Monday, March 20, 2006

The Right Metrics Emerge From the Role of Marketing

By now we've all heard about the Spencer Stuart survey that found that the average CMO’s tenure is about 22 months — hardly long enough to see any major initiative through. The key toward longevity, however, may be setting a role for the marketing department that fits the goals of the CEO.

A recent study by the Association of National Advertisers and Booz Allen Hamilton suggests that CMO success is first and foremost a function of knowing what role you’re signing up for. They suggested that there are three different roles of marketing organizations within companies.

Role #1: A Marketing Services Organization
The marketing department is a service provider to the rest of the organization. It provides the benefits of centralization in:
  • media buying;
  • advertising and marcomm materials development and production; and
  • coordination of vendors and agencies.

Role #2: The Marketing Department as Advisor
As a corporate marketing function, the marketing department helps align marketing plans of multiple business units with overall corporate strategies in terms of:

  • brand development, uniformity, and compliance;
  • best-practice sharing across business units; and
  • training/education to improve the breadth and depth of marketing skills throughout the company.

Role #3: Marketing as Growth Driver
The marketing department is the engine of growth for the CEO in driving the corporate agenda; it is responsible for alignment of all necessary resources including:

  • brand strategy and execution;
  • customer touchpoint and customer experience management;
  • product development and innovation;
  • customer value development; and
  • marketing accountability and ROI.

There may be other models or hybrids of the ones above. Regardless, knowing what role marketing is playing in pursuit of the company objectives and confirming it with the CEO and the rest of the executive committee sets the boundaries of the playing field on which marketing is expected to perform. In the process, it suggests some clear opportunities for important dashboard metrics.

Once you have better clarity on how marketing fits into the company strategy map and once you’ve confirmed the role of marketing in the organization, you need to identify the critical performance objectives for the marketing organization. It’s impossible to build a relevant dashboard without knowing what those objectives are.

A good performance objective has three components: direction, magnitude, and timeframe.

Here’s an example: “I will achieve a 20% increase in market share in the next 12 months.” Increasing market share is the direction. Twenty percent is the magnitude. Twelve months is the timeframe. If you take any one of those three components away, you're left with an ineffective statement of objectives open to subjective interpretation. If you take away the magnitude and just say, “I’m going to increase market share,” you have no way to judge how much money you should invest in trying to achieve your goal or how much risk (i.e., spending) you should undertake to do so. If you take away the timeframe and just say you're going to achieve a 20% market share increase, you might be thinking that five years is a reasonable timeframe, while the CEO is thinking one year.

The three parts of a critical performance objective force you to close all the doors of subjectivity. And much like building a dashboard on forecast vs. “rear window,” the process forces you to really think about what exactly it is that you plan to accomplish and how well your strategies and tactics are aligned to do so.

It’s also fairly apparent how the three specific dimensions of critical objectives establish some potentially important candidates for dashboard metrics.

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