Tuesday, November 29, 2005

The Value of Knowing

One of the most common questions we get on marketing measurement begins with "How would you measure ...?"

When I hear those trigger words, my mind immediately goes to the response question: "What would you do with the information if you had it?"

There are two reasons the response question is so important prior to answering the original question.

First, the answer to the response question will help me understand the extent to which your organization has developed a thoughtful (if executionally challenged) perspective on critical metrics, or if you're still in the mode of identifying the superset of all possible things that might be measured.

Second, the answer will tell me the relative importance of the particular piece of information you're looking for and give me some sense of the economic value of having better certainty of knowledge. If having the knowledge will improve your business outcomes just marginally or not at all, we can pretty quickly agree that it doesn't really matter how we'd measure it. Conversely, if the expected economic value of knowing is significant, many possible doors open in terms of collection avenues, since we can presumably allocate a fair amount of resources to acquiring the knowledge and still show a very positive return on that investment.

Third (yes, I know I said there were only two, but it's a blog so cut me some slack), if your answer to the response question doesn't properly anticipate how having the knowledge would impact current decision processes, it's a sign that we need to lay some organizational groundwork before we even ask for the resources to go get the knowledge.

As you might imagine, most people are initially stumped by the response question. But if you think about your hairiest, most formidable measurement challenges in the context of the economic value of knowing, you really begin to define your priorities for knowledge aggregation.

Everything can be reliably measured -- somehow. The critical parameters (as in most business pursuits) are how much time, money, and political capital you're prepared to spend to acquire the knowledge. You can't possibly know what your tolerances are until you have some clarity on the value of knowing.

2 comments:

Rick Lightburn said...

About your remark in the final paragraph: "Everything can be reliably measured -- somehow."
It isn't true.
(Unless you mean by "thing" you mean "something that can be measured," in which case your remark is trivially true. Hang with me here: I'm going to get mathematical, then philosophical, but I'll get around to a marketing and managerial conclusion.)
Mathematicians who think about such things -- called topologists -- have formulated conditions under which things can be measured; they use the fancy terms 'metric' and 'metrizable.' They then have formulated objects that aren't 'metrizable.' Some philosophers might deny existence to mathematical objects, but that's a bit extreme.
But this is true in ordinary existence also: consider three 'things:' [A] my copy of Marketing by the Dashboard Light; [B] the shade of blue on the car outside my office; [C] the recent riots in Paris.
All three of these things are things, and they are all different. So there are differences between [A] and [B] and between [A] and [C], and these differences are things also.
Does it make any sense to say that the difference between [A] and [B] is greater than the difference between [A] and [C]? Of course not. But one can choose between them: folks choose between apples and oranges everyday.
So these are things that can't be measured, and they are encountered in everyday life. (You also seem to make an identification between knowing and measuring, which is also false.)
Such things are also encountered in the life of managers and marketers. Managers and marketers need to be innovative and creative, and objects are innovative and creative if they have the kind of differences between [A], [B] and [C] above: differences in dimension: you'd describe books, paint colors or socio-historical events with different ways or dimensions.
Sometime managers only require an improvement on a dimension; e.g., a coupon with a higher response rate. But the big gains are when a marketer or managers creates a new dimension, as when C. W. Post created the first coupon.
New dimensions aren't something that comes from metrics or dashboards.

Pat LaPointe said...

It would be difficult to disagree with your assessment that A,B,and C are different, and cannot thereby be "measured" on the same scale. Yet if our hypothesis is that they might be related, or perhaps even correlated to the desired outcomes, then by measuring them individually and presenting the measurements side-by-side we stand a better change of validating or invalidating our hypothesis. Either way, we have new knowledge and new dimensions are born from knowledge. At the senior management levels, optimizing on one dimension is a shortcut to irrelevancy.