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Longwoods Intl.

Accurately assessing the impact of marketing, advertising andcommunications efforts is critical. Billions of dollars andthe careers of marketers ride on the proper evaluation andmeasurement of the efficacy, performance, cost and impactof increasingly complex and integrated marketing activities. To thatend, the “black art” era of marketing is quickly disappearing. With it,the protection once afforded by its mysterious measures of successand failure has evaporated. In its place, a new systems approach hasemerged that builds on the principles of design – structure, process andcontent – and understanding of the customer experience to establishsynergy, while simultaneously breaking down barriers between creative,strategic, technological and analytic efforts.

Accurately assessing the impact of marketing, advertising and communications efforts is critical. Billions of dollars and the careers of marketers ride on the proper evaluation and measurement of the efficacy, performance, cost and impact of increasingly complex and integrated marketing activities. To that end, the “black art” era of marketing is quickly disappearing. With it, the protection once afforded by its mysterious measures of success and failure has evaporated. In its place, a new systems approach has emerged that builds on the principles of design – structure, process and content – and understanding of the customer experience to establish synergy, while simultaneously breaking down barriers between creative, strategic, technological and analytic efforts.

It is safe to say that the effective evaluation of marketing’s impact on sales is as much an integration of research tools and methods as it is an outcome of marketing strategies and deployment of new technologies. In fact, measurement approaches can, and probably should, start from the perspective of marketing strategy (i.e., the clients needs, challenges and goals), rather than from the perspective of research technique or new technologies, as it so often does. As the rapid emergence and proliferation of marketing channels and new technologies increase the ability to reach people in multiple ways, we must not lose sight of the fact that success in evaluation, measurement and marketing optimization is built from adherence to best practices in the fundamentals – research design, quality data and collection, and deep, rich diagnostic and predictive analysis – that answer a client’s most important questions and issues.

Customer measurement approaches exist – direct measures of what people see, hear, feel and do and why they do it (rational and emotional factors) – to support the holistic framework the client needs to be successful. Organizations that have overcome the “silver bullet” fallacy recognize the value of combining and using transactional, historical, convenience and survey data as a basis for quantitative guidance about the impact of marketing efforts. They have built processes that meet marketers’ day-to-day needs and desires to measure, track and optimize the impact of their creative, communications, relationship and marketing efforts, as well as the larger strategy, planning and financial payoff of marketing activities. Ultimately, a continuous customer and marketing learning cycle can be put in place, fed by the distribution and application of the appropriate measurement techniques and methods.

The Challenge of Measuring the Impact of Marketing

It’s a question as old as business itself: How can an organization be sure it is spending the right amount of money on the right kind of advertising, marketing and relationship building so that it can successfully impact and influence behavior and attitudes, and ultimately, sales?

To be sure, some marketers, especially those from data-rich firms, focused solely on direct marketing or those involved exclusively in e-commerce, are able to determine how responsive consumers are to an individual coupon, offering or price reduction. But things are not that simple anymore. More than ever, the marketing discipline is art informed by science: most organizations still spend vast amounts of money trying to create awareness, shift attitudes or influence behavior without knowing precisely the relationship between costs and effects.

Many marketing executives secretly feel that they have little choice but to throw money at the wall and hope that at least some of it will stick. That kind of thinking, however, is rapidly disappearing. These days, business leaders, chief marketing officers, and the people who work with them are under increased pressure to make marketing more a quantifiable science and less an ephemeral black art. Numbers-driven corporate leaders demand to know how efficiently their marketing dollars are being spent. New legislation is looming that will demand that marketers and advertisers show they are accountable. Achieving accountability in marketing has been tossed down as a major challenge from the executive suite. Marketing, advertising and communications professionals are under the gun to solve these pressing issues by proving that they can spend their dollars wisely to attain greater return on their marketing investments.

Understanding Marketing’s Impact: The Longwoods Quadrant Map

Most would agree that the primary goal of marketing and advertising is to attract attention, persuade through rational and emotional means, and to sell something (influence and change behavior). The wise marketer recognizes that the marketing battle is not just for the pocketbook; it is for the heart and mind of the consumer. Getting a consumer to hold your brand top of mind, to associate it with positive images, and to develop a strong motivation to respond and remain loyal – these communications and relationship objectives, coupled with profitable sales, provide unparalleled competitive advantage.

So how are organizations today measuring the incremental impact of marketing on changing attitudes, behaviors or the bottom line? The Longwoods Quadrant Map (LQ) depicts the four primary types of measurement that are used in marketing and advertising (see Figure 1). While the features making up these types sometimes overlap, or may appear somewhat arbitrary, the distinctions are useful for framing the strengths and weaknesses of a wide variety of methods, tools and techniques being used to measure the impact of marketing:

• Description: The most basic forms of measurement take place at this level. Descriptive advertising and media tools are sometimes used erroneously to predict sales or short-of-sales behavior. As we will see, this is not only unwise, but can be a serious waste of money.
• Interpretation: The next level of research seeks to interpret basic measurement and observations of customer tendencies, intent or behavior. Much of marketing research’s work is done here, and, more often than not, results-to-action are weakly presented, sometimes based on experience, intuition or pure guessing. Also included here would be basic in-market tests, which are potentially valuable, but are often overlooked or ignored because of the expense associated with them.
• Explanation: The third level in the Longwoods map is the least used, in general, by marketers, yet is the most dynamic, actionable and understandable guide to the assessment and evaluation of the drivers of marketing’s impact. ROI Marketing experimental design procedures allow for an understanding of the interactive effects of complex multichannel marketing and communications programs while also linking the results of a campaign to the incremental dollars generated by that program. The outcomes of this method encompass description, interpretation and explanation and, indeed, feed the next level, which is prediction.
• Prediction: The final level, prediction, is the ultimate goal of many marketers. As mentioned, the ROI Marketing method is a generative force for this level. ROI Marketing focuses on gathering converging evidence for the success or failure of a marketing campaign, while also helping discriminate between these factors. The final goal is construct validation, which is also an outcome of prediction. Marketing ROI uses an empirical method, as opposed to a class of techniques called econometric modeling, which attempts to discern and evaluate a picture of reality. While valuable in their own right for overall marketing planning and “what-if” decision making, statistical models are not a substitute for direct, grounded testing and evaluation of what marketers do on a daily basis: create, plan and manage marketing and communications campaigns.

The LQ distinguishes between subjective descriptive effects, and objective explanatory effects. Much of traditional marketing research has focused on describing and subjectively interpreting the impact of marketing (particularly media) communications. Thus, any linkage from here to accountability measures is more or less a leap of faith.

At the opposite extreme, recent advances in database technology, CRM and data-mining techniques have unearthed highly sophisticated predictive modeling techniques that lie unconnected to the more experience-based, subjective quadrants in this framework. Relatively few firms (although this is slowly changing) are addressing the third quadrant that focuses on explicating the what, why and how much impact of marketing. Yet, here is where the most important insights and relevant guidance toward improved accountability can be found.

Strengths and Weaknesses of Primary Measurement Approaches

There are currently three major approaches to evaluating the efficacy of marketing campaigns before they are launched and three that measure the impact of marketing after it occurs. All, essentially, are based on measuring, evaluating and understanding customers along the spectrum of experience. Marketing ROI is a newer method that measures and evaluates the efficacy of marketing immediately after a campaign is completed. It is meant to be used to benchmark and establish an ongoing marketing evaluation, optimization, and ROI improvement loop both within single campaigns, and across campaigns over time. In brief:

• To measure and evaluate pre-campaign
  • Qualitative focus groups
  • Pre-testing
  • Control-test group markets
• To measure and evaluate post-campaign
  • An empirical approach: Marketing ROI
  • A statistical technique: Marketing Mix Modeling
  • A proprietary, prepackaged brand model that is tracked on “short of sales” variables over time: brand (equity) tracking or monitoring

Figure 2 compares each of these in relation to: what they accomplish; challenges; how they are useful; and comments about efficacy.

Learning From Winners

Based on new business realities and demands for innovation shifts to improve the status quo, the need for a process-based approach to marketing performance evaluation and optimization is at hand. This is driven by the following points:

• There is no silver bullet tool or technique to handle the complexity and sophistication of today’s marketing realities.
• Given that reality, and the challenges it brings, firms need an approach of marketing measurement, evaluation and optimization from a strategic, process-based analytic perspective. In this new framework, market research and measurement techniques and methods are infused at the proper strategic, analytic and tactical points to:
  • Optimize within the marketing function – whether it be at the campaign, flight or the customer level
  • Enhance accountability, by transporting accountability information, data and metrics outside of marketing and into the corporate business intelligence stream

A new book entitled Learning From Winners was commissioned by the Advertising Research Foundation and sponsored by Microsoft to bring together leading-edge case studies of organizations that have brought holistic customer experience measurement to bear on driving outstanding business results. The primary reason that success was achieved is because these organizations have realized a carefully planned, strategic blueprint that includes robust customer measurement at key points in the marketing process.

A case example from Learning From Winners illustrates this new focus:

A major corporate brand observed a precipitous decline in sales over many years. Their flagship product was in a category that was notorious for “copy cat” advertising, but also one that had become perceived as a commodity. The organization decided that it was time to break out of the traditional, safe, familiar, but increasingly unprofitable, mode of operation. After a number of strategic discussions, they realized that the key was to better understand their customers’ experience through the eyes of how their product was used. This included both qualitative and quantitative explorations into perceptions and attitudes about how their customers experienced their products in day-to-day usage, as well as in relation to their total lifestyle (both business and home). Six distinct, but integrated, research phases brought the company to a place that totally transformed them from a commodity broker to one that connected them to their customers’ needs, their experiences, and also their dreams, visions and aspirations. This not only affected marketing, advertising and communications, but also brought the organization in alignment and dedication to serving the customer experience.

Multiple, in-market metrics showed that this new focus reversed a five-year downward sales trend. Unit share and sales volumes increased 20 percent in less than one year, even as brand, satisfaction, and loyalty measures climbed. This exercise completely changed the way the organization conceives of their relationship with customers, and the way they “speak to” the customer at every possible touch point: advertising, marketing, the Web, in-person sales and service, customer service, and even product development. As this case example shows, the road to CEM (customer experience management) is not necessarily easy, but the benefits are real.

In essence, this organization crafted a double closed-loop system that allowed them to continually optimize marketing and advertising efforts at the campaign/flight level, while spinning off marketing metrics that were linked to corporate-level valuations, business process management (BPM) efforts, executive reporting of “metrics that matter” across the company, and ultimately back into marketing resource planning and evaluation. Thus, this framework supports the credible, valid and useful research designs found in testing, measurement and marketing ROI methods, while also providing a more appropriate platform for brand/finance metrics and forecasting calculations, mixture (portfolio and decision-support) modeling, and enhanced brand/ROI tracking. Instead of vain attempts to force-fit a single silver bullet solution, all of the powerful techniques and tools of research, measurement, technology and statistics are subjugated to the process, and utilized where they can best serve the purpose: to drive, integrate or move the marketing effort forward to more efficient spending and effective outcomes; to higher-level corporate accountability and, ultimately, corporate valuation; and to loop back to inform large-scale marketing program evaluation and planning.

History has shown that business data silos exist and are hard to reconcile and integrate, even when it is technically feasible to do so. Change is unsettling. Advertisers and marketers alike prefer not to dwell on measures of accountability. In addition, research firms and agencies have much vested in current approaches being used by their clients. So getting a new system off the ground is quite difficult when blocked by habit, tradition and an unwillingness to change. That said, recent trends in the CRM movement and emerging BPM space, coupled with emerging regulatory pressure from the Sarbanes-Oxley Act, is again moving organizations and management discussions onto the playing fields of integration, alignment and accountability. The quest for corporate and business efficiency and effectiveness is not going to go away, particularly as chief executives, managers, investors and changing consumer expectations are so high. At some point, marketing and advertising will be swept forward, kicking and screaming, into the future. In many ways, we are already experiencing it. Wise counsel would advise that we consider taking the reins toward a new direction in marketing accountability that emerges from our own expertise; our experience and understanding of how to bring more science to the art of marketing; and a willingness to look through the eyes of the client to their needs, problems, challenges and issues, rather than through our own opaque, and possibly self-serving, lenses.