Tuesday, April 27, 2010

Measurement's Exponential Curve

I attended the Global Retail Marketing Association’s annual leadership conference recently and had the opportunity to interact with a few terrific speakers including Ray Kurzweil – renown futurist in all matters technology. Ray bombarded us with scientifically- and econometrically-based forecasts for where health, computing, and social technologies were headed.

Kurzweil has a pretty good track record in predicting these things (as evidenced by his success as an angel investor) based on a simple concept – that evolution in technology is not linear, but exponential. He cited examples of how this has been true across the technology spectrum time and time again, but also across the spectrum of life in general. By plotting the advent of major advances in life sciences, one can quickly see how the pace of innovation is accelerating. In fact, the average lifespan of a child born today will be well into their upper 80’s, and that lifespan is accelerating. (Do the math, and if those of us in middle age can just wait long enough, we may live forever.)

As I listened, it occurred to me how appropriate this concept was in the arena of marketing measurement too. While marketers have been seeking to improve the effectiveness and efficiency of their efforts almost since marketing was born as a functional discipline in the early 20th century, the pace of discontinuous innovation is accelerating. And when I speak about discontinuous innovation, I’m not referring to the introduction of internet-based research tools, but fundamental changes in the way we are learning to understand marketing’s impact on the consumer/customer.

For example, traditional survey-based research techniques are proving to be far less predictive of human behavior than bio-metric scanning methods that monitor brainwaves, heart rate, respiration changes, or skin temperature. Today, advertisers can expose their creative messages to prospective customers and read the immediate response in involuntary biometric systems which overcome the social and cultural biases that tend to filter logical survey responses.

Another example… many companies are dis-adopting regression-based marketing mix models in favor of artificial intelligence techniques and agent-based models which focus on replicating thought processes in the full context of competitive dynamics, instead of just looking for statistical relationships. True, these higher-intelligence techniques have been around for 30+ years and not yet found significant penetration in marketing applications, but the PACE of adoption is now increasing noticeably and innovation is driving relevance and applicability more quickly than ever.

All of this has me thinking these days that market research may be operating towards the end of its current lifecycle. The tools, methods, and techniques we use today will not persist more than another 10 to 20 years. We will learn to move past recording and clustering rational thought, and past our voyeuristic tendencies to predict future behavior based on past actions. And in the process, we will learn to reconcile what people say, think, and do with the powerfully innate drivers buried deep in our biological wiring – like in this example.

Inevitably, we will see many instances of borderline unethical manipulation which will slow this adoption curve a bit, but the amount of money and time being invested in these new areas of learning is far too great to be stalled by commercial mis-steps along the way.

So when you drag your finger across your touch-screen interface a few years from now, the underlying systems will capture not just what and where you touched, but your heart rate and body temperature at the time (along with possibly the size of your pupils). This information will feed logic-driven systems which will immediately adapt the type of images, sounds, and smells to your innate preferences to stimulate your interest far beyond anything we’ve achieved as marketers so far.

And just think about the impact this will all have on which metrics we adopt to measure performance…
Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on marketing metrics, ROI, and resource allocation, and publishers of MarketingNPV Journal available online free at www.MarketingNPV.com.

Thursday, April 15, 2010

Memo from the CFO: The Best Response

Two weeks ago I posted a disguised version of an actual email from the CFO of a Global 1000 company to the CMO of that company, congratulating the CMO on doing a good job of improving marketing efficiency, but then raising questions about the effectiveness of that marketing. I invited readers of Metrics Insider to comment on how they would respond if they were the CMO.

Some of the responses were, not surprisingly, promotional messages for proprietary marketing measurement research or analytical methodologies being positioned as silver bullets to solve the problem. While I’m sure some of these solutions would be helpful to some degree, it’s naïve for ANY executive to pin their hopes of understanding marketing payback on any single tool, method, or metric. Many have tried this approach, but very few have succeeded as the “tool in lieu of disciplined evolution” tends to answer the immediate questions, but loses luster as dynamics (both external and internal) evolve. Besides, CFOs tend to be immediately suspicious of any tool packaged in hyperbole like “all you really need is…”

A few responses were pretty hostile. They came in the form of marketers berating the CFO (aka the “bean-counting techno-wonk”) for asking such questions in a way that implied the CMO should have had a much better handle on marketing effectiveness. (for a more humorous approach along these lines, see what Chris Koch wrote). In truth, there was no malice in the questions posed. Just a bit of naiveté on behalf of the CFO with respect to the subtleties of marketing. Sometimes, that lack of understanding manifests itself in poorly-chosen words. But rarely does that mean the issuer of the words is “anti-marketing”. They are just playing one of the many roles they are paid to play… the role of risk management. If the CFO is to adequately assess the corporate risks (including the risk of wasteful spending), they must have the confidence to challenge the evidence put forward in support of EVERY material investment. If you ask the head of IT, you’ll likely find that they too have felt the heat of the CFOs microscope from time-to-time.

So if your first reaction was anger, get past it. Don’t let your own insecurities about marketing measurement negatively taint your assessment of logical questions that inquisitive but un-informed executives may ask.

I think, all things being equal, the best response would be:

To: Amy Ivers – CFO

From: Susan James – CMO

RE: Congratulations on your recent recognition for marketing efficiency

Amy –

Thanks for your note on measuring marketing effectiveness. You raise many good points that I too have been thinking about for some time. There are a number of ways we can approach answering these questions, but I’d need your help since some would inevitably require us to get comfortable with partial data sets, while others may necessitate a temporary step backwards in efficiency to enable some further testing. Together, we might be able to come up with an approach that John and the others on the executive committee find credible. But it might be a bit more involved than emails can adequately address.

I share your passion for better insight into marketing effectiveness. If you’d like to suggest a few possible dates/times, I’d enjoy getting together to bring you up to speed on what we’ve been able to do so far, where our current knowledge gaps are, and what we’re doing to try to close those gaps. I’d appreciate your critical assessment of what we’re doing, and any suggestions you may have for making us better.

Thanks for your input.


In a nutshell, the best strategy in this type of situation is:
  1. Disarm and diffuse. Take the emotion out of it, even if the history frustration runs deep.
  2. Focus on defining the questions to be answered. Don’t jump into evidence-presentment mode until you have agreed on what reasonable questions are. You’ll be shooting at a moving target.
  3. Prioritize the questions. Don’t assume they’re all equally important, or you’ll fracture your answering resources into ineffectively small parts.
  4. Decompose the questions into small pieces. Define the sub-components and assess what the company knows and what it doesn’t know with respect to each of the small pieces. Trying to boil the ocean is another sure way to accomplish nothing.
  5. Admit your knowledge limits. Be clear to label your assertions conservatively as facts, observations, and opinions derived from experience.
  6. Have a continuous improvement plan. Show your plan to improve the company’s marketing effectiveness in stages and manage the expectation that it might take time to tackle all the pieces to the roadmap absent a significant boost in resources.

I realize that many of you are caught in situations where the CFO’s questions may in fact be emanating from some apparent malice. In those cases, use honest questions to understand how much they actually know (as distinct from what they think they know). Their path to self-realization is only as fast as your skillful approach to engaging them to be part of the solution instead of just the identifier of the problem.

Using this approach, even the thorniest marketing/finance relationships can be improved by at least 50% (and I have the statistics to back it up).

Thanks for your comments.
Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on marketing metrics, ROI, and resource allocation, and publishers of MarketingNPV Journal available online free at www.MarketingNPV.com.