Thursday, December 18, 2008

Aberdeen Reports Show Varied Roles for Performance Measurement

Our friends at Aberdeen Group apply a highly standardized research process to technology issues. They take a survey that asks companies about their business performance and the business processes, organization, knowledge management, technologies and performance measures related to a technology. They then divide the companies into leaders (“best-in-class”), laggards and industry average based on their business performance, and compare replies for the different groups. The not-quite-stated implication is that the differences in performance are caused by differences in the other factors. This is not necessarily correct (the ever-popular post hoc ergo propter hoc fallacy) and you could also wonder about the sample size (usually around 200) and how accurately people can answer such detailed questions. But so long as you don’t take the studies too seriously, they always give an interesting look at how firms at different maturity levels manage the technologies at hand.

It so happens that three of the Aberdeen studies have been sitting on my desk for some time, so I had a chance to look at them together. The topics were Lead Nurturing, Trigger Marketing and Cross-Channel Campaign Management. All are currently available for free although the sponsors may contact you in exchange.

Since the Aberdeen reports all follow a similar format, it’s easy to compare their contents. From the perspective of marketing performance measurement, they contain two elements of interest. These are the performance measures highlighted as distinguishing best-in-class companies, and the role of measurement among recommended strategic actions. Here’s a brief look at each of these in the three reports:

Lead Nurturing. The report highlighted number of qualified leads and lead-to-close ratio as critical performance measures, and found that 77% of best-in-class companies were tracking them. It also recommended tracking revenue associated with leads, although it found only 35% of best-in-class companies could do this. But otherwise, it didn’t see performance measurement as a central issue: the primary focus was on matching marketing messages to the prospect’s current stage in the buying cycle. Other important strategies were leveraging multiple channels, identifying prospect buying cycle and needs, and using automated lead scoring to move customers through the cycle.

Trigger Marketing. This report did not identify particular marketing measures as critical, although it did say that having defined performance goals for trigger marketing programs is important. It reported the most common measure is change in response rates, used by 69% of all respondents. (The next most common measure, change in retention rates, was used by just 54%.) I take this as a sign of immaturity (among the respondents, not Aberdeen), since response rate is a primitive measure compared with profitability and return on marketing investment, which were used by 43% and 42% respectively. This is consistent with another finding: the most common strategic action is to “link trigger marketing activities to increased revenues and other business results” (32%). I interpret that as meaning people are just learning to do make that linkage and are simply using response rate until they figure it out. It might be worth noting that the Aberdeen analyst highlighted digital dashboards as next step for best-in-class companies wishing to do still better, although I didn’t see a particularly compelling case for selecting that over other possible activities. But I’m all in favor of dashboards, so I’m glad to see it.

Cross-Channel Campaign Management. Again, the report doesn’t specify particular performance measures. It does say that it’s important to optimize future campaigns based on past performance (pretty obvious) and highlight real-time tracking of results across channels (less obvious, although I’m not so sure I agree. Immediate results may not in fact correlate with long-term profitability). This report did include segmentation and analytics as a strategic actions. (I consider these as part of performance measurement.) In particular, it stressed that best-in-class companies were focused on identifying their high value customers and treating them uniquely. Most of the recommendations, however, were about building the infrastructure needed to coordinate marketing messages across channels, and then executing those coordinated campaigns.

So where does this leave us? I don’t draw any grand lessons from these three reports, except to note that financial measures (i.e., customer profitability and return on investment) don’t play much of a role in any of them. Even that probably just confirms that such measures not widely available, which we already knew. But it’s good to know that people are working on performance measurement and that Aberdeen is baking it into its research.

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