Performance Management Blog

Posts Tagged ‘Marketing Performance Management’

On measuring the performance of the Marketing department

Wednesday, July 20th, 2011

Source: Global Growth - jscreationzs

A performance report becomes functional by using KPIs that illustrate the business context and by which action can be identified or labeled worth trying.

When choosing a KPI it should fulfill one of the following categories (Shevlin, 2007):

To have the ability to explain. Do your KPIs help explaining why something has happened?
To be predictable. Can a KPI predict what will happen in the future within the company?
Behaviour change. The measurement of a KPI makes people to act or to behave in a particular way?

Some of the widely used KPIs for measuring marketing department’s performance are (smartKPIs.com, 2011):

% Brand awareness - Measures the rate at which target customers recognize and recall the brand.
% Customer retention - Measures the organization’s ability to create repeat business among its customer base. High retention indicates customer satisfaction is strong.
$ Customer acquisition cost - Measures how much it costs, in average, to acquire a new customer.
% Customer attrition - Measures the rate at which the customers stop purchasing the company’s products.
% Repeat customers - Measures the percentage of customers with repeat purchase behavior, from all customers. (more…)

Tags: Key Performance Indicator, Key Performance Indicators, KPI, KPIs in Marketing, Marketing Performance Management
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An overview of Marketing Performance Management

Thursday, February 3rd, 2011

Exploring the fundamentals for marketing performance management is an interesting journey, as it outlines the conditions that enhanced the adoption of a culture oriented towards performance in marketing and, not less important, the confirmation of marketing’s strategic role in organizations.

Investigating the specialized literature dedicated to marketing performance reveals at least three major directions that set the foundations for the discipline of marketing performance management:

The resource-based view (BRV) of the firm, a theory that is based on the following assumption: the purpose of any business is to create a sustainable competitive advantage, based on the existence of several core competences and their use at product / market level. Gaining a competitive advantage by delivering increased value to customers can lead to superior performance at both market (in terms of market share, customer satisfaction) and financial levels (shareholder value, return on investments) (Fahy & Smithee, 1999).
The development and proliferation of performance management and measurement frameworks that outline the limitations of using exclusively financial indicators in assessing and managing the performance of an organization. While the financial indicators are the ones that can reflect the ultimate outcomes of a company’s activity and can impact its very existence, they lack the ability to reflect relevant insights into the causes for poor performance. Such a framework is the Balanced Scorecard, one of the most popular performance management systems, introduced by Kaplan & Norton at the beginning of the ‘90s. Marketing metrics are generally found in the Customer perspective of Balanced Scorecards.
The emphasis pun on the idea of “marketing accountability”, in the context of marketing’s specific as an organizational function. For a long time, marketing has been considered a consumer of organizational resources that has had problems and imposed resistance when it came to proving the worthiness of that consumption. There are studies that reflect marketers are being perceived as ”expensive”, “untouchable”, “unaccountable”, “uncontrollable” and “bored with numbers” (Woodburn, 2004). To overcome this, the concept of marketing accountability has gained more and more attention, being defined by the American Marketing Association (AMA) as „the responsibility for the systematic management of marketing resources and processes to achieve measurable gains in return on marketing investment and increased marketing efficiency, while maintaining quality and increasing the value of the corporation” (AMA & Aprimo, 2005).

All these three developments have concurred to shaping marketing performance management, as a new paradigm in the marketing practice and research.

Note

For examples of performance indicators used in marketing performance management, visit KPIs in Marketing & Communications functional area on smartKPIs.com.

Source: smartKPIs Premium, 2010

References

AMA & Aprimo (2005), Marketing Accountability Study, White Paper, available at: http://www.tmcatoday.org/(accessed 2 February 2011).

Fahy, J. & Smithee, A. (1999), Strategic Marketing and the Resource Based View of the Firm, Academy of Marketing Science Review, Vol. 1999, No. 10, pp 1-21.

Woodburn, D. (2004), Engaging marketing in performance measurement, Measuring Business Excellence, Vol. 8, No. 4, pp. 63-72.

Tags: ama, American Marketing Association, Marketing Accountability, Marketing Performance, Marketing Performance Management, RBV, resource-bases view of the firm
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Measuring or managing marketing performance?

Tuesday, January 4th, 2011

Oftentimes, maybe due to the fact that increasing pressure is put on marketers to show in numbers the results of their actions and the budget they consume, companies strive too much to measure their marketing performance and forget or find it hard to actually manage it.

A CMG Partners and Chadwick Martin Bailey study conducted in 2009 has revealed some interesting findings that shed some light on the difficulties that marketers and CMOs face in their marketing management and measurement process, such as:

Only three quarters of the respondents consider they properly fructify the results of the measurement;
Some of the most common barriers in the measurement and management process are the poor ability to create alignment with other functional areas (especially sales and finance), the low commitment from top-management and resistance to change.

In such a context, a solution would be that of putting a greater emphasis on the process of actually managing performance, in the sense of properly planning, implementing and coordinating and only afterwards measuring and evaluating results.

Philip Kotler offers a comprehensive approach towards marketing management, as in the figure below:

The Strategic Planning, Implementation and Control process

Source: Kotler (2002)

It can be seen that measuring results is only one of the stages in the process, and that aspects such as planning (with contributions from other departments, such as the above mentioned sales and finance) or decision-making are at least as important as measuring and that all these stages are related.

As regards the control process, Kotler (2002) identifies for types of control, as it follows:

Annual plan control, that evaluates the extent at which the company fulfills the objectives established in its annual marketing plan (usually referring to market share, sales analysis, marketing expenses, customer portfolio etc.);
Profitability control, with regards to different markets, products, distribution channels or customer groups;
Efficiency control, in terms of advertising or promotional campaigns;
Strategic control, in the shape of marketing audits, marketing excellence or marketing ethics and social responsibility assessments.

References

CMG Partners & Chadvick Martin Bailey (2010), The Marketing Performance Advantage. Improving Effectiveness and Accountability, available: http://www.cmgpartners.com/userfiles/CMGP-CMB%20Marketing%20Performance%20Advantage%20-%20BMA%20presentation%20%283-16-09%29.pdf (accessed 6 January 2011).

Kotler, P. (2002), Marketing Management, Millenium Edition. Custom Edition for University of Phoenix, Pearson Custom Publishing, Boston, MA.

Tags: Marketing Control, Marketing Performance, Marketing Performance Management, Marketing Performance Measurement, Philip Kotler Marketing Management
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Improving marketing performance through marketing audits

Friday, November 5th, 2010

In the context of managing and improving marketing performance, the concept of marketing audit should play an important role as a comprehensive process of diagnosing and improving the marketing systems, processes, tools and principles an organization has currently in place.

The concept of marketing audit has been introduced by Philip Kotler in his ‘The Marketing Audit Comes of Age’ article, in which he describes the process, its roles and its benefits. In 1959, the American Marketing Association published the ‘Analyzing and improving marketing performance‘ report, which provided some practical guidelines for marketing auditing (Taghian & Shaw 2002).

Since its introduction, many things have changed in the global market place and aspects such as technological enhancements, shifts in customer demands and globalization have made the marketing capability more vital than ever. However, even now there is no unanimous understanding of what a marketing audit would consist of, what would be the areas of intervention and the steps needed to conduct the process of auditing itself. In other words, the marketing audit did not succeed in positioning itself as a standardized process, like in the case of the financial auditing, for example, where rules and processes are widely agreed and confirmed by codes of practice and regulations establishing the profession of financial auditor.

Kotler, Gregor and Rogers (1989) suggest six components of a marketing audit, as it follows:

Marketing environment, both at micro and macro levels. The purpose would be that of identifying opportunities and threats and particular tools would be the SWOT and PEST analyses or Porter’s five forces model.
Marketing strategy and correlation of the company’s objectives with its environment.
Marketing organization, in terms of marketing interaction with other functional areas (such as manufacturing, R&D, purchasing etc.).
Marketing systems that are in place to enable data gathering, marketing planning and controlling (i.e. marketing intelligence and decision-making systems).
Marketing productivity, which connects marketing to finance and accounting, this being the area where Key Performance Indicators would be compulsory to use.
Marketing function, such as sales or advertising.

Source: Practice-Reps (2010)

According to the same authors (1989), three cautions have to be considered in deploying a marketing audit:

Setting the right objectives for the marketing audit, agreed upon by the auditor and the company officer;
Data collection that might be subject of resistance from managers that feel threatened by the audit;
Presentation of results, that might not always meet the company’s expectations of improvement as these might have been set far higher than possible in that current state (click on the image for an example of a summary of a marketing audit report in the medical practice).

Although conducted by an external auditor in most cases, the marketing audit requires a great implication from all internal stakeholders. For example, in-depht in interviews might be conducted with the marketing staff and people from the other departments. Thus, one of the major benefits of the marketing audit relies in the experience of participating in such a process itself, enabling marketing specialists to improve their own capabilities, benefit from new knowledge and insights from maybe more experienced marketers than themselves.

References

Kotler, P, Gregor, WT & Rogers, WH 1989, ‘The Marketing Audit Comes of Age,’ MIT Sloan Management Review 15 January 1989.

Practice-reps.com, Marketing Report example, available at: http://www.practice-reps.com/Practice-Reps_Marketing-Report-Example.pdf (accessed 5th November 2010).

Taghian, M & Shaw, RN 2002, ‘The Marketing Audit and Business Performance: An Empirical Study on Large Australian Companies’ in Australian and New Zealand Marketing Academy Conference (ANZMAC) 2002 Conference Proceedings, Melbourne.

Tags: American Marketing Association, Analyzing and improving marketing performance, Five Forces Model, Marketing Audit, Marketing Environment, Marketing Performance, Marketing Performance Management, Marketing Strategy, Marketing Systems, PEST Analysis, Philip Kotler, SWOT Analysis, The Marketing Audit Comes of Age
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Marketing Performance – a review of instruments and models (II)

Tuesday, September 21st, 2010

Continuing the brief incursion in the most widely known instruments and models used in managing and improving marketing performance, today’s post explores two concepts traditionally used in a strategy management context: the SWOT analysis and the PEST analysis.

Both instruments are used in relation to the marketing environment, which consists of the following levels:

Internal environment – it is made of the internal forces existing in all organizational functions.
External environment – it is made of the forces from outside the organizations, that form the:

Micro-environment – forces that can influence and can be influenced by the organization;

Macro-environment – forces that influence the organization’s activity, but in respect to which the organization can only react and adapt.

Both the SWOT and the PEST analyzes make an evaluation of the organization’s environment, but from two different perspectives:

A. The SWOT analysis captures both the internal and the external environment (at both micro and macro levels). The emphasis is put on identifying and analyzing the following aspects:

Strengths – which are the organization’s main advantages in terms of internal capabilities;
Weaknesses – which are the organization’s main weak points, such as the lack of certain internal capabilities or their low performance;
Opportunities – which refer to trends, ideas, developments or other external aspects that could bring an advantage to the business;
Threats – refer, on the contrary, to external forces and developments that could damage the business if not addressed.

So, the SW part of the SWOT analysis focuses on the internal marketing environment and the OT on the external marketing environment. From the point of view of the OT, a business can fall into one of the four categories:

Mature business (if it deals with low opportunities and low threats)
Speculative business (if it deals with high opportunities and high threats)
Problematic business (if it deals with low opportunities and high threats)
Ideal business (if it deals with high opportunities and low threats)

B. The PEST analysis focuses only on the external environment, more precisely on the forces that influence businesses and industries at a macro level, thus it can be considered a part of the SWOT analysis which puts a great emphasize on the following four macro forces:

Political: trade agreements, trade regulations, marketing ethics etc.;
Economic: income levels that influence the buying power, interest rates, growth forecasts etc.;
Sociocultural (these are considered to have the most powerful and resistant influence on consumer behavior): consciousness to environment protection, the role of women in the society and in purchase decisions etc.;
Technological: inventions and patents, communication mediums etc.

Both SWOT and PEST analyzes are useful as their regular employment can reveal vital information for the business, both in terms of internal and external developments. Further on, these informations can be used in decision-making and execution, helping organizations get the best of their actions and opportunities on the market.

Tags: Marketing Environment, Marketing Instruments, Marketing Performance Management, PEST Analysis, SWOT Analysis
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Marketing Performance Management tools

Monday, August 9th, 2010

Marketing has been for some time one of the core organizational functions. Especially in today’s competitive global economy, the marketing capability is vital for success. As a result, Marketing Performance Management is gaining importance on marketers’ agendas, from both improvement and accountability perspectives.

The Marketing Science Institute from USA has ranked marketing accountability, ROI (return on marketing investment) and MPMS (marketing performance management systems) among the top 10 priorities in marketing research since 2002 and as top-priority for 2008-2010 (Lamberti & Noci, 2010).

Source: Kennedy (2006)

Marketing Performance Management has several dimensions, depending on the perspective of the measurement (whether it regards marketing results for the organization as a whole, or performance within the marketing department) and depending on the aspect under evaluation (whether it is branding, customer etc.).

Two of the most popular marketing performance measurement tools are:

Marketing Scorecard – contains KPIs that the marketing function uses to assess performance of the department as an entity in itself. It outlines the objectives of the function and their corresponding KPIs, grouped by perspectives (such as the traditional Balanced Scorecard ones).
Marketing Dashboard – contains KPIs that reflect the results of the marketing capability at organizational level, such as aspects related to the market position, customer analysis, brand dimensions etc. Marketing Dashboards can also be developed for specific aspects of the activities, such as Customer Dashboard or Brand Dashboard.

A Customer Dashboard can be organized around aspects such as, among others:

Dynamics in customer portfolio (common KPIs would be: % New client ratio, % Customer retention etc.)
Customer satisfaction (% Customer satisfaction with new products and services, % Customer complaints due to quality of services etc.)
Customer Behavior (% Repeat customers, # Average lag time between customer purchases etc.)
Profitability and cost analysis ($ Customer profitability, $ Average acquisition cost etc.)

Having these things clearly streamlined is very useful when organizing the Marketing Performance Management system and architecture, as it helps focusing on the most relevant aspects and organizing data in a structured and articulated manner.

References

Kennedy, N 2006, Google marketing principles, available at: http://www.flickr.com/photos/niallkennedy/102935116/ (accessed 9th July 2010).

Lamberti, L & Noci, G 2010, ‘Marketing strategy and marketing performance measurement system: Exploring the relationship,’ European Management Journal, vol. 28, pp. 139-152.

smartKPIs.com, Key Performance Indicator Examples in Marketing & Communications Functional Area, available at: http://www.smartkpis.com/kpi_examples/dashboard/ (accessed 9th July 2010)

Tags: Marketing Accountability, Marketing Dashboard, Marketing Performance Management, Marketing ROI, Marketing Science Institute, Marketing Scorecard
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Metrics for assessing and improving customer loyalty

Tuesday, August 3rd, 2010

Customer loyalty has been for long time one of the main areas of focus for marketers. Although arguable in some cases, it is widely mentioned that usually the costs of dealing with existing, loyal, clients are significantly lower than the costs for attaining new customers. Thus, retaining and increasing business with existing customers is top priority on marketers’ agendas, nearly in all industries and organizations of all types and sizes.

Many resources exist on the issue of customer loyalty, researching aspects such as the factors driving loyalty, the benefits of having loyal customers and how can loyalty levels be assessed and improved.

In this context, “The Wise Marketer” (a website specialized on customer loyalty) reports on loyalty strategies, principles and best practices, by the means of the Loyalty Guide that reached the fourth volume in 2010.

The Loyalty Guide outlines that customer loyalty strategies and initiatives need to be supported not only in the planning stages, but also during implementation and development (The Wise Marketer, 2010). The same source argues that applying solid mathematics, statistics and scientific measurement is the only way to assess the impact the program is likely to have on profitability and the customer base.

It is argued that customer loyalty itself can be difficult, sometimes impossible to be measured with accuracy, as it involves a high degree of subjectivity and emotions (The Wise Marketer 2010). However, performance measures should be defined or selected in order to assess sub-parts or expected effects of customer loyalty (such as the impact on profits).

Source: The Wise Marketer (2010)

The Loyalty Guide suggests several measures to be employed in this context (The Wise Marketer 2010), some of which we invite you to explore on smartKPIs.com:

Additionally, smartKPIs.com contains other customer loyalty metrics you can find useful in your customer engagement initiatives, such as:

% Account expansion – to see how the loyalty translates into increased business with customers
# Price elasticity – that will help assessing the extent at which customers are loyal when having to face a raise in prices
% Customers participating in loyalty programs – to monitor how well your loyalty programs are welcomed among customers
% Sole usage – a very important measure of customer engagement, indicating how much of the customer base does not buy at all from competition
$ Average retention cost – it helps you track how much it costs to retain clients and whether you do it in a profitable manner

To explore further examples of KPIs used to measure customer loyalty, engagement, segmentation and profitability, visit the Key Performance Indicator examples for Marketing & Communications Functional Area available on smartKPIs.com.

References

smartKPIs.com 2010, Key Performance Indicator examples in Marketing & Communications Functional Area, available at: http://www.smartkpis.com/kpi/functional-areas/marketing-communications/ (accessed 29th July 2010).

The Wise Marketer 2010, The Loyalty Guide 4 – Executive Summary, available at: http://www.theloyaltyguide.com/executive-summary.asp#metrics (accessed 29th July 2010).

Tags: Customer Engagement Metrics, Customer Loyalty Performance Measures, Loyalty Guide, Loyalty KPIs, Marketing Performance Management, The Wise Marketer
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The roots of Marketing Performance Management – An investigation in the context of its emergence

Saturday, May 1st, 2010

Literature reveals that the influence of Marketing on firm performance, especially on the bottom line, has been extensively explored, mainly from a resource-based view (RBV) perspective (Hooley et al. 2005; Fine 2009; Nath, Nachiappan & Ramanathan 2010). It seems natural to estimate that Marketing (no matter its forms: Market Research, Marketing mix etc.), as long as it generates sales, impacts in a positive manner the bottom line.

Moreover, there have been attempts to prove that customer satisfaction influences the stock prices, although economists and analysts commonly make limited use of this kind of data when projecting stock performance, and suggest firms should report forward-looking customer metrics (customer equity statement) (Fine 2009), because financial indicators have a lagging, not a leading perspective.

Source: Wikimedia Commons, 2010

The fundamentals for measuring Marketing results are therefore thought to rely on the very specific nature of Marketing as an organizational function. Just like the Human Resources function, Marketing was long considered to be a consumer of organizational resources, mainly financial, that wasn’t able to prove the worthiness of that consumption. David Reibstein from Wharton Business School, Jason Pashko from Accenture and Jeff Levitan from SAS discuss this issue in a webcast in 2007, arguing the replacement of “old age marketers”, that wanted to be left alone, stating that their activity was all about creativity and not agreeing with budget accountability with “new age marketers” that in order to be controllers and investors of assets present results in shape of metrics to prove they do their job well. One trigger that enhanced the extended use of performance measurement in Marketing was the development of technology and new business models that allow organizations to capture much more data on the market (Reibstein, Pashko & Levitan 2007).

Another context, besides that of accountability, mentioning the measurement of Marketing performance was the one dealing with improvement of Marketing practices and processes. Such a context can be found in a benchmarking initiative of the Marketing process. The benchmarking process is described by experts as a multistage approach, commonly consisting of the following three levels: identification of the best performers, setting the benchmarking goals and implementing changes. Performance measurement of Marketing appears in the second and the third stages: in order to set benchmarking goals, companies measure their own productivity against productivity of the leaders and during implementation, companies use indicators to track the progress in reaching the benchmarking goals (Donthu et al. 2005).

It is argued that commonly, a benchmarking tool needs to be focused on a single measure of overall efficiency or productivity that can be computed for the firm and compared with competitors. However, a more robust approach is by analyzing multiple inputs and multiple outputs that can provide feedback regarding areas with need for improvement (Donthu et al. 2005). For example, if the overall benchmarking measure would be the level of customer satisfaction with complaints handling, several inputs and outputs to be analyzed in this context would be the following:

# Time to resolve customer complaints (output),
# Investment in customer support infrastructure (input),
# Customer support staff (input),
# Complaints backlog (output),
% Times where customers with handled complaints were courteously recalled (output) etc.

The belief that Marketing influences firm performance and recent Marketing developments impose raised Marketing accountability and continuous improvement of the Marketing capabilities. Marketing Performance Management (MPM) has emerged as a new area of Marketing to deal with “measuring, learning from, and improving upon marketing strategies and tactics over time” (CMG Partners & Chadwick Martin Bailey 2009).

References

CMG Partners & Chadvick Martin Bailey 2009, The Marketing Performance Advantage. Improving Effectiveness and Accountability, viewed 3 May 2010, <http://www.marketingperformanceadvantage.com/>.

Donthu, N, Hershberger, EK & Osmonbekov, T 2005, ‘Benchmarking marketing productivity using data envelopment analysis,’ Journal of Business Research, vol. 58, pp. 1474– 1482.

Fine, LM 2009, ‘The bottom line: Marketing and firm performance,’ Business Horizons, vol. 52, pp. 209-214.

Hooley, GJ, Greenley, GE, Cadogan, JW & Fahy, J 2005, ‘The performance impact of marketing resources,’ Journal of Business Research, vol. 58, pp. 18– 27.

Nath, P, Nacchiapan, S & Ramanathan, R 2010, ‘The impact of marketing capability, operations capability and diversification strategy on performance: A resource-based view,’ Industrial Marketing Management, vol. 39, pp. 307-329.

Reibstein, D, Pashko, J & Levitan, J 2007, Marketing Performance Management: The Key to Accountability webcast, viewed 3 May 2010, <http://www.bettermanagement.com/seminars/seminar.aspx?mode=play&L=14518>.

Tags: Benchmarking, Customer Equity Statement, David Reibstein, Marketing Performance Management, Resource-Based Perspective (RBP)
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