The CMO´s Guide to Marketing Measurement
Measurement is, in general, a critical aspect of any organization today, and marketing is no exception. Digital marketing provides endless opportunities to track different activities, but in this ocean of potential measurement points, we often see companies ending up without a clear idea about how they measure the value creation of Marketing. Data and measurement present maybe the best foundation for a data-driven marketing organization. However, at the same time, it presents a risk, where isolated functions seek to justify their existence and game the system. In today’s world, where marketing and sales are moving closer together, there is a dire need for a holistic and architected approach – so how do we archieve this?
Start with the business
No two companies are the same, and therefore, there is no single recipe for the optimal measurement setup. The most common mistake we see with marketing measurement is to allow for a bottom-up approach, and letting the individual functions dictate the guiding star for the whole department. In order for marketing to be a tangible asset for the entire organisation, both measurements and strategy need to be rooted in the business. This needs to be done through collaboration with the rest of the C-suite and other functions, and hence, you can as a marketing leader frame your impact broadly to reflect all the ways marketing benefits the organization.
Measure what matters
Based on the wrong belief that “the more the merrier”, too many marketers go about measurements by reporting on all numbers they have available. Contrary to this approach, Marketing front runners are looking at measurements top-down:
Define the purpose: What is our role in the company?
Identify the objective: What is our role in the company?
Set the metrics: Which metrics enable us to measure the objective?
Set the targets: What are our target levels across those metrics?
The challenge is to measure both the short-term value creation – usually based on direct response and last-click attribution – and the long-term, time-lagged effects that does not show up instantly on digital radar. Solving the attribution puzzle is no easy feat in a B2B environment with a long sales cycle and complex buying processes. Consequently, the measurement framework needs to work at multiple levels at the same time, where each level has different objectives, and caters to different audiences with different reporting frequencies:
- Tier 1 (timeframe < 1 year) is concerned with the performance tracking of specific initiatives (ad, channel, geography, or campaign level). This type of tracking usually tracks the ROI of the initiative based on cost-of-leads and assumptions about the lead-to-deal conversion rate and value of the leads generated through the initiative in question.
- Tier 2 (timeframe 0-2 years) is concerned with measuring Marketing’s contribution to revenue. This includes the hard numbers on how Marketing, at an aggregated level, contributes to the different stages of the pipeline and ultimately drives direct revenue. Ideally, it also includes a cost component to understand not just revenue but also profit.
- Tier 3: Brand funnel (timeframe 3-5 years): This track measures your company’s awareness, consideration, preference, and positioning across the whole customer universe
Three Tiers of Marketing Performance Measurement
The underlying metrics within each of the measurement tiers are unfolded in our 110 paged CMO guide, which you can download free of charge by signing up in the buttom of this page
Making the most of Measurement
Making the most out of measurement is a broad and deep topic that can truly transform the performance and perception of your Marketing function – but it can also be a source of inefficiency and distraction. To get the most out of measurement, you need to test your thinking against a few principles:
While measurement, in its core, is about hard numbers and cold facts, reporting on these also has a strong storytelling component. Always consider: Who are the audiences for your reports, and how well proficient are they in Marketing speak and how knowledgeable are they about basic marketing concepts? Don’t be too optimistic here! It is crucial to link the data points to your purpose as a function and place the chosen metrics in a framework that has a concise and clear message.
Do not build the KPI framework bottom-up by letting each sub-department or role define their own objectives and metrics. This exercise needs to be run like a top-down cascade, where you start with the business goal and slowly fragment into more tactical metrics. If siloes or departments are allowed to define their own success, they will also game the system.
Discriminate between operational metrics (that tells you how to improve certain tactical initiatives) and strategic metrics (that delivers on the actual business goal). Too often, Marketing departments report tactical metrics (open rates in newsletters, LinkedIn followers, Website visits etc.) upwards in the system. While you can probably brag with some explosive increases, these metrics can often have the converse effect, as the CFO and likeminded people can see them as a sign of lack of business understanding.
Do you want to read more?
This topic is just one of the topics we cover in our recently released Marketing guide for Commercial Executive in B2B companies. It will help you answer questions such as:
- How should I organise my marketing department to create maximum value for the resources available?
- How do I define the most optimal tech stack to boost my department’s productivity and improve customer engagement?
- How do I make the collaboration with sales more value-creating and frictionless?
- How do I organise my Marketing department for maximum value
- How do I make sure that my people spend time on creating value for our customers and business instead of putting out fires or doing tedious, repetitive manual work
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