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Why we need to Elevate the Discussion on Marketing Performance Management

Here is the crux of the problem of Marketing Performance Management: 

Last August, DemandGen published a report on Marketing Analytics and Revenue Management which purports to quantify metrics used in measuring marketing performance. 

The survey question is “What metrics are you currently using to track marketing performance/ROI? (check all that apply)”  The possible answers include “web traffic”, “database growth”, “contact/lead quality”, “Campaign effectiveness”, “Number of leads generated”, “lead conversion”, “Marketing sourced leads”, “Social Media Referrals”, “Productivity Gains” and “Influence on Revenue/Deals.”

But only ONE out of 10 of these is a true metric of marketing performance.  (maybe 3, if “Campaign effectiveness” measures overall campaign ROI and if “productivity gains” is a good measure of marketing productivity.)  My beef is that most of these metrics are “factors” in the performance metrics of various marketing functions, but are NOT good metrics for overall performance. 

A good performance metric should measure an outcome that is meaningful to the business.  A “factor” is just one part of an equation that measure outcome. Most of these metrics are relevant to a marketing function, but not to the business.

Now let me say at this point that I LOVE this study and I can’t wait for the next one to come out.  Marketing Performance Metrics is one of the most important issues facing marketing leaders today, and we all should care much, much more about it.  And I love this issue, because I HATE the fact that “database growth”, “Lead Quality”, and even “Web Traffic” are considered Key Marketing Performance Metrics.  None of these are business metrics.  (Unless your business is online ad sales, Web Traffic is at best a 3^rd order factor in online lead growth.  It should be combined with a quality factor and a conversion rate to see if they are converting into high quality leads, forecasted opportunities, and sales.)

True Key Marketing Performance Indicators (Marketing KPI’s) should measure marketing’s influence on real business performance metrics such as sales, profitability, market share, customer renewal rate, price premium or other metrics that the CFO would report to shareholders.  

The one metric out of this list that should be the highlight of a board room discussion is Marketing “Influence on Revenue.”   This combines all the factors of the Revenue Generation function of Marketing (awareness, lead creation, lead quality, conversion, and sales enablement) into a measure of outcome that the business cares about (Incremental increase in Revenue). 

Granted, measuring Marketing Influence on Revenue (MIR) is rather complex.  But with today’s marketing systems, it is possible. In fact, I am surprised to hear that “43% [of those surveyed] track marketing’s influence on revenue/deals.”  From my anecdotal experience, that seems high.

My own informal survey of approximately 30 of my colleagues shows that, at best, a handful have the capacity to measure influence on sales. About half are measuring “Marketing sourced Opportunities,” which is a good proxy, if you can’t measure Influence in a more comprehensive way.  But I think we should strive to do better.   (And we will. Stay tuned!)

Either way, I hope that number is accurate, and that over time we get that number higher to 100% of marketing organizations.

The initial problem we need to overcome is general discourse of what metrics should be Key Marketing Performance Indicators.  We need to move away from marketing function “factor” metrics (metrics such as social media “likes”, web traffic, search engine rankings, database growth). These metrics cast marketing as a cost center and diminish marketing’s influence on business performance.  He need to agree on new targets and metrics that align with business goals. 

From the article:

Just more than half of respondents (53%) said their marketing departments are responsible for revenue goals. And while the survey found that 60% of respondents are “somewhat confident” they will reach revenue contribution goals for the current year, marketers point to several hurdles that prevent the collection and analysis of key metrics, including a lack of internal processes (47%); limitations of tools and technology (45%) and an inability to integrate data across tech platforms (42%).

Software solutions, processes and integration of data are holding us back on this issue.  These are problems technology and some good business processes can fix.  Our collective goal should be a day when all marketing departments are held responsible for revenue and can accurately measure their influence on revenue, profit margins, brand value and Customer Lifetime Value (CLV).  Only then will a CMO have metrics worthy of a board room discussion and be empowered to show the real value of marketing.  And then, and only then, will we move beyond just being a cost center.

According to the survey, more than 4 in 10 CEOs (42%) are now actively tracking marketing’s impact on revenue, and 21% of CFOs now have direct visibility into the revenue performance of marketing.

If you are part of the 42%, please share how you are measuring Influence on Revenue, and help us all move beyond the cost center stigma.

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