Executive Summary: An important subset of business intelligence is marketing analytics. These are data-driven processes, methods and techniques that serve to increase marketing’s efficiency and effectiveness. Much of this work is still based on traditional and non-technology influenced methods. That said, technology has an increasingly important role to play in supporting marketing optimization, improvement and accountability.

A gap remains, however, between a general understanding of what marketers need and do, and how technologists think and plan. This article presents a depiction of the current challenges in marketing analytics, how technology can play a significant role, and the analytic playing field that marketers need to address in today’s complex consumer world. We conclude with a description of an integrated marketing analytics process model that fits into a broader corporate business intelligence system. Support for this model is rapidly gaining acceptance as leading business organizations begin to integrate systems for collecting, storing and accessing data with tools, techniques and methods that marketers truly need to do their jobs.

Art Meets Science: The Challenge of Measuring the Impact of Marketing

It’s a question as old as business itself: How can an organization be sure it is spending the right amount of money on the right kind of advertising and marketing so that it can successfully impact and influence behavior and attitudes, and ultimately, sales?

To be sure, some marketers, especially those from data-rich firms focused solely on direct marketing, are able, in a stimulus-response fashion, to determine how responsive consumers are to an individual coupon or price reduction. But things are not that simple anymore. More than ever, the marketing discipline is art informed by science: most organizations still spend vast amounts of money trying to create awareness, shift attitudes or influence behavior and adoption of new products and services without knowing precisely the relationship between costs and effects.

These days, business leaders, chief marketing officers and the people who work with them are under increased pressure to make marketing more a quantifiable science and less an ephemeral ‘black art.’ Numbers-driven corporate leaders demand to know how efficiently their marketing dollars are being spent. New legislation is looming that will demand that marketers and advertisers are held more accountable. In response, a clarion call for marketing accountability (return on marketing investment) is emerging to help marketing and communications professionals address these pressing issues by enabling them to better understand how they can spend their dollars to obtain greater return on their marketing investments.

Marketing Optimization and Accountability Demand Better Tools and Methods

In the not too distant past, companies relied in large measure on anecdotal evidence, marketer’s experience and rudimentary tools to develop marketing strategies and tactics, implement them and assess their effectiveness. It was accepted that marketing costs money—a necessary evil. By contrast, Marketing Return on Investment (ROI) requires the use of proven measurement methods and statistical techniques to analyze and quantify marketing spending. But Marketing ROI is more than a statistical tool; it is a method that focuses on using a variety of analytic and measurement techniques at appropriate points in the process of optimizing marketing activities. 

There are a number of ways to do this. For example, a growing proportion of marketers are very interested in using their detailed marketing databases to infer the unique contribution to sales of disparate marketing factors. (See The State of Marketing Accountability, the Association of National Advertisers and Forrester Research, 2004 Report.) But relatively few are actually deploying or successfully using the complex, and often expensive, statistical modeling techniques that are being promoted today, due to poor data quality, integration costs and concerns, and spotty, less than relevant results.

But other quantitative marketing measurement, assessment and planning methods have evolved as well (some with generative bloodlines from the fields of agriculture, psychology and education), and the demand for them is growing. Complex statistical modeling has a role in looking at the big picture of marketing’s impact. But marketers also need to be able to look at the effect of their efforts at the campaign (or even individual) level, across all media and communication channels, and sometimes across many brands or services.

Measuring the Impact of Marketing

So how are marketers today measuring the “incremental” impact of marketing on changing attitudes, behaviors or the bottom line? The Longwoods Quadrant Map (LQ) depicts the four primary types of measurement that are used in marketing and advertising. (See Figure 1) While the features making up these types sometimes overlap, or may appear somewhat arbitrary, the distinctions are useful for framing the strengths and weaknesses of a wide variety of methods, tools and techniques being used to measure the impact of marketing:

• Description: The most basic forms of measurement take place at this level. Descriptive advertising and media tools are sometimes used erroneously to predict sales or sales behavior. As we will see, this is not only unwise, but can be a serious waste of money.
• Interpretation: The next level of research seeks to interpret basic measurement and observations of customer tendencies, intent or behavior. Much of marketing research’s work is done here, and, more often than not, results-to-action are weakly presented, sometimes based on experience, intuition or pure guessing. Also included here would be basic in-market tests, which are potentially valuable, but are often overlooked or ignored because of the expense associated with them.
• Explanation: The third level in the Longwoods map is the least used, in general, by marketers, yet is the most dynamic, actionable and understandable guide to the assessment and evaluation of the drivers of marketing’s impact. ROI Marketing test and control procedures allow for an understanding of the interactive effects of complex multi-channel marketing and communications programs while also linking the results of a campaign to the incremental dollars generated by that program. The outcomes of this method encompass description, interpretation and explanation and, indeed, feed the next level, which is prediction.
• Prediction: The final level, prediction, is the ultimate goal of many marketers. As mentioned, the ROI Marketing method is a generative force for this level. ROI Marketing focuses on gathering converging evidence for the success or failure of a marketing campaign, while also helping discriminate between success and failure factors. The final goal is construct validation, which is also an outcome of prediction. Note that this is achieved via an empirical method, as opposed to a class of techniques called econometric modeling, which attempts to discern and evaluate a ‘picture’ of reality. While valuable in their own right for overall marketing planning and ‘what-if’ decision making, models are not a substitute for direct, grounded testing and evaluation of what marketers do on a daily basis: create, plan and manage marketing and communications campaigns.

Figure 1: The Longwoods Quadrant Map (LQ)

The LQ distinguishes between subjective descriptive effects, and objective explanatory effects.  Much of traditional marketing research has (and still does) focused on describing and subjectively interpreting the impact of marketing (particularly media) communications. Thus, any linkage from here to accountability measures is more or less based on a leap of faith.

Recent advances in database technology, CRM/Business intelligence, and data mining techniques have unearthed highly sophisticated predictive modeling techniques that lie unconnected to the more experience-based, subjective quadrants in this framework. Relatively few (although this is slowly changing) firms are addressing the third quadrant that focuses on explicating the ‘what’, ‘why’ and ‘how much impact’ of marketing. Yet, this is where the most important insights and relevant guidance toward improved accountability can be found.

Putting Marketing Analytics on the Corporate Radar

Based on new business realities and demands for innovation shifts to improve the status quo, the need for a process-based approach to marketing performance evaluation and optimization is at hand. This is driven by the following points:

1. There is no ‘silver bullet’ tool or technique to handle the complexity and sophistication of today’s marketing realities.
2. Given that reality, and the challenges it brings, we suggest approaching marketing measurement, evaluation and optimization from a strategic, process-based analytic perspective. In this new framework, market research and measurement techniques and methods are infused at the proper strategic, analytic and tactical points to: (a) Optimize within the marketing function—whether it be at the campaign, flight or the customer level. (b) Enhance Accountability, by transporting accountability information, data and metrics outside of marketing and into the corporate business intelligence stream.

Figure 2 depicts a process-based analytic framework that powers a closed-loop marketing function and links marketing outcomes and ROI metrics to the larger corporate accountability and technology system. It has two primary elements:

     A marketing optimization element—a closed-loop analytic process that encompasses:

• The marketing campaign (strategy, planning, and tactics);
• Research designed and applied at the appropriate pre, post and long-term measurement points;
• An ROI Marketing method in place to link holistic marketing impacts to sales;
• Diagnostics and analytics to evaluate current, and optimize future, marketing campaigns; and
• An enhanced brand tracking component that moves beyond short of sales measures.

      An integrated marketing accountability element that links marketing metrics with corporate brand/finance valuation, business process measurement and executive reporting (business intelligence and key performance indictor [KPI] dashboards):

• Asset valuation: linking key measures of the brand (short of sales and ROI results) with corporate financials;
• Business process integration: linking marketing process flow and outcomes with other corporate functions/activities, such as customer service, supply chain, accounting, administration, balanced scorecard, etc.; and
• C-level reporting: creating, building, and populating corporate and business dashboards with integrated business performance management metrics.

 Figure 2: Optimizing Marketing and Linking Accountability to the Corporate Business Intelligence System

In essence, we have crafted a double closed-loop system that supports (in the inner loop) the continual optimization of marketing and advertising efforts at the campaign/flight level, while spinning off marketing metrics that can be linked to corporate-level valuations, business process management efforts, executive reporting of ‘metrics that matter’ across the company, and ultimately back into marketing resource planning and evaluation (the outer loop).  Thus, this framework supports the credible, valid and useful research designs found in testing, Six Sigma measurement, and Marketing ROI methods, while also providing a more appropriate platform for brand/finance metrics and forecasting calculations, mixture (portfolio and decision-support) modeling and enhanced brand/ROI tracking. Instead of vain attempts to force-fit a single ‘silver bullet’ solution, all of the powerful techniques and tools of research, measurement and statistics are subjugated to the process, and used where they can best serve the purpose: to drive, integrate or move the marketing effort forward to more efficient spending and effective outcomes; to higher-level corporate accountability and, ultimately, corporate valuation; and to loop back to inform large scale marketing program evaluation and planning.

Conclusion

As organizations begin to better understand the needs of marketers, and work to integrate technology and marketing science, business intelligence, as a force in corporate success, will continue to rise in importance. There are many pieces to the puzzle of what makes a successful business, and the solution requires mutual understanding and willingness to align and integrate powerful systems, processes and methods that drive business growth. 

Recent articles by Dr. Raymond Pettit

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