Friday, May 30, 2008

Can Brand Value Really Measure Effectiveness?

One more comment on the ANA’s Integrated Marketing survey that I wrote about yesterday. I was struck that brand tracking studies ranked second among effectiveness measures, and brand equity measures ranked fourth. (Numbers are in yesterday’s post.) This is the more respect than brand measurement usually gets.

I suppose this reflects the nature of the survey respondents, who are mostly consumer marketers and (this being the Association of National Advertisers) are largely focused on conventional advertising. I suspect a survey of, say, Direct Marketing Association members would get very different results.

But it seems that brand value is also accepted as an effectiveness measure by people outside of marketing at the survey respondents’ companies. This suggests these people live in a very brand-oriented culture. Indeed, although a couple of speakers yesterday said they had trouble getting their company to believe ROI calculations based on marketing mix models, no one mentioned any problems gaining acceptance for brand metrics.

Lest you think the respondents are all packaged goods marketers, 20% of the survey responders worked in financial services and insurance. (One nice thing people used to good research is they publish all the details.) Computers and technology accounted for another 10%. The traditional brand-centric categories of consumer packaged goods were 11% and food, beverage and tobacco were 9% of the total.

One reason the high ranking of brand value measures caught my eye was that I had just compared brand valuations from two different sources: Millward Brown Optimor and Interbrand. Taking Google in 2007 as an example, Millward Brown gave it a value of $66.4 billion and Interbrand gave it a value $17.8 billion (Millward Brown’s 2008 figure for Google is $86.1 billion; Interbrand 2008 is not yet available.)

Any way you slice it, this is a very big difference. Rankings also diverged: Millward Brown placed Google first among all brands while Interbrand had it at number 20.

My point here is the financial values produced by brand valuation methodologies are very imprecise. It’s actually a bit frightening to think that advertisers would use them to measure effectiveness. The consumer attitudes captured in brand tracking studies are probably much more reliable, even though they cannot be directly converted into a financial measure.

Side note: I had no sooner finished this post than I received an email survey from ANA asking my opinion of the conference. These are definitely people who take their research seriously. Good for them.

Thursday, May 29, 2008

ANA Integrated Marketing Conference

I spent the today at the Association of National Advertisers Integrated Marketing Conference in New York. Presentations ranged from a nuts-and-bolts description of reaching government buyers to a frothy view of why consumer “conversations” will supplant traditional media. All quite interesting.

But the one comment that resonated most strongly for me personally came in the conference introduction by ANA President and CEO Bob Liodice. As a result of technology, Liodice said, marketing has changed more in the past five years than in the previous thirty. Marketing must reinvent itself in four primary areas: brand building, integrated marketing communications, marketing accountability, and marketing’s internal organization.

In a way, Liodice’s statement explained why a conference on integrated marketing is still needed. After all, the idea that marketing campaigns should coordinate across channels is by now a fairly old one, and it ranks with Mom and lapel flag pins as a beyond attack. So you would think we could just assume that all marketing communications would be integrated, rather than treating integration as a special case.

And perhaps we could, if we were only dealing with traditional channels like broadcast, direct mail, events, and so on. In reality, as we’ll see in a minute, even those aren’t as integrated as everyone would like. But the challenges of creating that integration are nothing new.

What is new is that various digital channels—Internet ads, social networking, mobile, etc.—have a potential so obviously huge that marketers cannot ignore them. Integrated marketing takes on a new urgency because marketers integrate the digital channels to take advantage of them. Indeed, most of the sessions at today’s conference dealt with digital issues.

One session that didn’t focus on digital showed results of an ANA-sponsored survey on integrated marketing issues. This found that the barriers to integration were largely organizational rather than technical. Specifically, the top four barriers were:

· 59% existence of “functional silos” inside the company
· 42% lack of strategic consistency across communications disciplines
· 36% insufficient marketing budget
· 36% lack of a standard measurement process

It’s only when you reach number five that the answer even might be related to technology:

· 33% lack of skill sets among marketing staff

Answers to other questions reflect a similar lack of obsession with digital channels. Indeed, the ranking of marketing communications programs by which “provides greatest value to your business” lists conventional channels first:

· 34% general advertising
· 11% in-store/point-of-sale
· 11% word-of-mouth/viral
· 8% public relations
· 8% direct response advertising
· 8% search engine marketing (at last!)
· 7% sales promotion
· 7% event marketing
· 3% internet advertising
· 3% sponsorship
· 2% social networking

One way to read these numbers is that ANA members are old-school mass advertisers who may dabble in digital channels but don’t take them seriously. But judging from the keen interest in digital at today’s conference, I don’t think that’s the case. Rather, I think these numbers mean two things:

1. most of the ANA members' business is still driven by conventional media, so by “value” they meant sales volume.

2. the obstacles to integrating digital media are the same, primarily organizational, obstacles that block integration of conventional media.

That the second of these points is true seems almost self-evident: although new technology can certainly be tricky, the real issue is figuring out what to do with it, not how to get it to work.

The first point seems more doubtful, because I think of “value” as a quality or efficiency measure (as in, “value for money”) rather than a simple volume measure (as in "value of sales").

But the ANA respondents may see things differently. When another question asked “the most important measure of effectiveness of your integrated marketing communications programs”, the ranking was:

· 35% sales growth / volume
· 11% brand tracking study
· 10% ROI analysis (e.g. econometric modeling)
· 9% brand equity measures
· 8% market share
· 8% response data (e.g. cost per lead, cost per sale, cost per click, etc.)
· 6% customer acquisition
· 4% customer relationship management data
· 3% profitability
· 3% lifetime value of a customer
· 2% advertising research
· 1% other

In other words, this group really does focus on sales volume. In fact, even the relatively high ranking of “ROI analysis” is misleading because it relates to econometric models, which primarily predict changes in sales volume. You have to get down to number nine, and a whopping 3%, before you actually reach the true value measure of “profitability”.

To be honest, these answers make me a little sad. I haven’t really given up my belief that lifetime value is really the most important marketing measure, even though I’ve pretty much abandoned hope of seeing it widely adapted. (See If Lifetime Value Falls and Nobody Measures It, Has It Really Gone Down? and a slew of earlier posts on my Customer Experience Matrix blog.) I’d be happy with profitability as a primary measure as well. But of the top measures listed in the survey answers, only ROI analysis has any real hope of tying specific results to specific marketing programs. All the others are important business value measures, but almost useless for measuring the contribution of individual marketing programs.

I’m not saying that I’m smarter than the ANA members who answered the survey. Quite the opposite: this is a very experienced group, with an average of 15.6 years in marketing. If they’ve concluded that volume and brand measures are the most important measures of effectiveness, I’m pretty sure that’s because they’ve tried them all and found volume and brand work best. And I’m guessing the reason is those are the measures that people outside of marketing—in sales, finance and the boardroom—pay attention to.

In short, what we have here is a rather tart dose of reality. Digital channels and subtle value measures may be new and cool and important. But the old media, organizational challenges and basic volume and brand measures are still what matter the most.

Thursday, May 22, 2008

Peer Networking Groups for Marketers

Maybe I need to get out more often, but I was a bit surprised to find how many membership groups are eager to help marketers with their jobs in general, and performance measurement in particular. Many publish research that is open to non-members too. Here is a list with brief descriptions, mostly taken verbatim from their Web sites.

American Marketing Association one of the largest professional associations for marketers, has 38,000 members worldwide in every area of marketing. For over six decades the AMA has been an essential resource providing relevant marketing information that experienced marketers turn to every day.

Association of Canadian Advertisers is a national, not-for-profit association exclusively dedicated to serving the interests of companies that market and advertise their products and services in Canada. Founded in 1914 and incorporated in 1917, membership in the ACA is restricted to advertisers only. ACA cuts across all products and service sectors and speaks on behalf of over 200 companies and divisions who collectively account for estimated annual sales of $350 billion. The ACA’s primary goal is to help members maximize the value of their marketing communications investments. Members realize tangible value through a wide array of specialized courses, seminars, publications and communications. Confidential one-on-one advisory services are also available for the asking.

Association of National Advertisers leads the marketing community by providing its members insights, collaboration and advocacy. ANA’s membership includes 400 companies with 9,000 brands that collectively spend over $100 billion in marketing communications and advertising. The ANA strives to communicate marketing best practices, lead industry initiatives, influence industry practices, manage industry affairs and advance, promote and protect all advertisers and marketers. ANA membership is corporate, not individual, and open to client-side marketing corporations only (advertising, promotion, PR agencies, media companies, and consultants are not eligible for membership). ANA advances marketing decision-making by acquiring, developing and disseminating unique and proprietary insights to ANA members. Our intellectual capital covers all aspects of the communications process, including brand building, integrated marketing communications, marketing accountability and the marketing organization. ANA consistently brings members together with industry thought leaders to promote fresh thinking, develop new ideas, provide professional training and facilitate industry-wide networking. The ANA convenes constituents across the entire marketing spectrum including peer marketers, agencies, the media, associations, consultants, vendors, production companies and academicians.

The CMO Club’s mission is to provide an environment of networking, insight, openness, and contribution for CMOs that enables its members to help each other become better CMOs. Members bring a diverse set of experiences and techniques to CMOs only dinners, online and events, creating an exchange of ideas that is truly valuable. The criteria for membership are simple: you are currently a Chief Marketing Officer, or have been within the last 4 months. You must not report to any other marketing executive. Should you leave your position as CMO and not retain another, your membership will continue for 1 year. We have over 1200 CMOs in the club (and over 550 online) with new CMOs joining every day.

CMO Council is a private, non-profit organization dedicated to high-level knowledge exchange, thought leadership and personal relationship building among senior marketing and brand decision-makers. The Council is based in Northern California, but regional chapters convene worldwide under the auspices of GlobalFluency, The Independent Network of Influence, which has more than 100 offices in 72 countries. The CMO Council is an invitation-only affinity group working to further the stature, credibility, influence, and understanding of the strategic marketing function among business executives, opinion leaders and critical stakeholders. CMO Council members are drawn from the upper echelons of corporate management to form a trusted, close-knit community of peers who use their access, connections and expertise for mutual benefit, support, referral and professional advancement. Membership is open to top-ranking corporate marketing decision makers only, not consultants or agencies. Members should have at least 15 years of marketing experience and have held executive management positions at new venture, emerging growth or established enterprise organizations. Nominees must have demonstrated marketing prowess, a proven track record of accomplishment, and leadership in evangelizing marketing and branding practices. The CMO Council operates the MPM Forum, which serves as a focal point for marketing professionals interested in advancing their knowledge of the MPM discipline. This Forum provides educational programs, access to the most complete library of MPM information available anywhere, and insights from leading global MPM experts.

Demand Metric is a management advisory firm dedicated to building Practical Tools and delivering Best Practices to Sales & Marketing executives in mid-sized enterprises. Based in Vancouver, it sells several subscription services. 500 members.

Evanta facilitates private executive networks designed to support the leadership needs of senior executives in Global 1000 organizations. Driven by self-governed, membership-only communities, its peer-based conferences, educational programs and digital media connect senior leaders who are focused on accelerating their organization's competitive advantage in the international economy. Activities include the CMO Executive Summit, a private conference built by CMOs, for CMOs. The one day event is by invitation only and is steered by a Governing Body of distinguished marketing leaders from Fortune 1000 companies and other leading organizations in our region.

Marketing Leadership Roundtable publishes ‘marketing performance measurement toolkit’ among other toolkits. The Marketing Leadership Roundtable operates on the principle that the collective experience and resources of a marketing member network can more effectively and efficently resolve challenges than any one of its individual participants. Through a central research team and the contribution of proven ideas, our members receive unlimited access to current best practice research and business intelligence, tools for increased effectiveness, and an unparalleled peer network. Key facts:
· Founded by the Corporate Executive Board in 2006
· Designed for organizations with annual revenue less than $1 billion
· Serves marketing executives and their teams with unlimited access
· Includes more than 1,200 best practice studies, benchmarking reports, and tools
· Over 150 member organizations and 2,500 participating marketing professionals

MarketingProfs, founded in January 2001, specializes in providing strategic and tactical marketing know-how for marketing and business professionals in organizations worldwide through a full range of online media. With over 308,000 members and 300 contributors, MarketingProfs provides members with practical marketing tools and information in many forms, including articles, online seminars, case studies, workshops, templates, benchmark survey reports, buyer’s guides and thought-leader panel discussions. Updated weekly, the content enables professionals to stay current and effective.

Marketing Science Institute, founded in 1961, is a learning organization dedicated to bridging the gap between marketing science theory and business practice. MSI currently brings together executives from approximately 70 sponsoring corporations with leading researchers from over 100 universities worldwide. As a nonprofit institution, MSI financially supports academic research for the development—and practical translation—of leading-edge marketing knowledge on topics of importance to business. Issues of key importance to business performance are identified by the Board of Trustees, which represents MSI corporations and the academic community. MSI supports studies by academics on these issues and disseminates the results through conferences and workshops, as well as through its publications series. Membership is open only to invited corporations and qualified academics.

World Federation of Advertisers is a network of 55 national advertiser associations on five continents and approximately 50 of the world’s top 100 marketers, WFA represents around 90% of global marketing communications, almost US$ 700 billion annually. WFA champions responsible and effective marketing communications worldwide. Its U.S. affiliate is the Association of National Advertisers.

Thursday, May 15, 2008

SAS Marketing Performance Management Provides Rich Business Model

Like Caesar's Gaul, SAS Marketing Performance Management has three parts: SAS Marketing Scorecards, SAS Profitability Management, and SAS for Marketing Mix.

The heart of the system is the Marketing Scorecard, which provides a detailed business model specifying the relationships among various marketing measures. These are expressed as key performance indicators (KPIs) which can be displayed on scorecards, dashboards, and strategy maps in views tailored to different types of users. Because the SAS model defines the relationships among its components, it can calculate the impact of changes in one element on other elements and on the business as a whole. Of course, clients can tailor model to fit their own business. But SAS says that starting with a predefined framework shaves several months from the deployment process and forces a degree of rigor that can be missing from systems that simply report on disconnected facts.

The data mart supporting all this can combine inputs from campaign reporting, financial systems, budgets, forecasts, syndicated research, and other external sources. The system can import results from individual campaigns for detailed operational reporting, and can aggregate these to compare them against higher-level financial or plan data. It would not typically incorporate customer-level data.

SAS for Marketing Mix started out as Veridiem, a suite of applications for marketing planning, reporting, analysis and optimization based primarily on marketing mix models. SAS acquired Veridiem’s assets in March 2006. It still offers a hosted version within its OnDemand solution as Veridiem MRM.

SAS has reworked the independent Veridiem software to share data and other components with the rest of Marketing Performance Management. In fact, you cannot purchase SAS Marketing Mix without also purchasing SAS Marketing Scorecards.

The Marketing Mix system itself is an administrative tool designed to help users use mix models more effectively. It will draw information from the data mart as model inputs, allow users to modify inputs to build different scenarios, combine the results of multiple models, present the results in a variety of formats, and feed forecasts back into the data mart for reporting. The models are built outside of the system, using SAS or other vendors’ products.

The third component of Marketing Performance Management is SAS Profitability Management. This is a version of SAS’s generic profitability management software, which applies user-defined cost assignment rules to calculate profitability down as far as individual transactions.

Pricing of the Marketing Performance Management system depends on the components purchased, number of users, and other elements. Entry price is $125,000 plus one to two times that amount in professional services.

Thursday, May 8, 2008

Factor TG Answers All The Measurement Questions

Most of marketing performance measurement comes down to three key questions:

- what is the sales impact of marketing spending?
- what is the value of my brand?
- how should I allocate my marketing budget across channels?

Think of them as the CFO, CEO and CMO questions, respectively. Each question is conventionally answered by a different tool: sales impact is measured by marketing mix models; brand value is measured by brand valuation models; and channel programs are measured by return on investment. Although there is some connection among these tools, they are mostly separate. They are also unavailable to many firms because of high cost and extensive data requirements.

Factor TG takes a different approach, using a single tool to answer all three questions at once. I’ll spare you the suspense: their secret is online consumer surveys. These provide the critical information which is otherwise unavailable to measurement systems.

Specifically, Factor TG surveys identify customer demographics, the advertisements that customers have seen, how customer attitudes have changed as a result, and the relationships between customer attitudes and purchase behavior. With this data as a foundation, Factor TG can calculate the impact of different campaign components, such as advertising medium and creative, on immediate sales and long-term brand value for the individual consumers. It projects from this to the campaign as a whole by adding sales information from company records or third-party compilers and media planning information about campaign costs and audiences. As a result, it can provide clients with reports on:

- the return on investment of specific marketing programs,
- the near-term impact of marketing programs on sales, and
- the long-term impact of marketing programs on baseline demand (which is the functional definition of brand value).

Obviously it takes a fair amount of rocket science to make this all happen. Factor TG must find ways to reach the right audience for its surveys and craft the surveys themselves to capture the right information. Then it must build complex models to estimate how consumer attitudes translate into behavior. It must also correlate survey results with external sales and media information to make meaningful projections at the campaign level. Finally, it must build still more models to estimate the long-term effects of changes in brand attributes.

Some of this resembles traditional marketing mix and brand value models. But while traditional marketing mix models are based largely on spending levels, Factor TG captures a greater level of detail about each campaign, allowing it to measure the effectiveness of individual campaign components much more precisely. Similarly, traditional brand value models give largely static estimates of the importance of consumer attitudes, while Factor TG looks at the results of small changes in those attitudes. This greater detail lets Factor TG provide weekly reports on current campaigns so that marketers can fine-tune their programs in near-real-time. Because the reports estimate both short-term sales impact and changes in long-term base demand, marketers are able to optimize their spending along both dimensions simultaneously.

Of course, this approach has its limits. The most obvious is finding enough people who have actually seen the campaigns being measured. Surveys are easily attached to online campaigns, but otherwise FactorTG must use customer lists, consumer panels or other techniques to locate the 3,000 or so audience members needed for an adequate sample. According to Factor TG COO Margaret Coles, it usually takes an advertising budget of at least $10 million to generate an audience large enough to survey effectively. The threshold could be still higher for certain population segments, such as those over age 65 or lower income groups. When necessary, Factor TG will gather information through non-Web techniques such as personal interviews at events.

In addition, I am personally skeptical of the accuracy of survey data. Capturing attitudes is fairly straightforward, but Factor TG must also rely on consumers to report their purchases and advertising exposures, which they may not recall correctly. Sales and advertising data are critical links in the chain because Factor TG needs them to estimate relations between consumer attitudes, campaign exposures and business results. The focus on survey data also leaves out competitive and environmental factors such as advertising levels, promotions, distribution and over-all demand.

Factor TG largely rejects these concerns, arguing it has proven its techniques to skeptical clients many times. Regarding competitive and environment factors, the company says it could include them in its models but has not found it necessary. In fact, Coles said its models have less than 1% error, although I’m not sure exactly what that is measuring.

A more convincing argument may be that Factor TG needs only to be directionally correct, allowing companies to identify the stronger and weaker campaigns so it can reallocate funds appropriately. This allow continuous optimization of marketing spend even if the precise details are incorrect.

Factor TG also benefits from making very frequent measurements, which allows it to recalibrate it models on a regular basis and thereby keep errors to a minimum. This contrasts with conventional econometric (marketing mix) models, which rely on years of historical data. Of course, frequent readjustment may itself lead to errors if the model overreacts to random variations in behavior. But this is the sort of technical adjustment that Factor TG’s statisticians are no doubt very good at.

Factor TG introduced its approach about three years ago. Major clients have been in the automobile, pharmaceutical and consumer packaged goods industries, which sell through third parties rather than direct to consumers. The company has also done several dozen projects in retail, consumer electronics, hospitality, and financial services. Most clients are advertisers, with some ad agencies and publishers. Initial set-up takes about six weeks, most of which is spent understanding the client’s situation and validating Factor TG’s models with the client’s in-house researchers. Pricing typically ranges from 1% to 3% of the media spend depending on the data volume and complexity of the project. All processing occurs on Factor TG's servers, which clients can access for reports via a Web portal.

Thursday, May 1, 2008

What's the Biggest Obstacle to Marketing Performance Measurement?

In work with my own clients and discussions with other people, I have found that the biggest obstacle to marketing performance measurement is the lack of necessary data. But when I mentioned this in passing to a marketing measurement expert whose opinion I greatly respect, he challenged me. He said that his experience had shown cultural, skills and experience gaps to be more important.

This really didn’t sound right, but there’s no point debating opinions. So I looked around for some more objective evidence in the form of survey results. I found two sets of results:

- In its 2007 Marketing Performance Measurement Benchmarks for Midsized Companies (free with registration), The Marketing Leadership Roundtable found that “lack of quality data” was by far the biggest factor contributing to dissatisfaction with marketing measurements. It was cited by 84% of respondents, while the next most common factor, ‘inability to generate predictive results’ was cited by only 56%. Score one for me.

I do have to note, though, that when the same survey asked about challenges to improving performance measurement, improved data came up in third place (70%), behind improved reporting systems (81%) and improved linkages to financial results (74%). Quite frankly, I don’t know what to make of the discrepancy. I suppose that marketers answering the second question were addressing the practical issue of what could be done within existing constraints.

Incidentally, this study also proves a very detailed list of the metrics people use in different areas, with percentages to show how often they are employed. Such lists are apparently quite popular, so if you’re into that sort of thing, it’s well worth a look.

- Aberdeen Group reported in its February 2008 study CMO Strategic Agenda: Demystifying ROI in Marketing
(requires payment) that the number one challenge to identifying marketing return on investment was lack of data (48%). Again this was substantially ahead of the next-ranked issue, timely access to relevant information, cited by 36%. Other issues ranked fairly close behind: lack of human resources, difficulty in identifying the right metrics, and communication between sales and marketing.

For what it’s worth, there is also another Aberdeen study from the same series, CMO Strategic Agenda: Automating Closed Loop Marketing, which is available for free for a limited time. Data also comes up as the top issue in this one, although the question is implementation challenges for closed-loop marketing. Specifically, the study shows 47% of respondents citing data consolidation as a top challenge, compared with 36% citing lack of technical skills and 32% citing continuous access to actionable information. Although this is a significantly different issue, it does confirm the general proposition that lack of data is a big problem for marketers.

Of course, none of these studies is definitive. But I think that despite my respected colleague’s comments, I’ll continue to maintain that lack of data is performance measurement Issue #1.