Tuesday, May 24, 2011

Marketing Mix Model Masochist

I’ll be honest — I’ve gone back and forth over the years on the value of marketing mix models, all the time seeking to understand where, when, and how they add the most value to marketing managers looking for insight into more effective and efficient marketing.

I think I’ve seen all the warts:

  • Models that just skim the surface of tactical optimization by looking only at media and ignore the category dynamics and uncontrollable factors, thereby overstating the impact of marketing in very suspicious ways.
  • Models that look backwards perfectly but are of little value if one is making decisions about what to do next.
  • Models that regularly seem to reward short-term demand-generation tactics because they can “read” those more cleanly than longer-term brand equity value.
  • Models with high “base” compositions which explain only a small portion of the change in volume or profit from one period to the next.
  • Models that understate the value of marketing by failing to account for the interaction effects, particularly those in the new digital and social media realm.

I’ve also heard some sophisticated marketers who have long used these tools question their predictive value, particularly in complex competitive ecosystems with lots of channel influences and/or short innovation cycles. I’ve heard many voices I respect in both business and academia say that MMM is “mature” (as in “aged”, “long in the tooth”, or “declining in value or relevance”).

So you’d think that I’d have given up by now and moved on to something more innovative that might address some of these issues… artificial intelligence; agent-based modeling; systems dynamics, etc. Nope. Call me a MMMM (Marketing Mix Model Masochist) if you will, but all this criticism has actually led me down the path of embracing them more than ever. Principally for one simple reason… they are effective ways of helping managers understanding what has happened and what might happen looking forward.

For whatever reason, MMM is a concept that most marketing and finance managers can actually grasp. It is neither too simplistic to adequately explain their understanding of the universe they operate in, nor too complex to be embraced and acted upon. They’re sort of the Goldilocks solution… just right.

Sure, there may be other techniques that could answer any specific question more comprehensively, but at what cost to transparency and credibility? Managers (at least the human ones) need to 1. understand and 2. believe the analysis they get in order to operationalize it. The core mathematical simplicity of MMM gives it an advantage in both those respects.

But I’m pretty sure that MMM is “mature” only in the sense that it is a settled science which keeps getting better with age. In fact, using lifecycle terms, I’d categorize MMM as more in an “adolescent” stage. New methods and techniques have emerged to help better decompose the base effects, isolate long-term brand impacts, explain the direct and indirect effects of various elements of the tactical spectrum, and improve the forward-looking capability of the models.

When combined with some appropriate adoption training and alignment within the management team, today’s marketing mix models actually:

  • Provide more operational guidance, aligning increases or decreases in marketing spending with channel management and supply chain considerations;
  • Link to tradeoff analyses on a market segment or brand equity level; and
  • Help establish spending strategies as market conditions change.

Improved automated functionality is also allowing marketers to react more quickly to results based on their needs by, refreshing the models frequently and putting broad “what if” simulation at the hands of the marketing planner.

Ever the skeptic though, I still see some need for improvement. Specifically, MMM cannot be effective unless the modelers:
  • Ensure that the organization as a whole understands the assumptions and limitations of the marketing mix model;
  • Realize that laying the acceptance groundwork around those assumptions is as important and challenging as building the algorithms or collecting the data;
  • Remain aware of changes in the competitive environment and how they affect business results; and
  • Understand that the model will, inevitably, fail; expect it and plan for it.

Finally, I think it’s critically important that marketers NOT stop at marketing mix models. Risk is magnified by over-reliance on a single tool. Today’s marketing measurement toolkit needs to be much broader. Deep understanding of brand drivers, customer behavior and value require input from tools and techniques outside the mix model, as well as in.

Pat LaPointe is Executive Vice President at MarketShare, and Managing Editor of MarketingNPV Journal, the most widely read journal of marketing measurement, available online FREE at www.MarketingNPV.com.

Tuesday, April 26, 2011

The Rock in the Pond

Given the power and potential of social media as a marketing tool, there is considerable interest in understanding how it interacts with traditional media as part of a broader mix.

There is a considerable amount of work going on in this area across a broad spectrum of social miners and digital pathway attribution seekers. But sometimes you can be too close to something to see it clearly. If you’re looking for the social media interaction from within the realm of the digital world, you may see “patterns” in the data that seem to establish relationships, but are in reality collinear with other larger forces taking place both within the beyond the total marketing mix (not to mention exhibiting dangerously “drunk thinking”).

To really understand how social and traditional media work together, I’ve been examining many econometric models from across multiple industries where there was a substantial investment in traditional media (e.g. TV, print, direct mail, etc.). Some of these models studied brands or companies where there was no material social media activity. Others had added a substantial social media element to the mix of variables. In all cases, a broad spectrum of “uncontrollable” variables (e.g. macro and micro economic factors, competitive marketing activities, category consumption trends, distribution changes, etc.) were added to the models to further refine the understanding of the impact of the marketing tactics alone and in concert. A few observations seem to be arising:

  1. Traditional media can often be the “rock in the pond of social media”. When the message delivered by traditional media is either very good or unfortunately very bad, the media message reverberates throughout the social spectrum like shock waves through a still pond hit by a rock.
  2. This “ripple effect” can add substantially to the overall impact of the traditional media and boost the financial payback significantly.
  3. Modelers regularly miss this insight if their methods are set to read the impact of the social media alone, or are looking only at the online tactical elements.
  4. Missing this causes many marketers to UNDER-ESTIMATE THE REAL VALUE OF THE TRADITIONAL MEDIA and over-estimate the digital elements. In some cases by as much as 20% to 40%.

The simple fact is that if there was NO stimulus from the traditional media (or if the impact was beneath some observable threshold), there would be no material reverberation in the social media space. Not that you couldn’t cause some social buzz without traditional media, but doing so usually requires some combination of A) catching creative lightning in a bottle and going viral; B) discounting to abnormally heavy levels; C) “borrowing interest” in forms like celebrity endorsement, customer loyalty programs, etc.; or D) experiencing something unfortunately negative which everyone seems to take notice of. In any case, those social-only strategies tend to be either unexpectedly expensive or very rare (one in a million perhaps?).

Using traditional media is still the most RELIABLE way to get a message out quickly and uniformly. And by investing in effective copy engineering processes (at the proven intersection of customer insights and relevant creative disruption), you can toss your rock confidently into the pond of social media and expect to see waves of profitable opportunity arrive on your shore.

Pat LaPointe is Executive Vice President at MarketShare, and Managing Editor of MarketingNPV Journal, the most widely read journal of marketing measurement, available online FREE at www.MarketingNPV.com.

Tuesday, March 29, 2011

Where Are You on the Digital Ladder of Insight?

I’ve been working on updating the “Ladder of Insight” I published several years ago to reflect some observations on levels of measurement sophistication with respect to digital/social attribution. From what I see in the marketplace, companies seem to be at one of four levels in their pursuit of better insights…

Level 1 – Monitoring chat boards; counting Tweets and followers; measuring owned-media activity (site visits, sourcing pages, etc.); using last-click attribution. Seeing a very limited view of digital activity and hoping to correlate outcomes with observed behaviors.

Level 2 – Above plus tracking sentiment for self and competitors; monitoring Google query volume for a few dozen key terms; using syndicated research to dissect online information searching and buying pathways; “allocated attribution” methods based on views/touches across digital exposures based on samples of cookie and clickstream data.

Level 3 – Above plus integrated view of digital and traditional tactics in a common analytical attribution model that establishes direct and indirect effects of digital, and social (both online and offline WOM) within the context of ALL marketing/selling tactics.

Level 4 – Above plus comprehensive online pathway monitoring based on full digital data sets from own site, referring sites, and ad placement servers. Accurate digital attribution derived when sampling is no longer required.

As you move up in levels, you gain more accurate perspective and find more ways to improve the effectiveness of marketing spend - which is increasingly measured in terms of both dollars and man-hours. But more importantly, you gain competitive advantages to exploit your insights and you get refreshed insights faster.

But before concluding that this is the path to marketing excellence, it’s worth remembering a few decades-old ground rules of marketing that seem to be even more important in the digital era:

  • Innovation brings buying attention to your product/service offering. Manufacturing or borrowing interest (celebrities, discounting, etc.) are expensive and short-lived ways of drawing attention to yourself. If there’s nothing substantive for people to talk about, all the social media effort in the world won’t amount to much more than a digitally collective yawn.
  • Online chatter about your category/brand is usually just a fraction of total chatter. Don’t underestimate the impact of offline WOM, particularly for lower-interest categories where consumers aren’t likely to want to tweet or blog.
  • Given the increasingly fragmented battle for consumer attention, sound segmentation is more than ever the key to getting relevant value propositions in front of the right customers. Just because you produced a “killer” online video doesn’t mean millions will want to view it.
If you have thoughts or ideas on how to improve on this ladder, please share…


Pat LaPointe is Executive Vice President at MarketShare, and Managing Editor of MarketingNPV Journal, the most widely read journal of marketing measurement, available online FREE at www.MarketingNPV.com.

Tuesday, March 15, 2011

Drunk Thinking

A policeman finds a drunk crawling around on the street one night, frantically searching for something at the base of a lamp post. He approaches cautiously and inquires as to the man’s strange behavior.

“I lost my watch”, says the drunk.

“Here, under this streetlight?” asks the policeman.

“No, over by that building 50 yards that way” he points.

“So why are you looking over here?” the policeman asks quizzically.

“Because this is where the light is. I can’t see anything in the dark over there.”

Drunk logic.

The same sort of logic underlying the methods many are taking to understand the impact of their social and digital marketing efforts. Looking for answers where the data is. Sometimes because this is the ONLY data we think we may have (although in practice most companies have much broader access to reasonable data than they think they have). More often, the scope of analysis is restricted to just our own area of personal responsibility. The thinking seems to be that we should just analyze the things we are responsible for so as not to get stuck in the endless politics of the rest of the organization.

I realize that it is pretty difficult to do attribution analysis without data. And of course one of the many wonderful aspects of digital marketing tactics is, well, they produce tons of data. So why shouldn’t we look for answers in the digital arena? We can use test/learn experiments; pre-post analysis; and multivariate testing to optimize our digital impact. All of which can provide great insights.

But if the questions relate to the impact of the digital/social tactics on OVERALL results, then we need to analyze the digital elements in concert with the rest of the marketing mix. If we’re only looking at the digital data to understand digital marketing impact, we are ignoring the interplay between the digital and non-digital elements of the mix and drawing conclusions that are unlikely to represent reality. Worse, we may be drawing conclusions that will reinforce inefficiencies or bad habits. And in the process, we actually REINFORCE the political obstacles that exist between groups within the organization. We present OUR analysis; they present THEIRS; and the cycle of gridlock continues.

If you’re responsible for digital/social marketing within a broader marketing organization, you may stand to gain MORE resources when you analyze the digital contributions in the broader context of other offline tactics. The investment in time or money you make in gathering the offline tactical data and including it in your analysis framework may be repaid many times over in the form of more budget dollars, more influence, and more autonomy. On the flip side, NOT making the effort is likely to either limit the magnitude or impact of your analysis OR, worse yet, diminish your credibility in the eyes of the key decision-makers.

No one wants to be the drunk under the lamp post when the police come by.


Pat LaPointe is Executive Vice President at MarketShare, and Managing Editor of MarketingNPV Journal, the most widely read journal of marketing measurement, available online FREE at www.MarketingNPV.com.

Tuesday, February 15, 2011

A Simple Formula for Success

A reporter recently asked me what I’d learned across several hundred marketing measurement projects in the past 10 years. Rather than spew out the usual rash of BS, I asked if I could call her back with a thoughtful answer. Here’s what I came up with:
For those of you not into algebra, the meaning is simple:

Success is the sum of all your experience finding insights, transforming them into action, and trying to create more value than the resources you consume in the process. And then all this is raised to the power of perception.

It’s not all too difficult to find new insights in the search for improved marketing effectiveness and efficiency. There is still quite a bit of wasteful spending going on, and the dynamic marketplace tends to ensure the continuation of that opportunity. The hard part though is translating those insight opportunities into actions that companies (read: people) can actually implement. Tricky.

And if that wasn’t difficult enough, we’re all often challenged to do it with toothpicks, a roll-on anti-perspirant, and a pack of bubble gum. Who am I, MacGyver? Seriously, you’re going to spend all that money on advertising and trade shows and then want to measure it for .000000000005% of total spend? Not gonna happen. But if we’re smart, we can demonstrate the potential returns associated with effective measurement, and build the data streams over time that break the cycle of insanity. Ironic though that companies building competitive advantage on deployment of strategic resources so often see performance measurement and continuous improvement as an expense. Fortunately, done well, the value of measurement always exceeds cost.

And finally, the power of perception. The quality of our measurement matters little compared to the perception of the quality. We can inspire an organization to action with bad measurement if we package it well enough. Obviously, that’s not our goal. But the inverse trips up more measurement projects than I can begin to remember – even GREAT measurement technique is worthless unless we get people bought into the process long BEFORE the numbers hit the charts. There is NO report pretty enough and there are NO facts compelling enough to move a seasoned executive off their experientially-derived position IF they don’t WANT to be moved. Our job in measurement is to lay the groundwork for them to be willing to move. Otherwise, we’re teaching pigs to sing - which just wastes our time and tends to annoy the pigs.

So taken together, this experience can be described in this simple formula. Plug in your numbers and see how well positioned you are to succeed.
Pat LaPointe is Managing Editor at MarketingNPV – specialists in measuring the payback on marketing investments, and publishers of MarketingNPV Journal.

Tuesday, February 01, 2011

Measuring Corporate Reputation Without Putting your Head on the Chopping Block

Like brand equity, corporate reputation is an intangible asset that has some very tangible ramifications. It has the power to affect every aspect of the business, including enhancing or destroying shareholder value. But when it comes to tracking and measuring the value of investments we make in enhancing reputation, it seems surveys of investor and analyst attitudes are all that makes it onto our Marketing Dashboard (since many have found promising their CEO that stock prices will rise in response to a proposed investment in corporate reputation to be a career-limiting move).

So how do you measure the payback on the next investment you might make in seeking to enhance that reputation? Start by developing clear ideas of who you’re trying to influence and what you’re specifically trying to accomplish before you begin.

Here’s an example…

Retail investments giant Company A invests $2 million in a public relations campaign in a mid-sized market centered around a donation to revitalize youth sports facilities, receiving in return naming rights on a prominent little league complex. Its rationale for making this gesture is to enhance the image of the company as a community minded, local organization, and to associate its brand with the youth and vitality of sports.

Company A measures the effectiveness of its investment in terms of the change in attitudes amongst the local customer, prospect, employee, agent, legislator, and vendor constituent groups. It develops elaborate surveys and measures the pre-post differential in the affected market versus nearby control markets where there are no such sponsorships. It also measures the number and nature of media “hits” received in the local press and calculates the value of that exposure if it were paid at rate card for each media.

So when all these indicators respond positively, Company A tells the CEO that “The campaign was a huge success! The attitudinal shifts are through the roof. And we generated over $2.5 million in free media exposure, giving us an ROI of 25% on the media value alone!”

Competitor Company B makes a similar investment in a different market, but does so against the stated goals of
  • increasing the number of “power agents” (those doing more than $10 million annually in sales) from 38 to 54;
  • improving employee retention in their local call centers from 70% to 85%; and
  • getting a local ballot initiative on the legislative calendar to create greater flexibility for the introduction of new products.

Company B’s strategy is to achieve the objectives above by influencing the agents to carry more of its products, giving employees more reasons to feel pride in their association with the company, and providing legislators with a basis for supporting legislation that some may consider controversial.

Company B measures shifts in key brand attributes amongst the key audiences. And it measures the amount and nature of media coverage it receives in the local press. But the firm also measures the number of agent-to-power-agent migrations, employee retention rates, and the week-by-week progress of its target legislation. So when it comes time to report back to the Board on the campaign effectiveness, they can report that:

  1. The firm increased the number of Power Agents to 57, which has a forecasted net present value of $1.4 million;
  2. Employee retention fell slightly short of the 85% goal at 82%, but the expected savings in recruiting and re-training are still worth $1.8 million NPV based on employee tenure and productivity; and
  3. The ballot initiative is in the right committee of the state assembly and a straw poll of legislators suggests a 65% likelihood of passage within the next six months, which would translate into a probability adjusted $4.2 million in incremental net profits from new-product sales.

Bottom line: the managers in Company B can report to shareholders that not only have they improved the attitudes among key audiences, but the investment they made in enhancing the company’s reputation has achieved short-term payback of $3.2 million, for an ROI of 60%, plus the prospect of a longer-term payback of an additional $4.2 million. And that’s before the value of any incremental media exposure is taken into account – which the sophisticated investors know is not really worth the rate-card value of the exposure, unless the company had intentionally planned to forego other advertising or communications expenses in achieving it.

So what did Company B do differently than Company A? It set expectations for the investment it was making in more financial, tangible terms, and then developed the framework for measurement in terms of the expected economic behaviors it intended to create. Sure, it included the attitudinal shift surveys to diagnose the effectiveness and consistency of its message. It just didn’t stop there.

The learnings: push past attitudes to measure the real value of corporate reputation in terms that CEOs can understand.
Pat LaPointe is Managing Partner at MarketingNPV – specialists in measuring the payback on marketing investments, and publishers of MarketingNPV Journal.

Wednesday, January 19, 2011

Why Does Marketing Have to be so Damn Hard?

Fact: Failure rates in marketing are astronomically high. Only a small fraction of new marketing initiatives succeed in achieving their intended objectives. If marketing were a baseball player, it would NEVER have made the major leagues. If marketing were a horse, you’d need 10:1 odds at least (and even then you’d be best served to box your bet across win, place, and show). If marketing were a bridge, you’d certainly not want to drive across it on a windy day.

Why? Why is it so damn hard to make marketing work consistently and reliably?

You might argue that the challenge lies in the very dynamic markets we operate in. Shifting sands are the rule, not the exception. No sooner do you get your feet under you than your knowledge is antiquated by the latest disruptive force.

Could be that marketers are in a constant state of experimentation, always in search of the magic combination of message and tactics that “move the needle”.

Or perhaps it’s the absence of good “raw materials”. Maybe we’re just reflecting the frequency with which we are given uninspired products with no news value and no clear differentiation.

But lately I’ve been thinking that it’s because of two key factors:

  1. Marketing involves integrating the left and right brains – something that very few people are capable of. It requires an ability to think conceptually and unencumbered by the present realities, yet to evaluate critically in a rigorous way. Without the former, we fail to innovate; without the latter, we fail to focus. Moreover, it takes more than one person in an executive committee who can actually do this two-brain thing to notice and approve a good idea when one hits the table. Odds of there being a quorum of such people in any one boardroom are long indeed, given that executive committees normally include strong left-brainers from finance, IT, and manufacturing/operations. No judgment here, just an observation.
  2. Marketers tend to be more right brain than left. They enjoy concepts and creativity and innovation and inspiration, but not the repetitive types of analysis that tend to extract true insights from the cacophony of marketplace response. Many don’t have the patience for disciplined experimentation and continuous improvement, preferring to “try new things” and make a name for themselves within their industry.
Fortunately, there are tools to help us overcome our fundamental limitations (personal or organizational) and learn from the collective experience of others. For example, in 2009 the Marketing Science Institute published a book edited by Professor Mike Hanssens of UCLA’s Anderson School called Empirical Generalizations about Marketing Impact which clearly lists 16 categories of collective learnings from hundreds of academic studies of marketing impact over the last few decades. For example, did you know that:

  • Gains in market share do not often lead to gains in profitability in either short- or long-run.
  • Changes in pricing have approximately 26 TIMES the impact on sales as changes in advertising spend levels.
  • Changes in sales budgets have more than 3 TIMES the impact on sales compared to changes in ad spending.
  • If advertising doesn’t work in the short term, it will NOT work in the long term with more exposure.
These are but a few of the gems you find in this book, which you can order at www.MSI.org. Or, if you prefer, check out Mike Hanssens’ recent webcast on this topic to be really astounded by all the things that you SHOULD have known about marketing but likely didn’t (or didn’t have the proof).

When we get marketing “right”, we make it really HARD for OTHERS to immitate. That’s why the big marketing victories are so transformative for companies (and careers). If we got just a little better at standing on the knowledge shoulders of our marketing forefathers (and mothers), we might actually get it “right” more often, and make it harder for THEM to catch up with us.
Pat LaPointe is Managing Partner at MarketingNPV – specialists in measuring the payback on marketing investments, and publishers of MarketingNPV Journal.

Tuesday, January 04, 2011

Predictions for Social Media Metrics: 2011

Never hesitant to jump on the New Year prognostication bandwagon, here are a few predictions for some significant new elements and important evolutions in social media metrics in 2011:

  1. Rapid maturation. Social media measurement will mature rapidly now that there is real money being spent by marketers in the social realm. Professional measurement tools and techniques have gained critical mass in the space to help keep the focus on measuring the business value of social media in terms of either individual behavior shifts or community support. For a terrific overview, see Jim Sterne’s latest book entitled “Social Media Metrics” (or better yet, this webcast overview).
  2. Government Drives Better Tracking. Social media tracking (e.g. seeing how and where messages spread) will improve significantly, mostly due to government regulation. Many of us work in industries that are regulated. These regulations require that our marketing messages come with appropriate disclosures about financial interests, side effects, performance guarantees, etc. The necessity of properly making and tracking disclosures has, till recently, held back many of our character-limited social media efforts. New companies like CMP.LY (www.CMP.LY) are taking the headache out of disclosure management and providing powerful tracking capabilities at the same time.
  3. Online and offline will merge. By year-end, social media will no longer be equated with just online marketing tactics. TV, print, and outdoor campaigns will increasingly be measured in terms of their ability to get people engaged in behavioral interaction (e.g. talking to others about a brand), and more fully integrated with the online elements. Online behavior tracking will more fully merge with offline survey research techniques to better identify and measure the value of specific types of engagement. Offline budgets will continue to be much larger in most cases, but the “Old Spice” success story has penetrated the consciousness of marketers to the tipping point where the business and financial benefits of full integration are too big to be ignored.
  4. Predictive value is emerging. The holy grail of social media is the “so what” – what will all the “buzz” do for sales and profits? Several big leaps have been made recently in terms of quantitatively tying social media engagement (giving AND receiving) to actual purchase behaviors and “norms” are beginning to emerge in key industries. In fact, the number and quality of such “norms” are increasing so rapidly that predictive validity is building. We can tell, in some industries, how early social media activity can predict overall campaign effectiveness, which in turn can predict customer/prospect buying behaviors. So if A=B and B=C, then we will increasingly learn to use A=C as a trusted metric for measuring the “so what”, and the pace of that learning will accelerate dramatically.
Generationally, it’s been difficult for many of the “over 40” set to wrap their brains around the implications of social media (possibly more from stress-induced eye strain than from lack of interest). But watching the college and teenage consumers of tomorrow NOT watch television (except sports and streaming movies) or read any printed periodicals, it’s clear that the media world HAS evolved. Only now is it becoming clear that the metrics are finally beginning to catch up.
Pat LaPointe is Managing Partner at MarketingNPV – specialists in measuring the payback on marketing investments, and publishers of MarketingNPV Journal.

Tuesday, December 14, 2010

Elves Dashboard; Santa Suffers

Dateline: North Pole

Santa slipped into a PowerPoint-induced coma today halfway through the annual Elfin Performance Dashboard presentation. “I guess we had a few too many metrics”, said Lenny, Chief Analytical Elf.

According to eyewitnesses, Santa’s head began bobbing on approximately slide 46, and by the time the Elves reached slide 101 his eyes had rolled back into his head and his breathing became very slow and rhythmic. Mrs. Claus was heard to wonder aloud if it had anything to do with the copious quantities of beef ingested by her husband over the past few weeks in an effort to fill-out his oversized red suit. However, the Elves had prepared for such possibilities by stocking the room with coffee, RedBull, and lots of M&M’s.

“This year, we just had so much more data” said Lenny. “Our new CBM (child-behavior-manager) application gave us much better information on who had been naughty and who had been nice. Combined with the state-of-the-art production management system and our world class routing software, we wanted Santa to see just how efficient we’d been this year in the hopes that he would fund our plant expansion in 2011.”

Dashboard experts were called in to analyze the structure and concluded that there were just too many metrics. Comprehensiveness went way up, but relevance declined exponentially.

“Next year we’ll have it slimmed down to just the most relevant facts” said Lenny. “And we’ll try to make it a bit more forward-looking so Santa can plan better to deliver more peace and happiness throughout the world.”

Here’s to a holiday that’s:
  • Simply
  • Filled with
  • Happiness
  • And Joy.

Tuesday, November 30, 2010

Send THIS to Your CFO (Anonymously)

Attention, all finance executives seeking to understand the ROI on marketing investments…

Over the years I’ve learned that if I come home to find something in the house broken or missing, I’m much more likely to get the truth if I ask my kids “does anyone know anything about ” than if I ask “who broke this?” or “who took my ?” The later approach immediately sends everyone into damage control mode, while the former gives them a bit more latitude to respond in a responsible way. They sense somehow that I am more interested in addressing the problem than finding someone to blame for it. Even the kids who know they never touched the object of my immediate interest learn from my approach and become more proactive in disclosing their borrowing or breaking events in the future.

There are similarities where finance and marketing interact. Finance is often perceived to have parental-like authority in its control of the budget and its audit/oversight responsibility. So it is an unfortunate truth that too often the journey towards better insight into marketing payback gets derailed right at the start when finance asks what they believe to be a logical and simple question, but which marketing interprets in the form of a challenge – e.g.
  • “Is our marketing generating any value for shareholders?” or
  • “How do we know that marketing is working?”
These questions have the immediate and profound effect of putting marketing into “justification” mode and encouraging them to respond defensively. And since marketers are pretty creative and articulate people, they usually answer with a long stream of ad-hoc evidence, anecdotes, and metaphors which individually may not be so convincing, but in the aggregate create enough uncertainty within the executive committee to neutralize the question and deflect the discussion. The result is a stalemate; where the inherent subtleties of marketing are explained with superior powers of persuasion to cast doubt on the wisdom of cutting marketing spend.

Of course this doesn’t help the organization get any smarter. In fact, it actually has a significant “insight opportunity cost” since all the resources that could have been directed towards the pursuit of true insight get diverted to “proving” that marketing works.

Successful marketing measurement, like many other challenging tasks within the company, is a function of effectively deploying constrained resources on a few key focal points rather than fracturing the effort in a broad search for the “preponderance of evidence”. Imagine the payback insight you seek is trapped inside a large wooden log, and splitting the log open is the only way to extract it. You can split the log with a sharpened axe striking the right point in a single blow (two at most), or you can endlessly pound it with a sledge hammer until it (or you) slowly turn to dust. Which approach would you prefer?

The CFO is much more likely to get the answers they’re seeking by approaching the dialogue on marketing payback from an angle that generates productive engagement rather than defensive deflection. Doing so requires three specific attitudinal changes in how most CFOs would normally pursue the answers:

  1. Acknowledge that good marketing always creates shareholder value. If necessary, suspend your disbelief and be willing to concede that if we did things better, we would see a beneficial result. Use questions intended to discover:
    • “What can we achieve with good marketing?”
    • “How well is our current marketing performing?” and
    • “How can we improve the payback we’re getting?”
  2. Embrace uncertainty – especially in the early stages of measurement when the unknowns will outnumber the knowns. Be patient with ambiguity and willing to accept “I don’t know…” as an answer from marketing in the near term, provided it is followed in short order by “…but here is what we can do to find out.” Premature demands for precision will backfire in the form of higher weighting of the more measurable marketing elements such as web site traffic and direct response programs – even if those aren’t the real drivers of your success in the marketplace.
  3. Exercise patience. The questions you’re asking will take some time to fully answer. Expect to see some progress made soon, and then more made in measured increments, but don’t assume that applying time pressure will speed the discovery. More likely, impatience will be met with passive-aggressive resistance which will surface many more complex obstacles than you or the rest of the finance team have the time or ability to conquer.

There are other more targeted questions you can ask of marketing to put the measurement effort on the right track. But if the spirit of your inquiry is interpreted as a quest for insight rather than an attack on the marketing organization, you’ll get much closer to the answers you’re seeking, and get there much faster.

Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on measuring and improving the payback on marketing investments, and publishers of MarketingNPV Journal available online free at www.MarketingNPV.com.

Wednesday, November 17, 2010


One of the most popular measures of relative marketing effectiveness continues to be monitoring share-of-voice (SOV) – a metric based on your total marketing/advertising spend as a percentage of the total spend in your category. Some even go a step further and look at an index of SOV to SOM (share of market). The argument for doing so is that if your SOV is less than your SOM, you are at risk of losing share. Presumably, the converse is then also true – that if your SOV is greater than SOM, you should expect to gain share.

For example, if your measured ad spend was $20MM in a category where total measured spend was $200MM, your SOV would be 10%. If your market share was 13%, you might argue that you are underspending on an SOV/SOM basis, and that more funding was required to maintain share. You may be right, but not for the reasons you cite. And even more importantly, more marketing credibility has been squandered on this simple argument than perhaps any other single metric over the past 20 years.

CEOs and CFOs see right through the SOV argument and regularly tear it to shreds in budget meetings. They tend to outright reject the premise that SOV drives SOM absent any clear data to the contrary.

If you understand the mindset of the CEO and CFO, you know they are very able to envision scenarios where spending even less money on marketing than our competitors could be beneficial if A) the existing core value proposition is better than the competitors’ and customers know it; B) the money would be better spent improving the core value proposition than investing in efforts to “sell” the current inadequate version; or C) the shareholders would benefit more by dropping the savings to the bottom line. Although not often stated, these intuitive expectations are almost always fueled by concerns about the relative effectiveness of the current marketing/advertising investments to begin with.

In this environment, the marketer who enters the meeting with an argument to raise spending levels to achieve some SOV target is actually heard to be saying “Johnny has more money so I want more”. And as soon as that impression is created, you might as well polish your resume because your influence over the marketing budget is now far smaller than even your most conservative hopes.

Nevertheless, relative spend pressure in the marketplace can and often is shown to have an impact on how market share migrates. So how do you bridge this gap credibly?

First, understand the difference between SOV and “Effective SOV” (ESOV). ESOV begins with relative spend, but then adjusts it up or down based on relative strength of your core value proposition and/or message execution. Taking our earlier example, if your spend was $20MM in a $200MM spend category, you would index your 10% SOV by looking at the relative stength of your ad copy execution. If copy testing told you your message was at parity with your competitors, your ESOV would equal SOV at 10%. But if your copy was 30% stronger or weaker than competitors, your ESOV could be 7% (10%*(1-.3)) or 13% (10%*(1+.3)). In other words, you may in fact need to spend more money to maintain an effective level of marketing pressure – even more than you originally believed. Alternatively, you may be benefitting from a strong message and providing an effectiveness dividend to shareholders by requiring less ad spend due to your very stong message.

Calculating ESOV by using ad effectiveness is good, but using relative strength of your value proposition, (the perceptions of the appeal of your product/service vs. your competitor’s before
taking ad execution into account), is even more encapsulating of the impact of marketing spend.

CEOs and CFOs see ESOV as a legitimate analyis of relative strengths and weaknesses. Consequently, using ESOV doesn’t cost you any credibility points. But it doesn’t unilaterally gain you any unless you are simultaneously able to explain the impact of ESOV on profitable share shifting. It’s one thing to know what your ESOV is as a starting point, but quite a bit more impressive if you know how a projected change in ESOV would translate into incremental revenue and margin flows.

There are several ways to determine the incremental impact of ESOV on financial outcomes. The first is with classic marketing mix models, which can help you better understand the historical relationship. If the category dynamics are relatively stable, this might be sufficient to project the outcomes into the future.

If you either cannot implement mix models OR are in a very dynamic category where the past is not a good predictor of the future, then you can use a combination of analytical and choice-options research techniques studying both your own and your competitor’s advertising to better understand the relative behavioral impact of each.

Neither method is perfect. But by triangulating on estimates of the relationship between ESOV and share, then consistently measuring it periodically to refine your understanding, you ensure that the next budget meeting will be a much more intelligent and fact-based discussion where both you and your recommendations come out alive and healthy.
Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on measuring and improving the payback on marketing investments, and publishers of MarketingNPV Journal available online free at www.MarketingNPV.com.

Tuesday, November 02, 2010

Tapping Into the Wisdom of Clouds

Prediction markets have been around for quite a while now. The Iowa Electronic Marketplace is world renown for accurately forecasting the outcomes of US elections often many months prior to election day. Sports betting sites in the UK and elsewhere move billions of dollars of wagers on the basis of the collective expertise of those betting on outcomes.

More recently, companies like Consensus Point, Crowdcast, and InTrade (among others) have brought the tools and technologies to the boardroom that allow managers to tap into global pools of “experts” to attempt to predict the future.

  • Hollywood movie studios have made “prediction markets” a key component of their forecasting efforts in deciding how much money to spend on advertising campaigns. (Interestingly, movies rated very high or very low receive relatively little advertising as WOM is expected to play its role at both ends of that spectrum; only movies in the middle-range receive significant ad spend).
  • Retailers use prediction markets to make decisions on which products to carry in inventory, as well as how to promote and price them.
  • Technology firms use them to decide which new platforms to bet on.
  • Pharma industry leaders use them to determine pricing strategies years in advance based on competitive pipelines and regulatory approval processes.
  • And B2B industrial companies use them to model the impacts of changes in sales force size, structure, and compensation.

Perfect? No. Helpful and insightful? Definitely, in several ways.

First, by identifying possibilities not previously within the imagination of your own executive team, and by considering factors which any small group of managers might overlook, they provide a more thorough and comprehensive assessment of uncertain outcomes.

Second, even if prediction markets cannot provide an exact answer (which they rarely can – being better at offering directional probabilities than precise forecasts), they can significantly reduce the uncertainty surrounding what a given market segment might respond to, or how a group of competitors might react to a significant change by one. This makes them good tools for setting performance targets and expectations in the absence of historical perspective.

Third, with the help of cloud computing and social networks, prediction markets are declining in cost to the point that they are often much faster-to-feedback and far less expensive than traditional survey-based research, while offering far greater flexibility to have respondents explore “what-if” scenarios.

Like any tool, they can be dangerous in the hands of amateurs. Garbage-in, garbage-out is a primary risk. So is being too confident in the absolute numbers, when the directional insights are often the most valid level of granularity.

Nevertheless progressive marketing measurers are using prediction markets to help them better understand and act on the insights they’re deriving from their mix models, their web analytics platforms, and their customer satisfaction and referral studies.

There is a whole lot more to learn about prediction markets before you jump into using them. But in general, you can benefit from using them to answer questions you might be struggling to answer with your current data streams if/when:

  1. You have a suitable pool of “experts” to engage in your marketplace. These experts could be associates, customers, prospects, or industry monitors. The exact number required differs by purpose. Sometimes you can get pretty reliable data from as few as 20 participants; other uses would require hundreds (or thousands) of participants.
  2. You can define your questions in terms of “what would happen if…”
  3. You can engage expert participants by offering something of true value in exchange for their effort and energy. Offering monetary rewards, special recognition, unique access, or other benefits of great interest will help ensure a more vibrant and active prediction market that explores new ground.

Finally, two quick learnings about how to get the most from your prediction markets (based on experience)

  1. Include some “noise” traders who inject provocative suggestions or wagers to ensure you draw reactions (supportive or contrarian) from the smarter traders with better insight.
  2. Run your markets as shorter-term events, and not continuous commitments over extended periods. Request only short-bursts of participants’ time; provide feedback quickly; and progress continually towards a defined end-point.

There’s a great deal of un-tapped insight potential in the clouds. Creative approaches are generating terrific new insights into marketing effectiveness and efficiency at increasingly faster rates. And the subset of “difficult to answer” questions is getting smaller and smaller every day.
Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on measuring and improving the payback on marketing investments, and publishers of MarketingNPV Journal available online free at www.MarketingNPV.com.

Wednesday, October 20, 2010

Metrics for Your "Special Purpose"

Question: What do Steve Martin (actor) and the ANA’s Masters of Marketing have in common? Read on for the answer.

I’m just back from the ANA Masters of Marketing conference this past week in Orlando.

Celebrating their 100th anniversary, the ANA once again did a superb job of bringing together 1600 members of the marketing community to hear 20 or so CMOs share their stories of success. Most were entertaining. Some were very informative – particularly when ANA CEO Bob Liodice would ask them questions about how they were measuring their success. On the whole it was clear that we (the metrics-loving community at large) have made some substantial progress in this regard as most of the CMOs were able to answer intelligently about what they were measuring and how it related back to business decisions.

But not since Steve Martin starred in “The Jerk” have I heard as much talk about “finding a special purpose”. The unofficial theme of the event seems to have been marketers talking about re-discovering their company’s true purpose in serving customers and enhancing their lives. Some have done elaborate research on their brands to find their “special purpose”. Others went back to the founders or the archives to refresh their institutional memories.

While I applaud the drive for more meaningful connections with customers and prospects, I think this trend poses a risk to lead us astray unless we apply a few carefully chosen metrics in pursuit of purpose.

First, we need to ensure that our purpose is RELEVANT. Those we seek to attract must find our purpose to be consistent with their view of how they want to live their lives, and see the link as to how we can help them do so.

Second, it needs to be MATERIAL. Even if relevant, our purpose may fail to inspire any change in behavior unless it eliminates a significant pain or provides a measurable gain. Most people will live with some degree of pain or inconvenience (tangible or otherwise) until the effort involved in resolving it is clearly less than the expected gain.

Third, our purpose needs to be DISTINCTIVE. It must be seen as somehow uniquely ours to fill. If the needs we are targeting at the core of our purpose can be filled interchangeably by any of our competitors (or other companies even in other industries), then we don’t have a true purpose, we have a slogan. An ad campaign. Some t-shirts. Pursuing a shallow-built purpose has historically been a terrific way to spend lots of money (and executive credibility) without actually achieving any value for shareholders. Hard, tangible value in the form of revenue, profitability, share, customer loyalty, referral networks, channel power, etc.

I wonder just how many companies could find a clear “purpose” that meets all those criteria?

More likely, companies have some ingredients of value proposition to offer that would rise to those standards IF they could better execute against them consistently enough to be recognized in the marketplace.

Chances are that you won’t FIND your purpose by looking through reams of research data. However, if you think you have some clues as to what it MIGHT be, you should be thinking about using various modified conjoint/choice-options types of work to validate it on the dimensions above, and in direct comparisons to WHAT ELSE you might do instead. At least then you would have some more specific sense of the value of achieving your purpose.

Once found, there may be a big role for broad-based advertising to help spark recognition of the match between the needs of the market and the abilities of the firm, as well as to inspire thousands of employees around the world towards a common goal. But as we contemplate using paid, owned, and earned media to get the message of our purpose out, let’s first ensure that we have more than a clever advertising idea to base our hopes (and those of our customers) on.

Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on measuring and improving the payback on marketing investments, and publishers of MarketingNPV Journal available online free at www.MarketingNPV.com.

Tuesday, October 05, 2010

Overcoming the Short-Term Bias in Marketing Measurement

At best, marketing measurement tends to slant towards short-term payback at the expense of longer-term brand and customer development. But when you add heavy doses of highly measurable online tactics to more quantitatively-elusive offline approaches, the slant can become an outright bias. Unchecked, this can seriously impair the marketer’s ability to make smart decisions beyond the next quarter or two. This is particularly acute with respect to fully integrated programs designed not just for lead generation, but for brand and customer development.

This pressure for short-term payback exists in part because finance cannot afford to “trust” the marketer more than one or two periods into the future, and in part because the marketer cannot “prove” that the immediate impact understates the true value derived. Rising above the stalemate requires some new thinking in how marketers plan, execute, and measure their programs, not to mention the way they communicate their expectations and findings to finance.

So how do we stimulate that new thinking? One way is to employ a Brand Value Chain.

The Brand Value Chain (adapted from Kevin Keller of Dartmouth and Don Lehmann of Columbia) helps clarify and document, for all to see, the anticipated relationship between elements of an integrated marketing program and financial value created through stronger brand equity.

In the simplest version of the Value Chain, an integrated campaign leads to some evolution in brand image, which in turn leads to some change in “equity”, which then translates into financial value.

The best way to understand the Brand Value Chain is to begin with the end in mind. Specifically, what sort of financial value is the integrated campaign supposed to lead to? Is it intended to increase the incidence of purchase? To decrease price sensitivity? To open new distribution channels through superior category leverage? To project more powerful negotiating position to vendors and suppliers? Or some combination of the above?

The Brand Value Chain tests your ability to clarify your expectations logically and to define the specific dimensions upon which brand “equity” must evolve to achieve them. How are you expecting the thoughts, beliefs, attitudes, associations, and permissions people ascribe to the brand to change or grow? What do you believe precedes seeing the desired economic behavior?

Finally, the “image” results are the early indicators (e.g. salient awareness, attribute- or characteristic-specific awareness, or more accurate awareness of the brand’s points-of-parity and/or points-of-difference) of progress. While important, they are a necessary but insufficient condition for a profitable outcome. Acknowledging this works to establish the necessity of time to translate imagery into equity into financial gain.

Once you have the Brand Value Chain constructed in a way that reflects your hypotheses about the way things work, you can identify which links in the chain you are able to test/read/validate and which you cannot. This brings focus to the information gaps and raises the question of tradeoffs between the cost and value of further insight for all to assess. If finance is so keen to have precise insight into the financial outcomes of brand advertising, they should be willing to invest in the research, testing, and experiments that would have to go into properly tracking the flow of results through the value chain. Otherwise, they will have to accept informed assumptions and estimating processes which find the balance between cost and benefit.

The Brand Value Chain has one significant flaw as it appears here. It follows the now widely discredited “hierarchy of effects” theory, which prescribed that awareness leads to conscious consideration which in turn precedes behavior. This linear model has been found to have only limited validity in the real world. However, the Value Chain does provide a great starting point for you to map out how you
think your category dynamics operate so you can construct one in a format that is most relevant to your business.

Measuring the impact of integrated marketing over the long run is possible with the application of the right tools and processes. Research, experimental design, factor analysis, and continuous feedback mechanisms all play a role in reducing the unknowns down to comfortable risk levels. It just takes some clarity and precision in defining expectations for marketing’s payback by building financial bridges from short- to long-term value creation.

Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on measuring and improving the payback on marketing investments, and publishers of
MarketingNPV Journal available online free at www.MarketingNPV.com.

Tuesday, September 21, 2010

5 Things You Can Do TODAY to Improve Your Measurement Foundation

While the economy may be improving, CFOs will be cautious not to spend too far in advance of strong demand. This will continue to fan the flames under the question of the expected payback on marketing investments, and expose cracks in your measurement foundation.

So now more than ever before it’s critically important to improve your ability to measure and improve your marketing ROI, and your credibility in explaining it. But most marketers can’t spread their resources too thin, so what will really make the most difference to elevate your measurement game?

Here are a few suggestions…

First, get the metrics right. Many marketers are still wrestling with a panoply of things that could be measured, instead of those which should be measured. They have too many metrics concentrated in the business outcomes (e.g. “revenue”) or in the marketing activities (e.g. “web pages implemented”), and not enough in the middle-ground explaining the progression of the engagement and ultimately buying process. Measuring your social media activities down to the millimeter doesn’t matter at all if you don’t have a clue about the financial return of your brand advertising.

The “right” metrics are the ones that A) give you the insights to answer the question “what do I do next?”; B) are calibrated to move up or down as your spend patterns change so you can learn what moves the needle; and C) elicit head-nodding from the CFO for their credibility and validity. They should account for the impact of the vast majority of your marketing spend activity, and always be pushing to link closer and closer to the ability to determine financial value created.

Second, experiment liberally. If you’re not spending at least 10% of your total budget experimenting, your knowledge foundation is crumbling. Deliberate, focused experimentation is the most credible and effective way to test unknowns about strategy, tactical execution, or resource allocation mix, and do so in a “live” environment where all the boogey man variables can and do impact the results. It creates a disciplined approach to continuous learning and improvement that cannot be achieved through research alone.

Third, standardize business case requirements. Each and every proposed initiative above some spending threshold should come with a business case using a common template that forces the proposer to specifically articulate their assumptions about how this investment will ultimately help improve shareholder value in some financial context. This not only helps the quality of the plans submitted, but also permits some portfolio management of options when the resources aren’t quite sufficient to cover all requests.

In the beginning, these business cases will be full of holes. But in time, validated assumptions will fill the holes and become a repository of institutional knowledge for reasonable expectations. Then you’ll be able to approve or reject ideas faster, and with less haggling with finance. Not to mention the insight you’ll gain into where you need to shore-up your key assumptions.

Fourth, stop searching for “proof” and look for insight. When marketing measurement emanates from a defensive posture, it tends to solve small problems in sequence so as to win one argument at a time. This energy consumed by “fighting” these battles tends to blind CMOs from pursuit of the broader understanding of the real drivers of business success.

A better approach is to work with finance, sales, SBU’s and other key stakeholders to lay out the series of key questions you would like to be able to answer, ranked in order of priority. Once you’ve finalized the list, you now have the framework against which to plan your assault on ignorance in a way that engages the whole organization on the path, and sets you on a foundation of credibility.

Fifth, practice transparency. Make every assumption plain for all to see and criticize. Label educated guesses as such. Invite anyone to challenge your knowledge and engage them in a discussion of the practical limits on what might be known at what cost in what timeframe. Present expectations in terms of probabilities and ranges where certainty is lacking, and allow the informed opinions of others to factor into setting those ranges so they begin to have some ownership of the uncertainty “problem” themselves and are thereby more supportive of you spending money to solve it.

Finally, remember that in measurement “no pain, no gain” is very real. It takes focus, effort, and resources to improve your knowledge. These five components will help you lay the right measurement foundation to build on.

Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on measuring and improving the payback on marketing investments, and publishers of MarketingNPV Journal available online free at www.MarketingNPV.com.

Tuesday, September 07, 2010

Measurement Problems? Check Your Credibility Chain.

Which of the following is the biggest obstacle to better measurement of the payback on marketing investments?

A) Lack of data
B) Low measurement skills
C) Drowning in a thousand metrics
D) Low credibility in the eyes of key stakeholders

While data and skills are critically important components of measurement success, there is no single obstacle more formidable than lack of credibility. Data, after all, can be estimated within reason. Skills can be “rented” while they are being developed. But credibility either exists or it doesn’t. And if it doesn’t, the road back can be long and winding.

Credibility is so crucial since so much of marketing measurement involves making assumptions. Assumptions about the impacts of tactics on prospects; assumptions about the interaction effects between tactics; assumptions about the effects of macroeconomic forces; etc. For every assumption, there is an element of credibility in both the assumption and the assumer. In other words, there are dozens or even hundreds of places where cracks can form in the credibility of any measurement framework.

Managing the credibility of any measurement effort can be broken down into four elements, each of which are necessary to preserve the “credibility chain”.

First, measurement efforts must be seen to be aligned to the needs of the business. Key questions being answered need to be clearly linked to the success of the business in both the current and future perspectives. In addition, those key questions need to be seen as worthy of the resources being allocated to pursuing answers, and “material” to the decisions the business will face.

Once aligned, the measurement effort needs to be seen as comprehensive. Every relevant dimension must be explored fully to leave no stone unturned in search of insight. If there are 100 stones which need to be uncovered and you only explore 99, you get no credit. Rather, you figuratively get hit in the head with the 100th stone by those who feel you may have conveniently ignored it for fear it contained secrets that would undermine your arguments.

But even being comprehensive isn’t sufficient… you need to also be seen as objective in your assessment of what you find under each rock - identifying both the supporting and refuting evidence observed. Yet objectivity is difficult for marketers who tend to see the world through rose-colored glasses, hoping that things we try will work in the marketplace. That’s a natural psychological mechanism in a profession where small failures happen every day on the path to learning. It just needs to be counter-balanced by a concerted effort to question those optimistic tendencies, if for no other reason than to demonstrate that your primary concern is truth, not “proof”.

And finally, when that aligned, comprehensive, objective assessment gets translated into recommendations for how money should be spent, accountability is the perceived result. And people who are seen to be accountable are usually entrusted with more resources and responsibilities.

When you line each of these components up, the end result is credibility in measurement.

If your key stakeholders are questioning the credibility of your measurement efforts, chances are your credibility chain is broken somewhere. Take a look back to see if you have clear alignment on what questions you are answering and how they are prioritized. Ask yourself if there are any other “rocks” that could be turned over. Test your observations with others to see if they are seen as objective. And then check to ensure your recommendations are directly linked to the insights you’ve gained in the process.

It clearly takes more effort to build and preserve a credibility chain than it does to throw ad-hoc metrics and data at your key stakeholders. But it almost always is an investment that leads to longer, more successful tenure in senior marketing roles.

Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on measuring and improving the payback on marketing investments, and publishers of MarketingNPV Journal available online free at www.MarketingNPV.com.

Tuesday, August 24, 2010

Achieving Simplicity in Measurement

So often I hear that a given approach to measuring the payback on marketing is “too complex”. It often gets voiced as. “This is too complex for our executives to understand. Can’t we just make it simple?”

The answer is YES. We can make it simpler. To do so, we need to start by recognizing that there are several types of “complexity” that need to be managed:

Over time, I’ve come to learn a few things that help in trying to manage these complexities:
  1. Simplicity is the destination, not the starting point. If the answers were simple, you would have found them already. The challenge is to sift through the complexity to identify the real insights - e.g., discovering brand drivers, identifying customer segments, etc. The path towards marketing measurement excellence requires working through complexity to arrive at the core set of appropriate measures, processes and frameworks.

  2. Complexity in measurement is a reflection of complexity in the business. The measurement plan just reflects the nature of the business, and should be on-par with the complexity management already deals with daily. The goal of the measurement plan is to establish a more structured framework for systematically eliminating complexity over time by isolating the most meaningful areas of focus. If you knew those already, you wouldn’t need to search for them through your metrics.

  3. Complexity is only a problem when introduced to the BROAD organization. The totality of the measurement plan and activity will be contained within a small group of people who already manage the current complexity. It is the responsibility of this core group to communicate comprehensiveness without adding any un-necessary complexity. Roll-out to the broader workforce will be the gradual and likely limited by function.

  4. Simplicity, if not thoughtfully pursued, can inhibit competitive differentiation. If the real competitive insights were are as obvious as picking up shells on the beach, everyone would have them. Try not to limit yourself to picking up the same shells as your competitors. Complexity is often a necessary part of meaningful innovation.
Specific to each type of complexity, there are some clear resolution strategies…

In the end, the goal of enhanced marketing measurement is to guide the organization to take bigger, smarter risks to achieve competitive advantage. Identifying and analyzing those risks is always complex. Your measurement approach needs to be based upon the processes, skills, and tools designed to make it SIMPLER in the future than it is today.
Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on measuring and improving the payback on marketing investments, and publishers of MarketingNPV Journal available online free at http://www.marketingnpv.com/.

Tuesday, August 10, 2010

Dashboards - Huge Value or Big Expense?

I’m hearing more and more “dashboard bashing” these days. Seems that many have tried to implement them, and then drawn the conclusion that the view isn’t worth the climb. I’ve even been inside companies where you cannot even say “dashboard” in front of senior executives for fear of them throwing you out of the room. Likewise, I’ve been inside companies and heard things like “Dashboards are easy. We have hundreds of them.”

Having “written the book” on marketing dashboards several years ago, I think I own part of this problem. And I confess that there are far fewer comprehensive dashboards in use within Global 1000 marketing organizations than I thought there would be by now. In short, it seems it was a good idea in concept, but it just hasn’t “stuck” within most companies. Why?

Well for starters, dashboard design and implementation tends to get delegated down the hierarchy and get treated like campaign management or marketing automation tools. It’s a bit paradoxical, but if a CMO wants an insight-generating dashboard that saves them time, they need to put more time into nurturing its birth and evolution. EVERY successful dashboard implementation I’ve seen (and yes there are a few) shares a common foundation of senior management attention and high expectations. Without that, they are born of a thousand compromises and arrive neutered of their value.

Second, they are set up to fail by unrealistic expectations with regard to resources required. Sure the software to run dashboards is getting much cheaper all the time, but the effort to gather, align, and interpret data is significant. Not to mention the time required to train the staff how to USE the dashboard to THINK differently about the business than they did before. After all, if your dashboard doesn’t offer the prospect of causing people to think differently, why do it when you can just continue to rely on the existing mélange of reports flying around the building?

Third, there is pressure to execute in Excel in the belief that it will be easier and less expensive. In reality, the limitations it imposes undermine the potential to grab people’s imagination and draw them into interacting with data in new ways. The users can’t sense anything different from the reports they currently get. In short, penny wise and pound foolish.

And finally, start with metrics which CAN be measured today (the pragmatist approach) instead of envisioning the spectrum of things which SHOULD be measured (the visionary approach), and force some amount of new learning exploration right from the start. Without this stretch exercise, many dashboards are started with no prospect of new information, and therefore no compelling reason for anyone to take the time to learn to use them.

So to sum up what we’ve learned, I’d say if you're looking for great insight without expense, stay away from dashboards. You'll be disappointed. But don't burn your bridges behind you. After you've searched far and wide for true insight-generating solutions that meet the "good" and "cheap" criteria, you may just arrive back at the reality that insight is derived through dedicated effort over time. And while the current generation of dashboard software options is slick and inexpensive, they won’t perform the most important transformations for you – the process, skill, and culture ones.

Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on measuring and improving the payback on marketing investments, and publishers of MarketingNPV Journal available online free at www.MarketingNPV.com.

Tuesday, August 03, 2010

Catching Lightning in a Bottle

What do these great marketing breakthroughs have in common?

• MasterCard “priceless”
• Energizer bunny
• “Got Milk?”
• Absolut ________

All were truly “breakthrough ideas”. All were “viral” ad campaigns before there was such a term. But they all were much more than ad campaigns – they were positioning strategies that effectively cemented their brands into the top echelon of their respective categories. They were marketing platforms that have lasted for many years and evolved to adapt effectively in dynamic environments.

Yet of all the marketing jargon that’s penetrated our brains, I think the concept of the “breakthrough idea” may be one of the most dangerous.

Would we all love to have one? Sure. When one comes along, can it revolutionize our business? Absolutely. So what’s the problem? Shouldn’t we all aspire to the same success?

Statistically speaking, most marketing organizations have a better chance of hitting the lottery than they do creating a breakthrough idea that’s more than just a short-lived ad campaign. Declines in both research budgets and internal competencies are primary causes. But internal politics and dynamic competitive environments play a role too. All of which is exacerbated by shorter timelines to produce demonstrable results.

Having spent the better part of the last 10 years crawling inside many Fortune 500 companies to help them measure marketing effectiveness, I have recently come to the (much overdue) conclusion that most measurement problems stem from the core evils of parity value propositions and absence of effective positioning. We’ve somehow managed to shift almost all our efforts from strategic insight development (which we’ve outsourced to consultants and research companies, and then put them on very tight budgetary leashes) to tactical execution in the mistaken belief that the only viable strategy for success in a two-year evaluation window is to catch lightning in a bottle in the form of a positively viral ad campaign. In other words, most unintentionally place themselves in a position where they are relying upon lightning to strike in a specific place during a short window of time.

True, most of the breakthroughs above were born in moments of pure inspiration on either the client or agency side. But those moments were carefully “engineered” to come about through insightful research and market study. They were successful outcomes of a diligent “R&D” process.

As you look ahead to your 2011 budget, how much have you allocated to “R&D”? Not surprisingly, even companies with multi-billion dollar R&D budgets for engineering and product development will likely have just a small fraction of their overall marketing budget dedicated to generating market/customer insights. Far more money will be allocated to unstructured and uncontrolled experimentation with communication tactics in support of messages which are neither “breakthrough” nor effective strategic positioning. Many will invest heavily in analytics to optimize the media mix of campaigns to get the biggest return for the tactical budget, yet will go to sleep at night wondering if they’re actually saying the right things to the right people to inspire the right behaviors.

Increasing the probability of success in marketing almost always comes down to executing against a process of hypothesize, test, learn, refine, repeat. Along the way, you can employ a few metrics to gauge your progress at improving. For example:

  • Relative Value Proposition Strength – a measure of the degree to which your core value proposition (unbundled from ad execution) is preferred by the target audience relative to the options they see themselves having. Tracking this on a regular basis helps diagnose the extent to which your core offering is driving/depressing results versus your execution of it.
  • Positioning Relevance – a measure of the degree to which your key positioning points resonate on relevance and materiality scales compared to other positioning strategies the customers/prospects are exposed to from competitors.
  • Message effectiveness – a measure of the degree to which your message execution is delivering the right message in a compelling and differentiated manner.

Finding out where you score high or low on these metrics will direct and focus your efforts at improvement. It may also help enlighten others around the company as to the need to invest more in developing stronger value propositions through product/service innovation.

Implementing a few structured steps like these can go a long way towards informing your understanding of where and when lightning is more likely to strike, so you can put your bottles in the right places.

Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on measuring and improving the payback on marketing investments, and publishers of MarketingNPV Journal
available online free at www.MarketingNPV.com.

Tuesday, June 22, 2010

Twitter Metrics? Why Bother?

There sure is lots of buzz these days about how to measure Twitter. One recent question submitted was typical… “How do we measure the value of the tweets we’re producing every day?”

Wrong question.

The right question is “SHOULD we measure the value of the tweets we’re producing every day?”

For the vast majority of companies out there, I think not.

It seems to me that Twitter is a productivity tool. You use it to efficiently communicate messages to people who have indicated a desire to hear them. In doing so, you also benefit from their willingness to re-tweet along to others they may know with similar interests.

As such, the inherent value proposition of Twitter is to REPLACE higher cost avenues of reaching interested parties with LOWER cost avenues. Consequently, the financial value of using Twitter for business is the cost savings of reaching the same people more efficiently and/or the now-affordable opportunity of communicating deeper into the universe of current and prospective customers. All of which is, to a reasonable degree, measurable.

So why am I skeptical about measuring tweets?

First off, there are no platform costs for tweeting. No software to buy. No hardware to install. Just use any web-enabled keyboard and you’re off. Everything you need to get started is free. If you’re not adding staff, and/or you’re not keeping staff to tweet when they would otherwise be expendable, then you have NO incremental cost. If this is your situation (and for most of you I suspect it is), then why bother measuring something that comes at no cost? Save your marketing measurement energy (and that of your management team) for bigger, more expensive issues with more meaningful marketing metrics.

But if you add or divert headcount (staff or contractor) to tweeting in a way that adds to cost, you should be prepared to forecast and measure the impact.

Your Twitter business case for adding additional headcount (aka “Chief Tweeting Officer”) is based on the premise that more/better tweeting will drive measurable impact on the business in some way. So you would compare the incremental headcount cost of the tweeters with the expected incremental impact on the business in terms of:

A) Incremental customer acquisition;
B) Incremental customer retention ;
C) Incremental share-of-customer;
D) Incremental margin per customer or transaction;
E) Improvements in staff or channel partner performance;
F) Accelerated transactional value; or
G) Early indication of problems and the resulting benefit of acting quickly to fix them.

Each of these could be determined through a series of inexpensive experiments intended to prove/disprove the hypothesis that tweeting will somehow result in economically attractive behavior. Some might happen as a direct result of the tweeting. Others may be indirect results in association with combinations of additional marketing tactics (e.g. paid search or display advertising). Define your hypotheses clearly and succinctly, then monitor tweet consumption…

Anyone rolling their eyes yet?

Bottom line is that tweeting, like all social media activities, are engagement tools. We use them to try to engage current/prospective customers in further dialogue of investigation of the solutions we can offer them. So from a measurement perspective, that suggests we focus on what specific types of behavioral engagement we are trying to drive, and what economic impacts we anticipate as a result. Measure changes in those two elements and you’re well on your way to success.

There are always ways to measure marketing effectiveness. Everything in marketing can be measured. But the first and most important question to ask is “what would I do differently if I knew the answer to the question I’m asking?” Only then can you decide how to PRAGMATICALLY balance measurement with action.

My friend Scott Deaver, EVP at Avis car rental is fond of saying “don’t bother if you can’t weigh it on a truck scale.” I think that applies very often to twittering away time measuring Twitter.

Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on measuring payback on marketing investments, and publishers of MarketingNPV Journal available online free at www.MarketingNPV.com.