Why Marketing Needs a Balanced Scorecard

Earlier this year, ITSMA, VisionEdge Marketing, and Forrester Research surveyed marketing leaders about how they demonstrate marketing's value to the business. The survey revealed that marketers are producing more performance data than ever, but that most of the data doesn't resonate with senior company leaders. For example, the survey found that only 9% of CEO's and 6% of CFO's rely on marketing data to make business decisions.

The study authors contend that most marketing metrics don't do a good job of communicating the value of marketing for three reasons.

• They measure marketing activities, but not important business outcomes.
• They measure operational efficiency, but not the effectiveness of marketing.
• They measure past performance, but they don't provide predictive insights about future outcomes.

Measuring the impact that marketing has on company revenues and profits is a critical aspect of managing marketing performance, but an effective performance management system for marketing must also perform several other functions. For example:

• It must measure the performance of individual marketing activities and programs so that marketers can make investment and marketing mix decisions that will maximize results.
• It must enable marketers and other business leaders to evaluate how well their company's marketing strategy is working.
• It must support both strategic and tactical decision making.
• It must enable marketing leaders to measure the efficiency and effectiveness of operational marketing activities and processes.

In order to perform all of these functions, a performance management system for marketing will necessarily include several types of metrics, including some of the kinds of metrics that are now being criticized. Specifically, a comprehensive marketing performance management system will include:

• Financial and non-financial measures
• Metrics for leading and lagging performance indicators
• Measures that focus on the strategic impact of marketing and metrics that support tactical decision making
• Measures of ultimate business outcomes and measures of activities, outputs, and intermediate outcomes
• Revenue and cost metrics

To prove the value of marketing to C-level executives and manage the marketing function effectively, marketing leaders need a balanced scorecard for marketing. Since its introduction by Robert Kaplan and David Norton in the early 1990's, the balanced scorecard has become one of the most widely-used and effective tools in the business management arsenal.

In my next post, I'll describe what a balanced scorecard for marketing looks like.