Aligning Interests

June 24, 2013 By Rick Shea Leave a Comment

Introduction

Last week something strange happened in front of my house that knocked out the power to my house. I’m glad it happened on a relatively cool day rather than on a hot, sticky day like today.

While I was inconvenienced for about 12 hours in which I had no power, I’m thankful for the inspiration for this month’s newsletter which talks about the importance of aligning marketing’s interests with those of the whole organization and how doing measurement properly helps to get you there.

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As I opened my front door Wednesday morning to toss a few items into the recycle bin, I quickly realized that something had gone terribly wrong in front of my house.

From my front door, I saw a police officer, two firefighters, three Toronto Hydro linemen, an Atlas Van Lines driver, their respective vehicles, flashing lights, barricades, pylons and a cat. Taking in this scene, it quickly sank in that the large Altas moving van with live hydro wires draped across it, was probably the cause of all the commotion.

Here’s what happened. The van was very tall. The overhead hydro wires, which reach across the street to feed electricity into the houses on my side of the street, hang very low. Tall van + low wires = problem. As the van drove up my street, it snagged and pulled down the wires that feed electricity into MY house, which knocked out my power.

My neighbour Blair saw the whole thing happen. He called 911. The 911 dispatcher called the police, the firefighters and the hydro guys. No one knows who called the cat, or why the cat was there other than to hold the humans in contempt.

Over the next three hours, I had productive conversations with all of the aforementioned, as well as with my insurance agent, the claims adjuster, a contractor and an electrician. All were professional and courteous. But, here’s the thing.

Everyone I talked to had a different agenda, a different boss to answer to, and a different view on how to proceed. I found this both interesting and frustrating, yet not at all unusual. To varying degrees, most organizations experience this.

While this “organization” had been assembled hastily to address the downed power lines situation, it behaved as most organizations behave. That is, the first concerns of the individuals involved were guided by their own self-interests. More importantly, they were able find common ground within those interests and come together around common objectives.

What does this have to do with marketing measurement? I thought you’d never ask! Some of the biggest challenges and benefits of marketing measurement are related to getting everyone on the same page and aligning their interests.

Aligning marketing’s objectives with those of the organization is critical to both the success of marketing measurement efforts and the success of the organization at meeting its overall objectives.

Alignment

Here are three key principles to achieving both types of success:

1. The whole organization must commit to marketing measurement.

Marketing and other parts of the organization need to mobilize around a clearly defined measurement objective, such as finding the best and most effective ways of spending marketing budgets. Marketing can’t and shouldn’t go it alone. It needs support and commitment from the rest of the organization for measurement to work and lead to better spending decisions.

2. The organization and marketing must jointly commit to a measurement methodology.

If marketing unilaterally develops an approach to marketing measurement, others in the organization might think that marketing developed their approach with their own self-interests in mind. That is, they might assume that the methodology is biased towards showing that the marketers in question are brilliant and highly effective.

On the other hand, if marketing involves other elements of the organization that might naturally have competing interests or alternate perspectives on how to measure marketing, then those “competing” interests will bring more balance to the methodology and more acceptance by all of the results.

A joint commitment to a methodology means they must agree on a way to measure marketing’s success. I define success as marketing meeting its objectives and helping the organization to meet its objectives. Objectives-based measurement forces alignment around the objectives themselves.

3. The organization and marketing must jointly decide what to measure.

Focus

Remember that marketing’s purpose is to attract customers who create the most value for the whole organization. That means you need input from each key functional area to know how they each define value, high value customers and profitable customer behaviour. Those definitions will point the way to the key performance indicators that should be included in your measurement.

Including a range of metrics that matter to all aspects of the organization will mean that you will be measuring marketing according to how the whole organization defines success. It will also be easier to get the support and data you need to measure marketing in terms that everyone will understand.

In an organization, everyone has a role to play. Each person has his or her own biases and priorities. At times, it can seem as though different people and parts of the organization have competing interests.

Effective organizations find and focus on the common objectives within those competing interests. One of the most important benefits of measuring marketing based on results vs. objectives is that to do it properly those objectives will need to align with those of the overall organization.

Filed Under: Approach, Metrics, Objectivity Tagged With: Alignment, Effectiveness, Management, marketing, Measure, measurement, Metrics, objectives

Stealth Benefits

May 15, 2013 By Rick Shea Leave a Comment

Introduction

You know how when you take a vacation there are usually certain things you must see or do at your chosen destination? For example, when you go to Greece, you have to go to Athens to see the Parthenon. While it’s one of the great and obvious things to see in Athens, I find it interesting how your vacation highlights may well end up being about the unexpected pleasures, like a beautiful scene in the countryside or a chat with a complete stranger at a café.

It turns out that networking and marketing measurement are much the same. Both are well worth doing for all the obvious reasons, but it’s the unexpected stealth benefits that may well end up being the most important.

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Two days ago, I was drinking tea at Starbucks with a consultant I met in February and her business partner. We were enjoying a fun and productive conversation when it suddenly hit me. I love networking.

I know that love is probably too strong a word for my feelings about networking. Still, now that I’ve fully embraced networking as an integral part of building my own business, I can’t imagine my working life without it.

The ParthenonWhen I took my first tentative steps into the world of networking, my dual objectives were to expand my network and find clients, the obvious reasons for networking. While networking has proven to be beneficial on both counts, it has been the other unexpected benefits that I’ve enjoyed the most.

  • I’ve made great friends
  • I’ve built relationships with talented people I’d be happy to employ, work for or with, or recommend.
  • I’ve learned a lot and broadened my perspective.
  • I’ve become a connector, introducing people who could benefit from knowing each other.
  • I’ve become a mentor to students and an advisor to start-ups, and was thrilled to learn last week that the Ryerson DMZ is adding me to their roster of advisors.

I didn’t set out to make any of these things happen, but they did. While less obvious than growing my network and finding clients, these unexpected benefits are important and impactful, both personally and professionally. I call them stealth benefits because they sneak up on you. Without warning and undetected, they just happen.

In that respect, marketing measurement is a lot like networking. There are obvious benefits from measurement, and there is at least one multifaceted stealth benefit. The obvious benefits include:

  • Finding out which marketing programs work or don’t work.
  • Knowing where to cut budgets or where to invest more
  • Improving overall marketing effectiveness
  • Driving better business results

Delphi CountrysideMarketing measurement also delivers the very powerful, and perhaps unexpected stealth benefit of bringing more discipline to the marketing function and the broader organization. Here are three facets of this stealth benefit:

 

1. You will set better marketing objectives.

Good measurement requires first setting clear and measurable objectives for your marketing programs. If you don’t know precisely what you want your marketing to do for you, then how will you know if it worked? As they say, “If you don’t know where you’re going, how will you know when you’ve arrived?”

To measure marketing properly, you have to set proper objectives. Without clear objectives, you won’t know what to measure or if your results are any good. You’ll also run the risk that your measurement might really just be counting, as I wrote about here.

 

2. Marketing will align properly with your whole business.

Your company’s strategic planning and budget setting should guide the setting of marketing objectives. Marketing helps to deliver against the budgeted revenue and profit objectives. When you plan specific marketing programs, set objectives that align with and roll up to those company objectives committed to in the budget.

Measurement is most effective when the whole organization commits to it. This brings the right people from different functional areas to the same table to agree on what marketing success means for the whole business and what to measure. Measurement helps to get everyone on the same page.


3. Your marketing programs will focus more on the right things.

The best marketing delivers more of what I call “Profitable Customer Behaviour”. What, when, where, how much and how often they buy, how and how much they pay, whether they are costly to manage or service, whether they refer new customers, etc. all impact the profitability of each customer and the overall business.

To uncover what Profitable Customer Behaviour means for your organization, ask people in different functional areas to complete the following statement:

We’d make more money if more of our customers (did this): (fill in the blank) .

Clearly defining profitable customer behaviour helps to clarify what marketing needs to achieve in order to create the most value for the business. Those clear definitions also force everyone to focus on the impact that various types of customer behaviour have on their part of the organization, and how that affects the bottom line.

 

Measurement brings additional discipline to marketing decision making, and that can only be a good thing. It may not be the first benefit you think of when you commit to measuring marketing, but the stealth benefit of that increased discipline will happen, whether or not you see it coming.

Now, if you’ll excuse me, I have to go sneak up on some more networking opportunities!

Filed Under: Approach Tagged With: Effectiveness, Management, marketing, Measure, measurement, objectives, Planning, Strategy

Predictions and Marketing Knowledge Succession

January 31, 2013 By Rick Shea Leave a Comment

On January 15th, I attended Deloitte’s Technology, Media and Telecommunications Predictions 2013. The presentation was delivered at The Carlu in Toronto by Duncan Stewart, Deloitte Canada’s Director of Research.

I enjoy attending events like this for two main reasons. The first is for the content, as it helps me to stay on top developments and trends that impact my clients and the environment in which they operate.

The second reason is for the networking and to possibly meet new people or bump into a familiar face or two. One of the familiar faces I saw after the event belonged to my friend and fellow consultant, Rob Coatsworth. After a quick hello, we decided to go chat over a coffee.

One topic of our conversation was knowledge succession, which is one of Rob’s areas of expertise. Knowledge succession helps organizations to capture, retain and pass on the experience-based knowledge that individual employees accumulate, rather than have the knowledge leave when employees leave the organization.

While knowledge succession is hardly a new challenge, I found our conversation thought provoking because I think the challenge is now greater than ever, and I believe this is especially true for marketers. Here are some reasons why:

General Environmental Factors

Multiple Jobs Per Career. The days of working for one company your whole career and getting the gold watch upon retirement are long gone. Employer/employee relationships are less loyal and have evolved from being career-long marriages to serially monogamous relationships. At some point, either or both parties decide that it’s time to move on and try something new.

Short-Term Financial Pressures. The financial markets exert tremendous pressure on publicly traded companies to hit their quarterly financial targets. Senior executives whose compensation is tied to hitting those financial targets often reduce headcount and salary expense in order to hit those targets. Well paid long service employees, who generally have accumulated the most knowledge are attractive targets to be let go for the expense that can be saved.

Aging Baby Boomers Will Retire. While the impact of this has been delayed by the volatility in financial markets, a large number of highly experienced and long service employees are at an age where they would like to retire if they could, and will when they can, taking their knowledge with them.

Marketing Environmental Factors

Marketers Change Jobs Frequently. Employers value marketers with a range of experiences working on different brands in different categories for different companies. That encourages marketers to keep changing jobs to drive up their marketability and market value.

Accelerating Marketing Complexity and Speed. Marketing is changing rapidly, with innovation, technology and media fragmentation driving much of that change. There are more ways to communicate with consumers and many more touch points along the path to purchase. The pace at which marketers have to execute campaigns leaves them little time between campaigns to measure and learn from past efforts.

Measurement and Marketing Knowledge Succession

Organizations that want to improve their marketing effectiveness need to learn from their successes and failures. That means they need to measure and learn which campaigns are most and least effective, so they can adjust their strategies going forward.

Without an organizational approach to capturing and retaining the lessons learned, it is left to individual marketers to do their own learning. So long as they stay, the organization will benefit but if they decide to leave, the knowledge will leave with them.

The reality is that employees leave and unless companies find ways to learn along with the employees, they are just training their competitors’ future marketing talent. A big step in the right direction is to measure all marketing.

Here’s a five step plan for Marketing Knowledge Succession:

  1. Commit to learning. Broaden your focus on executing marketing programs efficiently and effectively to also include learning from those programs to enhance future strategies and tactics.
  2. Embrace measurement as the key to learning what works and what doesn’t for your brands. Track your success at meeting each campaign’s objectives.
  3. Adopt a measurement methodology that can be applied consistently across brands, programs and time. A consistent methodology will give you benchmarks and a basis for rating and ranking programs.
  4. Measure the things that matter. Choose metrics that indicate whether your marketing is driving profitable customer behaviour and creating value for your business. Keep in mind those Key Performance Indicators that matter to financial markets, owners, investors and business managers and find a way to connect your marketing measurement to the health of the business.
  5. Keep good records. Make sure you have a way to securely collect, store and share the results of your measurement efforts. You’ll be building a knowledge data base that current and future marketers in your organization can use to refine their strategies and execute more effective programs.

Knowledge succession has a medium to long term focus, but committing to it also provides short-term benefits. To be able to aggregate and pass knowledge along, you first have to capture it.

To learn what works and doesn’t work in marketing, you have to measure it, and what you learn can pay dividends on your very next campaign. That will benefit both marketers and their employers, today and in the future.

This is not a prediction, unlike those presented by Deloitte, but I do firmly believe that organizations who commit to marketing measurement and knowledge succession will have a brighter future.


Filed Under: Approach, Effectiveness Tagged With: Effectiveness, Knowledge, Management, marketing, Measure, measurement, Strategy

Leap of Faith

October 22, 2012 By Rick Shea Leave a Comment

I have to admit that marketing measurement was the last thing on my mind as I watched daredevil Felix Baumgartner take his extraordinary leap of faith from a balloon at an altitude of 128,100 feet. The only thing on my mind was that Felix was clearly out of his.

Few things in life are certain, but I am quite certain that I could never do anything like that jump. It would require a bravery possessed by very few people on the planet. I’m not one of them, nor am I out of my mind, at least that’s what I think!

As I thought more about whether Felix might actually be out of his mind, I decided that while he definitely was brave, he probably wasn’t crazy. I also realized he needed something more than his bravery to make such a jump.

I consider Felix’s plunge towards the New Mexico desert a leap of faith because, before he could hop off that ledge into a four plus minute free fall, Felix absolutely had to believe in three things:

  • His Team – That they knew what they were doing and wouldn’t let him down.
  • His Technology – That his spacesuit would protect him and that his parachute would open BEFORE he hit the ground.
  • Himself – That no matter what happened, he could handle it, such as pulling out of a wild spin before blacking out or dying.

Without these beliefs, I’m pretty sure Felix wouldn’t have jumped, as the risks and the price of failure would have seemed insurmountable. One mistake, one miscalculation or one malfunction could certainly have killed him.

By contrast, a decision to measure marketing is considerably less risky and dramatic than a decision to jump to earth from the edge of space. Still, it can seem daunting to leap into marketing measurement as there are some risks, including that you might:

  • Not learn anything that helps you improve your marketing
  • Waste precious resources, like money and time
  • Expose the fact that some of your marketing is ineffective

While these are legitimate concerns, there are lessons from Felix’s leap of faith that we can apply to marketing measurement which also help to mitigate those risks.

Believe in what you’re doing: There are many ways to approach marketing measurement. What matters is to commit to a methodology that you can execute consistently. If your organization can commit to an approach and stick with it, then you greatly improve your chances of success. Much of what you will learn will come from applying one approach across all forms of marketing spending.

Get all team members on the same page: Successful teams focus on common goals. Everyone needs to understand and agree on your reasons for measuring, on what you’re trying to learn and on how you define measurement success.

Get the help you need: Support your measurement efforts appropriately, with the people, time, expertise and funding you need. You may have sufficient internal resources or you may need to supplement those resources with external help. It’s tough to take that leap if you think you will be out there on your own.

Remember that it’s a journey: Your efforts to develop effective measurement practices will likely be a long journey with a lot of small victories along the way, and probably a few mistakes, too. The full experience of that journey with all the victories and mistakes is where you’ll learn what you need to know to succeed. The things you’ll learn along the way will often pay dividends immediately, like helping to identify and eliminate ineffective marketing programs.

I can imagine that Felix overcame many obstacles in the years, months and days leading up to his big jump. The spectacular success of his jump was not so much a single event as it was an end point in a journey, and while it may be an end point for Felix, it is also a key milestone in an ongoing journey for science and space exploration.

Those who succeed at marketing measurement make a commitment to the journey and begin that journey believing they have what it will take to overcome obstacles, mitigate risks and achieve success. They also know that by making sure they have the right stuff for measurement – a blend of people, expertise, technology and methodology – they can believe in their journey and take their own much less risky leap of faith.

Filed Under: Approach, Effectiveness Tagged With: Effectiveness, Management, marketing, Measure, measurement

Taste of Marketing Measurement

September 21, 2012 By Rick Shea Leave a Comment

Last month I attended ‘Taste of the Danforth‘, my favourite summer event in Toronto. Now in its 19th year, this weekend long event along a 3km stretch of Danforth Avenue typically attracts around 1.3 million people over the weekend. I live nearby, attend almost every year and generally eat too much while I’m there.

I planned to meet a friend on the Danforth Friday evening but when the forecast called for rain, we called off our plans. The forecast turned out to be wrong and as I sat at home on a fairly dry Friday night, I wondered just how many other people didn’t go to Taste of the Danforth due to the threat of rain and how much that might have reduced sales for each restaurant participating in the event.

Marketing Effectiveness

I also thought about how event organizers seemed to have been very effective at creating awareness for the event. I saw a lot of local media coverage and I noticed how Taste of the Danforth was listed in every what’s-going-on-in-Toronto/Ontario listing I saw in print and on-line.

Marketing effectiveness measurement tends to focus on whether specific program objectives were achieved, such as attracting and keeping profitable customers and creating value for the business. Yet, as I was reminded by sitting at home when I should have been out eating too much, marketers can do everything right and still end up with bad results due to factors outside of their control, such as bad weather (or a bad forecast).

Event Objectives

I’m guessing the event’s main marketing objectives are to generate awareness, attendance and trial of both the area and of individual restaurants, and to also increase post-event traffic and revenue for local merchants.

While I sat home that night, I watched a segment of a local newscast about Taste of the Danforth in which a restaurant owner told the interviewer that this event generally makes his year. I imagine that some restaurants might aim to sell enough souvlaki in three days to possibly pay for a renovation or to simply make enough that weekend to stay in business for another year.

Objectives like this point the way towards some of the metrics I would include on a scorecard to measure the effectiveness of the marketing, but there are other factors to consider.

Those Pesky External Factors

For this event, the number one external factor outside of marketing’s control that can impact its success is the weather. I imagine that the event organizers must make the appropriate sacrificial offering (lamb would seem appropriate) to the Greek god (Zeus?) most responsible for weather. A hard rain could severely reduce attendance for an evening or whole weekend.

The Measurement Dilemma

There are three general approaches to choose from regarding external factors.

1. Ignore Them

This option will always be as tempting as all the delicious foods one finds at Taste of the Danforth. I can’t imagine how I’d ever determine how many people didn’t go to Taste the Danforth that Friday night because they thought it might rain, or how many sticks of souvlaki didn’t get sold as a result.

2. Model Them

This option is worth considering when you have a lot of data. If the organizers have 19 years worth of data that would correlate daily attendance with weather forecasts and actual rainfall, then that would be a start. Still, for most marketers, the costs of sophisticated models and analytics can quickly become too high relative to the size of the marketing expense they’re meant to measure.

3. Track Them

I think it is well worth tracking any external factor that could impact results, such as weather, competitive activity and labour disruptions. I arbitrarily score each external factor on a five-point scale, where the low end of the numerical scale corresponds to “very negative” and moves up through “somewhat negative”, “no impact”, “somewhat positive” and “very positive”.

I keep this very unscientific scoring of external factors separate from the rest of the scoring I do on the factors that seem to be within marketing’s control and on the results that can reasonably be attributed to the marketing. I don’t muddy the waters by including the external factors in the calculation of the overall score, but I do note them and score the severity of those factors.

The value of tracking external factors comes when you analyze a group of marketing programs, such as past years of Taste of the Danforth. Imagine looking back and seeing great year to year variations in attendance and not knowing in which years it rained all weekend, or there was a transit strike.

Without tracking external factors, it would be easy to come to the wrong conclusions about the effectiveness of specific marketing programs. It would be hard to decide whether specific programs should be repeated or changed and also to learn which tactics were the most and least effective.

Always track those factors outside of your control and the degree to which they may have helped or hindered your results. That will at least give you a taste of what else might have been going on at the time that may have impacted your results.

Filed Under: Approach, Metrics Tagged With: Effectiveness, External Factors, Management, marketing, Measure, measurement, Metrics

Down In The Alley

July 19, 2012 By Rick Shea Leave a Comment

A few years ago, the couple who live across the alley behind my house decided to host a small gathering on their driveway for those of us living nearby on either side of the alley. A few homes had sold recently and they decided that this would be a good way to welcome the new neighbours and help everyone get to know each other a little better. It was fun, and this annual tradition lives on 4 or 5 years later.

This year’s edition of the alley event happened last Saturday afternoon. One of the things I enjoy about these neighbourhood gatherings is having the time to learn about each other in a relaxed setting.

On Saturday, I was having a good chat with my exceedingly well-named neighbour, Rick. He asked about the nature of my work and so I gave him a bit of an overview about how I measure marketing effectiveness. That quickly led to him asking me this question:

“What did you think of General Motors’ announcement that they were pulling their Facebook ads?”

My first reaction was that I supposed GM felt their ad spending on Facebook wasn’t working.  As we continued, our conversation shifted to the timing of GM’s announcement, mere days before Facebook’s highly anticipated initial public offering. We concluded that something must have gone wrong in their relationship with Facebook for GM to announce their decision at such a sensitive time.

After Rick, who is an actor, entertained the local kids by juggling while walking on stilts, I went home, considered our conversation, did some research and organized my thoughts.

What I Found & My Thoughts – #1

In case you missed it, GM announced they would eliminate $10 million of advertising spending on Facebook. This still leaves another $30 million which they spend on their Facebook marketing initiatives, although I don’t believe any of that spending becomes Facebook revenue.

Clearly, GM thinks there’s an audience on Facebook worth engaging through marketing, but not so much for advertising, at least not yet.

What I Found & My Thoughts – #2

The $10 million is a drop in the bucket compared to GM’s 2011 total US ad spending of $1.8 billion ($3 billion globally), and Facebook’s 2011 revenue total of $3.7 billion, most of which was for advertising.

Smart marketers who spend $3 billion annually on advertising almost certainly also measure the effectiveness of that spending pretty rigorously. It is a natural part of the process to question, evaluate and optimize all parts of that spend on an ongoing basis, and the Facebook ad spend would be subject to that scrutiny.

What I Found & My Thoughts – #3

It has recently been reported that Facebook and GM are back in talks to renew GM’s advertising and that GM is asking Facebook for more data to bolster their measurement efforts.

Perhaps the problem was not so much that GM’s Facebook advertising didn’t work, but rather that GM couldn’t prove whether or to what degree it did, or didn’t. I also wonder whether GM’s pre-IPO announcement was a negotiating tactic to get the data they want from Facebook.

What I Found & My Thoughts – #4

I noticed that following GM’s announcement, their rival Ford tweeted something to the effect that Facebook ads are effective when used properly. Let’s assume the people at Ford are also pretty smart and measure rigorously, too. By implying they know their ads are effective, their tweet also implies they are better than GM at measuring Facebook ad success, and thereby raises some related questions:

  • Does Ford use Facebook ads differently and in a way that makes measurement easier?
  • Is Ford better than GM at setting measurable objectives for each ad?
  • Does Ford already get better Facebook data than GM?
  • Was Ford’s tweet was just an attempt to position themselves as smarter than GM?

We can’t know the answers to these questions, but we can remind ourselves of a few marketing measurement fundamentals:

Set clear and measurable marketing objectives: To know whether a marketing program worked, you have to first define exactly what it would mean for your program to “work”. In other words, what outcomes would make you happy?

Your objectives must be reasonable and attainable: A clearly defined objective isn’t necessarily attainable. A good outcome can still fall well short of an unreasonable objective, and be classified as a failure, when in fact the failure was in the setting of the objective.

You need to be able to get the data you need, consistently, reliably and cost-effectively: This may be at the crux of GM’s discussions with Facebook. GM may know exactly where they want to go with their Facebook ads, but they just can’t tell if they’re getting there, which when you’re behind the wheel of a $10 million dollar ad spend, is sort of important.

It will be interesting to see whether GM and Facebook can reach an agreement. My guess is that GM won’t want to walk away from advertising to Facebook’s massive and targetable audience, particularly if it seems their competitor(s) may be having success in this regard. Maybe GM just needs to know if they’re meeting their objectives and whether their Facebook ad spend has them driving on a six-lane superhighway, or somewhere down in the alley.

Filed Under: Approach, Effectiveness, Metrics Tagged With: Effectiveness, Management, marketing, Measure, measurement, objectives

What Problem do you Want to Solve?

April 19, 2012 By Rick Shea Leave a Comment

Earlier this week, I did a little light reading on big data. I’ve been hearing a lot about big data lately so I thought I’d investigate.

Truthfully, reading about big data is hardly light reading. Big data presents a big challenge and is emerging as a hot topic in marketing and general business management circles.

What is big data? Well, it’s not about presenting numbers in larger fonts to make it easier for people over 40 years old to read, although I’d probably appreciate something like that. Big data relates to the fact that businesses (and not-for-profits, and governments, etc.) operate in a data rich environment featuring increasingly voluminous, complex and diverse data.

For many organizations, there is more data coming at them than they can handle. The data is evolving rapidly and outgrowing their ability to analyze and glean the insights they need from the data to make better business decisions.

I liked the closing section in this article from which I’ll paraphrase advice from Christer Johnson, IBM’s head of advanced analytics in North America. To get started in tackling big data, first decide what problem you want to solve. That’s great advice in many aspects in life, including big data and it certainly applies to marketing measurement.

I’m reminded of the oft-quoted John Wannamaker, a pioneer of the department store concept in Philadelphia in the 1860s, who famously said:

“I know that half of the money I spend on advertising is wasted; the trouble is I don’t know which half.”

I think of John Wannamaker as one of the founders of the discipline of marketing measurement, as he may have been the first one to define the problem. I’m not convinced he ever solved the problem, but at least he knew what he needed to know. Here’s my take on the problem he was trying to solve.

For context, John’s quote comes from a time with a much less complex marketing environment, before there were any broadcast, internet or mobile media. John’s choice of advertising tactics was probably limited to a few simple options such as:

  • newspaper ads
  • flyers handed out to passers by
  • outdoor signs
  • a guy with a sandwich board on the sidewalk in front of the store
  • a boy cycling around the store, yelling out this week’s specials (a very primitive form of Tweeting)

Yet, in that simple world, John Wanamaker didn’t know which half was wasted. If John were alive today, he’d probably admit that he didn’t even know if it was half, or one quarter or two thirds that was wasted. All he really knew was that some forms of his advertising were more effective than others, and he wanted to know which they were.

With all due respect to John Wannamaker, I’d like to restate his well-known quotation as:

“I know that some of my advertising programs are more effective than others; the trouble is I don’t know which ones. Mostly, I just want to know the best way to spend my money.”

We can modernize this problem statement by substituting the word “advertising” with “marketing” and then it can serve as a starting point for most companies’ marketing measurement efforts. Like John, all managers with a marketing budget need to determine how to optimize that budget to meet or exceed their business objectives.

In these more complex times, with many more marketing tactics to choose from, there is also a lot more data to analyze and understand. Each program may target different customers, using different tactics with different objectives and performance metrics. Gathering the data for those metrics can involve a variety of sources, analytics tools and research techniques.

All that diverse data, big or otherwise, can certainly be a big mess if you don’t have a way to organize and analyze it. The analysis needs to happen in a way that enables comparing each program’s outcomes to the others, so you can identify the best ways to spend your marketing budgets.

A well-designed marketing scorecard can solve this problem. The key is to design your scorecard in a way that makes comparisons between diverse programs meaningful, and helps you to solve the same problem John Wannamaker was trying to solve all those years ago, to find the most effective ways to spend his money.


Filed Under: Approach Tagged With: Management, marketing, Measure, measurement, Metrics, ROI, scorecard

Measure Well, Sleep Well

March 15, 2012 By Rick Shea Leave a Comment

If you know me or have been reading this newsletter for any length of time, you may know that photography is my favourite pastime. What you may not know is that organizations sometimes bring me in to take photos of their events, which is how I found myself at the AllerGen 2012 Annual Research Conference.

AllerGen is a not-for-profit organization whose role is to mobilize Canadian science to reduce the illness, mortality and socio-economic costs of allergic disease. The conference showcased the latest research in this regard and while often over my head scientifically (not hard to do), I found it quite interesting.

During an afternoon break at the conference, a distinguished looking gentleman named Douglas Barber approached me to talk photography. Our pleasant conversation eventually shifted to the conference and he told me a story that I quickly realized fit my thinking on marketing measurement.

Douglas explained he is on AllerGen’s board and that an issue of concern to him is the cost to the Canadian economy from the “asthma drag” on productivity. He explained how asthmatics can be less productive at work or even miss entire days of work following sleepless nights caused by asthma. Parents of asthmatic children can also experience the same productivity losses. Douglas also told me how he once did a quick “back of the envelope” calculation to estimate that asthma costs our economy between $10 and $20 billion per year in lost productivity.

Sometime after Douglas did his quick calculation, a full study was done to properly analyze and estimate the economic impact of asthma’s drag on productivity. The study concluded the annual costs are $15 billion. That’s right; a costly and complex measurement process produced the same answer as one expert using a pen and the back of an envelope.

Two aspects of this story relate to my views on marketing measurement:

  • Douglas’s back of the envelope calculation relative to the full study is similar to how a marketing scorecard can be a proxy for a sophisticated and costly marketing measurement process. In both cases, the less sophisticated approach doesn’t need to be perfect, just accurate enough to support analyzing options and making the right decisions. As I like to say, it’s not about precision, it’s about the decision.
  • The back-of-the-envelope estimate worked because it was done by an expert using a sound methodology. Douglas has an extensive business background and apparently knows more than just a little about productivity and related calculations. Scorecards are a proven methodology that you can enhance with expertise about your marketing and your business.

There is another lesson in Douglas’ story, and that’s the need to right size your measurement efforts to the magnitude of the decisions you need to make.

Research Investment Decision

  • Douglas’ back of the envelope calculation and the full-blown study produced essentially the same estimate and both pointed toward making the same decision. It’s a pretty compelling proposition if investing perhaps a few hundred million dollars into research would lead to recovering even just 10%, or $1.5 billion of the lost productivity, especially as that benefit would be realized every year.
  • The problem is that any decision to potentially invest a few hundred million dollars needs to be substantiated by more than a back of the envelope calculation. In this case, the cost of the research needed and the probability of recapturing that 10% are two other variables that I think would need to be estimated. It’s understandable that a full-blown study was needed to examine the overall business case.

Marketing Investment Decision

  • Similarly, for companies that invest tens of millions annually in marketing, it makes sense to support the decisions that need to be made with sophisticated marketing measurement efforts that might cost hundreds of thousands, or more.
  • For most companies with smaller marketing budgets, a practical lower cost approach such as one using a scorecard may well be the right sized measurement solution. In most cases, the overall measurement expense likely needs to be a small single digit percentage of the total marketing budget.

I like simple and elegant solutions that deliver what you need. A marketing scorecard’s simplicity keeps measurement costs down, while its elegance allows the flexibility to include a suitable level of expertise and sophistication to right size your measurement efforts to your marketing budgets.

Whichever measurement approach you choose, be sure to combine a sound methodology with the right expertise to learn what you need to know to make the right decisions. Measuring well will help you to sleep well and be a productive marketer!

Filed Under: Approach Tagged With: Effectiveness, Management, marketing, Measure, measurement, return on investment, ROI, scorecard

Wine Scoring & Marketing Measurement

February 16, 2012 By Rick Shea Leave a Comment

Tuesday evening I was browsing the latest edition of the LCBO’s ‘Vintages Release Catalogue’. This catalogue provides descriptions and sometimes wine critics’ quality scores for the new wine products about to be released through Vintages stores in Ontario. As I browsed, two thoughts came to mind.

Firstly, I noticed that most of the scores in this catalogue were between 88 and 92 on a 100-point scale. It struck me that this suggested the majority of the wines in this catalogue were of very similarly high quality, with almost all wines rated within a narrow 5-percentage point range. I found that odd, perhaps unrealistic, and decided to think about it. Secondly, I noticed that the wine descriptions were making me thirsty.

Wine Glass, Red Wine

Seeing the wisdom in choosing the beverage that best suited the task at hand, I poured myself a glass of red to compliment my thinking, sat down with the catalogue and made a few calculations and notes. Here are some highlights.

  • Vintages published scores for 57 of the 120 wines in this catalogue. The wine critics quoted used the 100-point scale for 48 of the 57 rated wines. The other nine were based on 20, 5 or 3-point scales.
  • Of the 48 using the 100-point scale, 41 (85.4%) received a score between 88 and 92, and 30 of those were either 90 or 91, which confirmed my first observation. The other 7 wines were rated higher than 92, leaving no scores below 88.

Taking a sip from my glass, I contemplated why so many wines received such similar scores, and how all this relates to marketing measurement. Here are a few thoughts:

Wine Scoring: The LCBO is in the business of selling wine and I suspect they have a policy of only publishing scores of 88 or higher. I tested this theory by looking at the two previous Release Catalogues and wasn’t able to find a wine scoring 87 or lower. Perhaps they’ve learned that lower scores reduce sales and so don’t publish scores below 88.

Marketing Measurement: Marketers are in the business of spending money effectively to drive positive business outcomes. Instead of measuring only the best marketing programs or those you might want to cast in a favourable light, measure and rank all programs so you can identify which are most and least effective, and then optimize future strategies accordingly.

Wine Scoring: By my rough count, the 48 scores using the 100-point scale were sourced from 26 different wine critics. While each used a 100-point scale, I have a hard time believing all 26 used the scale in exactly the same way. I also suspect that some critics are more generous with their scores than others, like my calculus teacher in CEGEP. The other important issue is that scoring wine is a highly subjective exercise. It isn’t at all uncommon for two or more tasters to disagree on a wine’s quality and the corresponding score. Experts have different opinions on subjective matters.

Marketing Measurement: To minimize inconsistencies, reduce or eliminate subjectivity and personal bias from your measurement processes. Having 26 experts using similar but sometimes different methods of scoring your marketing programs based on their personal opinions would not be a recipe for consistency. One person needs to lead your measurement efforts using one methodology that your organization understands and supports.

Wine Scoring: I did a little reading on wine scoring and discovered that wine critics can be inconsistent in the scores they award to the exact same wine on different occasions. For example, the influential wine critic Robert M. Parker has apparently pointed out that he sometimes assigns different scores to the same wine at different tastings, but that those scores tend to be no more than 3 points apart. It seems that differences in tasting conditions and the taster’s emotions can lead to different scores. To address this, I believe Robert Parker publishes average scores when multiple tastings produce different scores.

Marketing Measurement: Consistency is important in making comparisons meaningful. Pick one methodology that can be used consistently across all programs. Consistency should help you to avoid having all your scores cluster within a narrow range where differences may not be significant, or actionable. Programs can differ significantly in their effectiveness at meeting your objectives, and so their scores should reflect those differences. Also, if data for one metric is collected at various times, or from different sources, you might want to follow Robert Parker’s lead and use an average score for that metric.

Advice for Wine Drinkers: Don’t worry about the difference in quality between a wine that scores 88 and another that scores 92.  Both are high quality wines and the difference in scores may come down to who tasted it, under what conditions and the tasters’ preferences. Here’s the fun part. Through trial and error, you should eventually be able to determine which wine critic your tastes best align with, and then the ratings and tasting notes from that critic will help you to make better wine purchasing decisions.

Advice for Marketers: Similarly, there will be some trial and error involved, but not nearly as much fun. Select a measurement methodology that you can apply fairly, without personal bias, and consistently across all programs. Be disciplined about measurement and it will ultimately highlight which marketing programs best meet your objectives and create value for your business. That will help you to make better marketing decisions, which you may wish to celebrate by opening a bottle of your favourite wine!

Filed Under: Approach, Objectivity Tagged With: bias, comparison, Effectiveness, Management, marketing, Measure, measurement

Do Daily Deal Coupons Work?

January 19, 2012 By Rick Shea Leave a Comment

Daily deal coupons are all the rage these days, led by Groupon and their numerous competitors. Since I have a pretty extensive background in consumer promotions, particularly couponing, I tend to get pulled into discussions on daily deal coupons and I often notice the frequent related media coverage. Setting aside all the buzz around them, they’re really just a new twist on an old marketing tactic, but do daily deal coupons work?

Traditional paper coupons and price discounts have worked quite nicely, since the late 1800s in the case of coupons, and I suppose for centuries or millennia in the case of price discounts. One of the main reasons to discount is to attract new customers to try your products or services, and then hopefully sell them more stuff and/or turn them into profitable repeat customers who will pay full price on future purchases. Daily deal coupons can certainly do this.

It is beyond the scope of this newsletter to address the dos and don’ts of daily deal coupons, but you’ll get some insights if you Google “Groupon horror stories” and “Groupon success stories”. I will say that you’ll want to have a way to limit response levels or to make sure you can live with whatever level of response you get.

To address whether daily deal coupons work from a measurement perspective, my answer leads to more questions, starting with “Well, it depends, what did you want them to do for your business?”

Drilling down a bit further, answers to the following four fundamental questions should inform the planning, objective setting and measuring of any marketing program. Clear answers should point the way to what and how to measure, and whether the program “worked” to meet its objectives.

Let’s look at each of these.

1. Who are you targeting? While many answers are possible, the best answer is often “new customers” to help grow your business.  Merchants benefit most when they structure their daily deal coupon offers to attract new customers, rather than subsidize existing customers who would have bought without a coupon.

2. What do you want them to do? You’ll want new customers to buy for the first time whereas you may want existing customers to buy something more or different than usual. In addition, you might try to prop up an under-performing aspect of your business, such as your slow month or time of day, or a product that isn’t selling well.

3. How much value will that create for your business? This one is especially important and a bit tricky. You’ll need to consider the short term (this transaction) and the long term (the customer’s lifetime). Ideally, you’d like this transaction to create enough value to at least cover your costs, but if it doesn’t you’ll need to make up the difference and ideally much more over the lifetime of those customers who buy your daily deal.

Short Term – This Transaction: Consider your variable cost of providing the products or services you will sell through this coupon and compare that to the revenue from your share of the coupon selling price, which you will split (often 50/50) with the daily deal provider. Also, consider whether you’ll receive your share of the revenue when the coupon is bought, or when (and if!) it is redeemed.

Long Term – The Customer’s Lifetime: How long is the lifetime of a typical customer? On average, how many times will each customer buy over that lifetime, and how much will they buy each time? If each new customer’s lifetime is just this one transaction, it may not be worth your while to offer this coupon. But, if you can convert enough of those new customers to loyal repeat customers for many years, then discounting to get them in the door should be worthwhile.

4. How many people do you need to do that for this expense to be worthwhile? Once you know what a customer is worth to you over whatever time frame you want to use, and you know your costs, then you can set an objective for how much value (metrics include new customers, number of transactions, transaction values, etc.) you want this marketing investment to generate. Then you can measure against those objectives.

Clear Objectives Make Measurement Easier

To measure whether or not a daily deal coupon or any marketing program worked for your business, you need clearly defined objectives. In other words, to measure whether you have succeeded, you must  first define success. Clear objectives will tell you what metrics to use and where to find the data.

It’s one thing to attract new customers with discounts, and quite another to keep them. Can you convert discount shoppers to loyal customers? Success will come down to your company’s ability to deliver a superior customer experience in the short term, and to build a positive relationship with each customer over the long term and maximize both the lifetime and the value of as many customers as possible. Of course, that’s something every business has to do well, however they find their customers.

Daily deal coupons may be a relatively new marketing tactic, but there’s nothing new about the fundamentals that determine whether you should use them, whether you’ll be successful and how to measure your success. Clear objectives will help you to decide whether to use daily deal coupons and to evaluate whether using them worked, however you define success. To compare the success of a daily deal coupon program to any other type of marketing program, well that’s a topic for another newsletter.

 

 

Filed Under: Approach Tagged With: Management, marketing, Measure, measurement, objectives, Planning
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