Wednesday, September 19, 2007

Knowing Is Believing

Now that 2008 budget season is upon us, it’s time to identify knowledge gaps in the assumptions underlying your marketing plan – and to lay out (and fund) a strategy for filling them.

We recently published a piece in MarketingNPV Journal which tackles this issue. In “Searching for Better Planning Assumptions? Start with the Unknowns” we suggested:

A marketing team’s ability to plan effectively is a function of the knowns and the unknowns of the expected impact of each element of the marketing mix. Too often, unfortunately, the unknowns outweigh the hard facts. Codified knowledge is frequently limited to how much money lies in the budget and how marketing has allocated those dollars in the past. Far less is known (or shared) about the return received for every dollar invested. As a result, marketers are left to fill the gaps with a mix of assumptions, conventional wisdom, and the occasional wild guess – not exactly a combination that fills a CMO with confidence when asked to recommend and defend next year’s proposed budget to the executive team.


Based on our experience and that of some of our CMO clients, we offer a framework to help CMOs get their arms around what they know, what they think they know, and what they need to know about their marketing investments. The three steps are:

1. Audit your knowledge. The starting point for a budget plan comes in the form of a question: What do we need to know? The key is to identify the knowledge gaps that, once filled, can lessen the uncertainty around the unknown elements, which will give you more confidence to make game-changing decisions.

2. Prioritize the gaps. For each gap or unanswered question, it’s important to ask how a particular piece of information would change the decision process. It might cause you, for example, to completely rethink the scope of a new program, which could have a material impact on marketing performance.

3. Get creative with your testing methods. Marketers have many methods for filling the gaps at their disposal; some are commonly used, others are underutilized. The key is determining the most cost-effective methods – from secondary research to experimental design techniques – to gather the most relevant information.

Don’t let the unknowns persist another year. Find ways to identify them, prioritize them, and fund some exploratory work so you’re legitimately smarter when the next planning season rolls around.

Tuesday, September 11, 2007

Where Have All the CMOs Gone?

If I had to sum up in a phrase what I heard Monday at the ANA Accountability Forum in Palm Beach, Fla., it would be “hard work.”

We heard several stories of marketers (IBM, VF Corp., Johnson & Johnson, Kimberly Clark, Siemens, and Discovery Networks) who are at various stages of understanding the payback on their marketing investments. Some have established impressive abilities to ascertain directional returns via marketing mix models supplemented with online research panels. Others have defined their vision, building the requisite foundation - aligning roles, goals, and expectations – and beginning to see some results. Yet many of the attendees still appear to be circling around the need for better measurement, looking for a point of entry.

Depending upon how one interprets the survey of measurement and accountability practices released at the ANA event, somewhere between 20% and 40% of large marketing organizations are doing measurement reasonably well. Another 20% to 40% are making some progress, but still addressing large gaps of a cultural, organizational, or technical nature. And the remaining 20% to 40% are, apparently, selling far more product than they can produce, ergo they’re not interested in measurement.

Sadly, these numbers do not seem to have improved from surveys done in the past.

I have two theories on why we may have stalled.

First, the truth is getting out: Measurement is hard work. And now that all the low-hanging fruit of defining metrics and building models using available data has been picked, the real insights have proven to be hiding higher up the tree. It’s one thing to know you have a data gap in an all-important metric, but quite another to secure the resources to close it while developing a credible proxy in the interim. If you’ve bought all the relevant syndicated data and are still left with gaping holes in your spend-to-return equation, you face the possibility of having to build your own data, from scratch, to travel that all-important last mile. And if you’ve been standing on the periphery looking for a cheaper, faster, less organizationally intrusive approach to give you great insight at little cost (financially or politically), it’s not going to happen. Get out your ladder and start picking fruit.

Second, the actions of CMOs indicate that they may be losing interest in the topic. Events like the one I’m attending this week used to attract a strong following of CMO types. This year, very few. Have they lost interest? Do they know something the rest of us don’t? Is measurement fading as an issue with CEOs and CFOs? Do CMOs not like Florida in September?

The CMO’s absence in the dialogue suggests they’re delegating really difficult organizational problems to smart, hard-working people who unfortunately lack the political clout necessary to solve them. Maybe the CMO has sufficiently “checked the box” by assigning people to work the issue. Or maybe it’s just not a very fun project to work on relative to the excitement of strategic planning or shuffling the organizational chart. If the CMO is losing interest, progress will be measured in minor increments and marketing is unlikely to ever achieve critical mass of enlightenment.

Whatever the reason, the result is the same: Marketing loses credibility and influence in each passing quarter in which the CMO can’t answer the difficult questions about the relationship between spend and returns. The opportunity cost, both to the company and to the career of the marketer, is staggering.

Bottom line: This measurement stuff is hard work. As I see it, the CMO has two choices: Roll up your sleeves and get into the thick of it, or start calling the recruiters and let the next person worry about it.