metrics reloaded: marketing's opportunity to impact strategic direction

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Metrics Reloaded: Marketing’sOpportunity to Impact Strategic Direction

Laura PattersonPresident

VisionEdge Marketing, Inc.




Welcome and Agenda

By the time we wrap, we will explore

!"The State of Metrics

#"Measures of Success

$"A Framework for Quality Marketing Metrics

%"Define Outcome-Based Metrics andMarketing Metrics Categories

&"Associated Performance Indicatorsfor Each Category

'"Creating a Dashboard




Metrics Discussion:What’s Meant by Metrics?

Definitions (Webster):

( Metric – Standardof Measurement

( Benchmark – Standardby which OthersMeasured

( Measurement – Processof measuring

( Progress against a Metric




From CEOs, to CFOs, to CMOs Everyone’sTalking About Marketing Metrics

Two Top IssuesBrandsMeasuringEffectiveness – ANA2004 MembershipSurvey

•Few firms collecting Metrics to justify Marketing investments•Some firms spending 25% of revenue on Marketing•Nearly 40% CMOs dissatisfied with ability to measure Marketing results- CMO Council 2004 MPM Survey of 1000 Technology Companies 1. 66% ranked Accountability as

Chief Concern2. Strong Brand Franchise

followed at 48%3. 45% cite developing

integrated marketingcommunications

- ANA 2005

Top Priority: Enhanced Return on Marketing Investment for their Marketing & Research Functions-Advertising Research Foundation -(ARF) Survey of CEOs 2005

38% of the 95 companies in IDCsStudy, “Planning Your 2006Budget,” plan to deploy measurement processes over thenext 12 months




What Does the Corner Office WantFrom Marketing?

( The C-Suite is drivingrequests for moremetrics andaccountability frommarketing

( 66% of businessexecutives saymarketing analytics ismarketing’s greatestneed

( Booz Allen study

( “2/3 of CEOs feel that theirmarketing teams areresponsible for creating moretop-line company growth”

( 34.9% of CEOs give marketinga C grade, 9.6% of CEOs givemarketing an A grade, 8.4%give marketing a D grade

( CMO Council Renovate toInnovate, 2005




Metrics are Common Ground

Marketers – CMO Council

What are your most urgent organizationaldevelopment and improvement priorities

CEOs – Chief Executive Magazine

What are the first three actions you wouldimplement to improve your company’s marketingefforts?

15.0%Review and evaluate current personnel

16.1%Run more training programs

17.9%Realign reporting and managementsystems

27.1%Move marketers closer to the field

30.0%Restructure how group operates

30.0%Bring in new expertise and resources

37.5%Add more Internet and web resources

46.7%Identify and promote best practices

55.6%Improve marketing analytics

14.5%Change my CMO

29.4%Reorganize my marketingdepartment

40.3%Increase the marketing budget

42.0%Improve the product line

44.1%Add better technology

55.7%Increase the efficiency of themarketing organization




But the Types of Metrics Aren’t

( Commoncompany metrics

( ROI: amount of netrevenue exceedingcost of investment(90% of firms)

( Payback analysis(70% of firms)

( Net-present valuereviews (50% offirms)

( 95% of companies usemetrics to analyzepayback

( “Marketing must improveits value to justify itsexistence as a centralizedfunction,”

( Elana Anderson, principalanalyst, ForresterResearch




But What is Marketing Measuring?

Two Camps!" Activities such

as responserates, numberof press hits,

#" Operationssuch ascost/lead, leadaging,program-to-people ratio

32.9%

32.8%

11.0%

8.2%

5.5%

4.1%

1.4%

0.0% 10.0% 20.0% 30.0% 40.0%

Lead Quality

Sales Increases

Lead Volume

Market Share Gain

Brand Awareness

Cost per Lead

Brand Preference

Hearst Electronics Group 2005. 75 Senior Marketers




ROI Metrics Tracked by US Marketing Executives,2005 (as a % of respondents)

26%

34%34%36%

43%

44%51%

0% 20% 40% 60%

Customer satisfaction

Market share

Site Traffic

Sales feedback

Brand awareness

Qualified leads

No formal measurement system

scary

Source: CMO Magazine, April 2005




What Isn’t Being Measured?

( Nearly everyone says business with existing customers is important, BUT ONLY( 8% track or measure share of wallet (SOW),( 3% report SOW regularly to management( 9% include it in their marketing plan and have a process in place to track it.( < 10% measure customer lifetime value, customer advocacy, customer tenure

( 78% of marketing and business executives and professionals believe it is critical toacquire new customers in existing markets.

( Other than leads to conversion, track little else.( Only about 25% track and measure rate of customer acquistion (75% don’t)( Only about 37% report a market share metric (60% don’t)

( Only 1 of 4 measure marketing’s impact on business goals

( 2/3 do NOT include metrics in marketing plansStudies commissioned by VisionEdge Marketing

2003, 2004, 2005, 2006




Our Metrics Must Change

1. Marketing must transform into aperformance-driven, outcome-centeredorganization

2. From Tactical to More Strategic

( Marketing organizations must broaden focus fromsales support to a marketing framework linked tobusiness outcomes

( This framework must identify metrics thatimpact the organization’s economic performance &strengths

( Measure financial & NON-FINANCIAL goals

3. Must balance the ROI of currentprograms while still driving strategicissues that impact long-term viability

( Only 57% of Financial Directorsbelieve Marketing investment helpedlong-term corporate growth

( 27% interpret Marketing as short-term tactical measure

( 32% would cut Marketing “first” inhard times

( While 90% of CMOs polled felt thatthe ability to measure their marketingresults was a significant priority, 80%were unhappy with their ability to doso”( CMO Council MPM Study 2004




Four Categories of MarketingMeasurement

All of these Contribute to Revenue

1) Business acquisitions/demand generation

( Metrics such as market share gains,category growth, customeracquisition

2) Product innovation/acceptance

( Metrics such as market adoptionrates, new products as apercentage of revenue, time-to-revenue, user attachment & affinity,share of wallet, loyalty and referralrates

3) Corporate value

( Metrics such as Growth in BrandValue & Financial Equity, CustomerFranchise Value, Price Premium,Retention of Customers andEmployees

4) Corporate vision & leadership

( Metrics such as Share of Voice,Share of Distribution, Retention &Message Relevance & Tonality ofCoverage

Best Measure of Marketing PerformanceCMO Council 2005

1.2%Other

3.7%Viral word-of-mouth referrals

4.5%Increase marketing budgets and influence

6.9%Volume and quality of media coverage

6.9%Time-to-market improvements

7.2%Reductions in selling cycles

10.6%Competitive share of mind and voice

14.4%Brand value and equity

16.8%Market awareness (outside research)

20.5%Positive feedback from sales, channel andmanagement

22%Opportunities converted

27.7%Marketing spend effectiveness and ROI

29.5%Qualified leads generated

29.5%Company profitability

35.1%Customer value, loyalty, affinity

39.4%Market Share Gains

47.3%Revenue Growth




If We Change, Will it Matter?

Companies with “formal & comprehensive”Marketing Performance Management System:

( Outperform companies entering considerationphase

( Performance ratings of 29%, 32% & 37%better in sales growth, market share &profitability

( CMO Council/Business Week MPM Survey October 2004




A Tale of Two Marketers

) Tracked Trial Rates

) Measured Adoptions Rates

) Focused on category growthrate

) Tracked Open and Click-Through Rates

) Concentrated Awareness

) Focused on Lead ROI




To Make Progress Must Shift

!" Focus from Sales support to Marketing AuditFramework Linked to Business Outcomes

#" To Measuring Financial and Non-Financial Goals

$" Utilize a Framework that Identifies Metrics thatImpact Organization’s Economic Performance& Strengths




Activity-Based

Operational

Outcome- Based

Leading-Indicators

Predictive

Evolution of Marketing MetricsTactical Strategic




Activity-Based

Operational

Outcome- Based

Leading-Indicators

Predictive

Evolution of Marketing MetricsTactical Strategic

Counting:Press HitsTrade show leadsClick-Through Rates

Efficiency:Lead/RepLead AgingCampaign ROIProgram: People RatioCost/Billing DollarProgram spend/headcountProgram/Total SpendAwareness: Demand Ratio

Business Outcomes:Market ShareCategory OwnershipLifetime Value

Likelihood of Outcome:Share of WalletAdoption RatesRate of Growth:Market




Activity-Based

( Counting – Xnumber of practices,runs, work outs, etc.( # of events

( # of responses

( # of partners

( # of press hits

( ExamplesActivity 2005 Result 2006TargetAided BrandAwareness 50% >50%Leads 150 1200CustomerReferences 15 20IndustryAnalyst Wins 2 3Press Hits 200 300ProductAwards 1 3

( So What? How do youtranslate these into abusiness outcome?




Operational Performance

( Functional –supporting systems &infrastructure – Bloodpressure, heart rate

( Efficiencies & ROI( Cost/lead( Cost/support call( Channel margin( Cost to acquire( Conversion rates( Lead aging( Program to people

ratio

• Examples:

2005 Result 2006 Target

$250/ A lead $200/A lead

5% tier 1 channel 7% tier 1 channel

60% conversion rate 70% conversionrate

3.72 program/people 3.85program/people

• More efficient, maybe moreproductive, maybe spending lessmoney, but what information doyou have to make strategicrecommendations or decisions?




Outcome-based

( Business results –races/games won( # of share determiners

( Average lifetime value

( Size of deals

( Customer attrition rate

( # of deals/segment

( % of demand/channel

( Examples

( Facilitates Investmentand Strategic Decisions

12% customerattrition annualized

15% annualizedrate customerattrition

2006Target

Top two sharedeterminers persegment

2005 Results

Top share determiner

per segment




Leading-Indicators

( Directional – StrategicSelection of Races( Share of preference( Share of wallet( # of share

determiners/segment( Net advocacy( Customer franchise value( Rate of growth-to-market

rate of growth

( Examples2005 Results 2006 Target20% top 3 segments 60% top 3(1:5) segments

(3:5)15% SOW tier 1 25% SOWCustomers tier 1

customers10.2 net advocacy 16 netscore advocacy score

( Facilitates BusinessDecisions and Direction




Predictive – Final Frontier

( Strategic Direction tied to businessobjectives

Share of Wallet & Lifetime value

Market Share in Particular Segment

( Create & Track to Dashboard

( Join C-Suite at annual & quarterlybusiness reviews




Five Reasons to Evolve to the NextStage – Outcome-Based Metrics

!"Better Indicator of our StrategicEffectiveness

#"Means to Ascertain Efforts with GreatestImpact

$"Means to Demonstrate Accountability

%"Focus on Contributors to Company’soverall Valuation

&"Provide Quality Control Process




What Would The Shift Look Like

FROM Measuring Activity!"Run six half-page ads in Network

World#"Exhibit at 5 tradeshows$"Create product brochure for new

product%" Revise online demo&" Generate 500 leads'"Implement a promotion with two

distributors*"Distribute newsletter 6 times+"Email blasts to prospects monthly,"Conduct customer satisfaction survey!-"Research customer product

requirements

TO Linking to Outcomes

!" A 7-8 New Strategic Accounts tosupport NA Market Penetration

#" Increase Customer Lifetime Valuefrom X to Y

$" Grow share of wallet among ourtop X customers from A to B

%" Add 3 New VARs in each of threeprimary verticals

&" Grow all Tier 1 Distributors Salesby 10%

'" Grow our product category by10%

*" Increase penetration of ABCproduct in Tier 1 Customers by15%




How Do We Get There?

“Marketing has the main responsibility forachieving profitable revenue growth”

Phil Kotler, 1999

Start with the purpose of Marketing




Foundation for Outcome-BasedMetrics

Three Primary Roles of MarketingSet the Stage for Outcome-Based Metrics

Find/SecureProfitableCustomers

Acquisition

KeepCustomers

Penetration

GrowCustomer

Value

Monetization




A Chain of Value

Acquisition Penetration

Monetization

AcquisitionMarketShare

PenetrationLifetimeValue

MonetizationBrand/CustomerEquity

Enjoy Economies of ScaleMaintain Greater ProfitabilityMore Leverage with Suppliers

Higher referral rateLess cost to serveLess price pressure

Less vulnerable to competitionBetter new product success rateHigher prices

Acquisition Penetration

Monetization




Our Three Roles Serveas Marketing’s Gauges

Market Share Lifetime Value Brand Equity

Find/SecureProfitableCustomers

Acquisition

KeepCustomers

Penetration

GrowCustomer

Value

Monetization




Three Gauges forMarketer’s Metrics Dashboard

Market SharePercentageof Total AvailableMarket or SegmentServicedby Company

Lifetime ValueRevenue& ProfitabilityContributed duringTenure

Brand EquityAdditional Revenue Linkedto Brand’s Name & Symbolthat Adds to (or Subtractsfrom) Value Provided byProduct or ServiceCompared to SimilarCompetitive Product




Key PerformanceIndicators for Each Metric

5 Brand EquityIndicators( Price Premium

( Net Advocate Score

( Customer FranchiseValue

( New ProductAcceptance/AdoptionRates

( Product Margins

Certain Facets of PerformanceMove Needles for Each Gauge

4 Lifetime ValueIndicators( Purchase Frequency

( Share of Wallet

( Advocacy/Loyalty

( Tenure

5 Market ShareIndicators( Share of Preference

( Share of Voice

( Share of Distribution

( Rate of CustomerAcquisition

( Rate of Growth:Market




Six Metrics to Start

( Market Share & these Performance Indicators

( Share of Preference

( Rate of Customer Acquisition

( Lifetime Value & these Performance Indicators

( Share of Wallet

( Recent Purchases and Frequency

( Brand Equity & these Performance Indicators

( Price Premium

( Net-Advocate Score




A Case Study: Video ConferencingCompany Sees the Value

From: Activity-Based( Literally monitoring dozens

of activities and reportingmonthly.

( Didn’t know whether thesewere the right things to bemeasuring.

( Didn’t know how to tieactivity tracking to thesuccess of our Marketingobjectives and strategies.

To: Outcome-Based( Used the mapping

process to focus

( Revised metrics

( Results:

( “On a worldwide basis, ourgroup’s systems unit salesincreased by 82% with theaverage order value forthese systems increasingby 11% for one productand 25% for another.”




Case Study 2: Logistics Company DiscoversImproved Route to Marketing PerformanceManagement

From Operational and Activity-Based( As a logistics company, marketing

reported its performance in thesame vein, measuring activitiesand productivity.

( The existing “dashboard” did aneffective job of tracking progresson activities, but not on thebusiness result of those activities.

( The executive team didn’tunderstand how marketing wasimpacting the business.

( Wanted to tie marketing planmore closely to business goals andprovide the right metricsframework for measuringmarketing performance.

( Deployed its mapping process tohelp the team focus on selectingthe right metrics and designingthe optimum report dashboard.

Added Outcome-Based( Revised marketing plan balanced

strategies and tactics, told a clear storyof how the marketing was going toaddress the opportunities in themarketplace and drive the businessforward.

( A new way to communicate howmarketing is impacting the business.

( Developed a short list of metrics thatserved as indicators of marketingperformance.

A few examples of these indicators andmetrics for the dashboard included:customer churn rate, market share byvertical, share of wallet, and companygrowth rate compared to category growthrate.

( “Before VEM’s our thinking was verytactical. Now we have some tools to helpus be strategic and measure ourcontribution to the business.”




Metrics Reporting

( C-level – need to seesnapshots of data thatenable action

( Dashboards serve as amonitoring & feedbacksystem

( Visual representation ofcomplexinterdependencies

( Utilizes and focuses onboth processes & results




Metrics Reporting - Dashboards

( Provide insight intoperformance

( Fosters decision-making

( Aligns strategy withimplementation

( “To address short- and long-term objectives, some firmshave developed marketingdashboards that define keymetrics and give a unified viewinto the effectiveness of theirmarketing.”

Taddy Hall, ARF




Why Isn’t This a Dashboard?

( A good dashboard( Shows how marketing is

moving the needle( Helps assess what is and

isn’t working( Enables better decisions –

is actionable( Provides a unified view

into marketing’s value( Enables better alignment

between marketing andthe business

( Translates complexmeasures into ameaningful and coherentset of information

Design and develop new merged intranet site

Implement guidelines for continuous improvement of marketing and sales intranet site

Program #4

Automated Online Direct Marketing

Program #5 - Create four regional Marketing Programs

Define Markets requiring emphasis, implement direct

marketing program

Evaluate Mid-west BAXSaver opportunity

Enhance access and ease of use

Maintainance and create new materials needed

Corpoarate Capabilities Presentation

Program #6

Set up Profoma (Access to online direct marketing

materials - customized, printed, shipped & tracked)

Link to Virtual Warehouse




A Dashboard for Action

Improve Your Probability for Success ™www.visionedgeMarketing.com


Segment Revenue by Channel

Revenue By Channel

!""#$%&'#"()'*+,'"+

-.&+/(0%/1+&(2+/$'3+4

Marketing Investment to Revenue

MDF

(Mktg $)




Metrics Reporting – Creating theDashboard

( Use a mapping processto define what metricsto include

( May have severaldashboards – forexample

( One for C-level

( One for Marketing Mngt

( One at tactical level

( Data Integration is theChallenge( 48% of execs at large firms

cite “lack of integratedcustomer data” as their topchallenge

Jupiter

( Only 29% of marketing execsare satisfied with how theirCRM applications integrate withother data

Forrester

( Only 29% can easily accessand use marketing performancedata to shape future strategyand investment

AMR




Metrics Reporting

( Dashboard correlates Marketing activitiesand Metrics

( Focus on the most relevant, essential, & valuableactions

( Begin with business outcomes

( Identify most important measures of success

( Define performance indicators connected with thesemeasures

( Determine which data provides necessary information

( Analyze & report




Map is the Basis of Dashboards

TeamTactics/Activities

MarketingFunction

OperationalStrategies

MeasurableObjectives

BusinessInitiatives Driven

by Marketing

BusinessOutcomes

(Generally aboutmarket share, profit,

customer value).

Dash

board

Up

Dash

board

down




Creating Your Dashboard

( Design Your Dashboard to:

( Demonstrate how you are are moving theneedle

( To communicate what performance indicatorsaffect the business?

( When designing your dashboard consider

( What information/data will you need

( Whether you have access to this informationand if not, how will you acquire the data




Marketing Dashboard

At least six metrics should be considered forevery marketing dashboard

!" New customer wins (acquisition) and rateof growth as it relates to market growth

#" New customers won by the competition$" Information about repeat business (SOW,

Customer Value)%" Customer Churn Rate/Defections/losses&" Overall Net Advocacy Score'" Market Value Index




Where to Start

( Companies Must Take Metrics Seriously

( Conduct an Audit

( Companies Must Use Metrics to GuideBusiness Decisions

( Create Dashboards & Not UsualOperational Charts

( Companies Need Marketers with Metrics Skills

( Training Starting at Undergraduate Level on Up




Metrics Competency

( State of tools, systems, & processes

( Audits provide a means to assessorganization’s current state, how muchchange required & in whichdirection/areas

( Self-scoring

( External experts




Metrics Proficiency

( Training( Even best athletes, e.g.

Olympic contestantsinvest in training &coaches

( Marketing Performanceexceeds trackingnumbers & requiresskills at right time atright place( Training in Marketing

measurement rare




Success Factors

Effective Metrics, commit to:

!"Strategies Linked to Metrics

#"Validate Links between PerformanceIndicators you Selectand Strategic Metrics

$"Set Right Performance Targets

%"Measure Correctly & Consistently




Three Final Thoughts

!" A Little Less Talk and A Lot MoreAction

#" Start with the data you have, defineyour gaps and your action plan to fix

$" Stop reporting on activities, think interms of what information is neededto make important strategic decisions




Thank you

( Questions?

Metrics concept papers, Measure WhatMatters book, and subscription to freeweekly Metrics Newsletter available at

www.visionedgemarketing.com




“Measure What Matters”

Presents a metrics framework marketing professionalsand company executives can use to ensure marketingis tightly connected to business goals and provides anapproach marketers can employ to demonstratemarketing’s contribution.

“ The book is full of useful tips and practicalinstructions for measuring the truly important metricsthat enable marketing to impact a company’s mostcritical goals.”

“Should be required reading BEFORE the writing orformulating of any marketing plan or budget.”

“Measure What Matters ranks in my top 10 marketingbooks.”

“… one of those rare pieces of work that brings theright information to the table at precisely the righttime.”

"There is something in here for every marketer whowants to prove that marketing, done strategically, canbe a huge competitive advantage in driving profitablegrowth.”

Available for purchase online atwww.visionedgemarketing.com




About VisionEdge Marketing

( Headquartered in Austin, TX, VisionEdge Marketing, Inc. is theleader in metrics-focused marketing, providing complete strategicand product marketing services and training

( Company provides data-based strategically-tactical! programs toinfluence prospect and customer purchasing behavior and drivedemand designed to build and maximize valuation throughpositioning and brand strategy

( The firm primarily works in the B-B space, predominantlytechnology-based companies with an emphasis on software,wireless, security, networking, computing, semiconductors, andmedical devices. Some of our 70+customers include: AbbottSpine, a division of Abbott Labs; Adobe; BAX Global; BarberFoods; Boxx Technologies; ETS-Lindgren; FreescaleSemiconductor; Infoglide Software; Motion Computing; ROCSoftware; SkyBitz; and Sterling Commerce