Understanding the Accounting and Marketing Benefits of Customer Franchise Value

It can often be difficult — sometimes down right impossible — for marketing and finance to coexist when finance needs short-term results to satisfy their generally accepted accounting principles (GAAP) and marketing is trying to build overall brand equity, which leads to long-term customer relationship value.

In the diagram below, you can see that there is much involved in arriving at ROI from the marketing point of view. However, the accounting department only sees that the shortest distance to any destination is a straight line — i.e., 2007 marketing activity should lead directly to 2007 sales.

Customer Franchise Value (CFV) can help bridge the gap between the two departments and help marketing give finance what they need. CFV is a metric that gives the CFO a tangible number to get his hands around that explains payback on marketing efforts today — key emphasis on the word today. In short, it’s a “net present value” snapshot of your current customer base.

At the same time, it serves as a more disciplined way of helping marketers understand the tangible, financial value being created over time — not just the strategic value. Basically, it gives marketers the breathing room they need to invest in longer-term sales growth.

In our latest issue of MarketingNPV, you’ll find a robust discussion on this subject that will help you create your own customer franchise value metric system.

Click here for the article on our website.

Big News in the World of Marketing Measurement

I don’t spend a lot of time talking about our firm and what we do – but I need to share some big news….

Dave Reibstein, William S. Woodside Professor of Marketing at Wharton, past Executive Director of the Marketing Science Institute, and co-author of the recent book - Marketing Metrics: 50+ Metrics Every Executive Should Master – is joining our firm.

I’m delighted to be working with Dave and his colleague from CMO Partners, Peter McNally. They are world-class marketing strategists with a strong financial orientation and great expertise at selecting the right marketing metrics to diagnose and predict performance. Working together – aside from having some fun - we’ll be looking to conquer the challenges of effective and efficient marketing resource allocation.

If you’d like to get a sense of the things that will be driving our work, check out “10 Immutable Laws of Marketing Measurement”, a new piece co-authored by Dave and yours truly.

Beware Bogus Surveys That Kill Credibility

The popularity of the marketing measurement movement seems to have every PR-hungry consultant jumping on the “survey says” bandwagon to create some “content”. You know the type. “We asked 1,000 people what they thought about….”

The answers are supposed to provide you, the marketing executive, with a benchmark of what your “peers” are doing, so you can gauge the relative performance of your own company or department. Only they don’t. They just manipulate your desire to know and play off of your lack of technical knowledge in reading research results.

It’s ironic, isn’t it, that people who supposedly specialize in credible marketing measurement resort to scientifically flawed methods in their own marketing efforts:

- The survey samples are drawn from convenience and are representative of no larger group (except the group of people who happened to respond to the survey).

- The motivations of the respondents to be truthful seem to pass without question.

- There is no attention paid to the non-respondents (whom one might presume are protecting some real, non-public insights).

- And the summaries exclaim how 40% of respondents said this while another 52% said that, all the while ignoring the fact that the error rates for the study may be +/- 20% or more.

If you presented such garbage information to your executive committee, chances are you’d be out on your ass quicker than your resume could get updated.

I’m not diminishing the importance of qualitative research by any means. I’m simply calling on the emerging industry of measurement consultants to adhere to the same standards they advise their clients on. If you seek publicity for qualitative work, be sure to clearly label it as such and use as many words to explain the limitations of the conclusions as you employ in proposing them.

On the client side, you should have higher standards. Ask a few key questions about anything labeled “research”:

1. Is this qualitative or quantitative? Qualitative research summaries shouldn’t be rooted in numerical comparisons across sub-samples. Their findings are only valid at the level of broad observations and hypotheses.

2. What universe is this sample representative of? Understanding the sample number of respondents in the context of the non-respondents and the group selected to receive the opportunity to respond will tell you if those who did respond are really reflective of your “peer” group and if the differentials reported are meaningful, or manufactured.

3. What is the error factor of the findings? If they can’t say for sure, then it’s not a quantitative study, which means you should pay no attention to the actual numbers and percentages reported.

If we all apply a bit higher standards for credibility in our work, we will collectively advance the credibility of the marketing discipline in its ability to self-measure. Failing that, we’ll continue to be accused of being more interested in PR than real results.

Marketing and IT: Hyatt Proves That A Team Approach Is Doable

For years, marketing has been feeling the short-end of the stick from IT in terms of support and prioritization. IT, on the other hand, has been mopping up after marketing “experiments” with outsourced, on-demand solutions that didn’t work exactly as hoped. So how do you get the CMO and the CIO to work more closely to integrate their efforts to achieve their (presumably) common goals?

Hyatt seems to have solved the problem. They named Tom O’Toole, formerly “just” the CMO, to be CIO, too.

In an interview I did with Tom recently, he offered a few suggestions for ways to solve expectation and delivery gaps that typically form in the Marketing-IT relationship. Now before you read these, keep in mind that they were coming from the mouth of someone who spent the bulk of their career in the brand marketing world…

Tom’s suggestions for CMOs are:

1. Don’t develop and staff your own applications without at least discussing it with IT. If you do, we don’t have the expertise or the staff to support them. Most often, these systems aren’t well-documented.

2. Don’t mess around with the network. There are security concerns, bandwidth concerns, and reliability concerns. You really have no idea how problematic it can be for a network manager whose job depends upon network performance and uptime to all of a sudden have major delays or outages caused by a rogue Web server he didn’t even know was connecting. It can literally bring the entire company to a standstill.

3. Try to stick with packaged solutions. If you can recommend a solution from a vendor who has already built all the interfaces with the software we run our enterprise on and has tested them with dozens of other clients, it takes a tremendous amount of work (and time) out of the assessment process.

For the entire Q&A with Tom O’Toole, go to:
http://www.marketingnpv.com/interview.asp?ix=1176

Predicting The Path of Predictive Analytics

Analytics are increasingly the lifeblood of a CMO’s accountability process. And we’ve seen marked advancements in these tools, as marketers turn up the pressure for more usable insight.

In the aggregate, I see four key trends shaping the analytics space:

1. C-level involvement. The corner office will go from interested to involved to participating in marketing decision making. The analytics underlying resource allocation recommendations will need to more clearly articulate and justify what you need, why you need it, and yes, the payback. They will have to speak for themselves, sans the geek interface.

2. Continuous marketing measurement. The near future of analytics will go beyond one-time, “what’s going on today” metrics to present real-time continuous results. This constant flow is critical to overcoming the challenges of today’s fractured media environment. A new ‘test and learn’ framework is also helping marketers capture feedback and adjust to it more quickly.

3. Cheaper, faster models. Similar to Moore’s Law, the speed of analytics models will continue to increase and the capabilities will improve, while the price will gradually decline. Specifically, we anticipate deeper support for data integration and “what if” scenarios.

4. Software tailored to your needs. You’ve been made to walk the walk. Soon, the analytics vendors will be doing it too. While this may be the trend furthest down the pike, we feel the survival of today’s analytics tools is dependent on their ability to be “componentized” to create relevance and meet the unique needs of individual marketers.

None of these trends will cause a definitive paradigm shift next week, or even next month. Rather, the change will be subtle and incremental. But a look back 12 months from now should show considerable advancements beyond today.

For a deeper analysis of these four predictions, go to:
http://www.marketingnpv.com/article.asp?ix=1180

WOM Measurement – The Wild, Wild West

As one of the newest media (and one that is still very much evolving), there’s quite a bit of measurement snake-oil surrounding the links between word-of-mouth marketing and financial value creation.

I don’t think we’re far off from bringing respectability to it, because all the necessary tools are there. But we won’t progress unless marketers stop being satisfied with simple “stroke counting” measures — like message delivery and open and pass along rates — and start building a roadmap that more clearly links WOM to revenue and profit.

Here’s a 6-step prescription for WOM measurement progress:

1. Define Objectives. Clearly and succinctly state the intended outcome of the campaign expenditure in economic or behavioral terms.

2. Test the effectiveness of your message strategy to determine the recipients’ behavioral outcome.

3. Develop test-and-control constructs to determine the true predictive value of the awareness or attitude change, and its effect on behavior.

4. Conduct post-campaign interviews with current and new customers, and those who still resist your value proposition to find out what did or didn’t influence their decision to act or not act.

5. Review your proposed measurement methodology with key constituents of the outcome (i.e., the CFO and CEO) in advance to get their feedback and to tighten any loopholes and gaps.

6. Be clear on your expectations. State them in as tangible of financial terms as you can. Then ask yourself the tough questions: Did you succeed in achieving your goals and expectations? Continue to adjust as you move forward.

As word of mouth grows into a recognizable line item on the budget, the measurement practice must improve along with it. Otherwise, it’s the wild, wild west all over again.

If you want to see more on measuring word of mouth marketing, read:
Is There a Reliable Way to Measure Word of Mouth Marketing?
http://www.marketingnpv.com/article.asp?ix=1175

Prediction for 2007… Pain

With all the hype surrounding the resurgence of legendary on-screen boxer Rocky Balboa, I couldn’t help but borrow a line from the old Clubber Lang (Mr. T) in anticipation of what 2007 will bring for marketing measurement. He said, “My prediction… pain.”

In the case of marketers, that pain is likely to be felt most by some of the late adopters to measurement discipline. In fact, marketers who haven’t yet made a concerted effort to get a suitably comprehensive and properly stakeholdered measurement process in place are likely to feel the pain more than ever in 2007. Why?

First, CEOs and CFOs are hearing more and more about how measurable marketing is these days. They’re seeing it at conferences, reading about it in their trade journals and hearing it firsthand from their peers. These seeds, once planted, can’t help but grow up through the most hardened sidewalks of resistance. And when they crack through the foundation of credibility, the crumbling is impossible to stop.

Second, unless you’re lucky enough to be in a high-growth business spinning out exceptional shareholder returns, the die is likely already cast for another year of cuts to the marketing budget. The best you can hope for is that the slashes will be swift and sharp. But chances are, they will more likely resemble death by a thousand small incisions. And you can forget about defending your turf. If you had the insights the CEO needed to be more confident, you wouldn’t be the one who’s budget they look to begin with.

Third, if you’re entering the “opportunity zone” of your tenure with the company (somewhere between months 20 and 30), you may have but one more chance to put a sound foundation behind your next budget recommendation. But you’ll need to start now. It takes a minimum of nine months, and more often 18, before you can really get a good historical handle on marketing performance drivers and be able to correlate them to spending with any predictive validity.

The good news is that, if you start in January while the year is fresh and new, you’ll have a fair chance of making a big difference for 2008. You can build a foundation that will serve you immediately and for many years to come. But by April, your window will close. So the question for many marketers isn’t whether or not there will be pain in 2007, but whether it will be the pain of progress or the pain of avoidance. Either way, the choice is deliberate.

Wishing you the very best (and a full bottle of Advil or Tylenol) in 2007.

WOM – Before You Measure, You Need to Define

If you’re unsure whether word of mouth is shaping into a highly valued tool that should be a required element in your marketing arsenal, you need look no further than the November 29th issue of The Wall Street Journal. In it, Research In Motion (RIM) — makers of the infamous BlackBerry wireless device — ran a full-page ad touting the strengths of WOM in building their BlackBerry business.

When a company is willing to spend tens of thousands of dollars in a national print publication to let the world know that word of mouth is working for them, all CMOs should sit up and take notice.

But while this gives WOM some of the respect it deserves as a media form, I’m not seeing a slew of other companies pushing to get in line behind RIM to do the same. That’s because most companies today are still struggling with the basics — things like defining what constitutes word of mouth, establishing a budget for it and defining how to measure it.

Through several interviews we conducted for the lead article in our latest issue of MarketingNPV Journal (“Is There A Reliable Way to Measure Word of Mouth Marketing?”) we found that marketers, consultants and other industry experts do not even agree yet on a definition. This is a critical first step if we are to eventually achieve the task of standardizing metrics.

The Word of Mouth Marketing Association, in its 2005 report, does a good job of clearly explaining all the elements that encompass word of mouth. We break them down for you in our article — things like defining the difference between organic and amplified word of mouth; the latter can be facilitated and controlled by companies, the former cannot, and that’s critical for companies to know and understand.

Which type of word of mouth an action or campaign falls under also affects the portfolio of metrics at a company’s disposal that can be used to track and measure them. For instance, organic WOM can be measured through traditional brand tracking devices, reputation surveys and customer experience monitoring, while amplified WOM lends itself more toward direct response-type campaign measurement tools.

To access the full article and learn more about how to define and measure word of mouth marketing:
http://www.marketingnpv.com/article.asp?ix=1175

Building Actionable Performance Dashboards

No single metric — especially not ROI — will suffice in providing all the data a company needs for making appropriate day-to-day and long-term decisions about marketing resource allocations. Instead, dashboards — which integrate a company’s key performance indicators into a centralized strategic view — are crucial to a firm’s ability to understand overall effectiveness and efficiency, as well as identify which efforts affect the bottom line.

We’re constantly looking for best practices on building marketing dashboards to impart to our readers. In a recent issue of MarketingNPV Journal, we presented the results of a Marketing Leadership Council study in which we participated that does just that.

The study presents a robust roadmap for marketers to follow when building a dashboard based upon some real case studies of Global 1000 companies, including critical steps common to all dashboards, pitfalls to watch out for and best practices for moving forward.

To read a full-text copy of our summary of the report, click here.

To learn more about the Marketing Leadership Council, go to: http://www.marketingleadershipcouncil.com.

For additional articles on marketing dashboards:

5 Keys to an Effective Marketing Dashboard

The Balanced Scorecard: Prelude to a Marketing Dashboard

Marketing Performance Out of Alignment? A Good Marketing Dashboard Will Focus and Inspire

Interview with Arun Sinha, CMO — Pitney Bowes

Timken Rolls Out a Marketing Dashboard for Industrial Bearing Group

Getting More Than Goodwill From Corporate Reputation

How do your employees feel about your firm? Are you getting the most favorable analyst ratings? Do your investors and shareholders approve of your vision and direction?

How your constituents — customers, employees, investors, shareholders, financial analysts, the media, interest groups, regulators, partners/resellers, and suppliers — view your corporate reputation directly affects, either positively or negatively, your bottom line.

Each group is unique in how its behaviors can positively or negatively affect a company’s reputation and bottom line. For instance, favorable employee opinions can result in longer employee retention and higher morale, which reduces employee acquisition and training costs and improves productivity. Bad morale or publicity can cause an employee exodus. Favorable ratings from financial analysts can help improve share price, but more tangibly, they can lower the cost of capital and generate greater interest in the company’s bonds amongst the investment community. Meanwhile, an endorsement from an influential community interest group can open doors for powerful partnerships, increase acceptance among customers, employees, and analysts, and could even generate increased interest within the investment community.

The chart below shows examples of profitable behaviors by constituency group. Each of these constituent behaviors is trackable, measurable, and can be directly related to a desired financial outcome. The key to achieving those outcomes is to set reputation goals that tie in directly with your business goals, then to create metrics that measure performance against them.

Constituency groups are not "one size fits all", however. Some companies have unique needs and adjust the groups within the circle to fit. For instance, Bill Margaritis, senior vice president of worldwide communications and investor relations at FedEx, includes “emerging markets” as a distinct constituency group because he feels you have to communicate differently with people in markets you are entering than you would with people in markets in which you already have an existing reputation.

Judi Mackey, senior vice president and director of the U.S. corporate and financial practice of public relations firm Hill & Knowlton, splits consumer customers and B2B customers into separate buckets because she feels consumers seldom base their purchase decisions on a corporate brand (unless there is a scandal). Conversely, she’s found that if a corporation behaves badly, it influences B2B customers more.

To truly understand the benefit of cultivating positive constituent behaviors and maximizing them to your company's advantage, consider the following 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, in return receiving 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.

Given these objectives, 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 on key brand equity attributes and measures the pre-post differential in the affected market vs. 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, what does Company A tell the shareholders? “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!”

Compare Company A’s approach to retail investments giant Company B, which makes a similar investment in a different market, but does so against the stated goals of:

1. increasing the number of “power agents” (those doing more than $10 million annually in sales) from 38 to 54;


2. improving employee retention in their local call centers from 70% to 85%; and


3. 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.

Like Company A, Company B painstakingly 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, the board can relate not just that attitudes have improved amongst the key constituency groups, but more tangibly that:

1. the firm increased the number of power agents to 57, which has a forecasted net present value (NPV) of $1.4 million;


2. employee retention fell slightly short of the 85% goal at 82%, but the expected savings in recruiting and retraining 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 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 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.

Have you had any bottom line success from tracking, measuring and cultivating the benefits received from positive constituent behavior? Feel free to share your story here. MarketingNVP and your industry peers would love to hear from you.

Have You Measured Your Reputation Lately?

We've seen all too clearly in recent years how having a negative reputation can cost companies millions...or worse, can destroy them entirely (think Union Carbide, Enron, Arthur Andersen and Cendant). But for most companies, the effects of a negative reputation to their bottom line are much more subtle and 'under the radar' -- perhaps even creating a perception of weakness rather than negativity. These are the worse kind, however, because they go unnoticed and unmeasured for long periods of time, yet can create as much damage against a company's shareholder value and bottom-line profits as a single catastrophic event.

A well thought out and planned reputation management strategy, with clear metrics, should be part of every company's overall business plan. However, until such an internal plan is put in place, there are a number of tools at companies' disposal that can be implemented immediately or almost immediately. They include:

1. Public Rankings. Many best-practice leaders consider public annual rankings such as Fortune’s “Best Companies to Work For” and “Most Admired Companies” critical measures of how they are perceived in the marketplace. Rankings such as these directly affect a company's ability to draw in the best employees, generate positive analyst ratings and secure favorable financing terms.

2. Reputation Indexes. One public dashboard used to track and measure reputation is the annual Reputation Quotient(SM) by Harris Interactive. Reputation Quotient metrics fall into six categories, each with 20 attributes rated on a 7-point scale. The study culminates in a list of the top 100 companies ranked by revenue. The ranking is based on up to 8,000 general public interviews identifying the companies with the most visible (best and worst) reputations. Then, approximately 20,000 people are each given about six company names from the list and asked if they are familiar with the companies. If they are familiar, they are asked to rate up to two companies on each of the 20 attributes. Each company is rated by approximately 650 people. Out of this ranking comes the Reputation Quotient score.

Other organizations providing similar tools with different methodologies include the Reputation Institute’s RepTrack®, CoreBrand, Millward Brown, and Young & Rubicam.

3. Media Content Analysis. MCA tools have advanced greatly from the days of manually cutting out articles with a scissor. Today, vendors in this space such as Biz360 and Delahaye provide robust analysis of what media mentions actually mean. For instance, Delahaye gathers news from major news sources, then scores and ranks the top 100 U.S. companies by measuring how many positive and negative reputation-driving attributes are found within each story. The attributes are classified into five dimensions: stakeholder relations, financial management, products and services, organizational integrity, and organizational strength. Delahaye looks at such things as tone, whether key messages or graphics were used, whether the company name was in the title, and where it appeared in the publication. Each component carries a different weight. The summary measure, called the Net Effect, provides an all-inclusive bottom-line figure of news measurement. The firm publishes a quarterly index. Clients also get customized reports that show how they compare against industry leaders in the index.

4. Reputation Mix Models. Like the now commonplace media mix models, some companies are beginning to develop reputation mix models that feed detailed attitudinal scores from multiple constituent groups into regression algorithms along with sales, margin, and share-price data to see where the correlations are. Simulation tools can then be developed to “forecast” the impact on one or all of the economic output variables if the reputational attributes could be enhanced by various degrees. These models provide a basis for attempting to assess the utility of investment in developing specific reputation components amongst key constituent groups.

Regardless of which tools you use, every company should have a clear, well constructed reputation management measurement system that ties back to a board-level dashboard. A negative or weak reputation can have significant financial ramifications. Conversely, a well-structured program will provide companies with benefits tied to improved shareholder value.

100 Measurement Stories Don’t Add Up to Any Great Insight

Most large marketing organizations have made significant strides in the development of sophisticated methods to improve marketing measurement. Ph.D. mathematicians are commonly on staff, stewarding elaborate survey research, media-mix models, and analytical models for assessing the return from proposed initiatives.

But step back from the complexity and one can’t help but wonder if all that measurement is being approached in too tactical a way to credibly tell the overall story of marketing effectiveness and efficiency. With few exceptions, marketing departments appear to be measuring payback in a disjointed series of technically sound but ad-hoc ways in four distinct measurement silos: customer metrics, unit metrics, cashflow metrics, and brand metrics.

The customer metrics silo often looks at how prospects become customers. From awareness to preference to trial to repeat purchase, many companies track progression through a “hierarchy of effects” model to track evolution of broad market potential to specific revenue opportunities. Satisfaction with the customer experience is measured by surveys and reported by channel and touchpoint, although rarely in correlation to specific customer behaviors.

In some companies, the customer metrics silo includes robust attitudinal data on customer segments — why they want what they want or buy what they buy — which is often correlated with actual customer transactional data to create a robust segmentation model. The segments are then monitored for “mobility” (the directional progression of prospects/customers from one segment to a presumably more valuable one) and velocity (the speed with which customers are moving between segments). In many B2B organizations, this customer pathway can go all the way to developing a customer-specific P&L.

The unit metrics silo is the one likely to be at an advanced state of maturity in most companies, owing to the underlying IT systems ability to tell what was sold, where, and at what price. Most marketers have fairly good information on how many redheaded, left-handed, overweight men in their 40s have purchased a minimum number of units in the prior six months with an “r” in them. (Yet surprisingly few know the identity of the individual they actually sold it to.) With some quick math, they can figure out the marketing cost per unit as a gross method of measuring efficiency. Some further mathematical gymnastics can get to pricing optimization analysis, which in turn can provide some insight (albeit a bit oblique) into the value of branding.

The cash-flow metrics silo focuses on efficiency of marketing expenditures in achieving short-term returns. Program and campaign ROI models measure the immediate impact or net present value of profits expected to be derived from a given investment initiative. Media-mix models use statistical regression techniques to identify which combinations of media placements, integrated media elements, and even copy executions generate the most profitable response from customers. And armed with those insights, the marketing department can demonstrate how it is optimizing resource allocations toward the activities and executions with the greatest forecast return in a sort of “portfolio management” exercise.

The brand metrics silo often tracks the development of the longer-term impact of marketing through brand health. Survey-based tracking studies gauge customer and prospective customer perspectives on the brand — its functionality, personality, accessibility, and value propositions. Brand scorecards monitor the evolution of these perspectives over time within market segments and across multiple constituencies like employees, regulators, and community influencers to get a full view of brand equity drivers. And many have taken the successful leap to develop financial models for estimating the financial value of the brand as a means of determining the aggregation of assets on the balance sheet as an outcome of marketing investments.


Yet despite the implementation of effective measurement systems within one or more of the silos, most marketing departments still struggle to synthesize insights gained across silos in a manner that helps one silo explain another or clarifies the predictive drivers of the business on a broader level.

For most companies, it’s not possible to do this scientifically since it’s not an econometric modeling problem solvable by equations and computers. Each silo measures very different components of marketing effectiveness in very different ways. Some are shorter term and some longer term. Linking them algorithmically forces you to make some very large assumptions that may be unreliable in the face of actual marketplace dynamics.

Even if you can solve the problem algebraically, you will likely have to employ statistical techniques of such sophistication that few people in either marketing or finance will understand sufficiently to embrace and defend the method.

The net effect of all this uncoordinated measurement is that marketing gets lost trying to divine the true story of effectiveness of resource allocation from 100 data points on a three-dimensional scatter plot with no clear picture emerging. And while it may have been accepted practice in the past to throw this measurement spaghetti at the wall when asked about the payback on spend, today’s CEOs and CFOs have little patience for the fog of complexity.

To tell the complete story of effectiveness and efficiency of marketing investments, consider developing a marketing dashboard. A dashboard can structure many disparate sources of information in a comprehensive, organized manner and present the insights derived from each silo in a graphically related view that facilitates the human brain’s incredible power to find subtle, contextual links. A well-designed dashboard suggests to the user that the many individual component metrics are actually all part of one single story, not a jumble of dozens.

The debate on the “art” or “science” nature of marketing is over. It’s both.
The science is reflected in the mathematical, cognitive, and behavioral tools we employ to identify opportunities and gauge our success at exploiting them. Our repertoires are expanding with every passing year as more researchers develop better tools and techniques.

The art has historically been defined as the creative spark of imagination behind our execution of marketing messages in words, pictures, and forms used to engage the customer.

Today, the art is increasingly needed to help make sense of the science. The best scientific measurement techniques are lost on the audience that suffers through dry and uninspired soliloquies of interpretation, or, worse yet, death by 100 pages of charts and tables.

As true marketers, we should be able to paint a picture to tell a better story. The dashboard can be a powerful canvas.

Engagement: The Emperor’s New Clothes?

After much buzz, the Advertising Research Foundation (ARF) came forth at their annual conference recently with a proclamation about the new way to measure advertising effectiveness. They called it "engagement."

When I think of customer "engagement," I tend to think in terms like repeat purchasing, loyalty, customer referrals, or perhaps even just an inquiry. As you can probably tell, I’m hung up on the idea of actually making profits from mutually beneficial customer interactions.

The ARF, a learned and highly professional organization dedicated to the study of advertising effectiveness, took a different approach. In a press release issued last week they said: "Engagement occurs as a result of a brand idea or media the consumer experiences which leaves a positive brand impression. It is now a critical advertising model to replace GRPs in the 21st century. It is important that we think hard about engagement to develop a robust measurement of when consumers are strongly engaged in brands, brand ideas, and their surrounding environments.”

The ARF deserves applause for trying to push beyond the GRP as the standard measure of advertising. Imagine how difficult it must be for an association like theirs to straddle the incredibly diverse and often conflicting interests of its membership. But this definition of "engagement" appears to leave the emperor shivering naked in the cold.

For starters, the term "engagement" implies an active level of involvement with the brand. Yet their definition suggests that achieving a passive "positive brand impression" fills the bill. It doesn't. Advertising history is chock-full of examples in which famous campaigns have created favorable impressions but failed to make the registers ring sufficiently enough to cover the investment.

Further, the proposed definition of engagement doesn't even require achieving a level of brand preference. It stops at favorability. The implication is that an advertising campaign could be deemed successful in engagement terms if it created widespread favorability without actually engendering any incremental preference for the brand on an emotional or rational level. When faced with the actual purchase decision, and confronted with variables of price, convenience, competitive presence, etc., a consumer who is only "engaged" at the level of favorability is highly unpredictable. Even those who have actually developed a brand preference will defect in significant numbers in the face of actual buying conditions.


It would be difficult to argue that creating engagement as they define it is a worthwhile goal for many brands — particularly those mired in the perennial parity of mature categories with few distinguishing product/service characteristics. But while the recommended shift from the exposure-driven concept of ratings to the consumer-centric element of favorability is a step in the right direction, it stops far short of being a practical measure of success.

Rather than adopt a single, broad-sweeping, lowest-common-denominator definition of "engagement," the advertising community would be better served to recognize engagement as a progression from awareness to interest to favorability to preference to purchase to repeat purchase. True, this linear relationship doesn't always reflect the reality of the consumer buying process in every category, but it is an effective starting point for companies to begin to ask themselves what they really know about the patterns of progressive engagement in their key categories. Some will need to add elements of "participation" to the chain to reflect voluntary dialogue pre- or post-purchase. Others will want to include referral as a crucial measure of engagement. It can (and should) be customized to the needs of the circumstances.
The key is to recognize that "engagement" isn't a stage, it's a process. It should be measured in a time series with frequency distribution of prospects and customers at various points along the evolution spectrum. Volume, mobility, and velocity of movement between stages should be the key metrics of engagement. Taken together, they tell a story of continuous improvement and help to predict the economic value of investments targeted at promoting movement earlier in the process.

Contrary to debate within the research community, the greatest challenge for the ARF model of engagement will not be engineering a technically valid and reliable mechanism for reporting (and pricing) on engagement. Rather, if the favorability-focused definition is adopted as the emerging metric for the effectiveness of advertising in the 21st century, marketers (and media and agencies) will cement their positions nearer the bottom of the credibility ladder in the eyes of their C-level peers who will struggle mightily to understand the very subtle differences in the proposed approach vs. the broadly discredited ones of the past. It will not help marketing (or finance) get a better grip on advertising effectiveness. Only efforts focused on bridging the gap between the spending and financial value recognition can do that. Short of that, we’re just shifting the traditional marketing vs. finance argument to a new set of words.

The ARF deserves recognition and thanks for having steered their members onto the right train. Let’s just be careful that we’re not getting off a few stops too early to really help advertisers understand the economic value of further investment in advertising.

Myths and Truths About Advertising Effectiveness – Part 2

TRUTHS ABOUT ADVERTISING

Continued from my last post ...

Based on nearly 50 years of industry research, Tellis has developed several conclusions about advertising's effect on sales. Here are a few.

1. Weight alone is not enough. Very often, when an ad campaign is not meeting its goals, the first "fix" that comes to mind is to extend the flight length, or "weight," of the campaign. But studies have shown that increasing campaign weight is not enough to affect a change in sales, particularly in mature, saturated markets.

2. Advertising is a subtle force. Research has shown that, on average, sales increase 0.1% for every 1% increase in advertising spending. Tellis calls this "advertising elasticity," and the small amount shows that advertising is a "subtle" rather than powerful force, especially when compared to price changes, which have been found to have about 20 times the impact on sales. The point is that advertising has to be carefully planned and executed over an extended period of time.

3. The effects of advertising are fragile. By this, Tellis means that the effect of advertising may not be correctly measured by using the wrong analysis or method. The slightest misassumption or miscalculation can be caused by:

• advertising's subtlety, compared with price or promotion;


• lack of immediacy in effect; and


• bias, caused by the fact that ads don't run in isolation, making it nearly impossible to determine whether the ad, something else, or a mixture caused a lift.

4. Firms often persist with ineffective ads. There are several reasons for this conclusion, including lack of sufficient testing, fear of the effects of cutting back, and competitive pressures. In addition, ad managers may boost advertising to help spike sales to hit topline goals, or may use up unspent ad dollars rather than risk losing the money in the following year's budget. This behavior often results in running unprofitable advertising, since ad managers don't always know how effective (or not) their campaigns really are.

5. Advertising's effects are not instantaneous. A portion of an ad campaign's effect can extend beyond the life of the campaign for several reasons. First, consumers take time to absorb (and trust) messages that interest them. Ads will resonate even further if they hear positive comments about them from their peers. Yet, even if interest in a product or company develops, consumers often are not motivated to make a purchase until they have a need for that item. These carryover effects allow advertisers to stop advertising for brief periods without suffering immediate sales loss. In fact, research shows that taking breaks in-between flights may work better than continuous long-term runs, and those that don't take breaks can actually overuse an effective campaign.

6. Advertising carryover is generally short. Despite common beliefs that the effects of advertising are long-lasting, research shows that the carryover effects can actually be measured in weeks, days, or even hours. And while people often remember slogans, campaigns, and jingles years after they've run, there is no conclusive evidence, according to Tellis, that those memories translate into purchases.

7. Advertising is effective either early on or never. Some believe that if a campaign doesn't produce results quickly, they simply need to give it more time. Research shows this strategy to be flawed, however, noting that extending the run of an ineffective campaign will not, in and of itself, improve its effectiveness.

8. Wear-in is very rapid, while wear-out occurs early. Optimization is a mission-critical process for any advertising strategy today. Marketers must optimize run time, in addition to creative elements, media placement, and other variables. The increasing effectiveness with repetition due to increasing awareness, trial, and purchase is called "wear-in." Once over that threshold, consumer saturation sets in, also known as "wear-out." This occurs anywhere from six to 12 weeks after campaign launch. It can happen as quickly as the very start of the campaign. In general, the faster the threshold is reached, the more rapid the descent. If it is slow and steady, wear-out will be slow and steady as well.

9. Hysterisis is very rare. "Hysterisis" — the lingering effect on sales after a campaign is suspended — is rare, but does happen. This is more likely when the advertised product is far superior to those already on the market; the campaign uses a novel approach, or word-of-mouth marketing #8212; primarily from the press — creates a domino-like pass-along effect. In the latter situation, the ad simply seeds the process, which then multiplies on its own accord.

10. Emotion may be the most effective appeal. The three most common types of appeals are arguments, emotions, and endorsements. Emotional appeals tend to do a better job of cutting through the clutter and getting attention; they require less viewer concentration than the other forms; and tend to be more vivid and better-remembered than other types of appeals. In addition, most viewers have the same kind of reaction — there is no counterargument — opening the door for a more immediate call to action.

11. Advertising is more effective for new products than for mature ones. Heavy competition may push mature products to overadvertise, causing consumers to tune out. New product messages, on the other hand, can be refreshing, generating more interest. In addition, competition for new products may be light, making the ads stand out more.

12. Advertising affects "loyals" and "nonusers" differently. It takes less advertising to generate a response out of an already loyal customer than it does to capture the attention of new customers. The paradox is that loyals are likely to become saturated more quickly with repetitive ads for a brand they already prefer, while nonusers require higher ad frequencies to attract their attention.

As busy as managers are today, it's easy to get confused between the things we know and the things we think we know. Tellis' conclusions, dispassionately derived from careful study of more than 50 years of valuable insight, help us step back and put our strategies in perspective. They also persuade us to question our advertising methods, processes, and thinking to ensure they're on the right track. Using some of the observations above to critically question advertising strategies and plans can only help improve the results — even if you disagree with Tellis' findings relative to your specific circumstances.

A checklist such as this can also be very helpful in developing a framework for parsing out the critical metrics for measuring the success of your advertising, and demonstrating to the rest of the organization that the advertising campaigns are well-vetted and planned to minimize the most common failure risks.

Myths and Truths About Advertising Effectiveness – Part 1

Dramatic advertising successes — defined as a huge increase or reversal of a brand's performance due to advertising — do happen, but they are rare. Heavy competition, combined with the challenges of coming up with new, winning creative, make this task difficult (though not impossible) to achieve.

When it comes to advertising, Gerard Tellis, Ph.D., knows what works and what doesn't. For over 20 years, he has studied all aspects of advertising effectiveness as professor of marketing at the University of Southern California Marshall School of Business and in visiting positions at Erasmus University Rotterdam and the University of Cambridge. His work has been published in two books, and he has authored numerous articles in the Journal of Marketing, the Journal of Marketing Research, and Marketing Science.

His most recent book, Effective Advertising: Understanding When, Why, and How Advertising Works (SAGE Publications, Thousand Oaks, CA, 2003), is a meta-analysis of 50 years of research in the fields of advertising, marketing, consumer behavior, and psychology. In it, he summarizes the body of scientific evidence to debunk numerous myths about advertising effectiveness and lay out some well-documented findings that experts and novices may not know.

THE MYTHS OF ADVERTISING

"Where's the Beef?" "Just Do It." "It's the Real Thing." Some advertisements are clearly more memorable than others. But does being memorable mean they are also successful? Following are 10 myths about advertising widely believed by consumers or the public at large. Marketers, according to Tellis, perpetuate these myths when they fall back on their personal experiences or casual observation rather than on research findings.

1. Advertising creates consumer needs. There are more than 30 million iPods in play today. Did advertising create that need, that mass enthusiasm? Certainly, before iPods existed, consumers didn't go around saying, "For heaven's sake, would somebody pleeeease invent a little portable box that plays a ton of music?" They didn't know they needed or wanted portable music until it was available to them. Situations like this push marketers toward the dangerous conclusion that advertising can create a need, when at best it can be used to exploit one already emerging.

2. Advertising's effects persist for decades. Coca-Cola is well-known by nearly all consumers due to its longevity in the market. But is it the advertising that drives Coke's market share or is it simply that some people love the flavor? The former statement leads to the misnomer that some long-surviving brands are still around because they have been heavy and consistent advertisers, which drives a dangerous tendency to conclude that consistent advertising over an extended period of time equates to long-term brand success.

3. Even if advertising doesn't work at first, repetition will ensure ultimate success. The "frequency" part of the reach-and-frequency formula guides how many times consumers need to see a message to fully absorb it. As a result, if an ad doesn't resonate well with an audience, advertisers will sometimes blame lack of sufficient frequency, concluding mistakenly that more frequency will solve the problem.

4. Three exposures are enough for effective advertising. Speaking of frequency, there is a long-held belief that three impressions are optimal for viewing an ad, after which effectiveness of that ad drops off. Tellis attributes this theory to General Electric researcher Herbert Krugman, who theorized that the first ad would draw attention, the second would stimulate interest, and the third would push the consumer to buy. Since then, we've seen examples in which even one exposure was enough, and many others in which the optimal was considerably higher.

5. Firms often use subliminal advertising. Tellis feels the myth may be propagated by a general lack of trust for big business or a lack of consumers' understanding of what subliminal really means. Anyway, this practice may not be legal because the Federal Trade Commission outlawed this form of advertising in 1974.

6. Humor in advertising trivializes the message. Humor in advertising is often weakly related or even unrelated to the brand, leaving some advertising professionals to question whether humor gets in the way of the message. In reality, humorous ads may do several positive things, including relaxing an audience, opening their mind to the message, distracting them from counterarguing, and leaving them in a positive mood. Indiscriminant use of humor, however, may do more to hinder than help the acceptance of the message.

7. Sex sells. Or does it? Ads centered around sex appeal draw attention, but not always positive attention that stimulates the desired perceptions or behaviors.

8. The most effective ads offer strong, logical arguments. This myth centers on the belief that consumers — even loyal ones — make decisions by comparing the performance or characteristics of competing brands, in which the preferred brand's attributes stand out. Sometimes true; often not.

9. Unique creative execution drives results. Constantly pressured to think outside the box, many advertisers (and their agencies) believe that ads must be entirely unique to capture attention. There is no scientific correlation between uniqueness of the message and sales of the product being advertised. Novelty in your message, media, target segment, product, or creative is more likely to foster sales increases than simply increasing ad intensity would. But novelty alone is not a prescription for success.

10. Advertising is very profitable. There is a widely held assumption that, with all the money spent on advertising, it must be very profitable, or companies wouldn't be spending such large sums on it. In reality, the huge levels of spending are more likely a reflection of continuation of past practices than superior ROI.

All about the truths in my next post.

Causes of Marketing Misalignment

Marketing carries with it a lot more challenges today than it did even five years ago. Many internal and external forces work to undermine the prospects of marketing alignment in ever more subtle ways.

• Target audiences are fractured into smaller and smaller segments, each with unique needs and definitions of value.
• Media options, already highly fragmented, show every indication of becoming more so (perhaps by yet another factor of 10) over the coming decade.
• Data, which only a few years ago was unavailable to marketers, is readily accessible to almost everyone in the organization and consequently open to interpretation by nearly every parochial interest.
• An explosion in the number of marketing programs or initiatives spawned by these factors makes it increasingly difficult to determine the results of any single effort; a melting pot of tactics all lay claim to the desired outcomes.
• Web-enabled data sharing has given birth to geographically scattered work teams that may be closer to the customers but often are held together only by a common logo on their paychecks.

Peer Pressure
As if these factors weren’t enough, today’s marketing organization likely attracts the keen interest of the CMO’s peers on the executive committee as they all struggle under the weight of escalating topline growth expectations.

These new realities are corrosive influences on old marketing organization models, eating away at both effectiveness and productivity while simultaneously causing marketers to work harder to protect the illusion of control.

Today’s model organization seems to create customer value in a matrixed collaboration of all major functions of the company. The departments work together on strategic development, value propositions, channel management, information and communications management, and performance measurement.

Many of these historically marketing-driven activities have expanded to include finance, human resources, information technology, operations, and other internal disciplines, putting quite a few cooks in the kitchen. And while it would be difficult to argue that the end product isn’t bettered by cross-discipline scrutiny, “efficient” isn’t often a word applied to this collaborative effort.

Conforming Amid Complexity
So how do you stay focused and aligned in a world requiring the assimilation of more facts, more data points, more options, and more opinions than ever before? How do you continue to improve efficiency and effectiveness when the very definitions of both seem to be in a perpetual state of flux? And how, in the era of Sarbanes-Oxley, do you maintain the proper balance of controls and freedoms to juggle discipline and responsibility with creativity and innovation?

A few ideas and examples of reorganizing marketing for greater success follow. If you haven’t already read it, you might also want to re-read the entry titled “Note to CMOs: Get a Contract.”

Alignment: The First Ingredient of Marketing Accountability

Psst. Want to know the secret to better marketing ROI? Just hire a statistician, add some complex analytical models to measure the marketing mix, and VOILA! you’ve got it.

That is overly simplistic and wrong, isn’t it? If it were that easy, we’d all know exactly what we were getting for our marketing dollars. The truth is that it isn’t even close to being that easy.

Many ascribe the difficulty of marketing measurement to the unique art/science blend of marketing. This is partially true. Marketing is certainly not as much of a quantifiable science as we’d sometimes like to believe. However, marketing is not alone in that boat. Information technology, operations, and even finance feel similar pressures to and pain from quantification. Yet what separates these other functional areas from marketing and gives them the appearance of greater accountability is the degree to which they have organizationally, culturally, and operationally embraced the acceleration of science within their disciplines to reduce uncertainty.

If marketing is to make a successful transition from its creative roots to its true strategic calling, we need to look at how we use our political capital to organize, structure, train, and manage our human capital. We need to establish an irrefutable reputation for accountability and gain recognition as excellent stewards of the company’s resources.

The very first ingredient of marketing accountability is alignment — alignment between CMO and CEO; alignment between company goals and marketing goals; alignment between marketing and the rest of the organization; and, last but not least, alignment within the marketing organization itself. After all, absent strong alignment behind a shared set of clear and measurable goals, no one is really accountable for more than his or her own interpretation of his or her individual job responsibilities.

Satisfaction is NOT Loyalty

Over the years, most companies have acknowledged that happy customers are more likely to be repeat customers than unhappy ones. Owing to the difficulty of defining “happy,” loyalty indicators predominantly have been linked to satisfaction measurement. Some have even gone further, setting their sights on nothing less than “delighting” customers or eliciting the rare reaction of “wow.”

Yet none of these descriptors has proven sufficiently objective to span business units, channels, or customer touchpoints so as to create a consistent standard for managers to achieve. Nor has any been more than loosely correlated to incremental profitability because few attributes are so distinct that they exceed the matching efforts of competitors. Nevertheless, the majority of mid-sized to large companies today have some sort of measurement system for customer satisfaction, if for no other reason than to ensure continued performance at or above their category’s competitive standard.

Satisfaction = Loyalty?

Satisfaction, though necessary, is an insufficient solo condition for loyalty. You can achieve high levels of satisfaction yet not inspire any real loyalty. For an example, look no further than your local car dealer. Automotive companies have been fast — and thorough — in their willingness to embrace satisfaction metrics. But anyone who has bought a car knows how sales reps manipulate the satisfaction scoring system. In a quiet moment during the new car delivery process, when one might reasonably expect the customer to be at the very peak of happiness, salespeople blithely inform their customers of the impending arrival of a J.D. Power satisfaction survey. Even if dealerships play it straight and work hard to meet customers’ needs, the manufacturers they represent have no better insight into customer loyalty.

That’s because functional satisfaction doesn’t necessarily ensure that either behavioral or emotional loyalty will follow. Satisfaction rates among U.S. auto buyers are often reported in the upper 80th percentile range — this past summer Toyota Motor Corp. topped the University of Michigan’s American Consumer Satisfaction Index with an 87 — but actual manufacturer repurchase rates hover in the 30th to 40th percentile range. Dealer loyalty is even worse, with only about 20% of customers returning to the same dealer to purchase their next car. This suggests that even though customers may want different car experiences every three to five years, no one auto manufacturer is meeting their needs. Loyalty is low in the category, regardless of what satisfaction scores say.

To reinforce the point, a number of academic studies in recent years have shown that satisfied customers don’t necessarily buy more or more often, in any category. Satisfaction as a proxy for loyalty is relative to each brand’s position in the market at any given time. If we accept that the perception of value most heavily influences comparative purchase decisions at any point in time, and past satisfaction is but an element of that perception, then if company B offers me greater value, all my satisfaction with company A likely will not prevent my switching for greater relative value.

Making Six Sigma Work IN Marketing: 7 Things the Black Belt Can Do

According to marketers who are admitted reluctant converts to Six Sigma, there are a few things the Black Belts can do to ensure a faster adoption curve and achieve better results within marketing.

1. Learn the language. Six Sigma is as foreign a language to most marketers as marketing is to Six Sigma. If your background is in operations, engineering, IT, finance, or any related functional area, you had an easier time absorbing the concepts and lexicon of Six Sigma than the marketers will. Your ability to understand the key drivers and challenges of the marketing department will springboard your acceptance. You need to make the effort first.


2. Emphasize the common ground. Both Six Sigma and marketing place a premium on getting at the voice of the customer and seeing it reflected throughout the company. Work to understand the perspective marketing has on that voice and compare your notes (and the notes of others around the organization) with theirs. Frame your questions, observations, and suggestions in the context of the customer and you will be readily accepted.


3. Start with some visible victories. Nothing builds success like success. So when it comes to defining and selecting projects, start with a few that seem tailor-made for quick success. Start small if necessary. It’s important that the first few projects be seen as quick, focused, and relevant. It also helps if your initial focus is on topline growth vs. efficiency so your efforts aren’t seen as a prelude to budget-cutting. Be careful not to get drawn into trying to solve the biggest, hairiest problems facing the marketers — many of them appear seductive but are sinkholes with ambiguous outcomes. It’s unlikely (and maybe unwise) that you’ll succeed immediately where generations of MBAs and Ph.D.s have fallen on swords before.


4. Don’t preach, teach. If your audience was infected with Six Sigma enthusiasm, it likely would have volunteered for training much sooner. Enthusiasm will build in proportion to the relevancy of your examples, not the abstract appeal of the concepts. Introduce tools in the context of pursuing projects with the highest priority. Otherwise, leave them in the bag.


5. Avoid the square peg/round hole syndrome. Evaluate projects to determine their fit with Six Sigma. If the fit isn’t right, don’t force it. Find ways to help adapt your Six Sigma skills to solving the problem, even if the approach isn’t right out of the playbook.


6. Embrace variability. Black Belts have been taught to see variability as a process defect and stamp it out in favor of standardization and reliability. Marketers have been taught to avoid standardization (which they equate with commoditization) in favor of differentiation. Find ways to separate good variability from bad without being seen as the enemy of creativity and innovation.


7. Promote the learning dialogue. Remember that the value in analytical models is rarely found in the numbers themselves, but often in the dialogue they stimulate.

Overall, recognize that your marketing audience has skills very different from yours. Marketers are more likely to be goal-oriented than task-oriented, conceptual than analytical, and appear unstructured or undisciplined when in reality they are processing decisions on the basis of years of experience, filtered by a large community of conventional wisdom.

Making Six Sigma Work FOR Marketing: 2 Good Places to Start

Few people are opposed to implementing Six Sigma processes, if the right areas can be found within the Company. The challenge is even greater within marketing departments with their ad hoc processes and short timelines. There are, however, a couple of Six Sigma "tools" that can be immediately implement in marketing with almost guaranteed success. Better yet, no statistics are required!

Process Mapping

Want to get 25% to 33% more accomplished with the same resources? That is a typical outcome from a Six Sigma process-mapping exercises.

For most marketers, the very word “process” conjures up images of deathly boring navel analysis and lint extraction by committee. So don’t use it. Think of it as “experience mapping,” “value graphing,” “frustration charts,” or some other creative moniker. But whatever you call it, recognize that most of the people on your staff may never have taken the time to step back from their day-to-day execution to really draw out on a whiteboard exactly how things get done from start-to-finish. How are local market campaigns executed? How are events planned and implemented? How are promotions moved from concept to market to assessment? Invariably, when they do they gain a whole new perspective on why some tasks are so frustrating, time-consuming, or unreliable.

Mapping the work process helps people see that there are, in fact, patterns buried in the seemingly random nature of the things they undertake each week. This pattern identification helps break down the emotionally filtered perceptions of where time, money, and energy are misspent and forces a re-examination of just how they are adding value (or not) at each stage.

In the end, process mapping shines a bright light on the value-destroying steps which slow down execution, add cost, or obscure the real opportunities. It illuminates the path to greater profitability or efficiency and draws your attention to things you can do NOW to have a big impact.

Voice of the Customer

At the very heart of Six Sigma lies an emphasis on ensuring that customer requirements are satisfied to the optimally profitable level. To do so, the company must know the customer's requirements, how well they are being met, and what opportunities for improvement exist.

While there are many passive ways to gather this information (i.e. complaints, returns, credits, warranty claims, etc.), gaining a full perspective requires a proactive apprioach, involving market research, customer/prospect interviews, and the like.

By leading the dialogue on how the voice of the customer is heard and measured throughout the organization, marketing can ensure that customer-centric business decisions become the norm and inspire the organization to higher levels of challenge in producing better products and services. This in turn creates more opportunities for differentiation in brand marketing and better coordination through all owned and third-party sales channels.

Marketers who embrace what Six Sigma really stands for (growth, efficiency, and customer-centricity) see ways to use the tools and training to inspire new levels of creativity and innovation, while helping the rest of the company build and maintain more profitable customer relationships. CMOs who’ve gone through that initial “oh no, not in my department” phase will tell you that if you plan the implementation carefully, choose the right tools, and get off to a strong start, Six Sigma jumstart marketing effectiveness and efficiency improvements that you’ve only been able to dream about up till now.