Marketers Who Spend-to-Learn Today Look Smarter Long Term
*This article was originally published on Forbes.com on October 10, 2017.
Two Marketing Truisms:
1. There has never been a better time to be a marketer. We are rolling in new capabilities, technologies, and data that improves customer experience, provides new insights, all of which adds value to brands.
2. Marketing has never been more difficult. Ninety percent (90%) of leading household goods brands are losing market share (Source: Catalina). Twenty-five percent (25%) of insurance customers attrite every year (Source: Bain). Of the Fortune 500, 38% saw revenues decline between 2014-2016 (Source: Fortune).
Two More Marketing Truisms:
1. Responsible marketers maximize their spend on working media, because non-working spend doesn’t drive brand growth.
2. Measurement makes the best marketers better.
When I worked on the client side, the running dialogue on replay in my head during every meeting was this: Do I invest all of my insufficient budget on advertising, knowing that my volume targets are already inflated and impossible to achieve with the meager budget allotted, or do I allocate some spend on measurement in order to gain valuable insights for the next campaign?
And I’m not alone. Marketers today face a growth crisis. Despite all of the advantages of the digital revolution, most brands are failing to grow topline revenues, expand penetration, acquire new sustainable customers, and maximize lifetime customer value. In order to maintain margin and demonstrate their focus on profitability to their Board of Directors and the Street, marketers are cutting budgets, shifting spend to lower cost channels, and trimming all non-working media costs to the bone. This includes marketing performance measurement, which often is funded out of and at the expense of the working media budget.
This is precisely where things go wrong. Marketers sacrifice learning for what they perceive to be a bias toward growth. Siphoning money from working media for post-campaign research doesn’t feel like growth.
But this penny-wise, pound-foolish approach is both short-sighted and self-defeating. A survey of 800 marketing executives by Forbes CMO Practice and Neustar found that high performing marketers are generating superior growth and marketing investment performance by enhancing their measurement capabilities. Marketers who invest more than 10% of their working media budget in marketing performance measurement are 3x as likely to exceed their growth plan by over 25%. They also have 27% larger internal staffs dedicated to measuring marketing performance measurement.
The research revealed that strategic investments in “non-working” media aimed at better forecasting, optimizing, and targeting marketing investments make the entire marketing investment portfolio work harder and accelerate growth.
This feels very true to me. My own experiences align with these insights. For one campaign I managed, we learned through smart measurement planning that first-party data performed 3x better than third-party or demographic-based audiences. We also learned which publishers performed well for us and which didn’t. These learnings made my next advertising investment measurably more efficient and our results much more impactful.
The research reinforces this point. High performing marketers committed to marketing performance measurement generated over 5% better media performance than the overall sample across the entire marketing and media mix. In particular, they were:
• Generating significantly (7%) better results from their investments in social, mobile and digital media
• Mastering the nuances of search and influencer marketing better than their peers
• Generating significantly (7%) better results from investments in Public Relations and Promotions and Incentives.
They are also achieving much better growth outcomes than average marketers from their marketing strategies, investments, and actions across 27 measures of business performance across the entire customer journey. By optimizing their marketing investment mix and performance, the high performers were able to get superior business results from their investments, including:
• Superior brand awareness outcomes in terms of social and traditional media performance indicators, as well as generating brand preference. For example, high performing marketers are over 10% more effective at leveraging social media channels to improve brand awareness.
• Better customer engagement in terms of campaign response, registration, opt-in, calls and time on-site. High performing marketers are over 9% more effective at generating inquiries, responses and registrations from their customer engagement programs.
• Significantly better demand generation with higher offer response rates and lead volumes. High performing marketers are over 9% more effective at generating responses to offers and face-to-face meetings from their demand-generation programs.
• Better sales outcomes in terms of ticket size, customer satisfaction (Net Promoter Score) and adoption rates. High performing marketers are over 10% more effective at turning customers into users and advocates (Net Promoters).
Tracey Paull, EVP Director at Starcom, points out that old measurement approaches are also part of the issue: “The real reason we see marketers moving away from measurement is not because they don’t believe in understanding what works and doesn’t … it’s because many of today’s measurement solutions are devoid of applicable learnings for future campaigns – either delivered too late or too macro. Measurement that is conducted and held accountable to be actionable at a granular level is what marketers should demand.”
Today’s measurement methodologies don’t require the same tradeoffs between granularity and timeliness. A smart measurement agenda that incorporates the critical feedback across key areas such as brand health metrics, performance metrics, and financial metrics can provide more rapid, actionable feedback for marketers to use developmentally, not merely as post-campaign yardsticks.
The key for marketers must be to maintain a growth mindset, by understanding deeply the impact of their investments. Are they driving incremental sales or base? Are they bringing in new customers or shifting forward purchasing decisions among current customers? Are they converting full price buyers or discounted sales? Are they winning with switchers? Are they building the brand or the business? Is growth sustainable or short term? Are they winning on effectiveness, efficiency or both? What do they need to do differently next time to drive even higher sustainable returns?
Cutting measurement investment reduces the feedback marketers receive about what works and what doesn’t. It obscures the impact of marketing and media investments. Without feedback, there is no way to learn. And without learning, there is no way to improve. There’s nothing truer than that.