Sunday, July 17, 2016

Activity Metrics Still Matter in Measuring Marketing Performance

Faced with growing demands by senior business leaders to demonstrate the value that marketing brings to the business, marketers have made measuring marketing performance one of their top priorities.

But despite all of the attention given to marketing performance measurement, recent research indicates that many marketers have more work to do to prove the value of marketing. In the Marketing Performance Management Study 2016 by VisionEdge Marketing and Demand Metric, only 23% of survey respondents said their CEO's would give marketing a grade of "A" on its ability to demonstrate its value and contribution to the business.

Many experts contend that the disconnect between marketing and the rest of the C-suite exists because marketers focus primarily on measuring marketing activities and the immediate results of those activities, and they don't put enough emphasis on measuring the impact of marketing on strategic business outcomes.

Some commentators have started calling activity measures "vanity metrics," so it's tempting to think that measuring activities and immediate results is no longer important.

It's clearly vital for marketers to measure the impact of marketing on strategic business outcomes and to communicate that impact to senior company leaders, but that doesn't mean that marketers should ignore activity metrics altogether. Measuring the impact that marketing has on strategic business outcomes is a critical aspect of managing marketing performance, but an effective performance management system for marketing must support several functions. For example, it should:

  • Measure the performance of individual marketing activities and programs so that marketers can make sound investment and marketing mix decisions
  • Enable marketers and other business leaders to evaluate how well their marketing strategy is working
  • Support both strategic and tactical decision-making
  • Enable marketing leaders to measure the effectiveness and efficiency of operational marketing activities and processes
In order to support all of these functions, a performance management system for marketing will necessarily include several types of metrics, including activity metrics. More specifically, an effective 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
When communicating with C-level executives, marketers should emphasize metrics that demonstrate the impact of marketing on strategic business outcomes, and it's usually a good idea to omit any detailed discussion of activity metrics. But activity and other operational metrics still play a vital role in managing the marketing function and improving marketing performance.

Think of it this way. For most of us, the primary reason for exercising regularly (our "strategic outcome") is to improve our health. We periodically monitor our health through physical exams and various tests, but many of us also track and record the results of our daily or weekly workouts, because they provide an indication of our health and physical condition. Our spouse or significant other is much more interested in the results of our latest annual physical than he or she is in how far we ran yesterday. But exercising regularly and monitoring our improvement are still important to a healthy lifestyle.

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