Cracking The Code: CMOs, Measurement, and Metrics
Although technological advances have simplified evaluating metrics and quantifying data from campaigns, it’s still a complicated process. How should marketers approach these challenges?
Marketers have struggled with metrics and measurement for all long as the profession has existed. Everyone has heard the famous dictum from early 20th century retailer John Wanamaker, “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.”
The interesting thing is, things seem to have gotten better and more challenging simultaneously. On one hand, this increasingly digital world has given us new worlds of data that allow us to measure far more than we ever have before. If Wanamaker had had access to the advanced software tools that marketers use today, he may never have uttered those words.
But on the other hand, marketers and CMOs are increasingly responsible for more of the customer experience and lifecycle, given the prevalence and ubiquity of digital interactions. That means there is more for a marketer to measure and a higher bar to ultimately show value to the business.
I’ve been hearing about and talking about the new shift in digital and engagement marketing as the key challenge for marketers and CMOs these days. Yet I am still struck by how often CMO conversations return to the perennial question of measurement. From my perspective, what’s clear is that as far as we’ve come and as much as we know today, we still have much to learn.
For many marketers, metrics are the bane of their existence when measuring their impact on the overall business. Unfortunately, we don’t have a choice. If you want credibility with your CEO and CFO, metrics and analytics are an essential part of the equation.
Do you know the ratio of customer lifetime value to the cost of customer acquisition? Can you articulate what the revenue or margin contribution is for each marketing dollar spent? Making a convincing argument about marketing’s contribution to the bottom line involves speaking in a language that the C-suite understands.
I still hear marketers making the case that marketing can’t or shouldn’t be measured. Once I heard the CMO of a large brand say, “What is the ROI of putting on your pants? I don’t know exactly, but I can promise you that it will make a big difference to your day if you don’t.” But if we marketers want the credit and respect that we deserve in this new marketing first world, we need to put that kind of viewpoint behind us and just get on with it.
We’ve come a long way, baby
The good news is that we have made so much progress as a profession over recent years. Technology has had a huge hand in that progress—our ability to track behaviors, slice and dice data, and connect it to outcomes has increased by leaps and bounds.
Fortunately, the tools are there for the taking. If you work in a business that is directly connected to the end buyer or consumer, you have incredible capabilities at your fingertips. You can deploy technology that allows you to directly tie marketing’s activities with its bottom line impact. Marketers in these kinds of businesses are registering gains they can measure and earning real positions of power inside their organizations.
For example, at one major electronics company, marketing increased its contribution to the company’s total revenues from under 10 percent to 26 percent. Marketers at another large healthcare solutions company were able to track how their programs contributed $600 million in customer wins for their corporate parent. These are hard numbers in black and white, and they present a compelling case of marketing’s value to the overall enterprise.
Challenges and the biggest room in the world
But, we’re not out of the woods yet in all cases—quantifying data is still hard in many ways. As I often like to reiterate, “The biggest room in the world is the room for improvement.” My conversations with marketers from Dublin to Auckland have underscored that there are still many challenges to overcome.
One of the challenges is that many top-of-funnel, acquisition-focused marketers can’t directly answer these impact questions, because they sell through channels, or partners, or through multiple outlets.
Consider the experience of the marketing chief for a major apparel brand I spoke with recently. “My CEO wants me to quantify the impact of all this marketing, but I can’t tell him precisely because, though I know people see the marketing for our shirts, they don’t buy them directly from us. Instead, they go into the department store or on Amazon to buy them there a week or a month after seeing my marketing,” this executive told me.
All I can say sometimes is, “Well do you want me to stop what I’m doing?”
Therein lies the source of much corporate and institutional frustration. Executives orchestrate tons of marketing to promote a brand, and perhaps a week later someone will see the campaign and stop by the company’s website to make a purchase. But how does the executive or marketing team know there was a causal connection?
These are the pain points I hear about most often:
- Problems related to attribution: “I sell through channel partners and retail, so I don’t have the first-party data to know what happened.”
- Issues related to causation versus correlation: “Did your marketing really create that result or would it have happened anyway?”
- Obstacles related to time: “We created that impression or awareness or preference, but they didn’t buy immediately so we lost the thread.”
- Challenges which point to externalities: “We’re creating real pipeline, but the sales team isn’t converting them and then they blame marketing.”
- Difficulties pulling data together: “My team spends three weeks every quarter manually trying to pull together data from different places to show the impact we are having.”
- Dilemmas that arise while connecting offline and online events.
All of these are very real challenges and concerns. We need to bridge that last mile.
The path forward
Given how far we have all come, this is hardly the time to look backwards or throw our hands up in despair. Many advances allow us to find a path forward through this maze.
For instance, the new science of multi-touch attribution should help marketers better understand all the places where we interact with people. The fact remains that marketing drives revenue and engagement through many different interactions via lots of different channels all over a period of time—whether that is short or long.
Yes, CMOs still have trouble connecting all the relevant data points to explain marketing’s ROI for their company, but there is a formula and a North Star.
In no particular order, I’d like to share a summary formula of what I have heard and what I have experienced myself as a marketer:
1. Measure the right things
Whether you think you can measure them or not, start by laying out the KPIs that matter to you and to the business. Importantly, this to stop measuring and reporting metrics like clicks, opens, and impressions at senior levels. Don’t get me wrong, they are important to running the engine, but they are merely intermediate steps to an ultimate outcome.
It’s perhaps more valuable and effective to discover outcomes with inquiries about:
- The pipeline created
- Customer retention rates
- Repeat purchase rates
- Competitive share of voice
- Analyst ratings
- Gross margin contribution
- Growth in customer lifetime value
Then maniacally focus on figuring out how to get there.
2. Create a customer interaction system of record
You can’t do multi-touch attribution, solve problems of time lapses, or connect the dots and data from partners or anywhere else when you can’t see signs of customer’s transactions over time. You need a comprehensive transaction record to view of each interaction with a specific customer or prospect and know who bought what when, which can be achieved via an e-commerce, PoS, or CRM system. These are all things you can get from marketing platforms. Before the advent of this technology, we had to use 52 databases that didn’t talk to each other. Having a platform as a foundation is critical—without it, do not pass go.
3. Commit the organization to engagement and relationships
One of the core reasons that many of the key challenges above even exist is because brands do not have a direct relationship with customers or consumers. This is where first-party data comes in, which is the core of direct response marketing.
People have made this distinction between direct response and brand marketing for years, saying that brand marketers are limited because they are too far away from the consumer’s end actions. The reality is that brand marketing is just direct response with a delay.
Industries have proven that just because you sell through a channel, doesn’t mean that you can’t have a direct relationship. In this new era of engagement marketing, a relationship with an end consumer or customer will be the difference between winning and losing. It will be the new source of competitive advantage, and those with the relationship will win.
4. Experiment with new ideas
Look for ways to create this relationship. There are an infinite number of things you can do:
- Start a loyalty program that connects PoS activities with an individual person.
- Create social media connections where people identify themselves to you.
- Provide a valuable community or content online.
- Use mobile apps to connect offline behavior with other customer data.
Experiment with the myriad of ever-changing technologies that have the potential for multi-touch attribution, as they let us consider how to close some of the gaps and address some of the challenges that still exist. Such advancements let marketers execute ideas that connect different interactions which were once previously disconnected. Don’t give up.
5. Don’t take any bulls*it
You have data today. Is it perfect? In a lot of cases, yes, but in some cases, no. But, don’t let anyone question it. That’s the beauty of data—it speaks truth. Be confident.
Yes, we still have a long way to go in some places—but, it’s a marketing first world and everyone knows it.
This post originally appeared on ClickZ.