Measurement Should Be From the Customer's Point of View

When sales are down, people ask questions. The answers are generally a litany of conjecture about what's behind the fatigue in the list, leads, close rates or market conditions—and let's not forget everybody's favorite scapegoat, stale creative. Despite the flying conspiracy theories, no one in the organization knows exactly what's causing the decline, and fingers are pointing.

Without a fully understood diagnosis, marketing executives are brought to the table and asked, "If I gave you another million dollars to spend, what could you with it?" This usually results in a one-time econometric modeling exercise forecasting the potential return on that incremental spend in a vacuum. And depending on the volume of the sales deficit, the immediate prescription is likely to be your garden variety mass market promotional advertising blitz.

In my 13 years in marketing, I have witnessed this quick fix, dead-end pattern dozens of times. And unfortunately, fixing the immediate problem almost always eclipses any focus on a long-term, sustainable marketing growth model. The emergency spending bridges the sales gap, so people stop asking questions about what happened. And marketing organizations create their own self-fulfilling shortfall year after year.

The truth is, without transparency into every step in the purchase cycle, it is impossible to effectively link marketing activity to financial impact. There are so many variables, some human, that are flawed in the process of communicating with customers—and capturing data about that series of communication—that marketers are often left crediting sales through a crude, match-back process that does not feed source intelligence back into the campaign planning cycle. Lack of knowledge about the data and binge spending results in borrowed leads that may never be replenished. But there's hope. This exercise reminds us that we can have an impact on the customer purchase cycle. The question is: How do we proactively harness that information to maintain a healthy pipeline?

Deploying a customer-centric measurement system
To link marketing activity to business results, you have to look at all of the critical components driving marketing performance—data, tools, people and processes. To effectively analyze marketing investments, data needs to be complete and accurate, and tools must be flexible and able to answer actionable questions. People in marketing must have the right skill sets to perform their function, and sales resources must cooperate in capturing information along the communication continuum. And all of the processes—from test design to accurate source capture and campaign attribution—must be locked down to create a learning loop that results in increased customer intelligence, improved response rates and, ultimately, uncovered opportunities for cross-selling.

Typically, organizations have a strong competency in evaluating individual campaigns, but many lack the measurement tools to assess marketing from a customer perspective—including tracking how many times you are touching the customer and with what message. We work with a financial services client that has three different lines of business—organized around product and channel—all talking to the same valuable customer with no knowledge of the other's activity. The result is more than 50 contacts to any one customer in a given year. That's close to one contact a week. But it isn't just the sheer volume of contacts creating saturation and decreased performance; it is also the lack of a coordinated effort to understand who the customers are and where they are in the buy cycle for a given product, relative to their lifetime value.

So, we created segments that roll up data from the three businesses and focus on customer profitability and unrealized potential. This provides one critical customer view across lines of business. Then we built a new measurement framework around the customer purchase cycle and mapped the appropriate marketing metrics—marketing activity (number of contacts by vehicle), marketing performance (response rates, conversion rates), marketing financials (ROMI, ROI) and customer metrics (customer value, share of wallet)—to those customer segments.

Through this lens, we understood the volume, efficiency and effectiveness of all marketing contacts by segment across the purchase cycle. The answer was obvious: fewer, but more effective, contacts. The buy cycle framework provided the "when" and the "what" of those contacts. Analyzing the relationship between buy cycle stages helped identify where marketing campaigns could be optimally deployed to create a sequence of events triggering a response. Additionally, an understanding of conversion rates at each stage isolated the steps in the process that were creating sales bottlenecks. Now we have ongoing tests to fine-tune how we might use the marketing mix (and the right message) to move a customer through a purchase cycle.

A win for you and your customer
The result of all of this is a better relationship with your customer. The right message at the right time is not just marketing rhetoric; it is a way of showing your customers you truly understand their needs. Oh and it increases marketing efficiency. Our financial services client was able to increase the annual return on its marketing investment by 18 percent. By spending less money on fewer but more effective marketing activities, the company was able to increase response rates and decrease its cost per sale. This new measurement system has nearly eliminated the need for shortfall spending because of the increased financial impact of the existing budget. In fact, our client is now sometimes asked to spend additional dollars to capitalize on the momentum. And that's a win for everyone.