From My Perspective

June 16, 2011 By Rick Shea Leave a Comment

I like walking. Many mornings, my walk takes me to nearby Monarch Park. Over the last few years, I’ve frequently taken my camera to the park as part of a photographic self-improvement exercise which involves photographing the same subjects over and over.

Going back to the same park repeatedly forces me to develop my ability to see and capture photos of the same subjects in new and creative ways. I’ve learned there isn’t one right way to capture any one subject, and there are usually many fine ways to capture the same subject.

Here’s what I’ve observed about the two main variables I have to work with; light and composition.

  • The light in the park can look very different in different seasons, at different times of day and in different weather.
  • As for composition, I see the best new photos when I change my perspective by changing where I’m walking or standing.

A recent foggy morning created new circumstances. The same old views looked very different due to the soft light and the masking effect of the fog.  In search of a new composition, I changed my perspective by leaving my usual route and walking through a more wooded area. Through the combination of the fog and a different perspective, I quickly saw something I had never seen, which led to my capturing one of my favourite images of the park.

When I first developed my approach to measuring marketing, my perspective at the time was that I was trying to solve the following problem. I was trying to help marketers answer questions like “Did that marketing program work?” or “Did I use my money wisely on that program?”. From that perspective, I designed a scorecard to measure individual marketing programs.

I started using that approach but quickly realized that my perspective on marketers’ problem needed to shift slightly.

  • Instead of asking “Did that marketing program work?” marketers wanted to know “Which of my programs worked best?”.
  • Instead of asking “Did I use my money wisely on that program?” they wanted to know “What are the best ways for me to use my money?”.

The differences between the original and the revised question in each pair are small in words but large in meaning. Answering the original questions can provide some insights about individual programs, whereas answering the second questions goes well beyond those insights.

With my slight perspective shift came more clarity about the problem marketers need solved. I developed a more robust scorecard, using a methodology that could be applied consistently across all programs. That change enables marketers to compare programs to each other so they can see which programs are most and least effective, and then adjust their marketing strategies and improve business results.

Just as importantly, I created an effective process for identifying and ensuring the right things would be measured on that scorecard.

Light and composition are the two main variables that impact taking photos, while a marketing measurement system’s two main variables are the design of the scorecard and the choice of metrics to put on the scorecard. In both cases, there isn’t one right or perfect approach, and many will provide worthwhile results if you get the fundamentals right and focus on solving the right problem.

  • The Right Problem to Solve: The reason to measure your marketing is to optimize your marketing decisions and improve your business results.
  • Scorecard Design Fundamentals: It needs to be flexible enough to measure any kind of marketing program, while also consistently using a standardized methodology that makes it meaningful to compare each program to all the others.
  • Choice of Metrics Fundamentals: Understand how your company creates value, who your ideal customers are and how you define profitable customer behaviour. Your marketing should target those customers and that behaviour, and the metrics you chose should help you to see whether marketing is helping to create value for your business.

Measurement is an integral part of continuously improving your marketing effectiveness. With a steady effort, an occasional shift in perspective and an eye on the fundamentals, your measurement will evolve and improve over time, as will your marketing.  In the meantime, I’m here if you need my help, unless I happen to be out in the park changing my perspective.


Filed Under: Approach, Metrics Tagged With: Effectiveness, marketing, measurement, Metrics, scorecard

Social Media and Social Eating

April 21, 2011 By Rick Shea Leave a Comment

Somewhere in the middle of a Dim Sum eating frenzy last Sunday at Rol San in Chinatown, my friend Elliot pointed out that five of our group of seven sitting around the table worked in marketing. Despite the fact that marketers can be creative and some in our group of seven are rather artistic, we’re nothing at all like Canada’s renowned Group of Seven painters. After our efforts last Sunday though, I’d say we are a group of seven skilled in the art of social eating.

Elliot’s comments came during a discussion about how a certain academic institution appeared to be measuring the success of a controversial event they had publicized through their website and social media.  In response to criticism of this event, they pointed to their number of subscribers, as if that somehow indicated a level of support for their controversial point of view.

Of course, just being a subscriber doesn’t automatically imply agreement with every point of view expressed. In this case, the number of subscribers was irrelevant. It would be more relevant to know the ratio of subscribers for vs. against the event taking place, and/or the point of view being presented.

Around the table we began discussing how to measure social media and quickly agreed that volume or Activity metrics aren’t as relevant as metrics that track customer Engagement. Even more important to track is a third group called Conversion metrics. To illustrate, let’s look at these three types of metrics in the context of measuring social media and also our customer experience at Rol San.

Activity Metrics

  • Social Media: Examples include number of subscribers, followers, followers/following ratio, tweets, fans, and links clicked. You can get a sense of what people are doing, but less about why or how they’re feeling.
  • Dim Sum Customer Experience: Examples include the total plates ordered, the average items eaten per person, and the average revenue per person. These metrics would tell Rol San how much we ate, but they wouldn’t know whether we were satisfied customers.

It is generally more relevant to look at:

Engagement Metrics

  • Social Media: Examples include forwards, mentions, likes, comments, retweets and the sentiment of comments, tweets and blog posts. These types of metrics can provide more insights into what your customers are thinking and feeling about your brands and marketing programs.
  • Dim Sum Customer Experience: Rol San might want to know if that second order we placed repeated any items from our first order. (It was hard to tell amidst the flurry of plates and chopsticks.) Did anyone tweet or blog about our meal, or post a review somewhere? Were the comments or reviews positive or negative? Are the people who posted comments influential with the right audience?

It can be hard to tell what customers think and whether they are truly satisfied. That’s why so many eating establishments include a customer satisfaction survey with your bill. Many of these direct you to a website to give your feedback, which can then be linked to your transaction (what you ordered, your server’s name, etc.) to help round out the customer experience picture.

Still, engagement metrics and customer satisfaction scores have their limits. What customers say can often be different from what they actually do. Attitudes and opinions can help to predict behaviour, but all that investors, shareholders and bankers really care about is profitable customer behaviour, and how that behaviour converts into value for the business.

Conversion Metrics

  • Social Media: The greatest Conversion metrics of all are revenue and profit. Other examples include qualified leads generated, content downloads, registrations, reservations and orders; basically anything that might track key steps in acquiring, keeping and cultivating profitable customers.
  • Dim Sum Customer Experience: Rol San should care about whether we come back as a group, or individually with more friends, and whether we recommend to others to dine there. In a retail business, these metrics can be hard to track, which is one of the reasons loyalty and viral marketing programs exist, to both incent and track profitable customer behaviour. It’s also why hosts or greeters sometimes ask “Is this your first time here?” or “How did you hear about us?”

I can’t speak for the others in our Group of Seven Social Eaters (G7SE?), but I think I will probably return to Rol San someday.  How’s that for mildly positive sentiment and uncertain repurchase intent? Rol San could invest a lot of money trying to predict my behaviour, but even I can’t predict what I’m going to do. They’d be better off tracking what I actually end up doing.

Conversion metrics are the most important metrics to track and they should be more heavily weighted on your scorecard. At the same time, don’t ignore Activity and Engagement metrics, as they are predictors of conversion. They can help you to identify where programs are succeeding and failing in creating the customer behaviour that leads to profits.

Why am I hungry?

Filed Under: Approach, Effectiveness, Metrics Tagged With: Effectiveness, marketing, measurement, Metrics, scorecard

Warren and Me

March 17, 2011 By Rick Shea Leave a Comment

While reading my good friend Warren Buffett’s 2010 letter to his Berkshire Hathaway shareholders, I found myself smiling and nodding on several occasions. Before I explain, I should point out that Warren and I are not actually friends; I just said that so you’d keep reading. I suppose it would be fair to say that I know Warren a lot better than he knows me, which is not at all.

The reason I referred to Warren as a friend, aside from the attention grabbing value of doing so, is that when I read his various comments about how he measures his company’s performance, I saw many parallels to my own views on measuring marketing performance. In that sense, we are friends. Here are a few examples featuring excerpts from Warren’s well crafted letter.

Example 1

  • Warren: “I believe that those entrusted with handling the funds of others should establish performance goals at the onset of their stewardship. Lacking such standards, managements are tempted to shoot the arrow of performance and then paint the bull’s-eye around wherever it lands.”
  • Me: Those managing marketing budgets have the same responsibility. Set performance goals up front so everyone is clear on how marketing spending will be judged. Selecting goals after the fact introduces a bias towards using metrics that prove marketing worked rather than determining whether it worked.

Example 2

  • Warren: “Our job is to increase per-share intrinsic value at a rate greater than the increase (including dividends) of the S&P 500.” … “The challenge, of course, is the calculation of intrinsic value. Present that task to Charlie (Vice Chairman, Charlie Munger) and me separately, and you will get two different answers. Precision just isn’t possible.” … “To eliminate subjectivity, we therefore use an understated proxy for intrinsic value – book value – when measuring our performance.”
  • Me: Marketing’s duty is to run programs whose objectives align with those of the organization. Any business exists to make money but, I don’t try to measure the exact financial ROI of each program because I feel that type of precision just isn’t possible. My proxy for ROI is to measure program results against their objectives, which should be focused on driving profitable customer activity and creating value for the business.

Example 3

  • Warren: In writing about how he values Berkshire, Warren explains why he doesn’t use net income as a metric. “Regardless of how our business might be doing, Charlie and I could – quite legally – cause net income in any given period to be almost any number we would like.”
  • Me: Choose metrics that are reliable and meaningful, and above suspicion of being manipulated to tell the story you want to tell. You want the people that matter to trust that your numbers accurately reflect the truth, not your version of the truth.

Example 4

  • Warren: Berkshire uses a well accepted accounting standard (Black-Scholes) for valuing option contracts, a standard that Warren doesn’t seem to like because under certain circumstances it can produce “wildly inappropriate values”. On this, Warren writes “Part of the appeal of Black-Scholes to auditors and regulators is that it produces a precise number. Charlie and I can’t supply one of those.” … “Our inability to pinpoint a number doesn’t bother us: We would rather be approximately right than precisely wrong.”
  • Me: I love that last sentence! There is a natural inclination to want to measure marketing precisely but I don’t think a high level of precision is needed to make good decisions. If you can be approximately right at identifying which marketing programs were most and least effective at meeting their objectives and creating value for your business, then you can make very good decisions that will optimize your marketing effectiveness.

I was glad to read how Warren’s point of view aligns with my thinking on marketing measurement. Any good measurement process just needs to be right enough to be an effective decision support tool. We need to measure the right things well enough that we learn what we need to know to make better decisions.

Warren and I may not be friends, but he’s a guy that I’d love to sit down with, have a hamburger (he apparently loves hamburgers) and soak up any wisdom he’d like to share. Since that’s not likely to happen, I’ll have to make do with a pretty good letter from a wise man.

PS. If you’d like to read Warren’s full letter, you can find it at the Berkshire Hathaway website: http://www.berkshirehathaway.com/letters/2010ltr.pdf

Filed Under: Approach, Metrics Tagged With: Effectiveness, marketing, measurement, Metrics, ROI
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