How Will You Measure Marketing’s Effectiveness?
The third of three marketing arguments your company must have
The first installment of this three-part series explored why investment bankers don’t eat at the Cheesecake Factory in discussing “What Do You Want Your Marketing Team to Do?” In making a case for arguing about “Where Does Marketing Fit in Your Organization?” the second installment included a tooth (teeth?)-clenching reference to “world-class” as well as a lobster dressed as a cowboy.
If you haven’t read parts one and two and wrestled those questions to the ground yet, you really should go back and start there. Trust me. It will make this part a LOT easier.
I’m going to let you in on a well-kept marketing secret. There’s a difference between what marketing claims it can do, and what marketing can actually do.
Most marketers will promise to increase sales, or improve retention or drive revenue if you’ll only approve a few million more dollars in the budget. But in reality, marketing can only contribute to those outcomes.
Wait, what?
Think about what’s between an initial marketing message and a closed sale. At the very least, there’s product design and quality. Did you know that at its peak, Yugo spent more than $8 million on marketing to promote a car that Car and Driver called “inferior to every other car in America”? Not a single dollar of that made the actual car suck less.
Then there’s the sales process and delivery logistics. Plus, to cover the financial impacts of cross-selling and retention, I’d add in customer service and maintenance costs. Marketing can’t be oblivious to these factors (more on that in a moment), but they also can’t directly control them.
At the corporate level, measurement of marketing’s effectiveness should be rooted in what marketing contributes to the entire sales process: getting the greatest number of the best prospects to engage with your company as efficiently as possible.
To effectively argue about marketing measurement and accountability, a company should consider three types of metrics.
1. The quantitative measurement of what marketing actually delivers.
- The measures marketing controls independently: Broadly speaking, these are things like the total volume and average cost of sales opportunities. (Yes, there are nuances here… and I’m happy to consult with you on their definition. Here endeth the shameless plug.)
- The measures for which marketing has a shared accountability: Lead quality and speed to close are good basic examples. I’ve worked with companies that used lead to quote ratio as the key measure of lead quality; if marketing is engaging people who are more likely buyers of the product, that number will be high…unless there are weaknesses in the sales process.
“But wait,” you’re probably thinking. “What about brand equity? Share of voice? Net promoter scores? All those other measures my marketing team talks about?”
As a CMO, these are important measures — in the same way that advanced sabermetrics like BABIP (“batting average on balls in play” in case you’re wondering…) are important measures to a baseball general manager. The better they are, the more likely you are to be successful. However, they shouldn’t be the end game for a CEO or a leadership team. (My beloved Boston Red Sox had the highest BABIP in the majors in 2020. They finished last in the standings. I’m not likely to contribute to the team’s bottom line by buying more tickets, or purchasing a t-shirt to celebrate our limited success.)
2. The factors that impact marketing effectiveness.
- The performance of the areas on which marketing depends, like sales channel capacity and product profitability levels. If your marketing team is driving more opportunities than you can effectively handle, it’s often doing as much harm as not driving enough opportunities.
- Individual scenarios, like legal issues and product recalls. This is where it’s important to keep marketing in the loop on those privileged and NDA-constrained discussions.
3. How well your marketing team understands your business.
This assessment, unfortunately, is all qualitative and revolves around questions like: Do they understand your products and distribution channels? Do they understand who your target customers are? And I don’t mean can they parrot back what you tell them — are they thinking ahead of you in this area?
If I were going to create some objective metrics, I might try:
- Amount of time CMO spends in his/her office — (Lower is better) — A good CMO is curious in areas beyond marketing, and actively engages individuals at all levels throughout the company.
- Number of people in marketing who get key performance reports — (Higher is better) — Look at your distribution lists for reports like sales capacity, new business pipelines and financial performance. At the very least, all marketing leaders should be on there.
- Number of times CMO/marketing gets told to “stay in its lane” — (Higher — to a point — is better) — Marketing should be as close or closer to your customers and prospects as anyone in the organization. If they’re not sharing what they learn and using that knowledge to inform the work of other parts of the company, you’re wearing sunglasses at night.
…
Arguing about marketing isn’t bad; it’s just that most companies are bad at it.
As fun as brainstorming and wordsmithing creative work may seem, C-suite execs are unlikely to add value commensurate with the cost of their time and the impact of their opinions.
But when leaders point their passion toward the fundamental expectations and organization of the marketing function, they establish a foundation that drives better, more efficient outcomes.
And yes, every once in a while, you can still weigh in on that new ad campaign.
