Tuesday Marketing Notes (Number 78—May 8th , 2007)

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Can Marketing Accountability Transform Your Company? Four Steps to a "Yes" Answer

by Merry Elrick

While most of us are still wondering if accountability can transform the marketing department, it’s becoming increasingly clear there’s a larger issue to consider.  That is, do companies committed to marketing measurement do better at delivering profitable revenue growth? Can marketing accountability make a significant impact on the entire enterprise?

Certainly companies that have begun to pay more attention to marketing operations are going to be more profitable.  When the marketing function is expected to operate as a profitable business, then no doubt its efficiency will increase and profitability will improve.  That involves establishing processes and systems, meeting performance goals, managing finances and making sure the necessary technology is in place to maximize effectiveness.  All that is well and good.   

But I'm talking about much more.  I'm talking about going beyond measurement for the sake of justifying a marketer’s existence or even determining payback. I'm talking about marketing driving the profitability of the entire organization.

Step One—Align marketing and business objectives.  Marketers must link their investments to business outcomes.  And those outcomes must be desired by the company, that is, the objectives of the enterprise.  Which means marketers must be privy to the objectives.  Only then can they close the gap between marketing and business goals, ensuring that every tactical initiative has a raison d'etre which is measured in financial terms. 

For example, if a corporate goal is to increase profitability, then marketers must demonstrate their role in retaining customers and the increased profitability that results.  More examples:  A better response rate to your direct mail programs brings in more incremental revenues.  Reducing the costs per quality lead will also reduce acquisition costs. If the company wants to increase short-term revenues by 10 percent, then marketers must be prepared to demonstrate how their customer acquisition program resulted in increased revenues of 10 percent.  It's up to the marketing leaders to define measurable goals that will impact the business, and translate the results into financial terms the C-suite can appreciate.

Step Two—Make measurement the core of performance driven marketing.  There can no longer be any doubt that measurement is critical to maximizing marketing's performance. You can't manage what you don't measure. In order to manage marketing investments, you must assess the impact of the investments and use that information to make adjustments to improve performance. 

The challenge is to establish a process of accountability which is continual and systemic to the organization.  Data is real-time and available to all appropriate stakeholders on an ongoing basis.  Marketing decisions are based on pertinent information that results in frequent fine-tuning and improvement--as opposed to decisions made once a year at budget time.  Budgets are based on hard data--not an arbitrary percentage of sales, not 12 percent less than last year's budget, not gut instinct.  And the marketing budget is treated like the investment it is, with marketers able to explain how a 10 percent cut will impact the bottom line in a negative way.

Step Three—Put limited marketing resources where they'll do the most good. There are now a dizzying array of metrics and tools which, coupled with even more activities and channels, make it difficult for marketers to assess performance with clarity. The key is to base everything on the desired outcome. So instead of a trade show budget, have a customer acquisition budget which might include additional tactics like an e-mail campaign.  And make sure all the budgets are aligned with goals and integrated across all marketing activities so you can compare what's working and what's not.

Problems arise when the C-suite insists on their favorite metric, ROI. This is a wonderful metric in many ways, but not always appropriate for long-term brand building programs, for example.  When CMOs are pushed to demonstrate ROI, they have no choice but to emphasize short-term activities, and even worse, short-term activities that provide easy measurement, like direct mail and e-mail campaigns. This leaves a whole bunch of things in the lurch, like branding, and along with it, long-term shareholder value. 

ROI metrics shouldn't be allowed to trump other measures that will help marketers determine how successful they are in achieving business objectives. That said, I believe in demonstrating ROI for every possible short-term tactic so you can compare the cost and return of each, reducing unnecessary costs and increasing effectiveness. The key is to maintain a balance by managing marketing communication budgets like investment portfolios, with each part of the budget tied to a desired outcome, long- and short-term.

Step Four - Build a culture of accountability.  Marketers can take a tip from the guy in operationswho has an hour-long power point presentation showing why it's ultimately more efficient to purchase 10-cent o-rings than 9-cent o-rings. Marketers must become personally responsible for every penny spent.  If you're going to invest in a whiz-bang flash intro or a six-color brochure with die-cuts, you'd better be able to explain why it's an investment and not an expense.  It's time to take responsibility for ultimate business outcomes, not just marketing activities.  

Marketing leaders can foster accountability by ensuring that marketing people understand how their job advances the goals of the company and how marketing objectives are tied to them.  CMOs can compensate marketers by accountability performance.  They can make it clear how poor marketing performance has a negative impact on the bottom line, and how a good performance drives profitability. Specifically, how is marketing contributing to brand value, how is it bringing in short-term revenues, or building long-term customer equity?

When marketers operate in an atmosphere of accountability, they are far more likely to make decisions that drive excellent performance and contribute to the profitability of the enterprise.  And isn't that what we're there for?

Merry Elrick, CBC, is Principal of DataDriven MarCom, Inc., a consulting firm that helps B2B marketers build brands with measurable value and acquire customers while demonstrating ROI accountability.  Contact her at merry@datadrivenmarcom.com or www.datadrivenmarcom.com