Free yourself from the tyranny of metrics

"You can't manage it unless you measure it." "Metrics are the heart of a well-run business." "CFOs are demanding proof." "Marketing must be accountable." Sound familiar? Nowadays, you can't step into the corridors of a major marketing department or open a marketing publication without hearing a call to action for marketing accountability. As well-known organizational expert Margaret Wheatly puts it: "We are all caught up in this measurement mania. We are not growing in wisdom right now. We may be just growing in freneticism." In fact, we count ourselves on the side of the measurement enthusiasts. Indeed, we've spent years working with companies to help them improve the quality of their marketing accountability. And, while we're glad to see that our measurement directives have taken hold, we can't but look across the marketing landscape and worry just a little. Like any movement, sometimes the very work overtakes the results. Let us explain. In our experience, companies are at risk of going hog-wild over measurement so that they become victims of the numbers. We can't help but ask: Are these measures all they are built up to be? Are they important to driving growth? Are marketers managing by the numbers or simply being managed by them? Under continued pressure from their CFOs, more and more marketers are beginning to take marketing accountability seriously. According to the 2006 Association of National Advertisers Survey conducted by Marketing Management Analytics, 58% of companies now have some formal marketing-accountability program under way. These companies are working to improve their marketing performance and reliability by improving skills, acquiring data and building the right processes, technology and metrics into their organizations. For most companies, marketing accountability is a no-brainer in light of the enormous amount of money spent on marketing. No other part of the corporation has spent so much with so little measurement rigor. Improper use of metrics can choke the growth right out of an organization. A company that misapplies its metrics, failing to build metrics so that innovation is balanced against operational excellence in marketing will, over time, find it is creating a culture devoid of risk taking, limited in vision and scared to reach for success. In reality, metrics will never help a company have the next great idea. No dashboard will ever meaningfully measure innovation. Great thinking will never come from applying a yardstick to an idea. Accidentally creating a "tyranny of metrics" is the lurking danger of marketing accountability efforts. When marketing teams that have historically made decisions based on instinct and creativity are told they will be evaluated on the financial payback of each tactical decision, they can easily become tyrannized by the numbers. Rather than look forward to the next big idea, they begin looking backward to what has worked before. For a year or two, the systematic elimination of ineffective programs results in significant financial improvement. The finance department enthusiastically lends its support as dollars are reallocated to proven programs or dropped to the bottom line. The accountability program is deemed a success and people get promoted. Long term, however, you can't run a company by looking backward. We've seen too many companies develop a "play-it-safe" culture where they base their marketing on historical data. That's like running a political campaign predicated on what you did for the last race. The fact is that the rules of the game have changed, and marketers need to change their tactics. Otherwise, they will be locked into outmoded approaches and never develop innovative ideas. learning what to measure If marketers need to be future-directed, how and why should they measure? After all, measurement, by definition, is based on the past. Successful measurement is about managing risk so a company can correct course in response to rapidly changing markets and increase its odds of future success. While metrics will never deliver the big idea, done correctly, they will help marketers know what isn't working. At VF Corp., for example, a well-balanced metrics program has helped alter the apparel company's perception of the value of marketing and how it can be used to grow a brand. Says Stephen Dull, VF Corp.'s VP-strategy: "For us, it is less about how to measure and more about how to interpret and bring multiple disciplines together to drive business decisions. By doing this, we have been able to avoid the 'tyranny of one voice' and make better business decisions." A successful marketing-accountability program is all about learning what to measure, when to measure and how to measure so a marketer isn't tyrannized by its metrics. A workable measurement program starts with establishing a set of clearly articulated business goals, articulating the questions that need to be answered to support the goals and establishing a set of metrics to track progress toward the goals. This approach, which we call GQM (goal-question-metric), allows marketers to use metrics as they were intended: to help manage risk, alter course and continuously manage improvement. At the same time, they allow for innovation. useful lessons In our experience, companies that have well-established metrics programs have learned some useful lessons for avoiding the tyranny of metrics. According to Mr. Dull, "if you leave your common sense at the door and focus only on metrics, you will misuse them. You won't find a single metric, for example, that represents the value of a sponsorship. Instead, companies should look at multiple metrics in conjunction with their knowledge of the consumer and their business if they want to make smarter business decisions." Here is a checklist to keep in mind for planning a marketing accountability program: Focus on the consumer. Begin with an understanding of the consumer segments and needs that drive your brand and category in the short and long term. Use a set of metrics that are relevant to the strategic role a product plays in the portfolio. Tactical ROI is not the be-all and end all for marketing decisions. For example, a product in the growth stage of its lifecycle may warrant investment beyond its short-term ROI scores. In this case, share of market, trial, and household penetration may be the most relevant metrics. Don't fall into the trap of justifying decisions because "the model said ..." Instead, historically based models should be used as the basis of simulations that look forward and help answer "what if" questions. Define guidelines for acceptable risk. Use a simulation tool to determine the impact an innovation will have on the bottom line before actually implementing the tactic. With marketing simulation as a core part of the planning process, marketers can bound their risk by testing best- and worst-case scenarios and exercise their decisions from multiple perspectives. Budget for innovation. Set aside a separate innovation budget to alleviate the risk of new programs. This budget should be defined in terms of its potential to drive both sales and advance business insights. Course-correct continuously. Marketers will embrace new ideas and try new programs if they are confident they can spot losers quickly and either fix the problems or abort the failures. To have this level of comfort, marketers have to invest in real-time data, processes for continuous program evaluation and protocols for quick decisions. In a time of challenged growth, a focus on marketing accountability can stifle innovation if it creates a risk-averse environment. But don't blame the metrics. Tyranny of metrics is really the tyranny of fear: fear of evaluation and fear of failure. Accountability is important, but it is best applied in tandem with the right tools (analytic and technical), support, training and rewards or else it can easily contribute to a "play it safe" culture. In developing their marketing- accountability programs, marketers must be thoughtful about the behaviors they want to encourage, and make sure the metrics and cultural rewards are truly aligned to goals. By following the six principles above, we believe companies can avoid the tyranny of metrics and ensure accountability programs are successful in delivering innovation and business growth. john nardone is chief client officer of Marketing Management Analytics and an expert in institutionalizing marketing analytics and CRM. Previously, he served as president-international at Modem Media. Ed See is chief operating officer of MMA. He was formerly managing director-global IT strategy, transformation and outsourcing advisory practices at BearingPoint.

Free yourself from the tyranny of metrics

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