Marketing's New 5 Ps: Turning What You Know Inside Out

by Jason McNamara

With apologies to Philip Kotler, whose four Ps—product, price, place, and promotion—have been integral to any successful product or service marketing effort of the past 50 years, today's successful marketing hinges on five new Ps.

Whereas the Ps we studied in college are all from the provider's point of view, these new Ps focus with laser-like clarity on the customer.

But customer-centricity can't be the mantra of just the marketing department. Every group, from the boardroom to product leaders to IT, must place the customer at the core of every decision it makes.

Responsibility for evangelizing within the organization rests squarely on the shoulders of the CMO. After all, if the marketing chief isn't living and breathing customer focus every minute, and encouraging others to do the same, who will believe its importance?

The CMO's office must consistently demonstrate to the rest of the enterprise the value of looking at all products, messaging, and brands through the customer's eyes. The entire organization can then get closer to the hearts and minds of their prospects and customers, with the added benefit of proving the value of every initiative that the company undertakes.

The new Ps are composed of five equally important, tightly interwoven components, designed to more tightly integrate marketing in the future.

1. People

Certainly, the audience must be at the heart of any marketing initiative. That isn't news to anyone in your department. Smart marketers have always had an instinctive sense of what their audiences would respond to. But no longer is it enough to know about your target in aggregate. Perhaps "person" might be a better heading for this P—because now it's important to know your customer intimately, as a human, emotional being.

It's one thing to know how people who generally look and act like your customer might respond. It's another to know exactly how John A. Sample has responded in the past, and what's likely to interest him next time. Why did he make his last return or exchange? What did he look at before placing an order? Has he purchased anything since his last call to customer service? What size does he wear?

Chances are, he's already told you who he is and what he wants—but were you listening?

2. Passion

Marketers are passionate about their profession. But no good marketer can function using only the right side of the brain anymore. Creativity and instinct are still important, but the anal side—the analytics side—is gaining fast.

Marketing is part of the business, and the business exists to perform. As a result, you're being held to greater accountability than ever before. Today, your passion for marketing must be driven by facts—the full view of all the data now available about customers, campaigns, and returns.

You already know that this passion for a 360-degree perspective can have an incredibly powerful effect. Being able to apply sophisticated marketing analytics to every piece of information you collect about your customers is like bringing the customers themselves in-house to tell you not just what's working and what isn't, but why. You can use this passion to your advantage, helping generate ideas, proving their relevance, and justifying the money you spend.

Still, a survey published in March by the Association of National Advertisers found that the top two concerns of senior marketing executives are integrated marketing communications and marketing accountability. Further research by the same group found that 60% of respondents had none of the necessary cross-functional involvement in their companies' development and management of marketing accountability programs to make them truly effective.

If you're like many CMOs, you've already identified the needs but may be uncertain of the solutions. Fortunately, each of these issues can be addressed by enterprisewide marketing analytics.

3. Processes

Marketing processes must become more enlightened. It's time for everyone to sing from one song sheet—instead of having discrete departments creating dissonant communications and hoarding data. Database and digital marketing, marketing operations, and customer relations all need to work in concert—a concept foreign to many companies in which other departments are often viewed as competitors rather than collaborators.

Again, the answer is a passionate, organization-wide approach to customer-centricity. If it doesn't come from the CMO, where will it begin?

Just two years ago, more than 40% of database marketers surveyed by Forrester Research lacked a complete picture of customer contact history, and one-third were missing transactional data from one or more channels.¹ That is clearly less than ideal.

In an organization with customer-focused processes, everyone strides toward a common goal. In a sales organization, for example, this can mean that the group which handles generating and tracking leads works closely with the sales team to contact, close, and communicate with prospects. Everyone has a hand in determining how often to communicate, how to allocate budgets, campaign lifecycles and more.

Forrester Research analysts suggest that "socializing" the customer database is a necessary change, so that everyone in the enterprise can contribute to and benefit from this tremendous asset. It's time to throw siloed systems, ideas, and processes out the window. But a sea change like this one has to start at the top.

4. Platform

An industry of ideas, marketing also now relies heavily on technology to guide contact strategies, deliver messaging, integrate information and processes, and measure performance. This takes powerful tools, only a few of which are up to the task of managing the vast data stores available across multiple channels, but they're out there.

Of course, software and technology can't solve the issues—they can only provide the platform for coordinating and accessing information, helping to apply customer-centric thinking to every initiative an organization undertakes.

Peter Kim of Forrester Research suggests that "many brand marketers don't understand IT's value beyond email and Ethernets. Conversely, many IT departments think of marketing as the 'make it pretty' department. In the best interests of the organization, marketing and IT must come together and share resources to build an experience infrastructure layer to support the customer experience. Marketers should add a high-level internal role to champion marketing technology and to manage the construction of a marketing technology backbone."²

Of course, the internal IT department may not be the answer. They have their hands full trying to satisfy new regulatory, privacy, and security demands that crop up every day. Marketing technology, however, is a specific discipline that applies technology to traditional and emerging marketing functions that can help companies deliver consistent customer experiences, integrate marketing processes, measure performance, align themselves to the needs of their businesses, and become more accountable to senior management.

5. Partners

Partners are an integral part of marketing—they always have been and always will be. The expertise they offer adds value over and above what can be achieved in-house. Consequently, CMOs must ensure that they have solid partner relationships that are part of the process and integrated more closely into the marketing department.

As marketing becomes more sophisticated, marketing service providers, agencies, and systems integrators must all be tapped to deliver on their particular areas of expertise. It's impossible to have all the skill sets in-house and do everything well and cost efficiently.

For many companies, this isn't a new idea—they already look to different providers for various types of creative, media buying, production, and more. It just becomes more critical as highly technical capabilities come into play.

Looking to the right partners means outsourcing key responsibilities to those best equipped to deliver on them, and that reduces the risk associated with investing in new infrastructure and specialist teams.

The Five Ps in Practice

When wholly, enthusiastically deployed, the new five Ps all work together—a passion for pleasing the person with whom you're doing business gives rise to new processes, the adoption of smarter platforms and value-adding partnerships that can make the promise of one-to-one marketing real.

But it has to be an enterprisewide way of thinking that comes from the top and infiltrates every member of every team. And it has to start with you.

Sources:

^1"Best Practices: Socializing The Customer Database," Forrester Research, Inc., July 23, 2007.

^2"Best Practices: Customer-Centric Marketing," Forrester Research, Inc., July 25, 2007.

Jason McNamara is chief marketing officer of Alterian (www.alterian.com).

Published on March 18, 2008

How to Create a Marketing Plan

What is a marketing plan and why is it so essential to the success of your business? Find out here, in the first section of our comprehensive guide to creating a marketing plan.


URL: http://www.entrepreneur.com/marketing/marketingbasics/marketingplan/article43018.html

Firms that are successful in marketing invariably start with a marketing plan. Large companies have plans with hundreds of pages; small companies can get by with a half-dozen sheets. Put your marketing plan in a three-ring binder. Refer to it at least quarterly, but better yet monthly. Leave a tab for putting in monthly reports on sales/manufacturing; this will allow you to track performance as you follow the plan.

The plan should cover one year. For small companies, this is often the best way to think about marketing. Things change, people leave, markets evolve, customers come and go. Later on we suggest creating a section of your plan that addresses the medium-term future--two to four years down the road. But the bulk of your plan should focus on the coming year.

You should allow yourself a couple of months to write the plan, even if it's only a few pages long. Developing the plan is the "heavy lifting" of marketing. While executing the plan has its challenges, deciding what to do and how to do it is marketing's greatest challenge. Most marketing plans kick off with the first of the year or with the opening of your fiscal year if it's different.

Who should see your plan? All the players in the company. Firms typically keep their marketing plans very, very private for one of two very different reasons: Either they're too skimpy and management would be embarrassed to have them see the light of day, or they're solid and packed with information . . . which would make them extremely valuable to the competition.

You can't do a marketing plan without getting many people involved. No matter what your size, get feedback from all parts of your company: finance, manufacturing, personnel, supply and so on--in addition to marketing itself. This is especially important because it will take all aspects of your company to make your marketing plan work. Your key people can provide realistic input on what's achievable and how your goals can be reached, and they can share any insights they have on any potential, as-yet-unrealized marketing opportunities, adding another dimension to your plan. If you're essentially a one-person management operation, you'll have to wear all your hats at one time--but at least the meetings will be short!

What's the relationship between your marketing plan and your business plan or vision statement? Your business plan spells out what your business is about--what you do and don't do, and what your ultimate goals are. It encompasses more than marketing; it can include discussions of locations, staffing, financing, strategic alliances and so on. It includes "the vision thing," the resounding words that spell out the glorious purpose of your company in stirring language. Your business plan is the U.S. Constitution of your business: If you want to do something that's outside the business plan, you need to either change your mind or change the plan. Your company's business plan provides the environment in which your marketing plan must flourish. The two documents must be consistent.

A marketing plan, on the other hand, is plump with meaning. It provides you with several major benefits. Let's review them.

* Rallying point: Your marketing plan gives your troops something to rally behind. You want them to feel confident that the captain of the vessel has the charts in order, knows how to run the ship, and has a port of destination in mind. Companies often undervalue the impact of a "marketing plan" on their own people, who want to feel part of a team engaged in an exciting and complicated joint endeavor. If you want your employees to feel committed to your company, it's important to share with them your vision of where the company is headed in the years to come. People don't always understand financial projections, but they can get excited about a well-written and well-thought-out marketing plan. You should consider releasing your marketing plan--perhaps in an abridged version--companywide. Do it with some fanfare and generate some excitement for the adventures to come. Your workers will appreciate being involved.

* Chart to success: We all know that plans are imperfect things. How can you possibly know what's going to happen 12 months or five years from now? Isn't putting together a marketing plan an exercise in futility . . . a waste of time better spent meeting with customers or fine-tuning production? Yes, possibly but only in the narrowest sense. If you don't plan, you're doomed, and an inaccurate plan is far better than no plan at all. To stay with our sea captain analogy, it's better to be 5 or even 10 degrees off your destination port than to have no destination in mind at all. The point of sailing, after all, is to get somewhere, and without a marketing plan, you'll wander the seas aimlessly, sometimes finding dry land but more often than not floundering in a vast ocean. Sea captains without a chart are rarely remembered for discovering anything but the ocean floor.

* Company operational instructions: Your child's first bike and your new VCR came with a set of instructions, and your company is far more complicated to put together and run than either of them. Your marketing plan is a step-by-step guide for your company's success. It's more important than a vision statement. To put together a genuine marketing plan, you have to assess your company from top to bottom and make sure all the pieces are working together in the best way. What do you want to do with this enterprise you call the company in the coming year? Consider it a to-do list on a grand scale. It assigns specific tasks for the year.

* Captured thinking: You don't allow your financial people to keep their numbers in their heads. Financial reports are the lifeblood of the numbers side of any business, no matter what size. It should be no different with marketing. Your written document lays out your game plan. If people leave, if new people arrive, if memories falter, if events bring pressure to alter the givens, the information in the written marketing plan stays intact to remind you of what you'd agreed on.

* Top-level reflection: In the daily hurly-burly of competitive business, it's hard to turn your attention to the big picture, especially those parts that aren't directly related to the daily operations. You need to take time periodically to really think about your business--whether it's providing you and your employees with what you want, whether there aren't some innovative wrinkles you can add, whether you're getting all you can out of your products, your sales staff and your markets. Writing your marketing plan is the best time to do this high-level thinking. Some companies send their top marketing people away to a retreat. Others go to the home of a principal. Some do marketing plan development at a local motel, away from phones and fax machines, so they can devote themselves solely to thinking hard and drawing the most accurate sketches they can of the immediate future of the business.

Ideally, after writing marketing plans for a few years, you can sit back and review a series of them, year after year, and check the progress of your company. Of course, sometimes this is hard to make time for (there is that annoying real world to deal with), but it can provide an unparalleled objective view of what you've been doing with your business life over a number of years.

Source: The Small Business Encyclopedia and Knock-Out Marketing.

MP 'Classic Truths': If You Don't Measure, You Can't Manage: The Best Metrics for Managing Marketing Performance

by Laura Patterson

Without metrics to track performance, marketing and business plans are ineffective.

Businesses need to know which success factors require measuring, and they must understand the differences between measurements (the raw outcomes of quantification), metrics (ideal standards for measurement), and benchmarks (the standards by which all others are measured).

For marketers, three primary metrics constitute a starting point for tracking their performance. Once companies are aware of their competitive position, their desired outcomes, and what it will take to achieve those outcomes, companies will be better able to identify the success factors, benchmarks, and appropriate metrics to meet their target.

Why Measure?

Metrics are a part of our everyday lives: from our heart rate, to our bank balances; from our weight, to the gas mileage on our cars. If we don't pay attention to these numbers, we create a risk for getting a heart attack, being overdrawn, or running out of gas.

The same is true in the business environment. If a company doesn't identify and track important performance measures, it increases its risks.

Metrics provide a means to assess progress; they provide valuable data points against which the marketing organization can track its progress. Metrics demonstrate accountability and allow marketers to better know, act upon, align efforts, and reduce market exposure. Metrics enable the marketing organization to truly serve as the eyes and ears of the company.

And, more importantly, establishing and tracking metrics will have a positive influence on the leadership's satisfaction with Marketing and the marketer's ability to secure funds. Only 38% of US executives say their companies are now measuring the results of their marketing efforts, according to a study of senior business executives conducted in the second quarter of 2004 by Blackfriar.

Will measurement actually change investment in Marketing? Blackfriar compared planned marketing spending for companies that measure marketing with those that don't. The result? Firms that measure marketing planned to spend an average of 41% of their annual marketing budgets during the second quarter. Those that don't measure planned to spend only 33%; apparently, they felt more comfortable planning to spend their marketing dollars than those that don't measure.

Measuring marketing also has an impact on the satisfaction of senior executives regarding their investment in Marketing. Some 16% of executives at companies that measure marketing said they were dissatisfied with their marketing efforts. But at firms that don't measure marketing, 28% said they were dissatisfied.

The simple act of measuring marketing results reduced the dissatisfaction of senior executives significantly. In other words, measurement allowed Marketing to prove its worth.

Defining Metrics

The world of metrics can be confusing for people new to these concepts. To better understand metrics and how they work, several terms must be defined:

• Measurements are the raw outcome of a quantification process, such as a company's numbers, ratios, and percentages.
• Metrics are the standards for measurement, providing target values that a company must achieve to reach a certain level of success.
• Benchmarks are the best measurements to aspire to, the standard by which all others are measured. Companies that set benchmarks in their industries are the ones often lauded in "Top Ten" and "Most Admired" lists and articles.

A good example of a marketing benchmark can be traced back to the early 1990s. Over a decade ago, market research firm IntelliQuest (now Millward Brown IntelliQuest) conducted a customer satisfaction research study for the personal computing industry.

The firm spoke to customers who rated the companies in the industry, which resulted in a measurement on a one-to-nine scale. It then learned that 84% of users who rated their satisfaction as a seven, an eight, or a nine would consider the same brand for their next purchase. Seven, eight, or nine became the metrics that companies aspired to attain. The benchmark was nine.

Three Metrics Gauges

To determine which success factors to measure and the appropriate metrics for each, marketers must have a clear understanding of the company's goals. A young company looking to gain traction in the market is focused on factors different from those of a more established company wanting to improve its customer relationships.

For those beginning to use metrics, listed below are four key performance indicators that support three metrics gauges: market share, lifetime value, and brand equity.

These gauges are directly linked to the three specific performance areas that Marketing can impact: acquisition, penetration, and monetization.

The first responsibility of Marketing is to identify and enable the organization to acquire customers, without whom there is no revenue, without which there is no business. Acquisition enables the company to increase its market share.

Although Marketing may not close the deal, marketing strategies move the customer through the buying process, from awareness to consideration. Four key performance indicators enable you to address market share:

1. Customer growth rate
2. Share of preference
3. Share of voice
4. Share of distribution

The second responsibility of Marketing is to keep the customers that the company acquires and increase the value of those customers. It is expensive and ultimately disastrous to have customers coming in one door only to go out another. High customer churn signals a variety of problems and hinders your ability to create leverage.

The following performance indicators will help your drive these penetration-related metrics:

1. Frequency and recency of purchase
2. Share of wallet
3. Purchase value growth rate
4. Customer tenure
5. Customer loyalty and advocacy

The third responsibility of Marketing is monetization. Up until the 1970s, a company's value was determined by its book value. Over time, intangible assets, such as a company's intellectual property, customer value, franchises, goodwill, and so on have had an increasing effect on a company's market value.

Marketing professionals can improve the market value of their company by improving their performance in four key areas:

1. Price premium
2. Customer franchise value
3. Rate of new product acceptance
4. Net advocate score

A recently published report, "Measures + Metrics: Assessing Marketing Value + Impact," by Glazier, Nelson and O'Sullivan, corroborates these gauges and performance metrics. In their report for the CMO Council, the authors specified four performance metrics:

1. Business acquisition/demand generation, which can include such metrics as market share gains, lead acquisition and deal flow
2. Product innovation/acceptance, which can include market adoption rates, user attachment and affinity, loyalty and word-of-mouth
3. Corporate image and brand identity, which can include growth in brand value and financial equity, awareness and retention of employees
4. Corporate vision and leadership, which can include share of voice and discussion, retention and relevance of messaging, and tonality of coverage

Regardless of which model companies choose to deploy, to fully capitalize on the benefits of metrics they should consider establishing a continuous process in which metrics are collected, analyzed, and reported on a regular basis.

Over time, metrics can reveal valuable information about which marketing tactics are most effective, what types of prospects are most likely to buy, which customers are most profitable, and how the market in general develops over time.

Also important to remember is that metrics themselves can change over time. As the market and the company evolve, marketers must diligently review and adjust their metrics.

Innovative competitors will continue to set higher benchmarks, ratcheting up the acceptable range of metrics. The airline industry's 45-minute airplane turnaround time was considered standard until Southwest Airlines decided to do it in 15 minutes. Some metrics may become outdated, and newer metrics and methods of measurement will require attention.

To work without metrics is to work blindly. A lack of metrics makes it extremely difficult to assess whether a course of action is working or needs adjustment. The proper use of metrics can provide guidance to help a company expand market position, lower costs, and retain the best customers so that the company can ultimately set the benchmarks in its industry.

Note: This MarketingProfs "Classic Truths" article was first published on November 23, 2004.

Laura Patterson (laurap@visionedgemarketing.com) is president and founder of VisionEdge Marketing, Inc. (www.visionedgemarketing.com) and author of Measure What Matters: Reconnecting Marketing to Business Goals and Gone Fishin': A Guide to Finding, Keeping, and Growing Profitable customers.

Published on October 23, 2007

Beyond the 4Ps: The 5Ts of Marketing Operations

by Adrian Carol Ott

CMOs of global companies are now confronted with unparalleled challenges—and opportunities:

Marketing accountability: It is no secret that CEOs are demanding greater ROI on their marketing investments. Consequently, many CMOs are driving initiatives to make the marketing function more accountable and measurable.

Globalization: Serving global markets necessitates that marketing coordinate campaigns across continents to leverage cost and synchronize messaging; however, campaigns must also meet local needs and norms.

Complex consumer expectations: Consumers have become increasingly vigilant about spam and privacy. Compliance with the regulations of each country and state is mandatory.

Mergers and acquisition (M&A) integration: Frequent M&A places constant demands to rapidly integrate messaging, Web, and collateral of newly acquired companies into the corporate brand. Inadequate marketing budgets frequently associated with acquisitions place additional stress on existing budget priorities.

New marketing technology: The advent of new internet technology has enabled unprecedented interactive dialog with customers. This presents a huge opportunity for forward-thinking companies to target and reach customers in personalized ways. However, new technologies must be implemented and integrated across the world with regional marketing teams that execute campaigns locally.

Stakeholder agreement: Coordination with regional marketing groups, product business units, and sales is a major task. Processes are needed to prioritize and support new product introductions and demand generation within marketing budget constraints. Terms such as "What constitutes a qualified lead?" need to be standardized worldwide. Otherwise, roll-up, visibility, and accountability via actionable CMO and campaign dashboards become nearly impossible.

Marketing Operations Emerges as a Discipline

Faced by these demands, many CMOs have commissioned a marketing operations organization to tackle these challenges. Originally designated to create metrics and dashboards for accountability, marketing operations is increasingly being treated by leading companies as a foundation to the marketing function.¹

Marketing operations is the only function (other than the busy CMO) that manages marketing from an end-to-end perspective. Marketing functions such as PR, product marketing and regional marketing only see a portion of the big picture.

"Marketing operations ensures marketing is run as a business," states a VP of Marketing Operations at a major Silicon Valley firm, "We strive to enable the marketing organization to be streamlined in day-to-day processes so they have time to think, focus on the customer and to innovate."²

The 5Ts of Marketing Operations

What constitutes marketing operations? Based on our work with clients, and in our research, we have found that marketing operations is an emerging dimension to the marketing mix. Enabled by new processes and technology, it goes beyond the 4Ps (Product, Price, Place, Promotion), and 3Cs (Customers, Competitors, Corporation³), to fully round out the marketing mix.

The 5Ts of Marketing Operations:

Total Strategy

Techniques & Processes

Tracking & Predictive Modeling

Technology

Talent

By approaching marketing operations across these dimensions, CMOs have an integrated approach to enable marketing worldwide.

Let's describe the 5Ts in more detail.

Total Strategy

This area involves strategy development in the product portfolio. It is not uncommon for large companies to have dozens of products in their portfolios—some have hundreds. Managing investments and priorities across the portfolio is paramount.

• What constitutes effective strategy development for each product?
• What are the key elements needed in each plan to win in the marketplace and to roll this out worldwide?
• Where do we "double-down" our investment? How do we gain market share with our resources? Where do we reduce investment?
• Does the organization reflect how our business should optimally interact with customers? Are there new ways we can improve our dialog and reach?

Chief of staff for the CMO: Based on our work with clients and research, the head of marketing operations in a number of companies takes on this role—driving the organizational agenda, identifying "white spaces," and ensuring measurement results are discussed at review meetings.

Techniques and Processes

How should information flow most effectively across the marketing organization worldwide? How do we make decisions? What are our governance processes? What is our roadmap for marketing processes next year? in three years?

• Fiscal planning processes and reviews
• How should budgets be allocated?
• How should we optimally interact with our customers? What are the touch points?
• How should information flow within marketing and with other stakeholders such as sales and business units?
• Standards and criteria for evaluating new initiatives and campaigns.
• What are product launch categories (e.g., criteria for "A," "B," or "C" launches)
• Can we apply Six-Sigma to our processes?
• Tracking and Predictive Modeling
• How do we make marketing more accountable? How do we measure campaigns and ensure better predictability of outcomes?
• How are we doing today? Metrics and dashboards.
• Forecasting—What are leading indicators of the future? How can we better target and predict? e.g., data-mining customer databases.

Technology

How do we implement technology across the globe to enable effective customer dialog, demand generation and measurement? What are the business requirements for IT? How does technology support the marketing and sales process road map for the next three years? How do we integrate with sales technology?

• Internet/Web/e-commerce
• Consolidating/rationalizing customer databases
• Online customer forums
• Marketing resource management software Analytics/decision-making software
• Marketing research databases, etc.

Talent

How do we ensure our marketing personnel are trained and able to work with new marketing technologies and processes? How can we enable them to make the right decisions based on analytics and campaign scorecards?

• What are the roles and responsibilities of each talent community?
• How do these communities interact? Where are the hand-offs?
• Training strategy with a marketing skills curriculum across the marketing function
• Ensuring balancing between the art and science of marketing

The 5Ts Transform the Future of Marketing

Although foundational, the 5Ts have a deep and significant impact on customer relationships. For example, by implementing integrated technology for demand generation and customer database access, regional marketing personnel can build innovative campaigns on top of a marketing operations infrastructure. By tracking the success of a campaign, companies will realize better customer targeting and ROI; they learn from prior successes and failures.

Although it can be a multiyear process for large organizations to implement all of the 5Ts, a holistic, integrated approach to marketing operations gains CMOs greater accountability and ROI for their organizations worldwide. It enables them to "run marketing as a business."

The 5Ts add a critical foundation to the marketing function, enabling marketing operations to support CMOs in tackling contemporary challenges and opportunities. The 5Ts are dramatically transforming the marketing function and changing how marketing will be conducted in the future.

Endnotes:

¹ In a number of business-to-business-focused firms, marketing operations is combined with the sales operation function to promote integration of the two groups. Although organizationally integrated, the purpose of marketing operations remains the same.

² HBS N. CA Marketing & Sales Roundtable, "Marketing Operations: How It Will Transform Marketing Forever," Panel Discussion with VPs of Marketing Operations from Symantec, Cisco, BEA, and a consumer packaged goods expert, June 20, 2006.

³ The 3Cs have been used in other forms and described in different ways. For example, we have heard "Communication" used as a "C." Our description is what appears to be most consistent in the literature. Other forms could be substituted for the 3Cs and have the same effect. The intent here is to avoid debate on this element, as it would diminish the central topic.

Adrian Carol Ott is CEO of Exponential Edge Inc. (www.exponentialedge.com).

Published on September 25, 2007

Quality Metrics Enable Marketing's Ability to Influence Strategic Direction

by Laura Patterson

Various studies for the past several years from the Association of National Advertisers, Frost & Sullivan, IDC, and the CMO Council, among others, have found that CEOs are demanding more accountability from marketing. While most marketers are measuring something, survey results indicate there is room for improvement regarding metrics and the quality of these metrics.

In fact, results from VisionEdge Marketing's 6th annual Marketing Performance Survey found that only 17% of the 136 executives and marketing professional indicated that their CEO would give marketing an A. In addition, this study and others continue to suggest that a gap remains between a company's business goals and the metrics marketing uses to measure their impact on these goals. Companies continue to struggle with the contradiction between priorities and action.

The need and opportunity remains for marketing to improve the linkage between marketing expenditures and delivered results.

"Marketing must improve its value to justify its existence as a centralized function," according to Elana Anderson, a principal analyst at Forrester Research. If we don't make our case and develop and communicate quality metrics, we may find the days of marketing as a standalone department numbered and instead find ourselves absorbed into sales, finance, or some other function.

It's not like this is a new phenomenon. The concept of measuring marketing has been around for a long time. The question is what should we measure and what metrics are best?

In 2001, James Gregory's article in the Journal of Brand Management shared a proprietary model that linked various financial factors and corporate images to stock prices, sales, and market share. Research at VisionEdge Marketing has found that most companies fail to measure such things as cost to acquire, order value, share of wallet, churn rate, brand equity, and other key business variables that marketing impacts. Rather, marketers have a tendency to measure such things as response rate, demo participation, event traffic, number of new contacts or leads, number of press hits, cost per lead, and lead aging.

While these metrics offer some insight into the results of specific programs, they do not link marketing to the business objectives. In fact, our studies indicate that only about one in four marketers measure marketing's impact on the business and nearly two-thirds of marketing plans do not even include metrics.

A Five-Point Continuum

Forrester Research, Marketing Management Analytics, and the Association of National Advertisers conducted an online survey to find out how marketing professionals leverage marketing analytics. Some 50% of the respondents indicated that measurement remains the hardest part of marketing and 51% are dissatisfied with how they measure marketing ROI. Yet nearly all of the respondents realize that measuring marketing is important and influences senior management's confidence in Marketing personnel and programs.

To make progress on the marketing-measurement front, marketing professionals must shift from tactically based metrics to metrics that are more linked to business outcomes. The measures must include both financial and non-financial goals.

This figure illustrates the continuum of marketing metrics and how marketing metrics are evolving:

Starting at the bottom left and working up and to the right, we can use this illustration as a framework to explore how marketing metrics are evolving from tactical to strategic. Activity-based metrics refer to those things we can count. This was marketing's first foray into the world of measuring—looking for things we could count, such as press hits, click-through rates, CPMs (cost per thousand), and so on.

Most marketing plans today consist of activity lists, such as the number of ads to run, the number of tradeshows to attend, the number of new product brochures to produce, the number of research studies to conduct, and so on. Marketing then reports on the status of these activities—ads ran and responses per ad, Web site visits and downloads, contacts per tradeshow, etc. These are then turned into charts in an attempt to present the marketing dashboard.

Yet with activity-based metrics all we have is a colorful status report and no information on the impact of these activities on the business. The company cannot make any key business decisions or determine whether strategies are working.

Operational metrics, the next level, is a step forward. These metrics focus on improving the efficiency of the organization. Typical metrics in this stage include cost per lead, lead aging, leads per sales rep, and campaign payback. The goal is to squeeze out any inefficiency. While this is a noble pursuit and an important one, marketing efficiency alone will not make a company successful. What really "moves the needle" in terms of business performance is how well its marketing identifies product opportunities, positions these products, builds market traction against the competition, and fosters customer loyalty. Performance outweighs efficiency.

Both activity-based and operational metrics are a good place to start, but neither serves as an accurate indicator of strategic effectiveness. Neither enables the organization to determine which efforts are having the greatest impact; neither provides a quality control process, focuses on marketing's contribution to the company's overall valuation, or serves as a good way to demonstrate marketing's accountability.

To address those issues, marketing executives and professionals need to evolve to outcome-based metrics to develop quality measures. Outcome-based metrics focus on three specific and common business outcomes: market share, customer lifetime value, and brand equity.

Once we accomplish a systematic approach to outcome-based metrics, we will have the basis for advancing to leading indicator metrics—those that help us determine the likelihood of a particular outcome and eventually creative models to use metrics to predict outcomes.

And once we've mastered leading indicator metrics, we're only a few financial models away from predictive models—those that allow us to predict a business outcome.

Creating Your Marketing Executive Dashboard

Marketing performance management and metrics tracking would be incomplete without a way to capture and report the metrics—that is, a dashboard. Ideally, metrics indicate the business health of your organization. A dashboard is the visual representation of a firm's health and provides a snapshot between actual performance and the goals. A good dashboard facilitates action. It not only reports on the metrics being monitored but also serves as a vehicle to help decide on what actions are required and their priorities. Yet, according to a 2005 study conducted by CMO Magazine, three-fourths of marketers have no formal scorecard.

Creating a dashboard is more than just producing a few charts and graphs. A good marketing dashboard serves as a visual and diagnostic vehicle that communicates marketing's effectiveness and impact on business goals. Every metric provides a specific perspective on the firm's business. Some metrics indicate whether there is a problem today, and others help alert marketing to a potential problem down the road. The status of the marketing organization on the metrics continuum will impact what kind of dashboard it can create. As the business goals change, it will be important to revisit the dashboard to make sure the dashboard metrics are still in alignment with the business needs and goals.

As companies progress along the metrics continuum from activity-based to outcome-based, the dashboard will also evolve. Outcome-based metrics involve a dashboard that hones in on the primary business outcomes: market share, customer value and shareholder value. Because these metrics tend to be more market centric, the dashboard begins to provide more strategic insight and direction.

The greatest challenge for the marketing organization is how to capture the metrics. Manual aggregation of data across multiple spreadsheets comes with potential issues, ranging from error-prone reporting to poor utilization of internal resources. Moving from a spreadsheet-based system to an automated system provides greater benefits to the organization as a whole.

A mapping process helps with defining the metrics and ultimately the dashboard. As a result, most companies select metrics and a dashboard that reflects the following six categories:

1. Market growth
2. Customer value and net advocacy
3. Profitable deal flow
4. Opportunity pipeline
5. Competitive health and market value index
6. Product innovation pipeline

Regardless of the metrics you ultimately choose or the categories represented on your dashboard, a good dashboard provides insight into performance, fosters decision-making, and aligns strategy with implementation.

Measure What Matters

We began this discussion about the need for marketing to be more accountable and to develop quality metrics. Hopefully, you have some new ideas on how to focus marketing metrics around business outcomes and how to develop quality metrics that will help you provide insight into how marketing is making a contribution to the company and how to demonstrate that contribution to senior management.

As you continue on your marketing performance journey we hope these ideas lead you to...

• Focus marketing metrics around business outcomes.
• Develop quality metrics that will help you provide insight into how marketing is making a contribution to the company.
• Demonstrate that contribution to senior management.

And we hope your journey will include the following three actions:

1. Start making active progress on improving marketing performance and accountability.
2. Even if you don't have all the data, start with what you have, define your data gaps, and develop a plan to close these gaps.
3. Stop reporting on activities and tactical data around campaigns and Web traffic, and focus on climbing up the metrics continuum. It may still be important to track campaign results for an internal functional dashboard. The more you can link marketing to business outcomes, the more you can influence your company's strategic direction.

If in doubt about what to measure, select those measures that help your company make decisions and take action. When used this way, marketing metrics enable a firm to seize a competitive advantage, and they position Marketing as a strategic member of the team.

Laura Patterson (laurap@visionedgemarketing.com) is president and founder of VisionEdge Marketing, Inc. (www.visionedgemarketing.com) and author of Measure What Matters: Reconnecting Marketing to Business Goals and Gone Fishin': A Guide to Finding, Keeping, and Growing Profitable customers.

Published on September 18, 2007