Marketing has always been a difficult area to measure, yet remains undeniably indispensible to virtually every business. As more tools become available, many marketing professionals find themselves surrounded by data. Yet there are currently no real standards for determining which data are actually important; indeed many refer to marketing as the “dark science” because it is so difficult to quantify accurately.
After all, it’s not that marketing professionals disagree on which units of measurement to use (eg, yards v meters), but rather that they have not reached a consensus on what to measure in the first place. Certainly the profession pays close attention to trends in metrics, but standardization has yet to emerge. In the meantime, companies come up with proprietary tools and claim to offer definitive metrics. In the short term, these companies may enjoy a competitive advantage. But they’re actually short-selling the industry in a way that could ultimately undermine the credibility of marketing as a profession.
David W. Stewart, Robert E. Brooker Professor of Marketing and Chair of the Marketing Department in the Marshall School of Business at the University of Southern California, suggests twelve ways that marketing can adopt and standardize its metrics. This week we’ll examine the first six.
1. Metrics must first be financial: The most comprehensible measurement across all segments of a company is return on investment (ROI). This measure puts marketing in the context of clear economic gains that everyone can understand. Furthermore, this is the only information that is useful to managers as they plan and execute budgets.
2. Marketing accountability must be measured the same as in other departments: Factors such as risk, capital investment, return, and the time value of money are crucial for determining budget and strategy. Before a marketing team can pitch a new or risky marketing strategy, the team must place it in the context of these factors.
3. Any measure of marketing activities should both impact future decisions and provide retrospective proof of its efficacy: In other words, marketing activities should demonstrate inherent value and become part of a company’s comprehensive business plan. The metrics should also help companies to decide between different marketing activities, based on specific goals and budget.
4. Effective measurement cannot be short- or long-term only: Every marketing effort has both immediate and long-lasting effects. The best metrics systems take both of these into account—and acknowledge that the two may not be congruous with one another.
5. Metrics must illustrate the difference between marginal return on investment and total return on investment: Eventually any marketing strategy will fall prey to the law of diminishing returns. This is especially true in today’s climate, where the array of marketing tools seems to increase exponentially. Marketing metrics must track the incremental return, so that strategies and campaigns can be abandoned when they are no longer effective.
6. Marketing metrics should account for the fact that different products produce different rates of return: Many variables impact the potential return on investment, including size, profit margin and rate of growth. Marketing metrics must take this into account. This component is especially important when marketers must promote a variety of products or services.
So what metrics work using Stewart’s model? How have you implemented metrics effectively in your marketing practice?