ana marketing accountability bench marking report 2005

8/14/2019 ANA Marketing Accountability Bench Marking Report 2005

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ANA Marketing AccountabilityTask Force Findings

October 8, 2005


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Table o ContentsPurpose and Background ................................................................................................................2Summary and Conclusions ..............................................................................................................4Approach and Methodology .............................................................................................................5Accountable For What .....................................................................................................................6The Culture o Accountability ...........................................................................................................9Denition and Types o Metrics ......................................................................................................Metrics Maturity Model ..................................................................................................................3Emerging Characteristics o Current Best Practice .........................................................................6Metrics Are Not Enough ................................................................................................................2About EMM Group, Inc. ................................................................................................................23Contact Inormation.......................................................................................................................23Bibliography: Marketing Metrics Resources and Reerences ..........................................................24Appendix ......................................................................................................................................26


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Background

In a January 2005 ANA survey o senior

marketers, accountability was listed as their

number one issue. Work in this area has

been and is a key initiative o the ANA and to

respond to the concerns o its members, the

ANA convened a marketing accountability

task orce. The purpose o the task orce was

twoold: () to review current best practices

used by ANA member companies to improvetheir marketing accountability; and (2) to

provide a practical catalog o accountability

metrics used by industry practitioners rom

which marketers may choose those appropriate

to their unique situation.

Twenty ANA member companies participated

in this task orce and we are indebted to them

and their representatives or sharing their

accountability experiences, their organizational

issues, successes and challenges. The act thatcompanies o this caliber and people suering

rom permanent calendar-overload took the

time to participate is testimony to the urgency

and timeliness o the subject. We thank the

ANA Board o Directors, currently chaired by

Jim Stengel, Global Marketing Ocer, Procter

& Gamble, or their invaluable input into this

project.

Lastly, the ANA thanks Gordon Wade, FoundingPartner o the EMM Group, or his tenacity,

enthusiasm and skillul leadership o this task

orce.

We hope this report contributes to making

marketing more accountable so that

consumers and customers have an enhanced

sense o value, protable brands may fourish,

shareholders may be enriched and marketing

proessionals may see their chosen proession

recognized or its irreplaceable contribution toour economy and culture.


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Every other unction is held accountable

or its return on investment. No longer

can marketing expect a ree pass

rom management and shareholders.

Marketing is competing with every other

unction in the company or a limited pool

o shareholder dollars. I this unction

alone cannot or will not prove its relativeeciency, management will not keep

eeding the beast.

Management has no other place to

turn or additional savings. Every other

unction has been six sigmaed and

TQMed into ghting trim. Management

believes the supply chain has no more

slack. Management believes operations

are wound tight. The view rom the corner

oce sees the marketing unction as thelast grape with any juice let unsqueezed.

Marketing can be measured more

precisely today than in the recent past.

The confuence o a torrent o data,

powerul hardware and agile sotware

has totally changed the measurement

environment. Marketing can no longer

claim with any credibility that its

eectiveness cant be measured. Relatively

precise results rom new marketingalternatives such as the Internet, have

ed managements desires to understand

the relative eciency o all marketing

expenditures. Ignorance o the law o ROI

is no longer an eective deense.

.

2.

3.

Study participants reveal several trends that have coalesced tocreate intense interest in marketing accountability

Marketers know they cannot ulll their

role as drivers o growth and as satisers

o consumer needs unless, and until, they

prove the worth o their unction.

Marketers are beginning to understand

embracing accountability has its rewards

as well as challenges. With the appropriatemetrics rom a robust accountability

initiative, marketers can now optimize

expenditure choices across the entire

spectrum. Instead o wondering which hal

o last years expenditures were wasted,

marketers can determine how to make

virtually all o next years dollars count.

The ocus on accountability has an ethical

aspect. Many marketers understand

that marketing unds arent theirs.They understand these unds belong to

shareholders who have a right to expect

more proessional stewardship o their

unds.

Lastly, some marketers are beginning

to abandon the historic deense that

marketing is an art which cannot be

measured, only appreciated, like a ne

wine or an evocative perume. The modern

marketer is beginning to see marketing asa process with measurable inputs and

outputs producing reliable, repeatable

results. The process approach which

revolutionized the supply side has nally

come to the demand side.

4.

5.

6.

7.


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Accountability is more dependent

upon corporate conviction than upon

algebra on steroids. Create a culture

o accountability.

Marketing should aggressively

embrace the responsibility or the

short-term ROI o its expenditures

and go beyond to demandaccountability or nurturing brand

equity, the single most valuable asset

o any company.

Measuring marketing ROI can be

done with signicant accuracy but

it takes process, determination, and

money. No magic bullet exists but

the capability to measure upwards o

90% o what most companies spend

on marketing is available today.

Superior metrics will not in-and-o-

themselves deliver superior marketing

results dened as robust brand equity

leading to volume and prot growth.

Metrics are a thermometer, a simple

but powerul diagnostic tool. No one

was ever cured by a thermometer

and marketing will not be cured

by metrics. The cure demands

a rigorous end-to-end marketingprocess within which metrics play the

same critical role they played in Dr.

Demings total quality reormation o

the supply side.

Summary and Conclusions

Every business vertical, indeed every

company, will have unique metrics

dependent upon what management

expects marketing to deliver. Start

by understanding managements

strategic expectations o marketing,

and then measure that.

A best practice metrics prolehas emerged along with a metrics

maturity model. Each company

should measure itsel against this

prole and maturity model.

Although a precise map remains to

be delineated, the view rom dierent

peaks on the analytical landscape

clearly shows the way to the land

o superior nancial outcomes goes

through brand equity and leads tobrand loyalty. Once bound to a brand

by a combination o brand experience

and emotional benets, consumers

are willing to reward brand owners

with higher margins or each

individual purchase occasion, oten

or a lietime.


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This project began with a sharing meeting o a

group o companies held at Procter & Gamble

in September, 2004. The meeting revealed the

diversity o practical challenges aced by dierent

verticals. An especially obvious dierence was

that between business to business (B2B) and

business to consumer (B2C) companies. The

key driver o dierence among the verticals is the

availability o reliable, granular, malleable andrelevant data. Some verticals, such as consumer

packaged goods and consumer nancial

services, are awash in a tsunami o data. For

them, the challenge is merely organizing the

data upon powerul sotware platorms permitting

sophisticated analytics limited only by the

analysts imagination. Other verticals had unique

sources o data and unique expenditure options

enabling and requiring unique metrics.

For that reason, beginning in May, 2005,we invited a diverse group o companies

representing numerous verticals in both

B2C and B2B, to join the ANA marketing

accountability task orce. The companies who

chose to participate, were a diverse group which,

taken together, oered a 360 degree view o

the opportunities, challenges and alternatives to

enhancing marketing accountability.

We asked the companies to ll out a short

survey primarily to orient the study organizerstowards areas o specic interest. Then we

had conversations with representatives o

the participating companies to clariy our

understanding o the state o accountability.

Ater these conversations, we collected internal

scorecards as well as other internal documents

relevant to the subject.

Then we searched the Internet to identiy

white papers, monographs and journal articles

dealing with the broad subject o accountability.

Suce it to say that this subject has generated

lots o interest rom a broad variety o industry

participants ranging rom various marketing

trade organizations, academics, consulting rms

and more than a ew practitioners. We have

included some o the more helpul articles in thebibliography o this report. Where we can identiy

a specic original source or a concept or idea

(like net promoter score) we have provided

specic attribution. We readily acknowledge

that the overwhelming percentage o the

concepts have emerged over the years rom the

work o countless pioneers and practitioners

too numerous to identiy and in most cases

anonymous.

One thing is certain, the work in this studydraws rom many sources, most importantly the

contributions o the participating companies. We

wish to acknowledge them all even i it must be

done as a group rather than individually.

Approach and Methodology

One group who deserves special mention is thethird-party marketing services providers such asresearch houses, advertising agencies and the like.These proessionals oten lead the way in developingnew techniques to measure accountability and ROI.Two rms specically were quite helpul, MarketingManagement Analytics (MMA) and the AdvancedTechnology Group (ATG) o the media buying giant,Mindshare. Each group was careul to sit through theirvast experience, remove any client specic detail andthen summarize their ndings or our study team. Wedeeply appreciate their help.

It should go without saying that the authors o this summary

report accept accountability or any errors in act or conclusion.


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Accountable For What

Much o the discussion around marketing

accountability is ocused intently around ROI or

ROMI, the return on marketing investment. This

ocus, some would say obsession, refects an

understandable desire or a one-number metric

that puts marketing on the same evaluative

standard as all other business expenditures.

The reasoning goes that i marketing can

provide reliable standard ROI gures or eacho its expenditures, top management will then

be enabled to deploy capital eciently among

the various competing demands or corporate

resources such as buildings and grounds, capital

equipment, research, operations, and marketing.

The problem with the ROI ocus on specic

marketing line items is that these expenditures

aect a very small percentage o the companys

volume even in the short-term. For most

companies in almost every vertical, marketerscould spend zero dollars over the next twelve

months and the company would still generate

sales rom what the analysts call carry over or

base line. The table below shows that or most

companies the expenditures being measured

eect about 20 to 25% o next years sales and

the carryover is 75 to 80% or more. Whats this

so called carry over? Whos accountable or that?

During our discussions with the participating

companies, one o the representatives put the

question quite artully: I know that this years

expenditures aect only a small portion o next

years sales. I know that we have carryover.

What I want to know is how much each short

term marketing expenditure contributes to

long-term carryover.

The technical answer to her question is

contained in the box below:


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For what should marketing be accountable?

For the short-term response to this years

expenditures? Or or something qualitatively

dierent and more undamentally important? Is

there something o permanent value or which

marketing is responsible beyond the short-term

return on a ew line items in the budget?

The table below attempts to provide ananswer by looking beyond the annual income

statement to shareholder value as measured

by Wall Street. For most companies, total

shareholder value could be deconstructed into

three components:

But she is actually asking a more proound question:

() the book value o the corporation, the hard

assets such as buildings, capital equipment

and cash; (2) the adjusted net present

value o this years prots and then (3) the

dierence between those two amounts and

the total value o the company represented

by share price multiplied by the number

o shares outstanding. That dierence or

most companies turns out to be a airly largenumber, something in the range o 35 to 50%

o total shareholder value.


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is responsible (or should be responsible) orunderstanding consumer needs, acilitating

development o critical unctional and

emotional attributes and positioning the brand

with consumers.

So when critics and colleagues demand that

marketing be accountable: a air retort is

accountable or what? The answer should be

that marketing is accountable or eciently

building long-term brand equity.

Thereore, any marketing accountability

project has to respond to the returns on short-

term expenditures but even more importantly

or the eect that any marketing expenditure

has upon those perceptions o the brand that

drive the rational and emotional loyalty to a

brand that we oten perceive as brand equity

As marketers we should accept the

responsibility or prudent investment o this

years budget while reminding management oour responsibility or building long-term brand

equity, a responsibility o ar greater value to

the shareholder.

Economists call that large somewhatmysterious value by several names: things

such as intangible value, market eects or

good will. Some call it brand equity because it

represents the belie that investors have in the

long-term prot-generating value o the brand

behind the stock ticker symbol. Whatever one

calls that dierence number; everyone agrees

that it is tied to an expectation driven by a

series o rational and emotional belies about

the uture perormance o the company. One

might even suggest that it is related to thecarryover a company will get in the absence

o any short-term marketing expenditure. Its

the loyalty the company has earned with a

core group o customers who preer the brand

because o the value stored in their minds rom

positive brand experiences, impressions and

promises.

The question remains, who owns this enormous

component o shareholder value, or equity?

Certainly the CEO is ultimately responsible oroverall shareholder value but marketing can

and should accept a major responsibility or

that intangible because it is marketing which


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The Culture o Accountability

Metrics, and the accountability they imply,

create problems in all unctions within all

company cultures. Metrics and marketing

is an especially volatile mixture because

the marketing unction has had ew metrics

in the past and other metrically dense

unctions within the company are deeply

suspicious about marketings sudden oxhole

conversion to the discipline o metrics. Addin the assumption within marketing itsel that

metrics are directly connected to personal

compensation and career advancement then

one has the recipe or major cultural push

back.

Nothing emerged quite so clearly rom our

discussions with study participants as the

cultural impedimenta associated with metrics

and accountability. Indeed, several participants

voiced the opinion that unless a companycreated a culture o accountability, no amount

o analytical artice would succeed. Marketers

must WANT to be measured, must embrace

accountability or even the most artully

designed metrics program will ultimately ail.

According to study participants, three

conditions seem essential to creating this

culture o accountability:

Leadership rom the top. Unless top

management demands accountability

and helps resolve disagreements among

competing approaches to accountability,

the culture will reject metrics or simply

reeze in place. I management is unhappy

with the pace o cultural accountability, the

rst place to look is the mirror;

Inclusivity. Metrics can not be successully

deployed by or within one unctional

silo. By their very nature, metrics have a

transunctional intercompany signicance.

Unless various unctions within the

corporation such as nance, operations,

business inormation and HR are aligned,

the entire edice o metrics will collapse;

and

Process. The key to creating culturalbuy-in is an inclusive process that creates

condence in the numerical accuracy

and relevance o the metrics as well as

their perceived airness and comparability.

Please see the brie discussion in the inset

box regarding a metrics process on the next

page.

.

2.

3.


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() it aligns the marketing

metrics with other

corporate stakeholders in

the larger accountability

culture thereby enhancing

marketings credibility

within the company; (2) it

ocuses the company onmanagements expectations

or the marketing unction;

(3) it ties marketings

metrics into the larger

business planning process

so that the company

provides the resources

which are required to meet

the expectations embodied

in the metrics; and (4)

it mandates sharing omarketings progress with

the larger internal corporate

stakeholder group thereby

providing visibility to

marketings contributions.

Using metrics developed

rom a sub-process such

as this to knit together a

larger end to end marketing

process is one o the

principal hallmarks o a

best practice marketing

unction.

The chart below outlines a metrics development and embedment process.Following a process such as this accomplishes several critical objectives:


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Defnition and Types o Metrics

In any discussion o a complex subject, some

conusion is introduced by the use o words

which understandably have dierent meanings

to dierent people. This requires that we

occasionally stop to dene terms which are

regularly used in any accountability discussion.

Words such as measure and metrics have two

have importantly dierent meanings.

A measure is a one-number act such as 00

miles or 5 gallons. A metric is almost always some

combination o measures that permit an analysis

or a conclusion. For example, I drove 00 miles

and used 5 gallons o gas thereore I got 20 miles

per gallon. 20 miles per gallon is a metric. I I

paid $3 per gallon or that gas, my cost per mile

(another metric) was 5 cents. With this data I

can benchmark the eciency o other cars, o

types o gas and perhaps even o personal driving

styles.

Many dierent kinds o metrics exist. One type

is an input metric. In marketing, a well known,

requently quoted metric is the cost per thousand

viewers o a specic media buy. e.g. we spent

$20 per M target viewers. This is a classic input

metric.

A second type o metric is an intermediate

metric, a calculation along a stream o inputs

and outputs which measures some sort o resultbut not an ultimate result. Awareness metrics

are classic intermediate metrics. We know that

investment A generated more awareness than

investment B and that has some value. What

we dont know is the eect or outcome o that

awareness on behavior. That takes us to the third

type o metric, an output metric.

A classic output metric produced by market

mix modeling is that or every one dollar invested

in night network TV, a brand generated $2.50 in

incremental prot or an ROI o $2.50.

Another caveat relates to the time period

represented by the metric. Most are remarkably

short-term in nature, even though everyone

recognizes that many marketing expenditures,especially advertising, may attract a new loyal

customer who creates a stream o prot or

decades. To counterbalance the renzied ocus

on the immediate, an understandable response

to Wall Streets incessant demands or quarterly

earnings, some marketers are beginning to

develop metrics around the lietime value o

consumers and customers. This is a useul and

revealing concept except in a ew industries

where purchase cycles and decision processes

negate its value (e.g. power generation dynamos).

Another denitional distinction involves attitudes

versus behaviors. The purpose o marketing is

changing attitudes. The purpose o changing

attitudes is changing behaviors. Not surprisingly,

metrics come in two favors, those that measure

attitudes and those that measure behaviors. Most

non-marketers (such as CFOs) preer behavioral

metrics, an understandable bias. Most marketers

spend lots o time looking at various kinds o

attitudinal metrics because they believe thatattitudes drive behaviors, another understandable

bias.


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Much o the exciting, breakthrough work inmarketing metrics today is being done at the

rontier where attitudes transorm into behaviors.

Sophisticated analyses measure which attitudinal

drivers change brand preerence and link to a

purchase change. From there, it is a ew short

steps back up the marketing value stream

to identiy which investments change which

attitudes the most ecaciously.

Some o our study participants are enabled to

do this today primarily because o the elicitousconvergences o attitudinal and behavioral data

rom identical sources.

Just as some metrics address attitudes and

other behavior, metrics also occur at dierent

points on the marketing value chain. One o the

objectives towards which marketers are graduallyadvancing is identiying key metrics or virtually

every marketing decision rom customer insights,

where all successul marketing begins, to some

o the more ephemeral areas o endeavor such as

public relations and product placement in a TV

show.

One intriguing variant o this longitudinal

search or metrics that interconnect across a

demand creation chain is the identication o

purchase decision unnels in industries such aspharmaceuticals, insurance and autos. In these

industries, marketers are looking at each level in

the purchase decision unnel to tease out the ROI

o marketing eort to see which alternative works

more eciently at each level in the purchase

decision process.


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Metrics Maturity Model

We speak o accountability as i it were a state

o being much like hypnosis. Accountability

is actually a journey which has many stations

along the way. When evaluating your companys

unique location on the journey, marketers may

nd it useul to review the emerging metrics

maturity model show below.

That model has our major axes:

Data;

Analytics;

Culture, and

Process embedment. Each deserves a brie

discussion.

.

2.

3.

4.


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Data Accountability implies quanticationand quantication implies data, most

desirably time series data, permitting

sophisticated analytics. Data is so basic that

it becomes a critical actor in determining

how accountable any marketer can

be. One o the major problems or many

marketers, especially B2B marketers is

the paucity o data directly connecting

marketing expenditure to a shit in attitudes

or behavior. This inhibits the development o

accountability. But there is light at the end othe tunnel. The Internet is now enabling the

capture o survey data at levels o granularity

previously not aordable. This oers

marketers, especially B2B marketers a new

way to capture the data needed to create

metrics and establish their accountability.

At the other end o the data spectrum

are companies with astounding levels o

transaction data captured at the level o

the individual customer. In these ortunateverticals, this data becomes o enormous

value when it is mounted upon a sotware

platorm permitting manipulation through

one o the online analytical processing

tools (OLAP). These tools enable a level o

analysis only dreamed about as recently as a

decade ago.

Metrics and Analytics The confuence

o masses o time series data, powerul

computer hardware and agile sotwarehas enabled a revolution in analytical

sophistication. Unortunately many

marketers have not advanced past the use

o virtually useless marketing input data

(e.g., cost per 000 impressions down

0% versus last year!). At the opposite

end o the spectrum are companies with

.

2.

market mix analytics embedded in real-timemarketing spending models permitting rapid

changes in marketing spending by target

consumer and marketing element. Some

are experimenting with advanced analytical

techniques such as agent based modeling

that permits the use o non-time series data

and oten uncovers emergent behaviors

not revealed by conventional multi-variant,

market mix modeling.

Still urther out are marketers trying tomeasure the value o new permission based

media, the relative engagement value o

one medium versus another and the ROI

o emotion versus rationally-based ad

copy appeals. Some o these issues are

in their early stages o understanding but

creative marketers are making progress in

all these areas. (Please see below or a brie

discussion o engagement.)

Engagement Metrics

Marketers are attempting to develop metricsaround engagement, the capability o a marketinginvestment, most typically an advertisement osome type, to capture and retain the attention o aconsumer in a avorable manner. Many academicand commercial third parties are addressing thissubject primarily because o the concern over wastedad investment against todays harried, multi-taskingconsumer. Work in this area, some o it by an ANAcommittee, is on going and will unquestionablyevolve over time.

At present, the most mature approach toengagement seems to be one developed by a thirdparty commercial rm located in Nicosia, Cyprus,Integration-imc. Their model develops engagementmetrics around brand experience points andbrand experience shares which appear to havesome predictive value. We have not included theirmetrics in this paper because they are proprietary toIntegration-imc.


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Culture We spoke above about theculture o accountability in which marketers

not only expect to be measured but demand

it. In these cultures, accountability is so

deeply ingrained that an attempt is made

to measure virtually all expenditures with

metrics recognized company-wide. At the

other end o the spectrum are companies

where metrics are owned by Finance or

created intermittently according to standards

separate or each SBU or operating

location. In these immature organizations,metrics becomes part o a game aimed at

avoiding serious accountability. Between

these extremes are organizations who

struggle to establish air and sustainable

metrics understood as such by all the key

departments across all SBUs.

Process Embedment A key to creating

a culture o accountability is a process that

enrolls key members o the organization

3.

4.

to develop air measures which can besustained over time. In the immature

organization, no metrics process exists.

Individual departments or even managers

create measures without attaining the

organizational input rom experts in nance,

IT, operations and market research who

are oten critical to the development o a

serious metrics eort. By contrast, mature

organizations have a robust metrics process

which involves key stakeholders and takes

pains to integrate marketing metrics intoan overall balanced corporate scorecard

approach which gets wide visibility across

all SBUs and unctions. A critical objective

o the process is to provide marketing

metrics with the same credibility that is

accorded metrics in operations, nance and

manuacturing.


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Emerging Characteristics o Current Best PracticeShown below are the emerging characteristics o current best practice.

A culture o accountability We have

discussed this above but it is so basic it

needs to be re-iterated here. Best practice

companies embed accountability into their

culture. Leadership must demand it and

marketers should welcome it.

An inclusive process Another basicand complementary characteristic o

accountability. A top-down endorsed,

inclusive process insures metrics that are

more credible across the all unctions within

the company.

Metrics tied to strategic expectations

Metrics must be tied to managements

expectations about marketing and to

company strategy. I management expects

marketing to build brand equity thenmeasures that. I delivering sales prospects

is important, measure that. I increasing

the lietime value o customers is important,

measure that. Do not try to build a dashboard

with ty dials and dropdowns. Focus on what

management expects rom marketing. Please

see the Appendix to this report or a catalog o

metrics by strategic intent.

Measures o marginal productivity

Optimizing marketing ROI requires marketersto measure not only the average ROI o an

expenditure but also the ROI o the last dollar

invested behind marketing vehicle A. Unless

marketers understand the slope o the yield

curve by expenditure type, one cannot know

the point at which expenditure must be

shited rom vehicle A (e.g., TV) to vehicle

B (e.g., magazines). Third-party providers

understand this issue well and are prepared

to address it.

Optimization modeling The calculations

on marginal ROI developed by what

is commonly reerred to as market

mix modeling is necessary to drivemathematical models that optimize

marketing spending. These sophisticated

sotware enabled models are oered by

third-party providers but many companies

create their own using o-the-shel

sotware or licensed proprietary sotware.

These models represent a quantum leap

in marketing eciency and are correctly

viewed as one o the two or three major

developments in the history o marketing.

Experimental design This relatively new

testing design protocol enables marketers

to optimize an individual marketing

program (such as a direct mail campaign)

which may have dozens o independent

variables producing thousands o potential

combinations. Using proven mathematical

techniques, experimental design enables

marketers to winnow down a eld o dozens

o variables to the small combination o

alternatives that produce the optimal result.

Lietime value o a customer Many

measures o marketing ecacy tend to

be short-term in nature i.e., the revenue

generated over the next 2 months by a

specic expenditure. Given the unortunate

ocus on short-term results rom Wall


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Street, such myopia is to be expected i notdesired. But, consumers have needs which

sometimes last or decades and thereore

some brand owners nd it desirable even

necessary to compute the lietime value o

a customer. This measure helps companies

calculate how much to invest to convert a

customer to a brand. A longer-term ocus

casts a more avorable light on conventional

advertising which oten shows a negative

ROI in the short-term but a positive ROI

when that advertising is given credit orthe long-term revenues generated by a

loyal customer attracted by the advertising.

Lietime value measures are particularly

valuable in many business verticals such as

nance, insurance and CPG. By contrast, this

calculation probably has little value in some

long purchase cycle categories (e.g., power

generators). In most instances, however, the

LCV calculation is worth the time it will take

practitioners to develop a set o assumptions

and accounting conventions necessary toproduce the measure.

ROI down a transaction unnel Many

practitioners, especially those in considered

purchase categories such as automotive,

insurance and pharmaceuticals, have

identied a purchase-decision pathway or

decision unnel, through which the consumer

traverses on the way to a nal decision. These

leading edge practitioners nd dierent ROIs

o eort at dierent stages in the decisioncycle and dierent response to dierent

marketing interventions at the same stage in

the cycle. This discovery raises a larger related

question regarding the ROI o expenditures in

the overall marketing process prior to these

relatively transparent expenditures on specic

media. For example, everyone recognizes

the value o a consumer insight thatprovides a proound competitive advantage.

How do we determine the ROI o our

market research expenditures? Packaging

expenditures? Promotional signage at retail?

Sales collateral?

Factors contributing to brand equity

enhancement and market share growth.

Many marketers use brand tracking

studies to ascertain perceptions o the brand

across a battery o emotional and unctionalbenet characteristics. Leading-edge

marketers have gone beyond to understand

what actors are driving brand equity, brand

preerence and market share. They then

design their marketing plan to change the

attitudes and behaviors around the actors

driving overall brand equity and brand

share.

The chart below shows how one marketer canprove that increases in brand equity are directlyassociated with increases in brand share. Thismarketer is able to deconstruct equity into variouscontribution to preerence drivers and ocus eorton the unctional and attitudinal elements whichare associated with increasing equity and share.


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Brand equity and brand loyalty links tobrand protability and shareholder value

Marketings most important long-term

responsibility is building brand equity.

Thereore the discussion o accountability

oten leads to a discussion o the relationship

between the ROI o building brand equity,

its eect on protability and ultimately

on shareholder value. This subject has

generated numerous academic studies over

the past decade. A particularly interesting

study was conducted by Stern Stewart, thedevelopers o the Economic Value Added

metric or nancial analysis. In this study,

Stern Stewart linked economic value added

to aspects o brand equity using the Brand

Asset Valuator model o Y&R.

No one study answers these questions

denitively but our review has identied

pieces o a mosaic such as the Stern

Stewart study which clearly suggests higher

brand equity drives brand loyalty which inturn produces higher margins and greater

shareholder value. Some leading edge

marketers are ocusing on developing loyalty

metrics to help them understand the ROI

implications o moving customers up rom

one lower level cohort on a loyalty ladder to

a higher level cohort or the relative eect o

one marketing investment against cohort A

at point B etc.

Major areas o challenge As a part o ourstudy, we asked participants what issues

were particularly vexing to them. Some have

been mentioned elsewhere in this document,

others are new. Heres a quick enumeration

and response based on data collected rom

participants and third-parties such as research

providers.

The link between long-term brand equityand the ROI o specic expenditures

We have discussed this above but

two other data points need to be added.

Several third-parties provided evidence

that it is possible to deconstruct the

short- and long-term eects o various

marketing expenditures, i.e., which

expenditure seem to build longer-term

equity and which seem to degrade

it. Without endorsing a method or a

supplier, suce it to say that this can bedone. To no ones surprise, these studies

indicate that advertising expenditures

are more associated with building

long-term strength while various price

expenditures may be more ecient

in the short-term but tend to degrade

equity longer-term.

Data Availability This is by ar the

most universal and rustrating problem

inhibiting accountability especially inmany B2B verticals. In these verticals,

companies oten lose track o their

product in a complex supply chain

replete with third-party distributors. In

these situations, marketers have one

basic alternative get clean data rom

a new source outside the value chain

and build metrics around the new

data. This means collecting customized

data either rom direct interviews or

rom one o the relatively new Internet-based panels. This costs money but

the alternative is to keep spending

money year-on-year with no idea o

the relative worth o expenditure A

vs. B. Any management team that is

demanding marketing proves its worth

should have some logical diculty in


20/47

denying a request or research unds tomeasure that worth. Many companies

are understandably enamored with the

simplicity and apparent power o the net

promoter score metric. We would simply

point out that one must expend some

research unds to develop this metric i it

isnt being provided within some existing

brand tracker.

Integrated Marketing Campaigns (data

clarity) Many marketers report

problems in deconstructing the eect o

individual components o an integrated

campaign involving the use o multiple

simultaneous marketing channels or

investments. From a technical analytical

perspective, this is a common challenge

to third-party analysts and one which they

can eectively address.

The most dicult challenge is when thesecomponents o an integrated campaign:

(a) Occur perectly co-terminously so

that analysts cannot use variations in

timing as an analytical lever; or (b) When

one o the elements o a campaign is so

small that the natural variations in the

data simply overwhelm the reading o

a component comprising, or example,

3% o an overall campaign. Under

these circumstances, analysts can applycertain advanced techniques to provide

perspective but by ar the most desirable

path is to prepare or analysis by creating

test and control groups. The willingness

to create test and control panels is a

leading edge indicator o a culture o

accountability.

The chart below demonstrates an analysis o anintegrated campaign by MMA. The chart shows therelative contribution o each element o the campaignand goes beyond to estimate the synergy traceableto the combination o elements, i.e. the incrementaleect o the combination above that generated by theindividual elements. In MMAs experience; synergy isrelatively small in most integrated campaigns.

Innovation et al Some participants

mentioned diculties in developingmeasures or specic strategic

responsibilities o marketing. For

example, one participant mentioned that

management wanted marketing to lead

innovation so her department needs to

advance a metric that would provide insight

into their perormance in this regard.

Still others cited competitiveness as a

marketing responsibility or which metrics

were being sought, customer centricity

was still another responsibility or whichsome marketers were looking or metrics.

This need relates directly to one o our

principles o best practice, identiying

managements strategic expectations

o marketing and developing metrics to

express progress or lack thereo in the


21/47

targeted responsibility. In the appendix tothis report we have started the compilation

o metrics by strategic intent so that

marketers may begin the process o

choosing a metric or set o metrics to meet

their managements expectations.

The chart below shows the standard ormat

used to present metrics by strategic intent.

For example, i management determines that

marketings strategic intent is to increase the

overall lietime value o the customer base at thelowest cost in marketing $s, this metric oers

a way to measure marketings success. This

approach rewards marketing, especially the

advertising component or attracting customers

who contribute prots or years. It also rewards

selling more product to current customers or

trading current customers up to higher value

products.

Linking metrics to planning A persistent challenge or all marketers is

linking metrics to the broader process o

marketing planning. Too many marketers see

the development o metrics as an end unto

itsel and have not realized that metrics are

a component o an overall more advanced

marketing process. This, in turn, presents

virtually all marketers with a major challenge

because they have no well-dened marketing

process. Thereore even i they have the

metrics, they are thoroughly bamboozled bywhere and how to use them other than to

mount them on a dash board and duck.

Several marketing service companies are

providing a partial answer via very sophisticated

computer models that incorporate market

mix modeling ROIs into real-time budgeting

models. These sotware-enabled models

represent a major breakthrough but they deal

more with the tactical aspects o marketing and

do not address the more strategic end-to-endmarketing process beginning with consumer

and customer insights.

Metrics Defnition Template

MarketingEciency LCV/ annual marketing cost

Denition/Calculation

LCV Current yr LCV yr last yr / mar-keting $s current year

Source o data Syndicated panel data, companysales records and marketing budgetdata

Calculation ortechnique

Compute the aggregate lietime valueo customers in ranchise, subtractlast years value. Divide the dier-

ence by annual marketing costs

Verticals whereappropriate

Valuable across many verticals, B2Band B2C

Problems orconcerns

Requires sophisticated calculationregarding customer loyalty decaycurve. LCV not universally appropri-ate


22/47

Metrics Are Not Enough

Metrics are not an end unto themselves.

Metrics play the same role in marketing that a

thermometer plays in medicine. Although it is a

powerul diagnostic tool, a thermometer alone

has never healed anyone. Metrics alone wont

save marketing. But metrics can be a powerul

ingredient in an integrated regimen that can build

brands, drive customer loyalty, and grow volume

and prots. That overall regimen is a holisticmarketing process that starts by gaining insights

into the customers deepest needs and moves

down an orderly path to which each preceding

step serves as input to the next and all are driven

by insights, metrics and best practice marketing

content.

The process approach described above is

standard, even required, in virtually every

other business unction except marketing. The

extraordinary improvements in supply sideproductivity are directly traceable to the broad

scale embedment o process advocated by Drs.

Deming and Juran. Despite the proven value

o process, marketing remains strangely, some

would say shameully. averse to process. One

thing is certain, the same management that today

is demanding metrics will start demanding a

serious marketing process tomorrow.

Get ready.

In the meantime, use the catalog o metrics

in the appendix to identiy or suggest an

appropriate approach or your situation. Start

by asking your management to identiy theirstrategic expectations o marketing. I its trial,

choose some trial generating metrics, etc. At

most companies, management has several

expectations o marketing ranging rom building

brand equity to generating trial, spending dollars

eciently and building a stronger more capable

marketing resource. Thats why most practitioners

will want to build a balanced scorecard o

complementary metrics.

To acilitate the building o a balanced scorecard,we have labeled the examples by strategic intent.

The appendix contains more than 50 dierent

metrics that address dierent strategic intents.

We hope these samples provide useul input as

you assemble you scorecard.


23/47

About EMM Group, Inc.

EMM Group is the creator o and world leader

in enterprise marketing management, the

marketing transormation that combines process,

best practice marketing content, metrics and

technology to build strong brands that drive

growth.

Our mission is to embed the discipline o

enterprise marketing management at thoughtleading companies in every business sector

around the world.

Our approach is detailed in our book, The New

Marketing Mission, How Process, Metrics and

Technology Can Unleash Growth.

Contact Inormation

Gordon Wade, Founding PartnerPh: 53.608.946

E Mail: [email protected]

Chris Charyk, Metrics Practice Partner Leader

Ph: 78.929.348

E Mail: [email protected]


24/47

Bibliography: Marketing Metrics Resources and ReerencesHere are articles, Web sites, and Blogs we ound helpul when preparing this report.

Articles:

Coming Up Short On Nonfnancial Perormance

Measurement, Ittner & Larcker, Harvard

Business Review, 2003

This article makes a compelling case or the

power and importance o causal modeling

in the creation o non-nancially orientedmarketing metrics, such as consumer

attitudinal states.

Brand Portolio Economics, 2002 Mercer

Management Consulting white paper

This article describes a ramework or brand

portolio management, and outlines an

analytical approach or assessing brand equity

and its impact on consumer buying behavior

The Power o Brand Delivery, McKinsey

Consulting position paper, 2001

This paper provides a helpul overview into the

use o choice-based analytical approaches to

understanding the drivers o brand equity, as

an important initial step in the design o brand

equity metrics.

Customer Satisaction, Cash Flow &

Shareholder Value, Gruca & Rego, 2003 MSI

Working Paper Series

This article summarizes a study examining the

impact o customer satisaction on operational

cash fows. The report attempts to quantiy

the impact o customer satisaction on the

magnitude and variability o uture cash fow.

What Value Marketing? A Position Paper on

Marketing Metrics in Australia

2004 paper documenting ndings rom the

Australian Marketing Institutes Marketing

Metrics project. The paper outlines a

ramework or marketing metrics, and

documents the most commonly used

marketing metrics in various areas. Much o

the ramework material is derived rom Tim

Amblers 2003 edition o Marketing and theBottom Line.

The One Number You Need to Grow, Frederick

Reichheld, Harvard Business Review, 2003

Reichhelds classic article outlines the

justication, calculation, and appropriate

interpretation o the elegantly simple and

powerul Net Promoter metric.

The Value o Strategy Decisions, 2005

Advanced Competitive Strategies articleThis article provides a simple yet powerul

approach to quantiying the impact o

alternative strategic initiatives, an approach

that is worth consideration in the evaluation

o assessing the potential impact o marketing

initiatives.

Measuring Marketing Eectiveness and Value:

The Unisys Marketing Dashboard, Miller &

Ciof, 2004 Journal o Advertising Research

article

A comprehensive description o the design

and implementation o a marketing metrics

dashboard at Unisys Corporation, with

particular emphasis on the critical corporate

cultural change management issues that need

to be addressed.


25/47

Metrics or Linking Marketing to FinancialPerormance, Srivastava & Reibstein, 2004

Marketing Science Institute working paper

A detailed overview about the current state o

academic attempts to link marketing activities

and nancial outcomes

Exploring the Brand Value-Shareholder Value

Nexus or Consumer Goods Companies, Kerin

& Sethuraman, 1998 Journal o the Academy

o Marketing Science article

An important academic study exploring the linkbetween brand value and shareholder value.

Getting Real About Customer Lietime Value,

Werner, 2003 Marakon Associates paper

A detailed exploration o the Customer Lietime

Value (LCV) concept and its importance in

understanding marketing importance

The Customer Lietime Value Concept & Its

Contribution to Corporate Valuation, Bauer,

Hammerschmidt & Braehler, 2003 Yearbook oMarketing and Consumer Research

A detailed exploration o the use o CLV and its

linkage to company shareholder value.

Economics Git to Marketing, 2003 Mercer

Consulting Journal article

This article provides a useul introduction to

the use o the analytical technique o choice

modeling to the assessment o brand equity.

Predicting the Unpredictable, Bonabeau, 2002Harvard Business Review article

An introduction to the marketing modeling

technique known as agent-based modeling

(ABM), which oers the potential or delivering

unique insights into the nancial and brand

equity implications o marketing investments.

How the Pursuit o ROMI Is ChangingMarketing Management, September 2004

Journal o Advertising Research article

This article describes a ramework and set

o criteria or successul implementation o

marketing ROI (ROMI) programs

Promotion Eectiveness: More Important Than

Ever or Consumer Products Companies, 2005

AMR Research article

This article proposes a new set o metrics to

understand promotions eectiveness, ocusingon key supply chain dynamics.

Processes and methodologies or creating a

global business-to-business brand, 2002 paper

by Randall Rozin

The author o this paper is the Global Manager

o Branding and Marketing Communications

with Dow Corning Corporation. He provides a

comprehensive ramework or brand building

in the B2B arena, complete with thoughts on

appropriate metrics.

Online Panels: The New Frontier o B2B

Research, Richard Thornton, UK Director,

Market Research, Ciao GmbHBIG Annual

Conerence, May 2005

This paper summarizes recent European

research into the benets and potential

limitations o using online customer panels

or B2B customer attitude assessment. Good

summary o the issues and considerations

involved.


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Web sites:

www.marketingnpv.comMagazine/website covering topics in the overallarea o marketing ROI

marketingtoday.comGood source o current news articles pertainingto marketing accountability and ROI.

www.themeasurementstandard.comA magazine/site (ree content with registration)oering surprisingly actionable and specicarticles devoted to media metrics.

www.msi.org/msi/publications.cmPublications site or the Marketing ScienceInstitute (MSI) many metrics-related whitepapers available here

www.cmomagazine.comMagazine/website with intriguing and uniquecontent, and a reasonably active blog. Goodeditorial integrity, as evidenced by theirdistinguishing vendor whitepapers rom other

content.

www.marketingpros.comLots o academic-oriented marketing metricscontent, some pearls among the more theoreticalpieces.

www.brandnance.comSome unique brand valuation and brandscorecard white papers on this brandconsultancys site

www.bettermanagement.comThis site contains several articles on the subjecto corporate perormance management withspecic applications in marketing and marketingstrategy

www.brandchannel.comInterbrands site oering unique white papers onthe assessment o brand equity

www.btobonline.comSite/magazine devoted to the broad area o B2Bmarketing, including some pragmatic and helpulB2B metrics articles.

www.marketingadvocate.comSite devoted to B2B marketing techniques,technologies and processes. Good collection orelevant white papers on a wide variety o B2Bmarketing and technology topics.

www.marketingsherpa.comContent and paid download site devoted tomarketing ROI and related topics good uniquecontent

Blogs:

blog.startwithalead.com/weblog/public_relations_pr/One o the better blogs devoted to B2Bmarketing topics, with a particular emphasis onpublic relations metrics

decker.typepad.com/

General marketing blog with some uniqueperspectives and entries on creating a culture omarketing ROI

www.buzzmetrics.com/blog/The ocial blog o BuzzMetrics, a word-o-mouthresearch and planning rm, and co-oundero the Word o Mouth Marketing Association(WOMMA). Unique refections on the disciplineo word-o-mouth marketing and the societal andbusiness impact o consumer-created content.

www.morningstarmultimedia.comProessional services marketing blog whichmany entries devoted to the discussion omarketing ROI


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Introduction to the Appendix(Appendix to ANA Marketing Accountability Task Force Findings)

The work o the ANA Marketing Accountability

task orce was twoold: () to review current

best practices used by ANA member

companies to improve their marketing

accountability; and (2) to provide a practical

catalog o accountability metrics used by

industry practitioners rom which marketers

may choose those appropriate to theirunique situation. This need relates directly

to one o the task orces principles o best

practice - identiying managements strategic

expectations o marketing and developing

metrics to express progress or lack thereo in

the targeted responsibility.

Current best practice suggests that metrics

refect the strategic intent which a companys

management has or its marketing unction.

I management expects marketing to buildbrand equity then measure that. I delivering

sales prospects is important, measure that. I

increasing the lietime value o customers is

important, measure that. With this principle in

mind, the appendix that ollows groups metrics

by strategic intent.

Every company and every vertical is dierent.

Thats why the appendix includes several

metrics under each strategic intent. These

unique metrics represent dierent ways

which study participants responded to their

managements request or accountability about

a specic strategic intent they attribute to the

marketing unction.

The appendix provides a method o calculation,

likely data sources and the types o verticals

or which this metric may be appropriate. We

do not claim this list is exhaustive. We expect,

indeed we hope that this starter list will inspire

users to develop dierent but more appropriate

metrics or their company.

This appendix represents but a beginning. We

welcome comments, questions and additionsrom every marketer.


28/47

Innovation

Defnition/

Calculation

Source o

data

Calculation or

technique

Verticals where

appropriate Problems or concerns

$ sales Sum o sales oproducts/services/retail locations < 3yrs old

Internal Com-pany sales

Simple addition.Results comparedto previous year

Virtually universal Simple, broadly applicable,practical measure

% o $ salesrom innova-tion

Sum o sales oproducts/services/retail locations 2 years.Identiy # advancedin grade. Calculate% advancement

Broadly appropri-ate or virtually allverticals

Must be used aspart o battery obalanced score-card metrics. Com-pared to industrynorms etc

Turnover A balanced score-card includingturnover amongemployees< 2years, amongemployees ranked

superior, amongmiddle manage-ment tier

Internal com-pany records

Identiy separatedemployees placewithin measuredgroup, derive %.Compare over time


Needs to beplaced in perspec-tive o vertical andtracked over time.Rationale behindturnover needed


46/47

Public Relations

The somewhat ephemeral nature o the publicrelations unction has led to a renzy o metricsdevelopment. Several highly competent industrygroups have developed approaches worthy o study.As one o our study participants pointed out, theirony o all these eorts to justiy public relations isthat everyone intuitively agrees about the power andcredibility o an artul PR campaign. Nonetheless,

it remains challenging to disaggregate the eectso PR rom many other company activities. Thisis especially true because many companies leanhardest upon PR to mitigate the negatives o someexternal untoward event. The elonious attempt topoint the nger at Wendys is a classic example othe challenges o creating PR metrics. The chartbelow oers some creative metrics shared with us.

Public Relations

Defnition/

Calculation Source o data

Calculation or

technique

Verticals where

appropriate

Problems or

concerns

AVEs (advertisingvalue equivalent)

The conversion onon paid mediamentions intothe equivalent oadvertising grossrating points

Third party dataproviders

Capture o impres-sions by mediatype and then theirconversion into theequivalent o paidgross rating points

Many verticalsand productcategories

Dicult to ascertainquality o mention,context, messagedelivered or aect onmessage recipient.A classic inputmeasure

Target StakeholderResponse

Attribute rankingamong selectedstakeholders(Industry thoughtleaders, media,shareholders, etc)

Brand trackertype survey

Survey research otargeted stakehold-ers on key industryand company at-tributes


Requires properselection o respon-dents and surveytechnique

Critical articleresponse

The percentageo major industryarticles espe-cially those with acritical viewpointwhich contain thecompanys detailedresponse

Internal tracking Identiy all majorarticles in key pub-lications. Computepercent containinga specic responserom the company


Requires denitionsregarding majorarticle and companyresponse. Does notmeasure cred-ibility or impact oresponse only abilityto respond

Response tospecic eort

# or % o visits onwebsite to speciccommunication to

targeted constitu-ency

Web trackingsotware

ID respondents toE-mail campaign tospecic constitu-

ents with targetedmessage. Calculate# targets or %responding in sug-gested manner (e.g.visits to website)


Does not measureeect o message inchanging attitudes

only eectiveness indriving target to webpage


47/47

Public Relations

Defnition/

Calculation Source o data

Calculation or

technique

Verticals where

appropriate

Problems or

concerns

Attitude changeamong target

in attitudesamong test andcontrol target audi-ence

Web trackingsotware

ID respondents toE-mail campaign tospecic constitu-ents with targetedmessage. Measureattitudes pre andpost among test andcontrol


Requires careulselection o test andcontrol groups

Media impactindices

Index o impactincluding # ostories, quality,tonality etc

Proprietary mea-sures rom thirdparties

Third party syndi-cated sources applyproprietary selectionand evaluation

metrics

Broadly availableor virtually allverticals

Generally do notmeasure eect oroutput o PR eortonly inputs or inter-

mediate metrics orqualitative measures

Attribute owner-ship among targetaudience

Ranking on mo-nadic 5 point scaleo key strategicattribute amongselected targetaudience

Survey research Select targetaudience. Identiyattribute to measure.Use simple metriclike 5-point monadic


PR eort not onlyinfuence on re-spondent rankings.Research mustocus on attitudestied more closely toPR activities

Awareness o goodworks

Awareness amongselected respon-dents o compa-nys good works

Survey research Select targetaudience. Establishunaided and aidedawareness o com-panys involvement

in specic cause orresponse


Awareness does notnecessarily translateinto improved at-titudes

Attitudes amongthose aware ogood works

Ranking on brandtracker amongthose aware/un-aware o companygood works

Brand Tracker orsurvey

Identiy activityto measure. Usesimple metric like5-point monadic.Compare aware ver-sus unaware respon-dents to isolate valueo good works


PR eort not onlyinfuence on re-spondent rankings.Research mustocus on attitudestied more closely toPR activities

ana marketing accountability bench marking report 2005

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