J. Wanamaker once said “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” Well, it turns out, a quote like this wouldn’t fly in today’s leading organizations. Recent research from Fournaise Group (see prior post “CMOs: With Your New Great Power Comes New Great ROI Responsibilities”) revealed 90% of CEOs interviewed don’t trust the CMO. The general consensus among CEO ranks is c-suite marketers are disconnected from the short- and long-term goals of the organization because they cannot sufficiently link marketing return to bottom line results. It seems if 50% of your marketing spend is wasted, you better be capable of identifying which half in 2013.
But what does this mean to today’s CMO? You have to be more focused on Marketing Performance Management. Marketing ROI is the proven correlation between marketing spend and gross profit generation. And while 69% of Marketers feel their strategies and campaigns do make an impact on the company’s business, they readily admit they can’t precisely quantify or prove the real marketing return on investment (ROMI). Seventy-seven percent (77%) of CEOs say that CMOs keep talking about brand, brand values, brand equity and other parameters that struggle to link marketing spend to results that really matter: revenue, sales, EBIT or even market valuation.
Here are 6 golden rules that will help marketers renew a focus on marketing performance management and link marketing spend to the bottom line:
1. Adopt new metrics
Okay, you still need to measure your traditional marketing KPIs like brand values, brand equity, brand reputation or customer experience, campaigns response rates, monthly unique visitors, etc. But it’s important to also start measuring and elevating financial KPIs and how you contribute: revenue from up-selling and cross-selling, customer lifetime value relative to customer acquisition spend, sales, EBIT and even market valuation.
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2. Don’t be obsessed by the new and sexy marketing channels. Just remember that only few CMOs have proven that Social is profitable….yet.
According to Fournaise 74% of CEOs say that “CMOs focus too much on the latest marketing trends such as social media, because they believe they represent the new marketing frontier – but [these channels] rarely demonstrate how they contribute to more business for the company.” Adopt a methodology to define the Customer Lifetime Value (CLV) as one of your key decision-making drivers. Once you’ve calculated the CLV for your entire database, you’ll be able to anticipate and demonstrate the financial consequences of your marketing actions. Even better, CLV will give you the power to ask for more budget, as you’ll be able to say to you CFO “If I have X more dollars for my campaigns, I can prove that it’ll generate X+Y additional margin”.
3. Don’t be afraid of data miners.
CMOs must embrace not only the creative marketers but quantitative marketers as well: Data is gold, big data is everywhere. To leverage this huge opportunity, more and more organizations are embracing marketing resources with prior experience in finance, statistics with quantitative skills that can help optimize campaigns and thus improve your marketing efficiency. Data miners and marketing technologists are now a must have in your organization.
4. Don’t think and measure in silos.
CEO expect CMOs to move beyond qualitative metrics such as click-through rates for email, website views, impressions, etc. According to Gartner, by 2017 CMOs could be spending more on technology than CIOs. But all these technologies lead to siloed data and fragmented views of customer engagement. CMOs need to champion initiatives that align and centralize customer data for real-time business rules that can be measured and optimized via technology. Customers are acting in cross-channel: you have to think, execute and measure in the same way.
5. Test, Test and Test.
Always test your marketing strategies and campaign hypothesis…..and learn from these tests. Test the offers, test the channel(s), test the messages, test the targets, test the timing of your campaign….test everything. You’ll be able to find the best strategies and prove the added value of your new marketing idea. As the great management luminary Peter Drucker once said “If it can’t be measured it can’t be managed.”
6. Measure, Measure and Measure.
Measure everything. Be obsessed and start to think of Marketing Performance Management as one of your most important investments for the next two years. Your MPM solution should embrace all your marketing activities, including the ability to gather information across channels.
CMOs are right to perceive a positive contribution to the bottom line. But perception needs to be supported by the numbers. Decades ago, measuring success was largely a function of experience and intuition—far too difficult, even impossible to manage. But the era of digital marketing makes it possible to automate meaningful marketing measurement that links to the bottom line. By finding the right balance between art and science and by adopting the “test-&-learn culture” CMOs can re-gain the respect of the CEO.