Marketing: The undervalued or the engine room?

One of the areas in marketing I am immensely passionate about is demonstrating the strategic value-creation philosophy of marketing. By definition, this implies that marketing is more than just sales or advertising, and definitely more than just a P&L expense. Marketing's standing in a firm goes beyond being merely a  business function - it is the driver of the long term sustainable and profitable growth for companies.

Given that marketing must be responsible for long-term growth and profitability, its domain, by definition, can't be restricted to advertising or sales. On the contrary, I look at it as an all pervasive discipline spanning all functions in the company.  However, in reality, there is a high variance in how companies define and treat the marketing function. 

Through my personal observations, I have built up a typology of the different roles marketing plays in companies. Simply put, these can be classified as : the undervalued, the underdog and the engine room. 

The first category is the undervalued. Here, marketing is viewed merely as a communications tool. For these companies, marketing is little more than advertising and promotions, with its main purpose being to influence consumer decision making. I have also observed that it is in these companies that there is the highest pressure to justify marketing ROI and the highest risk of marketing budget cuts, demonstrating the lack of belief and support for the function by senior leadership. Naturally, these companies also tend to be less sophisticated in their marketing organisation and practices.


Then the second category is of the underdog. Here, the marketing function is viewed as a challenger, with increasing emphasis placed on contemporary marketing philosophies and practices. Marketing in these companies encompasses consumer insights, product innovations, strategy and pricing, and is often leveraged to drive long term business growth. The marketing organisation tends to exhibit a high degree of sophistication in these companies. However, inspite of this, marketing lacks a seat on the table in these companies. Finance usually pips marketers in winning top leadership roles in these companies.


And last but not least - I like to refer to the third and most influential role of marketing as the engine room.  Here, marketing is more than a business function - it is the single most important driver of market share, growth and profits; it is a mindset of winning in the marketplace through robust consumer-centric strategies. These companies define marketing broadly to include P&L delivery, and hence, marketers in these companies go on to key top management positions in the company. Given that marketing includes cross-functional business leadership, marketing in these companies tends to be the most sophisticated and analytically driven. These are the companies that acknowledge the value of brand building and consumer insights, and invest heavily in advertising and marketing research. It is the companies that treat marketing as the engine room that are the best training grounds for classical marketing fundamentals.


Ideally, you want to be pushing to the right-hand side of this continuum, if you are to truly drive long-term growth and value through marketing.

Marketing's deadliest sin : Measuring the tip of the iceberg in advertising

One of the biggest sins a marketer can commit is scratching the 'tip of the iceberg' in advertising. It surprises me how often clients gauge the impact of their campaigns through superficial metrics such as awareness and message take-out.

Don't get me wrong. Awareness and message take-out are crucial in assessing the first level of impact of the advertising, but these are just the tip of the iceberg, in terms of the actual impact of advertising. One campaign may have an awareness of 90% and the other 60%, but would this mean the latter is less effective? Even though the latter reached less people, it could have had a stronger impact on equity and subsequently on sales.

What goes on 'between' message take-out and the actual sale is referred to as the 'black box' in marketing. It is every marketer's fundamental responsibility to see through (or atleast try to see through) this black box. Advertising is ultimately intended to have the following two impacts: 1. short term sales impact 2. equity impact which then leads to sales in the long term.  So if you are not measuring these when trying to understand the impact of your campaigns, then what exactly are you measuring?

I may remember your ad, may love it and could talk all day long about it. But this still does not mean that the ad strengthened the power of your brand in my mind and if I will buy it. Awareness and message take-out will tell you if your brand reached people, but not if people reached for your brand!

Measuring the value of insight: Closer to the holy grail - Part II

A few weeks ago I wrote a post on the topic of 'measuring' the value of insight and proposed a conceptual framework demonstrating this concept. One of the key points that I was trying to make through the article was the differentiation between measuring the value of insight versus gauging the effectiveness of marketing research programs. As mentioned earlier, gauging the effectiveness of a program is relatively simple i.e. ascertaining if the research delivered insights that then enabled the company to make certain decisions towards meeting its marketing objectives. Measuring the value of the research is potentially more complex. By definition, it means linking the outcomes of the research program to financial metrics such as ROI, profitability or even shareholder value.

This post is the second of my articles that hope to get one step further towards finding the holy grail !

I have illustrated my framework by using the example of a new product concept testing program.

From the 'insight funnel' above, it is evident that the new product testing program was effective. It enabled the company to successfully launch the new concept and boost sales, which then led to improvement in profits and ultimately shareholder value. But what was the 'value' of this research program?

What makes this topic fascinating is that just as beauty lies in the eyes of the beholder, the value of insight lies in the eyes of the decision maker.. What I mean by this is that the value of a research program is subjective

Let's assume that the company invested $100,000 in the program, and the ultimate net profit impact as a result of the new product was $1 million. Can we attribute this $1 million to the research program? Does this mean that the research delivered a ROI of 10x? The answer is YES, only if research alone led to the new product launch. More often than not, this will not be the case.

There are situations when managers would probably take the same decisions in the absence of research, as they would with the support of research. In the example illustrated above, what if the managers (based on intuition and judgement) would have launched the concept anyway and created communications that resonated with the target? Does this mean that the research program was not valuable?

Absolutely not. In fact, any insight delivered plays the role of mitigating risk or increasing confidence. Given that businesses face multiple decision choices and need to make trade-offs based on the risk-reward potential of decisions,  an increase in confidence leads to an increase in probability of making that decision. If the managers were only 60% confident of success (before the research), the insights from research can said to have increased confidence ( or probability of making decision) by 40%. Hence, if the net profit impact was $1 million, $400 (40%) can be attributed to to research program.

This throws up another potentially complex variable into the mix, negotiation. Negotiating the value of the insights we deliver, in terms of risk reduction and increased confidence, is key in resonating with our clients' business needs. The more robust our programs and insights, the better will be our ability to negotiate, and the higher will be the value of the insights we deliver.

Making the transition from insights to value creation: How do you stack up?

One of the biggest challenges (or opportunities) facing the marketing research industry today is the blurring of boundaries between research and consulting. Increasingly, clients are expecting research firms to not only provide insights, but also act as consultants in overall business and marketing strategy planning. I believe that firms best placed to thrive in the next decade are the ones that adopt the 'consulting' mindset, rather than the pure 'information' mindset.

Even though most researchers like to think that they are consultants (by default), this is not the case in most instances.  Adopting a consultant's mindset requires a significant face-shift not only in terms of skills, but also in terms of approach and the overall delivery model. 

Quite simply put, I differentiate researchers and consultants based on one fundamental criterion: a researcher works with data, while a consultant works with data gaps. This essentially means that a 'consultant' doesn't rely on the primary data to solve the client's business problem. Solving a business problem goes beyond merely using primary data - it is a combination of data (primary and secondary), expertise, context, judgement and intuition. 

I have a quick audit to determine where one lies on the strategic value creation continuum.

1. Do you know the key forces affecting the client's industry and business in general?

2. Do you know the client's strategic objectives for the next financial year? This not only includes marketing objectives, but also their advertising strategy, media, brand plans. 

3. What is your level of collaboration with the client throughout the research process? Do you attend the client's internal planning sessions?  Do you meet with the client at on-going intervals to discuss findings and brainstorm hypotheses/ possible actions? (rather than going away once the research was commissioned and coming back after 2 months with a magic solution!!).

4. Have you used alternative knowledge sources to address the problem? (i.e. secondary data, client's internal database information, industry context, expertise and judgement). 

5. Do you provide 'insights' versus just 'information'? More importantly, do you provide a strategic action plan for the client based on the findings?

6. Do you help the client operationalise and implement these strategic recommendations? Do you follow up and see if these strategic recommendations were implemented and if they had any value to the client?

7. Finally, and most importantly, would you still be able to solve the client's business problem if there were gaps in the primary data?

If we can answer "yes" to each of these questions, we can be sure to have made the transition from being a source of "information" to a source "strategic value" to our clients.

So, based on the above, where do you stack up?

"Measuring" the value of insight: It can and must be done, but how? (Part I)

I had the privilege of attending the AMSRS State Conference last week and really enjoyed all the presentations and ideas put forth by the speakers. However, the one that resonated with me the most was the one by  Duncan Rintoul on "The real value of market research". This is a fascinating issue and whilst there have been considerable advancements in measuring the value of 'marketing', the same cannot be said for 'marketing research'. 

The concept of measurement is not a new one, and neither is the idea of measuring the value of marketing research. But the presentation essentially crystallized some of my own thoughts on this topic, and provided a framework for thinking critically about the 'net' value of the research we do for our clients, as marketing research consultants. I think Duncan's approach is an excellent one, and I must commend him for this; not to mention that the idea has actually sparked a lot of discussion both within the agency and the client-side on how this could be taken further and implemented. 

The reason why I have inverted commas around the word measuring in the title of this post is because I wanted to differentiate between the notion of 'measuring the value of insight' versus 'evaluating the effectiveness of marketing research'. A research program is deemed to be effective if it enabled the company to make key decisions, which then translated in the achievement of broader marketing and corporate objectives. Measuring the value of marketing research, on the other hand, is quite different, and potentially more complex. It is about ascertaining the net dollar impact that the research had on the bottom-line of the company.

I think Duncan's presentation provides a good framework for evaluating if the research has been effective, but the point of my post is around 'measuring' the dollar impact of the research on key financial metrics. So essentially, it is the same idea taken to the next stage in the measurement chain.

So why is measuring the net dollar impact of research necessary? Why isn't ascertaining whether the research has been effective or not, enough? Well, quite simply put, it is because as a client, you are always contemplating between potential research proposals and programs. To truly extract maximum value, you need to select the research program that will deliver maximum net returns to the company.

Imagine this scenario: You conducted two separate research programs on brand tracking. Both programs provided insights that enabled in making key brand decisions and hence, helped in achieving your marketing objectives. But, which was more valuable? If you had to choose one over the other, from a purely financial point of view, which one would you choose? I think this is essentially the premise of my argument. 

This is an issue which needs detailed explanation, and I am not going to give a magic answer to this, but I will end by presenting my framework:

I will be sharing my insights and ideas on how to interpret this framework and also on how to tackle the last level in the measurement chain i.e. financial impact, in my next post. So stay tuned for more, and let me know your thoughts and comments in the meanwhile.

The age old conundrum: "Measurement stifles creativity!"

I read an article in Ad Age recently ("Why metrics are killing creativity in advertising") which made the audacious claim that "when marketing decisions are based on numbers, we lose the desire to be creative".  Well, the classic battle between the left and right brain marketers continues!

Firstly, from the article it is evident that the author (advertising agency creative exec) is someone who disregards the notion of measurement (rational judgement), for the sake of emotion (which is not always rational). This poses the question: Why is measurement seen as alien to the creative process? 

Being a quantitative person myself (someone who likes objectivity), I must admit that I disagree with the assertions in the article. I do not think that numbers hamper creativity. I view numbers as doing one thing and one thing only: turning our subjective judgements into objective, & giving us answers that take us closer to the truth. Agreed that reality is distorted at times and numbers are at times incapable of delivering the truth, but we cannot know this unless we have tried.

I also think that metrics (or numbers or measurements) enhance creativity in marketing, rather than stifle it. I believe that the ability to quantify not only gives answers, but also improves the robustness of our endeavors. Thinking specifically about what the author is referring to (i.e. advertising campaigns), tracking or measuring outcomes takes us closer to understanding what the trigger points are in order to drive objectives, and creativity can thus be a more 'targeted' exercise. Not sure if there is such a concept, but what I mean by this is 'productive' creativity.

Also, with regards to testing new advertising concepts, I believe that metrics aid creativity. An idea is only as creative as the tangible impact it has on the market, and metrics help in gauging this 'tangible' impact. Without measurements or metrics, who would decide what is considered as creative? Metrics give creativity the credibility it deserves.

Well there is always an alternative view to every argument and in this case, it is this: do not "over rely" on metrics to give you answers. I think this is where the problem lies - many a times, we tend to substitute judgement or intuition for hard numeric indicators. Hard numeric indicators are just one part of the entire decision making puzzle. Sometimes, in order to be successful, we need to do the contrary to what the numbers say. Sometimes we need to do the subjective rather than the objective, do the irrational rather than the rational. 

Numbers stifle creativity ONLY if we let them.

The 'ROI' of ROI !

Ever wondered what the ROI of ROI is? What I mean by this is the net value derived from initiatives that are aimed at measuring ROI. Is it even worth measuring the ROI of every marketing activity?

Not really.

There are three key questions to ask before embarking on a marketing ROI measurement program:

1. Why is this information needed? What decisions rely on this information?
2. What is the potential value if these decisions are right? What is the potential risk if the decisions are wrong?
3. What is the degree of accuracy needed (or margin of error tolerated) from measurement?

If measuring the return from marketing activities costs more than the net value derived from doing so, then measurement is a failed exercise. If rough indicators or hypotheses will do the trick, then why waste time, money, effort in chasing 100% accuracy?

Always remember that "not everything that can be counted, counts" ! If we live by this principle, we can probably make a more critical and informed choice of which activities to formally measure, and which ones to crack open through intuition and judgement.

No news is bad news. Probably not!

One of the toughest aspects of being a marketing research consultant is to provide bad news to a client. The bad news could be in the form of declining scores of certain metrics or a discovery that one of their key strategies is 'ineffective'. Fellow consultants will probably agree that this is not the best situation to be in.

I was in a similar situation recently. One of my clients saw their satisfaction scores and other performance metrics decline significantly and to be very honest, this freaked the hell out of me at first.

If handled inappropriately, such situations can easily become a you vs. the client contest, one that you certainly don't want to be in. The key lies in taking the client on a journey with you - a journey of discovery and opportunity identification.

From my own experience of such a situation, I have learnt the following: 

• First the foremost, keep the client in the loop. If you discover something potentially negative, it is probably a good idea to let them know and involve them in the process early. You don't want the news to be a 'shock' to them, which will ultimately pose questions to the validity and accuracy of your claims.
• Leverage the client's insights for hypothesis building. The value of this cannot be  emphasised enough. Clients know their business better than you. In my case, I benefited immensely from bouncing ideas off the client and this eventually led to the identification of certain potential triggers of the problem.
•  Know the data and context backwards. This is probably even more important when reporting something negative to the client. You need to build and demonstrate confidence, which comes from having an in-depth and expert understanding of the problem.
• Try to find solutions through innovation. Situations like this demand more innovation and creativity than usual. Try to find potential triggers of the problem through unique approaches and analysis. Don't be afraid to experiment. In my case, I found value from using a new approach and combining it with interpretation, based on the context and existing hypotheses. Upon doing this, the root cause of the problem was clearly evident.
• Know your communication strategy. By this, I mean your strategy or approach of communicating your findings to the client and their wider stakeholders. You can take one of two approaches : the subtle approach or the 'hard facts' approach. Having done both of these (in two different situations), I think this is purely a function of the nature of the client. If your client is extremely skeptical and aggressive, you probably want to take the subtle approach! (Caveat: Ensure that the essence of the problem is not lost due to the subtlety). Our job as consultants is to accurately reflect the depth and breadth of our findings. 
• Finally, sell the problem as an opportunity. In every problem lies an opportunity. Make sure to communicate this to the client. Demonstrate how your identification of the problem could lead to better opportunities for improvement and re-assessment of some of the key strategies, which could potentially have tremendous long-term value for their business. In order to do this, we need to sell a solution, and not just report on the problem.

If we can follow the above, we can ensure that we not only solve our clients' toughest problems, but also ensure that they come back to us, when they have another one!

The trouble with Brand Value

Brands create value.

Let me re-phrase : Strong brands create value.

Brands create value not only for consumers, but also companies. I see this as a cyclical process - brands first and foremost, create value for consumers, and this then translates into value for companies. You just can't be profitable without delivering genuine consumer value.

Great companies know this. They find ways to re-invent their brands to ensure that consumers love and resonate with them. They do this through imagery (Mercedes Benz), building relationships (Nike) or even by creating experiential value (Apple). The marketing discipline has come a long way. Very few today would argue that brands are the pillars of strong consumer relationships and loyalty.

But the trouble with brand value is that it starts getting blurrier as we move through the funnel.

Kevin Lane Keller, one of the great brand thinkers of our generation has summarised this funnel pretty succinctly.

This is all well and good. But the model fails to acknowledge the difficulty in justifying linkage.

Consider this:

The impact of brands on consumer value metrics (awareness, salience, attachment, loyalty) can be measured fairly easily through primary research. In fact, advances in marketing mix modeling have made the second level of linkage (sales, profitability, ROI) possible too. But how can the perennial 'shareholder value' be justified by marketers ? Today's economic climate makes it necessary for marketers to justify linkage not only with sales but also with long-term shareholder value.

If a marketer invests $100,000 in brand building, what is the long-term impact on shareholder value?

The difficulty arises due to the long lag effect of most marketing outcomes (sometimes even years), making accurate linkage extremely difficult. There is no doubt that brands do create shareholder value (look at the long-term stock market stability of some of the great brand-companies, for eg. Procter & Gamble, and this will be clearly evident). But the trouble is in linkage. 

This is unarguably the biggest challenge facing marketers today. Many probably don't even realise it.

The four habits of highly 'effective' marketing companies

Ad Age's CMO Strategy column is one of my personal favourites. The content really resonates with the idea of this blog and what I am trying to capture with my writings. I read a recent article on Why Measurement Alone Will Not Lead To Better Marketing and I couldn't agree with it more.

However, the article stirred up a whole new set of thoughts in my mind i.e. what makes companies highly effective marketers?  Well, let's start by thinking about it this way : "You can't manage what you can't measure", and hence, the first step to effective marketing is measurement.

But how do we measure the impact of marketing? And, can we measure marketing? Marketing is not something that can be measured, there are too many variables involved, it is highly intangible, right?

Wrong.

I am a firm believer that good marketing practice starts from the belief that marketing IS tangible and marketing CAN be measured. It is a similar concept to winning the Olympics - it seems really difficult and sometimes highly impossible, but people win gold medals at the Olympics, don't they?

So how can we as marketers win gold medals i.e. clearly articulate the impact and value that marketing creates for the organization?

I am not going to propose a secret formula for success or a magic metric to follow, simply because there isn't any. But what we can follow is a set of guiding principles and then apply them to our business context to achieve maximum impact.

Principle 1 - Define:  Understand what marketing means to your company and what it is accountable for, both in the short and long-term. Is it short-term incremental sales, brand equity, bottom-line growth or even long-term shareholder value creation. This first step is crucial in laying the foundations of effective measurement.

Principle 2- Design: Select the right metrics that align with and allow the measurement of these objectives. Is it ROI, cash flow, NPV, share price or even simple metrics such as NPS (net promoter score), brand awareness, intention to purchase or sales? Once there is clarity on what is being measured, the battle is half won.

Principle 3 - Decipher: This is the tricky part. But how do we measure ROI or NPV? How can we be certain that X% to our revenue or profit can be attributed to Y marketing activity. We can't be certain. But what we can do is build hypothesis through an expert understanding of our business and make reasonable assumptions based on our historical experience and current context. So principle 3 is acknowledging that measuring marketing is all about smart hypothesis building & testing! No marketing mix model will yield results with 100% accuracy.

Principle 4- Deliver: The last but most important of them all. Measuring marketing is all about courage and perseverance. It needs senior-level support, buy-in and initiative. It needs alignment with all other functions in the company. It needs to be a shared responsibility of all. It needs continuous learning. And finally, it needs artistic flair (hypothesis, creativity in selecting approaches & processes) as well as scientific rigour ( decision tools, statistical & modeling expertise). One cannot be substituted for the other.

Let's embrace one, and the others will follow.