Creating an Effectiveness and Measurement Culture
10 min read.
Business leaders know instinctively that too much focus on the short term is bad for business. A 2019 study into management boards found that two thirds of senior leaders agreed that a better balance between short- and long-term marketing objectives will deliver a greater return.1
However, the same study also found that businesses had a lack of belief in how they measured brand health and were also focusing on the wrong metrics. It found that senior leaders were fixated on short-term measures and do not invest in the creation and maintenance of brands or measure brand strength on a consistent basis.
As we move into 2020, marketing is more accountable than ever. However, the increased use of zero-based budgeting and the abundance of measurement systems belie a long-recognised truth: there is a tension between accountability and effectiveness. To make marketing more accountable, short-term metrics are often erroneously prioritised over long-term metrics; Binet and Field argue that marketers are often guilty of being ‘seen to be effective’ rather than focusing on being truly effective, which can inadvertently lead to the destruction of shareholder value.2
Focussing on short-term success is a symptom of an underlying common condition in organisations, namely, the absence of an ‘effectiveness culture.’
A 2018 study by the IPA found that half of marketing teams rated their ‘effectiveness culture’ at six out of ten or less.3 More worryingly, there was a strong short-term bias in planning and resource allocation: according to agencies, only 37% of clients had agreed plans and objectives for the year and only 5% had agreed plans and objectives for one to three years. In addition, 73% said that short-term tactical needs often took priority over longer-term objectives.
2020 IS THE TIME TO RESET YOUR CULTURE
2020 is an opportunity for you to reset and ensure your focus is on effectiveness, with the goal of having a disproportionate impact on business performance. To do that, you must move beyond merely paying lip service to effectiveness, and instead build an effectiveness culture and mindset across your teams.
Most organisations lack a shared definition of effectiveness.4 The first step, therefore, is to define what is meant by effectiveness; without that, there is no stable foundation on which to build a culture.
Many marketing teams’ key objectives are short-term sales. This overlooks how marketing contributes to long-term value through building and maintaining base sales, retaining customers, establishing a price premium and supporting brand extensions into other categories.
Getting a better understanding of the overall financial contribution of a brand is the next key step in an effectiveness programme. Once this is quantified, it is easier to reframe marketing’s role as the custodian of a significant commercial asset, and importantly, understanding marketing’s role in sustaining the value of that asset – not just in driving this month’s sales targets.
For instance, one of the principle roles of marketing is to drive purchases without the need for discounting; however, in a survey only one respondent claimed to have a measure of price elasticity in their measurement framework.5
ESTABLISH AN EFFECTIVENESS PROGRAMME
You must put effectiveness on your agenda. You can do this by establishing an effectiveness programme that reaches across organisational boundaries.
Here is a simple Effectiveness Checklist to get started:
1. DEFINE EFFECTIVENESS
Ensure you have a company-wide shared definition of marketing effectiveness. A good definition is:
The measure of how effective your strategy is in optimising investment to achieve positive results in both the short and long term.
You could refine this by defining what constitutes short-term and long-term objectives.
2. IDENTIFY THE RIGHT METRICS AND SUPPORTING EVIDENCE
Choose your metrics and be clear whether you’re measuring short- or long-term effects. Whatever you choose to measure, ensure you agree on the supporting evidence that justifies the metrics used and the level of precision for each metric. For instance, research has shown that a 1% increase in brand consideration leads to a 0.5% to 1.5% increase in sales.6 However, nationally representative surveys of 1,000 respondents, have a tolerance of roughly +/- 3%. So, it typically only makes sense to review and make decisions on this metric after at least six months of an initiative.
3. UNLEASH YOUR EXISTING DATA
The quickest win in measurement is typically not measuring more, but by integrating measurement that is currently fragmented and siloed. Most governments now have open data portals (such as data.gov.ie) to promote innovation and transparency through the publication of data in open, free and reusable formats. Marketing teams can improve effectiveness by adopting a similar approach and ensuring information is easily available and shared across teams and agency partners. Research indicates that 30% of clients do not share sales performance data with agency teams.7
4. SHIFT YOUR PLANNING HORIZONS
Most marketing teams have short-term objectives, and this is evident in the content they create. Ensure you have a longer-term plan with clear objectives in place beyond six months, one year, and/or two years.
5. CREATE A LEARNING AGENDA
There’s no perfect measurement system, but when you’ve completed the first four steps, you’ll have a good idea of any significant gaps in measurement, knowledge and capability. Prioritise these gaps; identify the ones that will have the biggest impact on your organisation and then develop a plan to address them. This might involve leveraging existing research or tools or conducting business experiments, but it might also involve commissioning new research, utilising advanced analytics or selecting new third-party tools. Whatever you choose, make sure the investment in time and money is balanced against the likely pay-off.
Most importantly, establish an effectiveness mindset across your team and organisation, based on applying evidence to business performance. This requires action-orientation and the application of evidence to decisions. Marketers need to move beyond a reporting culture to a ‘What next?’ culture based on effectiveness.