Top Marketers Share Perspectives on Marketing Measurement

 

Recently MarketingNPV had the distinct pleasure to host an event featuring a group of CMOs from across industries offering their perspectives on the challenges of measuring marketing effectiveness. As you might imagine, we heard many commonalities, but also a few differences in both the approach to measurement and the processes employed. Following are some brief excerpts.

 

Our company culture is to drive profitable revenue growth. Given our size, it's a great testament to the 325,000 orange-blooded Home Depot associates who have worked so diligently to ensure our success.

We receive daily sales data from our stores detailing the previous day's performance, so we can determine what worked and what didn't with regards to a particular marketing promotion. We can model the potential lift associated with incremental investments or changes in the marketing mix. We also analyze external variables like the weather, competition, etc.

Our marketing resource allocations are prioritized on a combination of short- and long-term objectives, and our key metrics are determined by our strategic goals. We look at consumer trends like demographic and lifestyle shifts, emerging needs and aspirations, as well as category and brand behavior. We also closely monitor market performance metrics, such as market share and competitive activity, brand strength, and customer satisfaction with the shopping experience. We're continually measuring customer satisfaction levels with in-store components like the products we carry, pricing, and service levels.

While progress has been made, there is still much work to be done in determining marketing ROI. As a result, you also need to have people in your organization who can make the best decision possible, with the best information and tools that are available.

 

There are some things that marketing wants to do that cause strife for the "quants" in the company – the CEO and CFO. But unless you're careful, the tyranny of measurement dumbs down marketing to focus unduly on just the measurable elements.

We focus our measurement efforts on answering a few critical questions, including:

What we really do in marketing is write a narrative around these questions, a story about customers in a marketplace and goods to be sold and how they're going to be purchased. Before measurements become important, plausibility of the story and of the proposed marketing approach are critical. In the Avis world, measurement is about customer loyalty and frequency of rentals. Loyalty is what matters to marketing. Frequency brings in the money. It's what matters to finance.

Once we know what's going to be measured and have the buy-in of finance, we decide on the marketing tactics. They should come last. It's much easier to build tactics out of metrics than vice versa. Loyalty, for instance, is built entirely out of branded experience. Brand advertising doesn't attach a price point, but it drives rental frequency. There are very few promotions with Avis, and the few are never price-based.

 

Until recently, HP had 86 business units with separate marketing functions pursuing a patchwork of goals and objectives, often overlapping and occasionally conflicting. Hundreds of brand messages were being pushed on the market at once. Establishing a clear role for marketing meant developing a unified strategy. So, we established a long-range plan for marketing, and the process of putting three-year and five-year expectations down on paper and quantifying them was enormously valuable in helping us to focus and prioritize our efforts.

HP's management platform for worldwide marketing starts with business strategy; progresses to marketing strategy and segmentation, solutions, and branding; and then funnels into marketing execution. Our Marketing Resource Management (MRM) system tracks our marketing spending, sales prospect progression, and total customer experience, yielding ROMI measures of brand awareness, brand equity, product demand, and revenue.

Marketing is principally about servicing customers' needs. If you believe that, then marketing is at the center of your company. Marketing sets the strategy and the long-range plan and produces financial outcomes. Having the disciplined planning process up front, combined with the comprehensive measurement platform on the back end, helps us improve our understanding of marketing's impact on the business every day.

 

We're a bit unique in that almost every executive in our company was the CFO at one time or another, so finance is the language they all speak. I need an ROI so I can say, "If you take $1 million away from marketing, this is what we'll lose." But there is not only one ROI. The ROI depends on who the customer is and where the value is.

To us, marketing is not just about generating sales, but about moving unaware consumers to awareness of our brand, aware ones to visit our store, visitors to make a first purchase, first-time purchasers to choose our company as their preferred provider, and repeat customers to give us the lion's share of their business. So we measure all the points of progression along that chain to know how our investments at the front end will pay off on the back end.

But not every single initiative we do needs to make money. We lose money, for example, when we send a plane to pick up new games on the day of their release to distribute to our stores while other retailers wait for the ships to arrive. It is good PR for EB Games to offer new video games for sale days earlier than the competition, and we know it gives our customers a positive experience that makes them think about buying from us first.

 

There is a correlation between strong brands and strong bottom lines. When we launched our brand program a few years ago, we really sought to understand what the value of the brand would be in five years. We also made sure that the value of the brand is closely tied to our new growth strategy.

We wanted to maintain the heritage of the brand but we wanted to change the postage-meter reputation and make our brand stand for "business-critical solutions provider." Now we sell solutions and not just products. That means marketing to various audiences, including the C-suite of large companies.

Our tagline – "Engineering the flow of communication" – reflected our strategy. We started to create a marketing campaign for customers, employees, Wall Street analysts, and journalists. Everything we did had to have one look and feel – events, trade shows, print advertising in trade books, case studies, direct mail, webinars, media relations, public relations, etc.

We carefully measure brand saliency, perceptions, and preferences amongst several key constituencies – customers, prospects, employees, and media. And we try to correlate these back to top- and bottom-line effectiveness, even though we know there may be somewhat of a time lag in the effect.

On a more granular level, our tactical measures show that the C-suite executives who we never thought would participate in webinars are doing so in strong numbers. One-third of all registrants on webinars are in the C-suite, and we have thousands of them participating. From a PR standpoint, it's also been a strong success. Media coverage increased significantly from 2002 to 2004. We've had 32 feature stories in A-tier publications in just the last year alone.

 

History has shown us that a powerful brand can stand the test of time. But even as the steward of a 75-year-old brand like Allstate, we must consider ways to reinvent ourselves to be relevant to today's consumers. Don't be fooled, getting to iconic brand status is not easy. Everyone may know that with Allstate "You're in good hands," but our challenge is to make consumers' brand experience even more memorable and meaningful.

To achieve iconic brand status today, your marketing organization must be ready to push the company out of its "cultural comfort zone." That not only means bold marketing and advertising tactics, but also potential realignment of your organizational structure, spending additional resources on key focus areas like "customer experience," and relentless attention to measurement, ensuring that senior management understands that your budget is driving results.

At Allstate, we have developed several multivariate measurement models that are highly predictive to point us in the right direction. Not Einstein level yet, but pretty good. We know, for example, that last year at least 30% of our quotes and about 24% of our sales were directly attributable to advertising. And we're getting a better handle every day on how investments made in improving the brand-experience bond between Allstate and our customers create a huge return on our significant marketing investment.

 

In most B2B companies that rely heavily on direct selling, the best sales professionals are larger than life. Some of ours are superheroes, and they get just about everything they want because they are good at selling.

These superheroes were great at taking anecdotal information from customers and prospects and convincing us of what we needed to do differently in the back office. We had customer satisfaction surveys, but it's really hard to drive sustainable change in your company when all you know is that you got an 8.5 out of 10 score on X, Y, and Z dimensions. In short, there was little discipline or common terminology to how we were bringing the voice of the customer into our company. We had "customer-need" anarchy depending on the internal organization.

In Six Sigma, we found a more structured way to let the voice of the customer drive the marketing, as well as other internal processes like supply chain. We translated those VOC needs into critical customer requirements. These become the measures, the tangible things that we have to deliver on. We continuously take those CCRs back out to the marketplace and validate them, then we rigorously measure our performance against those.

Culturally, we are a company mostly of engineers who love data. The secret to measuring marketing success for us was in learning to structure and communicate all the great customer feedback we were getting into a language that made sense to everyone, not just the best sales professionals.

 

Our marketing department was originally built to drive business. Fifty percent of what marketing is evaluated on is the effectiveness of new campaigns and initiatives, and the other 50% is the TTL company's net profit contribution. We have to be really astute about what we do every single day and make sure that the dollars we're spending go into customer impressions that will build incremental profit.

We spend a lot of time unbundling our marketing expenses so we can evaluate opportunities for savings or consolidate them in a way that's more efficient. We look at each of our 93 different media markets and their sales day by day, this year against plan. Over the years, we've developed a pretty good sense of what each of the media does relative to what it costs. We constantly pretest our advertising tactics before we roll out.

We have used some pretty elaborate multivariate testing to understand how different factors affect our business. We also know how the number of items we tried to sell in the Sunday insert will stimulate certain sales volumes given weather, promotional programs, competitive activity, etc. Using this same approach, we were able to winnow down over 100 different business-building ideas to just the handful that made a sustained impact at POS. Over the past three years, we have gained about a two-point comparable advantage over our aggregate direct competition – which is huge in a mature business like ours.

It's my job as head of marketing to figure out how to be smart in balancing all of the traditional things that we do with the continuous stream of new initiatives needed, as well as building equity in our company's brand. While closely monitoring the story we are telling in the marketplace, we're always figuring out how the various elements can drive more traffic and incremental gross margin. The job gets tougher every year, but the tools get better, the business process improves, and you get a little smarter every day.