Marketing performance measurement and management
Encyclopedia
Marketing performance measurement and management (MPM) is a term used by marketing professionals to describe the analysis and improvement of the efficiency and effectiveness
of marketing. This is accomplished by focus on the alignment of marketing activities, strategies, and metrics with business goals. It involves the creation of a metrics framework to monitor marketing performance
, and then develop and utilize marketing dashboards to manage marketing performance. This strategy is used by several companies such as IBM
, Intel, and Citrix.
Performance management
is one of the key processes applied to business operations such as manufacturing, logistics, and product development. The goals of performance management are to achieve key outcomes and objectives to optimize individual, group, or organizational performance. MPM however, is more specific. It focuses on measuring, managing, and analyzing marketing performance to maximize effectiveness and optimize the return of investment (ROI) of marketing. Three elements play a critical role in managing marketing performance—data, analytics, and metrics.
One of the core methodologies to measure marketing effectiveness is the collection of appropriate data. The gathering of right types of data, and its accuracy, is crucial in measuring the marketing performance. Agreement between the marketing department and the senior management is important in selecting appropriate data to be collected.
While data collection is relatively simple, a thorough analysis to make sense of collected data is critical. By thoroughly analyzing the data, organizations can gather actionable business insights to improve the marketing effectiveness and marketing efficiency. For example, organizations can use the analytics to drive the marketing return on investment
, and make faster and better business decisions.
One common use of these analytics is optimizing marketing spending by using market mix models
--models that measure the impact of marketing activities, competitive effects, and market environment on sales of a product. The consumer packaged goods (CPG) industry extensively uses this method, and it is now being adopted elsewhere. These models use data to create a model that establishes the link between spend in various channels, geographies and so on with incremental sales. The concepts and tools of these models date back over 30 years. With the increased usage of the Internet
, social networking sites, mobile advertising, and text messaging, interest in them is increasing. models.
Measurement and metrics enable marketing professionals to justify budgets based on returns and to drive organizational growth and innovation. As a result, marketers use these metrics and performance measurement as way to prove value and demonstrate the contribution of marketing to the organization.
Popular metrics used in analysis include activity-based metrics that involves numerical counting and reporting. For example, tracking downloads, Web site visitors, attendees at various events are types of activity-based metrics. However, they seldom link marketing to business outcomes. Instead, business outcomes such as market share, customer value, and new product adoption offer a better correlation. MPM focuses on measuring the aggregated effectiveness and efficiency of the marketing organization. Some common categories of these specific metrics include marketing's impact on share of preference, rate of customer acquisition, average order value, rate of new product and service adoptions, growth in customer buying frequency, volume and share of business, net advocacy and loyalty, rate of growth compared to competition and the market, margin, and customer engagement. In addition, MPM is used to measure the monitoring of operational efficiency and external performance.
Operations performance metrics is a term used when organizations manage marketing functions
as a business. Organizations committed to implementing MPM may create positions such as marketing operations director and marketing finance director. Program-to-people ratios, awareness-to-demand ratios, the cost vs lead, the cost vs sale, and conversation rates are the typical data collected and analyzed. Operational performance metrics, however, primarily provide the organization with a way to rationalize marketing investments, but do not correlate marketing to business strategy and business performance.
MPM tightly focuses on these operating measures to help marketers view how efficiently resources of the organization such as people, facilities, and capital are used. External performance measures aligned with business outcomes assess things such as the value an organization provides to customers or the performance of an organization relative to its competitors.
By using a top-down approach
, marketers develop metrics and specific performance targets known as key performance indicators (KPI). First business decisions are made to define the scope. To create metrics and KPIs, marketeers involved in MPM try to first brainstorm on the business outcome that they are trying to impact. This is followed by asking the opposite questions that need to be answered to determine if the questions have an impact on this outcome, and the necessary supporting data required to answer these questions. After determining what data is needed, marketeers need to search for this data, and determine the decisions and actions that must to be enforced as a result of this data mining.
Professionals involved in MPM implementation use a dashboard to report the marketing performance. The dashboard is where all data and metrics are collated and presented as useful information for the organization. Marketing professionals create these dashboards from metrics and KPIs. Organizations can then use this information to proceed with their marketing. In essence, a dashboard is a multilayered performance management tool that enables organizations to measure, monitor and manage business activity by using both financial and non-financial measures. The dashboard provides analysis into the progress of the organization toward achieving each defined objectives.
A good dashboard consists of three layers:
An ideal dashboard should show the progress of marketing, help assess productive areas, and help in the decision making. In addition, dashboards provide an indication on the value of marketing and also helps to align marketing with the business.
Processes must describe a document outlining the step-by-step actions that marketing must take to follow the process consistently. A valuable aid is the process map
. Process mapping is a technique to create a clearly defined objective to meeting business results. It provides a systematic description of the actions taken by marketing personnel as they use a specific set of activities to produce a defined set of outcomes. It can also help identify skills the organization may need to implement the plan. In addition, an organization can use the process map to identify technology and training requirements. For organizations committed to implementing ISO 9001, process maps are an integral part of quality management
.
The marketing metrics continuum provides a framework for how to categorize metrics from the tactical to strategic. By navigating this metrics continuum, from activity-based to predictive, marketers can move towards more effective marketing measurement and align measurement and metrics with business outcomes.
The use of systems and tools make it possible to determine the performing investments and the contribution of marketing efforts to the overall success of the organization. Without the implementation and use of these system and tools, creating a performance-driven marketing organization is difficult to achieve.
and Heidrick and Struggles study titled The Evolved CMO, found that 20% of the 115 chief and senior marketing professionals needed a further understanding in marketing measurement, customer relationship management
(CRM), and customer data analytics. Marketing professionals must be able to tap into customer information that enables them to provide a strategic guidance the organization requirements. This allows them to extend business into emerging markets and bring innovative products to market.
Professionals skilled in measurement, analytics, and data-management can serve as catalysts of growth. They can anticipate customer requirements and develop marketing capabilities of their organization. These marketing professionals can then assess how to measure the impact of marketing on the business and translate the metrics to simple charts, data, and figures that the top management of the organization (CEOs, CFOs, and other CxOs) can understand.
A United States-based study conducted by management consultants Bersin and Associates state that "today more than 40% of US corporations believe that 'driving a performance-based culture' is one of their top three talent strategies." Cultures that foster an environment of teamwork and employee development, and resource empowerment achieve higher quality outcomes. Similar to other optimization processes (for example a six sigma
quality management program), MPM requires a culture of accountability within the organization. Without a disciplined approach, success of implementation of MPM to drive productivity would not yield tangible results.
(CMO), Chief Financial Officer
(CFO), and marketing operations professionals
.
Marketing accountability of an organization lies with the CMO. CMOs are deeply involved with the MPM professionals to define marketing objectives, determine investments and prove the value of marketing in the organization. Marketing operations and analysis professionals are responsible for the creation of new metrics and processes to measure and improve operations performance. They are expected to evaluate and implement systems to improve marketing efficiency and effectiveness. In addition, they are faced with the challenges of collecting data and analytics essential to the development, and the deployment of marketing dashboards and creating the marketing operations road map. The chief financial officer of a company or public agency is the corporate officer primarily responsible for managing the financial risks of the business or agency. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management. As marketing is a crucial vertical of any organization, the CFO is an important stakeholder for any marketing and other finance-related tasks.
Marketing effectiveness
Marketing effectiveness is the quality of how marketers go to market with the goal of optimizing their spending to achieve good results for both the short-term and long-term...
of marketing. This is accomplished by focus on the alignment of marketing activities, strategies, and metrics with business goals. It involves the creation of a metrics framework to monitor marketing performance
Marketing effectiveness
Marketing effectiveness is the quality of how marketers go to market with the goal of optimizing their spending to achieve good results for both the short-term and long-term...
, and then develop and utilize marketing dashboards to manage marketing performance. This strategy is used by several companies such as IBM
IBM
International Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
, Intel, and Citrix.
Performance management
Performance management
Performance management includes activities that ensure that goals are consistently being met in an effective and efficient manner. Performance management can focus on the performance of an organization, a department, employee, or even the processes to build a product or service, as well as many...
is one of the key processes applied to business operations such as manufacturing, logistics, and product development. The goals of performance management are to achieve key outcomes and objectives to optimize individual, group, or organizational performance. MPM however, is more specific. It focuses on measuring, managing, and analyzing marketing performance to maximize effectiveness and optimize the return of investment (ROI) of marketing. Three elements play a critical role in managing marketing performance—data, analytics, and metrics.
Data and analytics
While data collection is relatively simple, a thorough analysis to make sense of collected data is critical. By thoroughly analyzing the data, organizations can gather actionable business insights to improve the marketing effectiveness and marketing efficiency. For example, organizations can use the analytics to drive the marketing return on investment
Return on investment
Return on investment is one way of considering profits in relation to capital invested. Return on assets , return on net assets , return on capital and return on invested capital are similar measures with variations on how “investment” is defined.Marketing not only influences net profits but also...
, and make faster and better business decisions.
One common use of these analytics is optimizing marketing spending by using market mix models
Marketing mix modeling
Marketing mix modeling is a term of art for the use of statistical analysis such as multivariate regressions on sales and marketing time series data to...
--models that measure the impact of marketing activities, competitive effects, and market environment on sales of a product. The consumer packaged goods (CPG) industry extensively uses this method, and it is now being adopted elsewhere. These models use data to create a model that establishes the link between spend in various channels, geographies and so on with incremental sales. The concepts and tools of these models date back over 30 years. With the increased usage of the Internet
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
, social networking sites, mobile advertising, and text messaging, interest in them is increasing. models.
Metrics and management
Popular metrics used in analysis include activity-based metrics that involves numerical counting and reporting. For example, tracking downloads, Web site visitors, attendees at various events are types of activity-based metrics. However, they seldom link marketing to business outcomes. Instead, business outcomes such as market share, customer value, and new product adoption offer a better correlation. MPM focuses on measuring the aggregated effectiveness and efficiency of the marketing organization. Some common categories of these specific metrics include marketing's impact on share of preference, rate of customer acquisition, average order value, rate of new product and service adoptions, growth in customer buying frequency, volume and share of business, net advocacy and loyalty, rate of growth compared to competition and the market, margin, and customer engagement. In addition, MPM is used to measure the monitoring of operational efficiency and external performance.
Operations performance metrics is a term used when organizations manage marketing functions
Marketing Operations Management
Marketing Operations Management is a version of end to end marketing optimization, from planning and budgeting, through marketing content management, to global marketing execution and analysis....
as a business. Organizations committed to implementing MPM may create positions such as marketing operations director and marketing finance director. Program-to-people ratios, awareness-to-demand ratios, the cost vs lead, the cost vs sale, and conversation rates are the typical data collected and analyzed. Operational performance metrics, however, primarily provide the organization with a way to rationalize marketing investments, but do not correlate marketing to business strategy and business performance.
MPM tightly focuses on these operating measures to help marketers view how efficiently resources of the organization such as people, facilities, and capital are used. External performance measures aligned with business outcomes assess things such as the value an organization provides to customers or the performance of an organization relative to its competitors.
By using a top-down approach
Top-down and bottom-up design
Top–down and bottom–up are strategies of information processing and knowledge ordering, mostly involving software, but also other humanistic and scientific theories . In practice, they can be seen as a style of thinking and teaching...
, marketers develop metrics and specific performance targets known as key performance indicators (KPI). First business decisions are made to define the scope. To create metrics and KPIs, marketeers involved in MPM try to first brainstorm on the business outcome that they are trying to impact. This is followed by asking the opposite questions that need to be answered to determine if the questions have an impact on this outcome, and the necessary supporting data required to answer these questions. After determining what data is needed, marketeers need to search for this data, and determine the decisions and actions that must to be enforced as a result of this data mining.
Dashboard
A good dashboard consists of three layers:
| Level | Function | Description |
|---|---|---|
| Executive level | Strategic level | Monitors and measures performance against business outcomes and marketing objectives |
| Operational level | Marketing management | Tracks performance of core marketing strategies and processes |
| Tactical level | Functions and individuals | Analyzes performance at project or activity level as they relate to the first two |
An ideal dashboard should show the progress of marketing, help assess productive areas, and help in the decision making. In addition, dashboards provide an indication on the value of marketing and also helps to align marketing with the business.
Processes
MPM professionals develop closed-loop business processes for data collection, performance target setting, measurement and reporting.Processes must describe a document outlining the step-by-step actions that marketing must take to follow the process consistently. A valuable aid is the process map
Business Process Mapping
Business process mapping refers to activities involved in defining exactly what a business entity does, who is responsible, to what standard a process should be completed and how the success of a business process can be determined. Once this is done, there can be no uncertainty as to the...
. Process mapping is a technique to create a clearly defined objective to meeting business results. It provides a systematic description of the actions taken by marketing personnel as they use a specific set of activities to produce a defined set of outcomes. It can also help identify skills the organization may need to implement the plan. In addition, an organization can use the process map to identify technology and training requirements. For organizations committed to implementing ISO 9001, process maps are an integral part of quality management
Quality management
The term Quality management has a specific meaning within many business sectors. This specific definition, which does not aim to assure 'good quality' by the more general definition , can be considered to have four main components: quality planning, quality control, quality assurance and quality...
.
System and tools
According to Marketing Metrics in Action: Creating a Performance-Driven Marketing Organization, the creation of a performance-driven organization requires two elements: a set of standards and processes for identifying and accessing relevant data, and the ability to generate performance metrics from the data.The use of systems and tools make it possible to determine the performing investments and the contribution of marketing efforts to the overall success of the organization. Without the implementation and use of these system and tools, creating a performance-driven marketing organization is difficult to achieve.
Management and skills
A Forrester ResearchForrester Research
Forrester Research is an independent technology and market research company that provides its clients with advice about technology's impact on business and consumers. Forrester Research has five research centers in the US: Cambridge, Massachusetts; New York, New York; San Francisco, California;...
and Heidrick and Struggles study titled The Evolved CMO, found that 20% of the 115 chief and senior marketing professionals needed a further understanding in marketing measurement, customer relationship management
Customer relationship management
Customer relationship management is a widely implemented strategy for managing a company’s interactions with customers, clients and sales prospects. It involves using technology to organize, automate, and synchronize business processes—principally sales activities, but also those for marketing,...
(CRM), and customer data analytics. Marketing professionals must be able to tap into customer information that enables them to provide a strategic guidance the organization requirements. This allows them to extend business into emerging markets and bring innovative products to market.
Professionals skilled in measurement, analytics, and data-management can serve as catalysts of growth. They can anticipate customer requirements and develop marketing capabilities of their organization. These marketing professionals can then assess how to measure the impact of marketing on the business and translate the metrics to simple charts, data, and figures that the top management of the organization (CEOs, CFOs, and other CxOs) can understand.
A United States-based study conducted by management consultants Bersin and Associates state that "today more than 40% of US corporations believe that 'driving a performance-based culture' is one of their top three talent strategies." Cultures that foster an environment of teamwork and employee development, and resource empowerment achieve higher quality outcomes. Similar to other optimization processes (for example a six sigma
Six Sigma
Six Sigma is a business management strategy originally developed by Motorola, USA in 1986. , it is widely used in many sectors of industry.Six Sigma seeks to improve the quality of process outputs by identifying and removing the causes of defects and minimizing variability in manufacturing and...
quality management program), MPM requires a culture of accountability within the organization. Without a disciplined approach, success of implementation of MPM to drive productivity would not yield tangible results.
Stakeholders
Stakeholders for MPM implementation include the Chief Marketing OfficerChief marketing officer
Chief Marketing Officer is a corporate title referring to an executive responsible for various marketing activities in an organization...
(CMO), Chief Financial Officer
Chief financial officer
The chief financial officer or Chief financial and operating officer is a corporate officer primarily responsible for managing the financial risks of the corporation. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management...
(CFO), and marketing operations professionals
Marketing Operations Management
Marketing Operations Management is a version of end to end marketing optimization, from planning and budgeting, through marketing content management, to global marketing execution and analysis....
.
Marketing accountability of an organization lies with the CMO. CMOs are deeply involved with the MPM professionals to define marketing objectives, determine investments and prove the value of marketing in the organization. Marketing operations and analysis professionals are responsible for the creation of new metrics and processes to measure and improve operations performance. They are expected to evaluate and implement systems to improve marketing efficiency and effectiveness. In addition, they are faced with the challenges of collecting data and analytics essential to the development, and the deployment of marketing dashboards and creating the marketing operations road map. The chief financial officer of a company or public agency is the corporate officer primarily responsible for managing the financial risks of the business or agency. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management. As marketing is a crucial vertical of any organization, the CFO is an important stakeholder for any marketing and other finance-related tasks.
See also
- Marketing operationsMarketing operationsMarketing Operations is a relatively new discipline within the Corporate Marketing function. Its existence was first recognized 15 years ago by research firms such as IDC and SiriusDecisions. Early adopters were high tech companies such as Cisco Systems, Symantec, and Adobe...
- Marketing operations managementMarketing Operations ManagementMarketing Operations Management is a version of end to end marketing optimization, from planning and budgeting, through marketing content management, to global marketing execution and analysis....
- Performance managementPerformance managementPerformance management includes activities that ensure that goals are consistently being met in an effective and efficient manner. Performance management can focus on the performance of an organization, a department, employee, or even the processes to build a product or service, as well as many...
- Marketing effectivenessMarketing effectivenessMarketing effectiveness is the quality of how marketers go to market with the goal of optimizing their spending to achieve good results for both the short-term and long-term...
- Marketing activationMarketing activationMarketing activation is the execution of the marketing mix as part the marketing process. The activation phase typically comes after the planning phase during which managers plan their marketing activities and is followed by a feedback phase in which results are evaluated with marketing...