Monday, October 02, 2006

Measuring well

Have you ever heard jokes about how MBAs love spreadsheets? It's true. When I was in business school, I noticed something interesting: when somebody really had no idea how to attack a case, they'd fire up Excel, throw every number in the case into it, and see what fell out.

(I'm not being catty about my fellow students; some of the cases are tough to get a handle on, and I had my share of experiences sitting trying to prepare for class, looking at one of those Harvard Business School case reprints thinking, "If I worked for that company, I think I'd go have a long lunch, because I don't even know where to start!")

But when you found yourself sitting in class while someone referred to their spreadsheet with graphs that compared factory output to daily temperature or some other crazy thing, it was hard not to find it a little funny.

I thought about that while reading the second installment of a series MarketingProfs is running about marketers' mistakes. This one is on "Using Metrics That Don't Matter to Top Management." They kick off with a funny example of metrics gone wrong:

In the 1970s, the Polish government set out to make its furniture industry more competitive in the global economy. To that end, the government rewarded furniture factories based on the total weight of their products manufactured. As a result, the citizens of Poland now have the world's heaviest furniture, according to a March 4, 1999 article in the New York Times.

Of course, Polish officials didn't intend to produce heavy pieces of furniture; they wanted to increase production. Yet, as this example reveals, performance metrics can't produce their intended outcomes if they don't measure what really matters to the business.

As a marketer, you have no shortage of metrics at your disposal—including brand awareness, customer satisfaction, and ad readership, to name just a few. However, your CEO and CFO, as well as your firm's shareholders, care less about these metrics than they do about others—particularly cash flow—and though these metrics are generally not part of the marketing vocabulary, they should be. [emphasis added]

I recommend reading the whole piece for some ideas on how you can figure out how you're being measured by the people outside the marketing department, and respond to that. I won't try to summarize, but let me mention one of the simplest metrics that is ignored more than you think: how your marketing programs contribute to revenue.

Marketers hate this because it's impossible to really do it properly. If you're doing brand awareness ads, can you measure the impact on sales? In many industries it's very difficult.

But that's no reason not to measure what you can. Do you have a system in place to track inquiries as they work their way through the sales funnel? Can you identify where things went wrong and sales were lost? Here's an ugly reality: if the sales team isn't making their numbers, fingers will be pointed at you. Here's another ugly truth: that may be justified. If you're not measuring anything, how can you know?

I've put these kinds of systems in place at several companies, and it's not easy. But you need to do it, even if every report ends with "This does not, of course, measure the results of the following marketing activities..." followed by a list of things that can't be tied directly to sales results.

I recommend starting now, before anyone's even asked you. Because by the time the question comes, it's because someone is thinking, "What the hell are those marketing people doing with all that money?"

And besides - you don't really want to be wasting your efforts, even if nobody's really paying attention, do you?

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