Thursday, December 11, 2008

Survey: Marketing Accountability Measures Remain Weak

Every year since 2005, the Association of National Advertisers and vendor MMA (Marketing Management Analytics) have joined forces to produce a survey on marketing accountability. Although the details change each year, the general results have been sadly consistent: marketers, finance executives and senior management are very unhappy with their marketing measurement capabilities.

In the 2008 study, released in July and just recapitulated in a new MMA white paper, only 23% of the marketers were satisfied with their metrics for marketing’s impact on sales, and just 19% were satisfied with metrics showing marketing impact on ROI and brand equity.

Furthermore, only 14% of the marketers felt their senior management had confidence in marketing’s forecasts of sales impact. And even this is probably optimistic: a separate MMA-funded study, also cited in the new white paper, found that only 10% of financial executives use marketing forecasts to help set the marketing budget.

The obvious question is why so little progress has been made. Marketers consistently rank performance measurement as their top priority (for example, see the CMO Council’s Marketing Outlook 2008 survey). Nor are marketers doing this out of the goodness of their hearts: they know that being able to show the impact of their expenditures is the best way to protect and grow their budgets. So marketers have every reason to work hard at developing performance measures that finance and senior management will accept.

And yet...when the ANA survey asked marketers to rank their accountability challenges, the top score (45%) went to “understanding the impact of changes in consumer attitudes and perceptions on sales”. This strikes me as odd, if the marketers’ ultimate goal is to understand the impact of marketing programs on sales. Measuring the impact of marketing programs and measuring the impact of customer attitudes are not the same thing.

Nor is this a simple fluke of the wording. A separate question showed the most common accountability investment was in “brand and customer equity models” (53%). These also measure the link between attitudes and sales.

One explanation for the disconnect would be that marketers can already measure the relationship between marketing programs and consumer attitudes, so they can complete the analysis by adding the link between attitudes and sales. This seems a bit optimistic, especially since it also assumes that marketers also understand the impact on sales of marketing programs that are not aimed at consumer attitudes, such as price and trade promotions.

A more plausible explanation would be that the link between attitudes and sales is the hardest thing to measure, so that’s where marketers put their effort. Or, maybe that relationship is the question that marketers find most intriguing because, well, that’s the sort of thing they care about. A cynic might suggest that marketers don’t want to measure the link between marketing programs and sales because they don’t want to know the answer. But even the cynic would acknowledge that marketers need a way to justify their budgets, so that can’t be it.

None of these answers really satisfies me, but let’s put this question aside. I think we can safely assume that marketers really do want to measure their performance. This leaves the question of why they haven’t made much progress in doing it.

One reason could be that they simply don’t know how. Marketing measurement is truly difficult, so that’s surely part of it.

Another possibility is that they know how, but lack the resources. Since good marketing measurement can be quite expensive, this is probably part of the problem as well. Remember that the resources involved will ultimately come from the corporate budget, so finance departments and senior management must also agree that marketing measurement is the best thing to spend them on. And, indeed, this doesn’t seem to be their priority. The white paper states that “the number of CEOs and CFOs championing marketing accountability programs within their firms remained negligible and unchanged from 2007.”

This is a pretty depressing conclusion, although to me it has the ring of truth. Fuss though they may, CEOs and CFOs are not willing to invest money to solve the problem. Indeed our friend the cynic might argue that they are the ones with a motivation to avoid measurement, since it gives them more flexibility to allocate funds as they prefer.

The white paper doesn’t dwell on this. It just lists lack of senior management involvement as one of many obstacles. The paper authors then go on to propose a four step process for developing an accountability program:

- assess and benchmark existing capabilities and resources
- define an achievable future state, in terms of the business questions to answer and the resources required to answer them
- work with stakeholders to align metrics with corporate goals and key business questions
- establish a roadmap with a multi-year phased approach

There’s not much to argue with here. The paper also provides a reasonable list of success factors, including:

- realistic stakeholders expectations
- agreement on scope at the start of the project
- cross-functional team with clearly defined roles, responsibilities and communication points
- simple math and analytics
- integration of analytics for pricing, ROI, and brand analysis

Again, it’s all sound advice. Let’s hope you can get the resources to follow it.

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