Marketing Accountability
Encyclopedia
Marketing accountability is a term that signifies management
with data
that is understandable to the management of the enterprise.
” (IMC) implies that marketing
and communications are integrated within the business and management of the enterprise, not as a stand-alone functional silo. Analogous to other business functions like manufacturing
and sales
, accountable marketing is based on a set of valid outcome performance indicators and the associated activity input costs. Outcome performance indicators are called Effectiveness Metrics; Effectiveness combined with costs is called Efficiency
(effectiveness per dollar spent) .
In order for indicators to be considered valid for accountability
, they must meet a few minimum requirements. They need to measure marketing outcomes from the consumer
s’ point of view, they need to include all marketing activities, they must be repeated over time, and they must meet statistical and technical metrology
criteria required of all measurement systems.
The measurements need to be true outcome indicators. Unlike sales where the outcome is easily quantifiable, marketing is more difficult to define. To be sure good marketing contributes to sales, but there is not a direct, fast-acting relationship between marketing activities and sales. Some marketing materials are designed to inform, others attempt to portray the product or service attractively, yet others attempt to influence purchasing behavior. Most marketing campaigns use a combination of channels that include all three. A brand may have glossy ads to boost attractiveness, brochure
s to convey information, and coupon
s with expiration dates to stimulate purchases. Thus a multiplicity of channels and contacts that influence target consumers needs to be measured together – to understand the holistic effect of these activities – and separately – to compare the effectiveness
among the channels. The outcome indicator can be called “Brand Experience”. Only consumers can discern the resultant brand experience in the clutter of the marketplace as each message competes with others for attention .
To assure meaningful comparisons among activities, brands, markets, and points in time; the metrics must use a common scale – a “common currency”. This is quite obvious in accounting systems for multinational corporation
s, but in marketing all too often this principle is ignored. Different communications activities are evaluated using different measurements. These methods fall short of accountability in that the activities cannot be compared directly and their synergies
cannot be discerned. Only measurement systems that use common units – to evaluate each contact, each market, and each competitor — can result in marketing accountability .
Marketing activity outcomes must be gathered on a continuous basis in time. While a single reading may provide some insight into the baseline
condition, accountability comes from understanding cause and effect. This knowledge comes from repeated examinations over time that show changes from marketing initiatives (from brand and competition) and the evolution of consumers’ needs. Harold Geneen
in his groundbreaking book “Managing” clearly explains the role of an effective CEO: to evaluate performance numbers on a continuous basis – when all are reviewed, he starts all over again. Only long term observation brings true insight of unanticipated changes and “red flags” in the data – good or undesirable .
All measurement systems, regardless of what they measure, are prone to misinterpretation and error
. Together these form the Science of Metrology. Measurement accuracy, repeatability, reproducibility, bias, data shifts, and data drifts are only a few common issues identified in measurement. Any measurement system used in management must be evaluated from the technical point of view to assure that it addresses these criteria. It is essential that measurement error is quantified so that managers react to changes in conditions, but not changes due to measurement variation. At the very least, all measurements need to show statistical confidence interval
s or so-called “error bars” . Independent organizations like the ARF (Advertising Research Foundation) evaluate the validity of commonly used measurement systems .
These outcome indicators – representing the condition in the marketplace – are combined with financial data to show efficiency of the marketing process. The financials are inputs: dollars spent for marketing activities. The best and most informative systems use Activity Based Costing (ABC) that track costs by each channel or marketing communications activity rather than traditional cost accounting by salaries, facilities, equipment, and materials .ABC methods have the best fidelity
as they show contribution efficiency (Brand Experience/$ spent) of each activity, and they may be summed in desired combinations (or campaigns). Understanding competitors costs and brand experience can lead to benchmarking
– a comparison to the best in class.
A well implemented business process
that yields common valid outcome indicators combined with spend levels leads to understanding of marketing performance. Using this “common currency” allows enterprise management, marketing management
and other managers to understand marketing performance effectiveness and efficiency. Additionally, marketing accountability metrics become understandable across management levels as senior managers and lower ranks all see and interpret the same information. The resultant transparency allows all to interpret marketing performance in the same way and promotes the contributors to concentrate their efforts in the same direction: toward the most effective and efficient marketing.
Management
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
with data
Data
The term data refers to qualitative or quantitative attributes of a variable or set of variables. Data are typically the results of measurements and can be the basis of graphs, images, or observations of a set of variables. Data are often viewed as the lowest level of abstraction from which...
that is understandable to the management of the enterprise.
Overview
Within marketing accountability the expression “integrated marketing communicationsIntegrated Marketing Communications
Integrated Marketing Communications is defined as customer centric, data driven method of communicating with the customer. IMC is the coordination and integration of all marketing communication tools, avenues, functions and sources within a company into a seamless program that maximizes the impact...
” (IMC) implies that marketing
Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
and communications are integrated within the business and management of the enterprise, not as a stand-alone functional silo. Analogous to other business functions like manufacturing
Manufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...
and sales
Sales
A sale is the act of selling a product or service in return for money or other compensation. It is an act of completion of a commercial activity....
, accountable marketing is based on a set of valid outcome performance indicators and the associated activity input costs. Outcome performance indicators are called Effectiveness Metrics; Effectiveness combined with costs is called Efficiency
Efficiency
Efficiency in general describes the extent to which time or effort is well used for the intended task or purpose. It is often used with the specific purpose of relaying the capability of a specific application of effort to produce a specific outcome effectively with a minimum amount or quantity of...
(effectiveness per dollar spent) .
In order for indicators to be considered valid for accountability
Accountability
Accountability is a concept in ethics and governance with several meanings. It is often used synonymously with such concepts as responsibility, answerability, blameworthiness, liability, and other terms associated with the expectation of account-giving...
, they must meet a few minimum requirements. They need to measure marketing outcomes from the consumer
Consumer
Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...
s’ point of view, they need to include all marketing activities, they must be repeated over time, and they must meet statistical and technical metrology
Metrology
Metrology is the science of measurement. Metrology includes all theoretical and practical aspects of measurement. The word comes from Greek μέτρον , "measure" + "λόγος" , amongst others meaning "speech, oration, discourse, quote, study, calculation, reason"...
criteria required of all measurement systems.
The measurements need to be true outcome indicators. Unlike sales where the outcome is easily quantifiable, marketing is more difficult to define. To be sure good marketing contributes to sales, but there is not a direct, fast-acting relationship between marketing activities and sales. Some marketing materials are designed to inform, others attempt to portray the product or service attractively, yet others attempt to influence purchasing behavior. Most marketing campaigns use a combination of channels that include all three. A brand may have glossy ads to boost attractiveness, brochure
Brochure
A brochure is a type of leaflet. Brochures are most commonly found at places that tourists frequently visit, such as museums, major shops, and tourist information. Brochure racks or stands may suggest visits to amusement parks and other points of interest...
s to convey information, and coupon
Coupon
In marketing, a coupon is a ticket or document that can be exchanged for a financial discount or rebate when purchasing a product. Customarily, coupons are issued by manufacturers of consumer packaged goods or by retailers, to be used in retail stores as a part of sales promotions...
s with expiration dates to stimulate purchases. Thus a multiplicity of channels and contacts that influence target consumers needs to be measured together – to understand the holistic effect of these activities – and separately – to compare the effectiveness
Effectiveness
Effectiveness is the capability of producing a desired result. When something is deemed effective, it means it has an intended or expected outcome, or produces a deep, vivid impression.-Etymology:...
among the channels. The outcome indicator can be called “Brand Experience”. Only consumers can discern the resultant brand experience in the clutter of the marketplace as each message competes with others for attention .
To assure meaningful comparisons among activities, brands, markets, and points in time; the metrics must use a common scale – a “common currency”. This is quite obvious in accounting systems for multinational corporation
Multinational corporation
A multi national corporation or enterprise , is a corporation or an enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation...
s, but in marketing all too often this principle is ignored. Different communications activities are evaluated using different measurements. These methods fall short of accountability in that the activities cannot be compared directly and their synergies
Synergy
Synergy may be defined as two or more things functioning together to produce a result not independently obtainable.The term synergy comes from the Greek word from , , meaning "working together".-Definitions and usages:...
cannot be discerned. Only measurement systems that use common units – to evaluate each contact, each market, and each competitor — can result in marketing accountability .
Marketing activity outcomes must be gathered on a continuous basis in time. While a single reading may provide some insight into the baseline
Baseline
A baseline is a line that is a base for measurement or for construction; see datum or point of reference .The word baseline may refer to:...
condition, accountability comes from understanding cause and effect. This knowledge comes from repeated examinations over time that show changes from marketing initiatives (from brand and competition) and the evolution of consumers’ needs. Harold Geneen
Harold Geneen
Harold "Hal" Sydney Geneen , was an American businessman most famous for serving as president of the ITT Corporation.-Biography:...
in his groundbreaking book “Managing” clearly explains the role of an effective CEO: to evaluate performance numbers on a continuous basis – when all are reviewed, he starts all over again. Only long term observation brings true insight of unanticipated changes and “red flags” in the data – good or undesirable .
All measurement systems, regardless of what they measure, are prone to misinterpretation and error
Error
The word error entails different meanings and usages relative to how it is conceptually applied. The concrete meaning of the Latin word "error" is "wandering" or "straying". Unlike an illusion, an error or a mistake can sometimes be dispelled through knowledge...
. Together these form the Science of Metrology. Measurement accuracy, repeatability, reproducibility, bias, data shifts, and data drifts are only a few common issues identified in measurement. Any measurement system used in management must be evaluated from the technical point of view to assure that it addresses these criteria. It is essential that measurement error is quantified so that managers react to changes in conditions, but not changes due to measurement variation. At the very least, all measurements need to show statistical confidence interval
Confidence interval
In statistics, a confidence interval is a particular kind of interval estimate of a population parameter and is used to indicate the reliability of an estimate. It is an observed interval , in principle different from sample to sample, that frequently includes the parameter of interest, if the...
s or so-called “error bars” . Independent organizations like the ARF (Advertising Research Foundation) evaluate the validity of commonly used measurement systems .
These outcome indicators – representing the condition in the marketplace – are combined with financial data to show efficiency of the marketing process. The financials are inputs: dollars spent for marketing activities. The best and most informative systems use Activity Based Costing (ABC) that track costs by each channel or marketing communications activity rather than traditional cost accounting by salaries, facilities, equipment, and materials .ABC methods have the best fidelity
Fidelity
"Fidelity" is the quality of being faithful or loyal. Its original meaning regarded duty to a lord or a king, in a broader sense than the related concept of fealty. Both derive from the Latin word fidēlis, meaning "faithful or loyal"....
as they show contribution efficiency (Brand Experience/$ spent) of each activity, and they may be summed in desired combinations (or campaigns). Understanding competitors costs and brand experience can lead to benchmarking
Benchmarking
Benchmarking is the process of comparing one's business processes and performance metrics to industry bests and/or best practices from other industries. Dimensions typically measured are quality, time and cost...
– a comparison to the best in class.
A well implemented business process
Business process
A business process or business method is a collection of related, structured activities or tasks that produce a specific service or product for a particular customer or customers...
that yields common valid outcome indicators combined with spend levels leads to understanding of marketing performance. Using this “common currency” allows enterprise management, marketing management
Marketing management
Marketing management is a business discipline which is focused on the practical application of marketing techniques and the management of a firm's marketing resources and activities...
and other managers to understand marketing performance effectiveness and efficiency. Additionally, marketing accountability metrics become understandable across management levels as senior managers and lower ranks all see and interpret the same information. The resultant transparency allows all to interpret marketing performance in the same way and promotes the contributors to concentrate their efforts in the same direction: toward the most effective and efficient marketing.