The foundation of all effective marketing efforts is a sound marketing strategy. Most marketing leaders feel fairly comfortable formulating strategy, but many find it difficult to measure how well their marketing strategy is actually working. The solution for this perennial challenge is a marketing Balanced Scorecard.
When Robert Kaplan and David Norton introduced the Balanced Scorecard in the early 1990’s, they saw it as simply a better way to measure organizational performance. However, many early adopters started using the Balanced Scorecard as a tool for implementing business strategy. They recognized that if the objectives and measures included in their Balanced Scorecard were derived from their strategy, the scorecard would become an effective tool for describing the strategy in measurable terms. Therefore, the Balanced Scorecard quickly evolved from a pure performance measurement system to a tool for managing strategy.
This is my third post about using a Balanced Scorecard to measure and manage marketing performance. In my last post, I described the four “perspectives” used in a Balanced Scorecard. In this post, I’ll describe how a Balanced Scorecard can help you determine how well your marketing strategy is working.
The key to using a Balanced Scorecard to manage marketing strategy is something called a strategy map. A strategy map is essentially a set of linked strategic objectives that are organized using the four Balanced Scorecard perspectives. The diagram below depicts a high-level, generic version of a Balanced Scorecard strategy map for marketing.
Each of the rectangles in a Balanced Scorecard strategy map will contain objectives that are derived from your company’s marketing strategy. In the above diagram, the rectangles contain descriptions of the kinds of objectives that would be included. For example, in the internal process perspective, one set of objectives will relate to the campaigns or programs that marketers design and execute.
In a Balanced Scorecard strategy map, the lines connecting the rectangles represent the cause-and-effect relationships that exist among your company’s strategic marketing objectives. These causal relationships define the “logic” of your marketing strategy, and they tie the objectives together to create a cohesive strategy. Describing these cause-and-effect relationships is one of the most critical steps in building a sound marketing strategy, and using a strategy map forces you to make these relationships explicit and visible.
In a Balanced Scorecard strategy map, the cause-and-effect lines indicate that achieving one objective is what enables another objective to be achieved. For example, the above diagram is indicating that if a company successfully achieves its customer value proposition objectives, the company will achieve its objectives relating to customer acquisition and customer loyalty. And, if the company achieves its customer acquisition and customer loyalty objectives, it will be able to reach is revenue growth objectives.
The most powerful argument for using a Balanced Scorecard to measure and manage marketing performance is that it provides a mechanism for demonstrating and documenting how individual marketing activities fit into and support your marketing strategy, and for connecting individual marketing activities and programs to ultimate business outcomes. The objectives and measures used in the customer, internal process, and learning and growth perspectives are leading indicators of the business outcomes that define marketing success. So, by monitoring your progress toward achieving all of the objectives included in your strategy map, and by testing the validity of the cause-and effect relationships you’ve defined in your strategy map, you are also measuring the effectiveness of your marketing strategy.