Innovative marketers have deployed marketing performance techniques to effectively guide spend in emerging digital channels and platforms. These progressive marketing organizations have prudently explored the benefits of the digital area by connecting strategic initiatives with a measurement and assessment capability to optimize marketing spending. Until the digital area proves itself relative to other competing areas of spend, this will be a valuable technique.
Specifically, progressive marketers rely on ROI directed funding for traditional channels and media, and they rely on return on objectives (ROO) for non-traditional, “new territory” funding (ex. parity in search ad exposure). ROI funding techniques work best within categories of spend that have easily identified transaction measures (ex. # of web pages viewed) and ROO for areas of strategic funding (ex. internal branding). The key to optimal allocation of marketing spend is a broader management technique that allows marketing decision-makers to balance ROI with ROO directed funding. A complementary test and learn approach with supporting analytics and feedback mechanisms provides a strong capability for optimal funding. With that ability, marketing management can be more proactive and timely with new areas of opportunity such as social media or search.
For digital marketing, funding increases will be accepted with greater ease and timeliness by knowing there is a technique for measuring the impact on the objectives or returns for that area, where empirical measures and benchmarks are thin. One way to execute this approach is to utilize a set of leading indicators to connect senior management objectives with department level objectives and generally reflected in cascading metrics designs. This provides top down and bottom-up accountability. A second step in that approach would be to inter-connect the metrics across organizational boundaries where marketing has minimal to no authority but where performance has a key impact on marketing initiatives. This is generally cross functional (and many times cross agency) and provides marketing with a set of leading indicators to know how well their initiatives are performing before they are reflected in financial reporting. Additionally, organizations utilizing these techniques can align the metrics within a scorecard which senior management can use to manage cross functionally and cross agency in a systematic manner.
The end result of these techniques is a better balance of supporting organizational performance attributes that will best contribute to marketing goals.
As example, a credit card company was looking to increase the business spend of their card holders in the small business category. Certain segments of that category exhibited seasonal spending characteristics for their businesses and increased spending was impacted by credit limits that assumed level, non-seasonal spending. The company sought to develop a major community group initiative for these customers with social media as the platform. Marketing was seeking significant budget to develop and maintain these community group activities. A set of cascading metrics was developed for these non-seasonal segments that included revenue improvement, partly driven by business transaction measures which in turn were partly driven by the increase in average credit levels.
Marketing recognized, however, that any promotional activities directed to those segments would be futile without participation of the risk management group which monitored and approved credit limits. A leading indicator focused on measuring the number of approved credit increases was developed for the risk management area. With this metric in place, marketing could continue to fund this effort on the basis of the risk management area meeting defined credit goals. Funding was adjusted largely based on the ongoing performance of this key activity.
The end result of these techniques is a better balance of supporting organizational performance attributes that will best contribute to marketing goals. In the digital space, where strategic top line funding needs to connect to the options that are available within digital and measured at an ROO level, this technique itself can be measured as a competitive differentiator from those companies that look to efficiently marry opportunity with proper funding.
Contact the author for questions or further discussion: Thomas Manning, Partner, Ninah Consulting, 1675 Broadway, New York, NY 10019, [email protected], 781-334-9973.
This article is part of a free e-book for Chief Marketing Officers:
Strategic Roadmap for Digital Marketing
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