Marketing performance measurement and management

Marketing performance measurement and management (MPM) is a marketing paradigm that calls for alignment of marketing activities, strategies, and metrics with business goals in order to make marketing more effective and efficient. The paradigm requires marketing professionals to create a metrics framework and key performance indicators, monitor marketing performance, and develop and utilize marketing dashboards to communicate and manage performance. Marketing Performance Management is the foundation for creating performance-driven marketing organizations. Marketing organizations need systems, tools, processes, new skills and a culture of accountability to create a performance-driven marketing organization.
Definition and Components of MPM
Performance management has been applied to various parts of a business including manufacturing, logistics and product development. Applying the concept to marketing is finally coming of age. Essentially performance management is “the process of measuring progress toward achieving key outcomes and objectives in order to optimize individual, group or organizational performance.” A performance-driven marketing organization is one that has a set of measurable performance standards, a pointed focus on outcomes, and clear lines of accountability—all of which are important if a marketing organization wants to prove its value. Marketing Performance Management (MPM) focuses on measuring, managing, and analyzing marketing performance to maximize effectiveness and optimize ROI (return on investment). Three elements play a critical role in managing marketing performance: data, analytics, and metrics.
Data and Analytics
A key part of our process of success at creating performance-driven marketing organizations is getting agreement between Marketing and the rest of the leadership team on how marketing performance should be measured. This is a critical step to insure you are focused on the right data and analytics. Organizations today are dealing with increasing market pressure and competition and an exploding amount of data. Therefore the ability to transform data into actionable business insights that can be used for improving both marketing effectiveness and efficiency is a central challenge and a critical capability for marketers. The ability to draw actionable insights from data is becoming an ever more important function for marketers.

Measuring the right things and leveraging data to make decisions and drive results that are meaningful to the organization is the realm of analytics. Data and the associated analysis of this data - analytics - are used to drive marketing ROI, glean strategic insights, make faster and better decisions, and improve marketing performance. Analytics is about applying a scientific approach to data. One of the most common uses of analytics within Marketing Performance Management focuses on optimizing marketing spend using Market Mix Models.

Market-mix models use data to create a model that establishes the link between spend in various channels, geographies, etc. and incremental sales. The concepts and tools of marketing mix modeling date back over 30 years. The renewed interest in analytics and particularly marketing mix modeling is a result of the increased pressure for improved top line revenue and the proliferation of new media (the Internet, social networks, search engines, mobile advertising, text messaging, etc) in hopes of accurately measuring the value of these ways to spend one’s marketing dollars.
Metrics and Measurement
Data and analytics are key to determining what is working, what changes may be necessary, and how to demonstrate your impact on and value to the organization. Through data and analytics you can create your metrics. Measurement and metrics enable marketing professionals to justify budgets based on returns and to drive growth and innovation. As a result, marketers everywhere have embraced metrics and performance measurement as way to respond to the leadership’s pressure to prove value and demonstrate marketing’s contribution to the organization.

The fundamental building blocks of MPM are integrated metrics that enable you to consistently measure marketing’s effectiveness, efficiency and financial contribution as a whole as for every marketing initiative. However, metrics need to be developed properly to be useful. It is important to avoid measuring siloed marketing tactics — such as Web analytics, response rates, awareness or results from other activities. To be effective and demonstrate value, overall marketing performance must be linked to business outcomes such as market share, customer value and new product adoption. Marketing should focus on metrics that link marketing to how they are moving the needle when it comes to finding, acquiring, keeping more profitable customers faster cost effectively and growing the value of these customers.

By managing the performance of the marketing team through metrics, you are more able to proactively manage the marketing processes to improve the bottom line through decreased costs and increased productivity. Appropriate metrics should enable you to track the overall effectiveness of your marketing. MPM isn’t about measuring campaign performance it is about measuring the aggregated effectiveness and efficiency of the marketing organization. MPM should bring broader business metrics that are non-program specific to the table. These marketing metrics should be relevant to all members of the C-Suite (CEO, COO, CFO, CSO, etc) and connect marketing to the rest of the organization’s goals.

While every organization is different and no one set of metrics is a panacea, there are some metrics categories every organization should consider. Some common categories of metrics every company should consider include around marketing’s impact on share of preference, rate of customer acquisition, average order value, rate of new product/service adoptions, increases in customer buying frequency, volume and share of your business, net advocacy and loyalty, rate of growth compared to your competition and the market, margin, customer engagement, etc.

In addition, it is important to balance your measures between those that monitor operational efficiency and external performance. Operating measures help marketers see how efficiently people, facilities and capital are being used. External performance measures aligned with business outcomes assess things such as how much value the organization is providing to customers or an organization’s performance relative to its competitors.

Use a top-down approach to begin developing your metrics and key performance indicators (metrics tied to specific performance targets). Start with the business decisions that will need to be made. To create your Metrics and KPIs start by answering these five questions:

• What business outcome are you trying to impact?
• What questions need to be answered to determine if you are impacting this outcome?
• What data do you need to answer these questions?
• Where is this data?
• What decisions/action will you need to be able to make/take as a result of the data?
Reporting and Dashboards
Reporting marketing performance often takes the shape of a dashboard. A dashboard is where all the data and metrics come together and present useful information for the company to move forward productively with their marketing. Metrics and KPIs are the building blocks for creating a dashboard.

A dashboard is a multilayered performance management tool that enables organizations to measure, monitor and manage business activity using both financial and non-financial measures. The dashboard provides insight into your progress toward each objective. It includes all the necessary dials and gauges to tell you where you are, where you’re going, at what speed, and indication of problems along the way.

A marketing dashboard generally consists of at least 3 layers:

• Executive level - strategic level - monitors and measures performance against business outcomes and marketing objectives
• Operational level - marketing management - tracks performance of core marketing strategies and processes
• Tactical level - functions and individuals - analyzes performance at project or activity level as they relate to the first two

The purposes of the marketing dashboard are to identify outcomes where marketing has a significant role, improve alignment and focus between marketing and the rest of the business, and to direct marketing resources where they will make the greatest contribution. A good dashboard achieves the following:

• Shows how marketing is moving the needle,
• Helps assess what is and isn’t working
• Fosters decision making - is actionable
• Provides a unified view into marketing’s value
• Enables better alignment between marketing and the business
• Translates complex measures into a meaningful and coherent set of information
Considerations
In order to achieve a good state of marketing performance measurement and management, the processes, systems and tools, skills, and culture of the organization must be considered.
Processes
If performance management is about “the process of measuring progress toward achieving key outcomes and objectives in order to optimize individual, group or organizational performance” marketing performance management must develop processes for these four things:

• data collection,
• performance target setting,
• measurement, and
• reporting.

Each of these processes should describe and document the step-by-step actions Marketing will need to take to follow the process consistently each and every time. A common way to document and describe this process is to create a process map.
Process mapping is a technique for creating a common vision and shared language for improving business results. Mapping is, therefore, an excellent tool for the performance-driven organization because it provides a step-by-step description of the actions taken by marketing personnel as they use a specific set of activities to produce a defined set of outcomes.
A mapping approach allows marketing the opportunity to define their own objectives by drilling down into more detailed analyses and metrics to improve performance. It can also help identify skills the organization may need to implement the plan. An organization can use the map to identify technology and training requirements.
Systems and Tools
According to Marketing Metrics in Action: Creating a Performance-Driven Marketing Organization (Racom Books, 2008), “creating a performance-driven organization requires two key elements: first, an agreed-upon set of standards and processes for identifying and accessing relevant data; and, second, the ability to generate performance metrics from the data. Marketers need systems and tools to implement these standards, streamline processes, and to gain access to multiple data sources.” Systems and tools make it possible to determine which investments are working and how marketing efforts contribute to the company’s overall success. Marketing cannot truly implement marketing performance management without systems and tools to help measure results and use analytics to determine what is and isn’t working. With the right systems and tools in place, measuring performance—and thereby creating a performance-driven marketing organization—becomes easier.
Skills
A Forrester Research and Heidrick and Struggles study entitled "The Evolved CMO," found that 20% of the 115 chief and senior marketers indicated they need more education in marketing measurement, CRM, and customer data analytics. To create performance-driven organizations, marketing professionals must gain the necessary skills and training to participate in a metrics-based environment. The right data and the ability to use these data are essential for marketers to be able to tap into customer information that will enable them to provide the strategic guidance the company needs to extend into emerging markets and bring innovative products to market. By becoming more skilled in measurement, analytics and data-management, marketing professionals can serve as the drivers of growth who can anticipate customers, develop their organizations' marketing capabilities, and figure out how to measure marketing’s impact on the business in terms that matter to their CEOs, CFOs, and the rest of their leadership teams.
Culture
According to a study conducted by Bersin and Associates (www.bersin.com), “today more than 40% of US corporations believe that ‘driving a performance-based culture’ is one of their top three talent strategies.” Cultures that encourage teamwork and employee development and empowerment achieve higher quality outcomes (Klein, Masi and Weidner, “Organizational culture, distribution and amount of control and perceptions of quality,” 1995). Marketing Performance Management requires a culture of accountability. Accountability for marketing organization means the willingness to demonstrate value and responsibility. Marketing organizations that focus on developing a culture of accountability are more successful at creating a performance-driven marketing organization and proving their value to the business.
Service and Technology Providers
Marketing Performance Management Consultants:

Lenskold Group- Applies marketing ROI techniques and tools to plan, measure and optimize marketing strategies, http://www.lenskold.com/
Marketing NPV- A specialty consulting firm exclusively focused on measuring and improving the financial return from marketing investments, http://www.marketingnpv.com/
VisionEdge Marketing- A data-driven and metrics-focused marketing firm that specializes in improving marketing performance and ROI, http://www.visionedgemarketing.com/

Marketing Analytics Consultants:

Allant Group- A marketing optimization solution provider that leverages predictive intelligence, strategic and analytic services and marketing automation to maximize marketing spend productivity, strategy and results, http://www.allantgroup.com/
Analytic Partners- Delivers customized analytics that improve sales performance and marketing ROI, http://www.analyticpartners.com/
Marketing Management Analytics- Offers fact-based analysis to quantify the sales impact of media, http://www.mma.com/

Marketing Dashboard Providers:

Corda Technologies- Provides innovative data presentation solutions, http://www.corda.com/
Merced Systems- Provides customer operations performance assistance, www.mercedsystems.com/

Marketing Systems and Tools Providers:

Alterian- Helps marketers improve results through its integrated marketing software platform, http://www.alterian.com/
Aprimo- Provides marketing software and services that enhance the productivity and performance of marketing organizations, http://www.aprimo.com/
SAS - Provides a software product for Marketing Performance Management that creates alignment between marketing strategies and activities, links marketing performance to the company's financial performance, and helps ensure accountability of the marketing team, http://www.sas.com/
Unica- Provides enterprise marketing management (EMM) software and services, http://www.unica.com/

Business Performance Management Providers:
Business Objects, an SAP company - Provides solutions that optimize business performance, http://www.businessobjects.com/
Cognos, an IBM Company- Provides business intelligence and performance management solutions, http://www.cognos.com/
Hyperion - now a part of Oracle, Oracle has acquired Hyperion, a leading provider of performance management software, http://www.oracle.com/hyperion/index.html

Professionals Who Hold MPM Interest
Chief marketing officer (CMO): Marketing accountability has risen to one of the top organizational priorities. Therefore, CMOs must work closely together with the rest of the to define marketing objectives, determine investments and prove the value of marketing to the company’s bottom line

Marketing Operations Professionals: Marketing operations and analysis professionals are responsible for the creation of new metrics and processes to measure and improve operations performance. They are expected to evaluate and implement systems to improve marketing efficiency and effectiveness. They are faced with the challenges of collecting data and analytics essential to the development and deployment of marketing dashboards and creating the marketing operations roadmap. For more about the emergence of this function see the Marketing Profs website.

Marketing Analytics and Strategy Professionals: A strategic and analytics marketing professional is responsible for keeping a pulse on market, customer and competitor trends, defining and conducting market research to improve competitive position and support business development initiatives. They are expected to provide the information and direction to promote the profitable growth of the company by identifying new opportunities, defining market and brand strategies, and providing competitive analysis and customer insight.

Chief financial officer (CFO): The Chief Financial Officer (CFO) of a company or public agency is the corporate officer primarily responsible for managing the financial risks of the business or agency. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management. (In recent years, however, the role has expanded to encompass communicating financial performance and forecasts to the analyst community.) The title is equivalent to finance director, commonly seen in the United Kingdom. The CFO typically reports to the Chief Executive Officer, and is frequently a member of the board of directors.
Resources and References
Collins, Kimberly. "Magic Quadrant for Marketing Resource Management, 1Q08." Gartner. 3 Mar. 2008. http://http://mediaproducts.gartner.com/reprints/unica/vol3/article2/article2.html.
Klein, A. S., Masi, R. J., and Weidner, C. K. (1995). Organizational culture, distribution and amount of control, and perceptions of quality. Group & Organization Management, 20, 122-148.
Lenskold, Jim. Marketing ROI. Marketing ROI: The Path to Campaign, Customer, and Corporate Profitability By James Lenskold
Published 2003, McGraw-Hill Professional, 256 pages ISBN:0071413634
Patterson, Laura. Marketing Metrics in Action: Creating a Performance-Driven Marketing Organization (Racom Books, 2008).
The Evolved CMO. Rep.No. Forrester Research and Heidrich & Struggles. The Evolved CMO. http://www.forrester.com/imagesv2/uplmisc/the_evolvedcmo.pdf.
Vittal, Suresh. The Forrester Wave™: Enterprise Marketing Platforms, Q1 2008. Rep.No. Forrester Research. Oracle.com. 17 Jan. 2008. http://www.oracle.com/corporate/analyst/reports/ent_apps/crm/forrester-wave-marketing-q12008.pdf.
"Workplace Performance Management: Now Business Critical." Bersin & Associates. http://http://www.bersin.com/research/content.aspx?id130&fid6838.

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