativeadvertisingcampaigns(e.g.thecog,hatesomething,changesomething,make
somethingbetterandthechoir).WhatMrThompsonwassayingwasthatbyusingmarketing
metricshecouldjustifyhismarketingexpenditure,makingtheseekingoffuturefundssomuch
easier.Nottomentionconfidenceandpeaceofmindandthatcomeswithknowingthatyour
marketingisbothefficientandeffective!

UsefulReferences
Farris,P.W.,N.T.Bendle,P.E.Pfeifer,andD.J.Reibstein(2009)KeyMarketingMetrics:The50+
MetricsEverymanagerNeedsToKnow,WhartonSchoolPublishing,PearsonEducation:Harlow,
England.
McDonald,M.AndP.Mouncey(2009)MarketingAccountability:HowToMeasureMarketing
Effectiveness,KoganPage:London.

Accenture/MarketingSociety
www.marketing
society.org.uk/downloads/awards/2007/MeasuringUp_MarketingMeasurementExcellence.pdf
MakingMarketingMeasureUp(BusinessWeekArticle)
http://www.businessweek.com/magazine/content/04_50/b3912109.htm
ThePerformancePrism
http://www.som.cranfield.ac.uk/som/research/centres/cbp/products/prism.asp

Prophet
http://www.prophet.com/downloads/whitepapers/effectivenessimperative.pdf

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TonyRowe
TonyRoweisanindependentMarketingandInformationTechnologyconsultant,educatorand
trainerbasedinHarrogate,NorthYorkshire,withaspecialinterestinmarketingmetrics.

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