Measuring Marketing Performance

This week, I read an interesting article on measuring an organization’s customer centricity.

https://www.london.edu/faculty-and-research/lbsr/the-alchemy-of-business-durability-and-profits?utm_source=twitter&utm_medium=sm_channels&utm_campaign=alchemy_of_durability_profits#.VwOEjPkrK70

The article made me think about my book Marketing as Strategy where I had addressed the issue of measuring marketing performance. This is still an important issue despite the 15 years since I wrote Marketing as Strategy. Then, I made a few observations about measuring marketing performance which I think may still be worth pondering on.

“To get respect, some marketers have rushed to quantify each activity in terms of profitability and shareholder value. After all, what cannot be measured, cannot be managed, let alone add value, right? Yet, we must avoid make-believe metrics. We can more easily measure the effects of promotions on sales and profits than those of advertisements, but that does not mean that we should rely more on promotions. Coca-Cola would not be a globally recognized brand today without a century’s worth of advertising.

Everyone in the organization, including marketers, must be bottom-line oriented. If profits fall short, then the company cannot continue serving customers or attracting resources to serve even more customers. While sales and profits tell us how well the firm has performed in the past, we must add indicators—marketing metrics like brand equity, customer satisfaction, and customer loyalty—that inform us about the company’s current health and its prospects. The CEO plays an important balancing role. Many years ago, Robert E. Riley of Mandarin Oriental Hotel Group noted, “As managing director, I take ultimate responsibility for the brand—as any CEO must.… In every organization, ultimately the CEO must decide on the final balance between short term financial objectives and the requirement to build the brand with a long term perspective.”

By building and using metrics that matter, one can clearly connect investments in marketing to the ultimate goal of satisfying customers profitably. These marketing metrics should help address important questions about the company’s marketing effectiveness, such as, Are we servicing our customers better? Have we truly differentiated in a clearly visible way that matters to customers? Is our differentiation generating profits for us? Does our price premium reflect the additional value delivered to customers? Are we satisfying our customers better than our competitors? Are we exploiting market opportunities faster than others? Do our people understand how we create value for the customers? Must distributors carry our products to maintain legitimacy in the industry? These questions will help a firm understand how well marketing is performing.

Most boards of directors devote precious little time to such marketing and strategy related questions and focus instead on past financial performance and proposed budgets, of which the latter rarely materialize. I have always argued that boards should carefully review such marketing metrics as customer satisfaction, brand equity, and customer loyalty—to bring the customer back into the boardroom.

Corporate marketing can influence the definition of the relevant marketing metrics at each of the five levels of business and ensure that each division and country tracks, collects, and reports the appropriate metrics using a common methodology so that executives can compare data across the firm (see ‘Marketing Metrics’ here). Managers can slice and dice comparable data in various ways to diagnose the overall performance of the corporation and demonstrate the productivity, or lack thereof, of marketing expenditures. At Grand Vision, the European optical chain, corporate meetings used to devote a day to discussing marketing metrics after participants present the financial numbers and employee statistics.”

Since I wrote the above, Facebook and Google have entered the marketing world. While it is easy to measure marketing performance on Google, I think we need to be careful not to spend only where we can track effectiveness easily. Instead, let us try to track marketing effectiveness even it is more difficult by doing experiments. Otherwise I fear we will not build brands, just short term business (except for Google of course). We all need to think deeply about measuring marketing performance and it is not an assignment that can be left exclusively to the marketing function.

Warmly

Nirmalya

Magic Dust

Lausanne sky in Spring over Lake Geneva is beautifully unique and always makes me nostalgic. A few photos from last night as the sun was setting.

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3 Comments Add yours

  1. Business strategy evolves from and feeds into strategic niches of Marketing, Sales, Finance,Technology, HR, Production….Bottom up and top down. Short and long term.

    The convergence being Customer and measures around customer. Hence Marketing gains a visible position despite all others being important.

    Interestingly business strategy must rise above the past to design frontiers of the future. Metrics can measure the now and the past.

    So what more may Businesses nee Boards be considering to innovate nee strategise these new frontiers?

    Beautiful pictures of Laussane. Thank you for sharing them.

    Like

  2. Heather says:

    Thank you for the thoughtful article. As a marketeer I want to be able to answer four primary questions – are we satisfying our customer to the point that they want to grow with us, have we selected those customers/markets such that they generate profitable returns for the company, are we doing this better than our competitors in the same space, and what do we need to offer to preserve/improve future profits. I like the metrics as they help to demonstrate the above. I would add share of wallet with key customers in to strengthen the customer metrics.

    I was lucky enough to visit Lausanne back in September, a truly beautiful place!

    Like

  3. R.Jayaraman says:

    The points made by Dr Nirmalya Kumar regarding marketing metrics have been in the radar of corporates for quite some time now and have been greatly facilitated in practice through balanced score card mechanism . The BSC is an excellent way of helping the corporate and the marketing divisions to conceptualise and metricalise the short term and the long term strategies in consonance , to maximise Brand equity . In fact the AT&T initiated Customer Value Management process can lead to identification of several key metrics to track marketing performance .

    Like

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