Why Marketing Depends on Metrics
In many organizations, marketing suffers from a crisis of credibility. Many executives believe it exists solely to support sales, or that it is an arts and crafts function that throws parties and puts logos on swag. It’s no secret that the C-suite does not care about the open rate of your last email campaign, or how many likes a Facebook post got. Metrics like click-through rate, impressions, and reach are still important, but only to the extent that they can be connected to revenue and profit. It is worth measuring and tracking the impact of all key activities, but all non-critical metrics should be kept internal to marketing. In other words, only share metrics that matter to the CEO and CFO.
Let’s walk through some first steps that marketing can take to shake this image of irrelevance and earn a seat at the revenue table.
Before marketing can make any progress, we must establish a culture of accountability. If marketing leaders insist that marketing is an art and not a science, then the department will remain isolated from other groups. This shift can be daunting, especially if current performance is unclear. Accountability is a double-edged sword that can reveal either weak performance or good results so it can be tempting to eschew accountability to avoid the truth.
Once you decide to pursue this culture change, confusion can still linger. Basic metrics such as lead source tracking and cost-per-lead are easy to implement, but until there is a holistic understanding of how marketing activities are impacting the bottom line, their upside is limited. Without the explicit connection to pipeline, revenue, and profit, these metrics lack value beyond the short-term.
To reach the accountability stage, marketing must be able to justify their expenditures as investments in revenue and growth. Getting there requires top-level buy-in, investment in the right systems and tools, and a potential restructuring of marketing incentives and compensation.
Reporting for the Right Reasons
Well-defined and smartly executed reporting is at the core of elevating marketing’s stature. Many marketers think of marketing ROI as simply reporting the outcome of their programs. What’s most important, however, is that the reports enable us to make decisions that improve profits. This is the difference between backward-looking measurement and decision-focused management. Remember that being data-driven is not enough. Data must be used to generate actionable insights; descriptive analytics and metrics disconnected from outcomes are worthless.
You should only focus on the decisions that improve marketing. To do this, identify up front what needs to happen to drive profits, and then build your measurements around capturing information that facilitates these decisions. Avoid reporting for reporting’s sake, and focus on measuring only the metrics that will guide you towards improving the bottom line. By aligning data measurements with your company’s strategic objectives, it will be easier to allocate resources by revenue impact.
Metric Mistakes to Avoid
All of this falls apart, however, if the wrong types of metrics are chosen to be reported. There are hundreds of marketing metrics, but most of them are not useful to the C-suite.
Here are some common pitfalls to watch out for:
Vanity Metrics: Too often, marketers rely on “feel good” metrics to justify their marketing spend. New social followers or impressions may look nice, but they don’t give insight into improving marketing performance.
Focusing on Quantity: Only looking at quantity while ignoring quality leads to programs that look good initially but don’t deliver profits.
Activity over Results: It’s easier to see and measure the costs going out the door than the results they produce. But if you don’t make an effort to do so, marketing gets framed as a cost center.
Framing results in terms of costs further perpetuates the notion that marketing is a cost center. That means when it’s time to cut costs, extra budget will be reallocated to a revenue-generating department such as sales.
Redefining Marketing Performance Measurement
CEO ratings of marketing’s performance directly rise and fall with their ability to quantify how marketing campaigns and programs deliver value in line with company revenue objectives. As an informed marketer, it’s your duty to infuse credibility into your organization by way of meaningful metrics that tie directly to your top and bottom line.
What metrics do you measure? Tell me about your best practices in the comments to keep the conversation going.