In the February 2019 edition of The CMO Survey, senior marketing leaders were asked what marketing leadership activities they find most challenging. The top challenge identified – by a wide margin – was demonstrating the impact of marketing activities on financial outcomes to other senior company leaders.
Measuring the performance and financial impact of marketing has been a persistent challenge for marketing leaders. In the 2019 Marketing Measurement & Attribution Benchmark Survey by Demand Gen Report, 58% of surveyed marketers said their ability to measure and analyze marketing performance and impact needs improvement or is poor/inadequate. The comparable percentage was 54% in the 2018 edition of the survey, and 49% in the 2017 survey.
Last month, an article published at the Harvard Business Review website described concrete steps that marketing leaders can take to improve their ability to demonstrate the value of marketing. “8 Ways Marketers Can Show Their Work’s Financial Results” was written by Paul Magill, Christine Moorman, and Nikita Avdiushko.
Paul Magill is a Managing Director with Deloitte Consulting and the former CMO for Abbott. Dr. Moorman is the T. Austin Finch, Sr. Professor of Business Administration at Duke University’s Fuqua School of Business and the Director of The CMO Survey. Nikita Avdiushko is a recent MBA graduate from Duke.
Eight Steps for Demonstrating Value
This article provides valuable advice for marketing leaders, and I would like to see the authors address this vital topic in a longer, more in-depth version of the article. In the meantime, here’s a very abbreviated version of the eight steps described in the already brief article.
1. Start with business value – “Marketing leaders should frame their impact broadly, to include all the ways marketing benefits the organization.”
2. Understand what business value means to each function – “Marketing leaders should translate the definitions of their value creation for the different [business] functions they interact with.”
3. Know your own metrics – Most marketing leaders have a set of KPIs they use to demonstrate impact on financial outcomes, and it’s critical to be thoroughly knowledgeable about them.”
4. Explain the inherent uncertainties of marketing measurements – “Deep knowledge of the metrics can build your credibility when you’re discussing them with other executives, but it helps to explain marketing’s inherent uncertainties.”
5. Emphasize validity over precision – “CMOs should emphasize that their metrics are valid when evaluating whether marketing activities are working as expected, and that the inherent imprecision in measuring marketing’s financial outcomes does not undermine their validity.”
6. Have a budget strategy – “Provide visibility on total spend, show how spend is aligned with business strategies and key priorities, and demonstrate how working spend has been optimized and non-working spend streamlined.”
7. Have a marketing transformation story – “Further credibility can come from demonstrating ongoing improvements in marketing effectiveness and efficiency.”
8. Meet one-on-one – “Marketing leaders usually attend monthly meetings of the senior management team . . . Our observations suggest these are often poor environments for demonstrating the impact of marketing on the bottom line . . . That work should happen one-on-one, with the CMO investing considerable time in educating their functional counterparts about these points above.”
First Among Equals
All eight of these steps are important, but I suggest that Steps 4 and 5 stand out as “firsts among equals.”
Over the past two-plus decades, various technologies have significantly enhanced our ability to track and measure some aspects of marketing performance. Today, for example, most forms of digital marketing are highly “trackable.” We can know who has opened our emails and who has viewed our content. We can even know how much time was spent with our content.
In addition, technology is now enabling marketers to develop and use more comprehensive revenue attribution models that leverage the strengths of both marketing mix modeling and multi-touch attribution.
But as the authors of the HBR article observed, marketing involves “unknown, unpredictable, and uncontrollable factors confounding precise measurement.” Unfortunately, much of the hype surrounding marketing performance measurement makes the job seem to be easier and capable of more precision than is actually the case.
So it’s important for marketing leaders to have open and frank discussions with other C-suite executives about what aspects of marketing performance can be measured precisely, and what aspects inherently require the use of assumptions, correlations, and probabilities. Such discussions will help set reasonable expectations regarding marketing performance measurement and ultimately enhance the credibility of marketing leaders in the C-suite.