The Problem With Marketing Measurement

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There seems to be two prevailing lines of thought in marketing-land these days.

One camp claims that “ROI is the ultimate measure of success — without it you can’t call an initiative a success.”

The other camp says “we need to invest in [enter-your-favorite-social media/technology] because it represents the future and it’s too early to measure the ROI of these investments.” And so this camp turns to metrics — often called “key performance indicators” — like page visits, time spent on site, and number of registered users, to track the progress of their initiatives.

Or they use “publicity” measures like the number of online references or TV air time devoted to PR campaigns like sponsoring a $1 discount on a gallon of gas for a few hours one morning at one gas station (that just happens to have a huge sign for the competitor, but now I’m getting petty).

My take: The problem is that neither camp is right. Nor is either camp 100% wrong.

OK, ROI might be the “ultimate” measure of success, but not every investment has a direct ROI. Some investments that marketing makes are for things that need to be thought of as infrastructure — an asset that enables other capabilities. There is no ROI on the infrastructure investment unless something else happens — that is, unless another investment is made in a marketing campaign or initiative that leverages the infrastructure investment.

Marketing infrastructure investments span a wide variety of things. Marketing execution technologies like lead management, campaign planning and execution, and analytics are all infrastructure (although they may produce a cost savings when compared to previous expense levels, which would produce an ROI — but this generally requires a reduction in staffing levels that just never seems to be realized). Market research is an infrastructure investment — it’s an investment in the firm’s ability to understand customers, prospects, competitors, and the market in general.

Branding efforts are infrastructure. And social media capabilities should be considered infrastructure, as well. They enable firms to have contact with customers and prospects in ways that the firms weren’t able to previously have.

Message to Camp #1: Trying to measure the ROI on all these investments is fruitless.

But the second camp isn’t off the hook, here.

Their favorite KPIs — site visits, time spent, online community enrollment figures — are insufficient for one or both of the following reasons: 1) They don’t capture incremental performance, and 2) They don’t cover a sufficient portion of the marketing funnel.

The first fault refers to the fact that when you consider the marketing funnel — awareness, consideration, preference, purchase — too many of the first camp’s metrics are skewed toward the beginning of the funnel, especially awareness.

This is the issue I have with the publicity and WOM stunts that firms pull. Great, you got 30-second coverage on the local TV station. But how many people heard about you as a result of the promotion that hadn’t heard about you before the promotion?

You don’t know, do you?

Even more problematic is that few (if any) marketers think proactively about whether they’re sufficiently investing in each part of the funnel. The ROI-focused folks are too narrowly concerned with the point of purchase, while too many other efforts are focused on generating awareness.

But what’s being done to improve how you firm moves prospects from awareness to preference, and from preference to consideration?  Are the conversion rates getting better? Getting done in a more timely fashion? Are you investing in those capabilities?

You don’t know, do you?

But you still pat yourself on the back for “only” spending $14K to get 30 seconds of air time on some local TV stations, a bunch of articles in newspapers, and a picture in Yahoo! News (which clearly shows your competitor’s name on the gas station sign).

This is why the finance people have a problem with the marketing department. The problem isn’t the absence of an ROI on marketing’s expenditures, it’s the absence of any semblance of coherence and rationale for why the investment was made.

Even more importantly, finance is frustrated that marketers don’t seem to understand the concept of opportunity cost — i.e., what else could we have done with that investment?

The solution isn’t hard to conceptualize, just hard to operationalize.

You have an investment portfolio, don’t you? You’ve got cash, stocks, bonds, and some of those investments represent different levels of risk and expected return.

Why, then, don’t you have a marketing investment portfolio to ensure that you invest across the marketing funnel, and that your marketing investments represent various levels of risk and expected return?

The answer is: 1) it’s hard to categorize and track those investments with a portfolio approach, and 2) to do this, it takes time and money, which isn’t available because marketing isn’t investing in infrastructure (the chicken and egg problem).

There’s another contributing factor. Many marketers are stuck in various belief systems — e.g., branding, customer experience, “customer service is the new marketing” — that prevent them from seeing that they have to invest in a range of capabilities, technologies, and media (new and old).

It’s going to a slow transition from cumbaya marketing to quantitative marketing.

Technorati Tags: Marketing, Marketing Measurement, Key Performance Indicators, WOM

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