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Marketing Metrics: Where to get them? Which ones work?
Local marketers say metrics are key to credibility and client success.
Numbers rule. More than ever, marketers are being pressured to deliver hard data on how their efforts increased the company's bottom line. In these days of lean profits and leaner budgets, a focus on metrics can mean the difference between a marketing department that's considered highly valuable and one on the brink of extinction. Want proof? Research giant IDC recently surveyed senior marketing executives in IT companies to determine their priorities for 2003. Measuring and justifying their efforts and steering marketing initiatives towards tangible results were at the top of their lists.
There's less agreement, however, on which metrics truly demonstrate ROI and, more importantly, how to get them. The Advertising & Marketing Review wanted local marketers' views on justifying the value of their work to management or clients. We asked four marketers about how they measure return on investment: Laurie Lavelle, CBC, MarCom/Advertising Manager, Arrow Electronics, North America; Ron Kahan, President, Ariss Kahan Database Marketing Group; Ken Sabey, Account Executive, HostWorks; and Lyla Hamilton, Director of Marketing, SageCircle. Their answers appear below.
Arrow Electronics
Arrow Electronics is the world's largest distributor of electronic components and computer products and a leading provider of services to the electronics industry.
Justifying the value of the work we do within MarCom on behalf of Arrow Electronics and Arrow's supplier-partners to management is an ongoing effort. In the last seven years that justification has changed to a more measurable, quantitative justification. Prior to this it was a "softer" justification and not looked upon as critically as it is today. We typically use the full spectrum of marketing communications tools, however for this article I'll focus in on our direct marketing efforts.
How do you determine the objectives of the marketing effort?
We use several methods depending on which type of project we're doing. If it's a product direct marketing effort (print, web or sales walk-in) we meet with the appropriate Arrow and supplier-partner marketing teams to determine what their overall goal is and align the marketing communications stimulus back to the overall objective/goal. An example of this would be: marketing needs to increase analog device sales by 10% over the next two business quarters and we can gain this extra 10% through existing customers that we identify as a viable target utilizing our in-house database. So, to determine the objectives of the effort we go to the heart of the request - if marketing approaches us to do a mailer, we dig deeper to find out what the underlying business goal is and then we make the determination if a mailer is the appropriate communications medium to meet this goal.
What metrics do you use to determine the effectiveness of the effort?
Sticking with direct marketing as an example, we use several metrics to determine effectiveness of our efforts. We measure just about everything that can be measured from a direct marketing effort. Specific examples of measure:
- Overall response rate to the media
- Percentage of completed/fill-out bingo cards/reply cards
- Hits to landing page (we drive responses through our web site)
- Referral links from landing page to other informational web pages
- Cost of the effort
- Return on Investment - cost calculated against leads and/or business brought in
- Number of product/design registrations (a registration is a confirmation of future purchase of product; this is quicker to measure usually than the actual placed order since that can be a long cycle in many cases)
- NSB (Net Sales Billed)
- If the effort is directed at existing customers we'll measure any additional business or market share; if the effort is directed at new prospective customers we'll measure quality of lead and this is done usually through our call-out/telemarketing account development group.
- In a broader sense we use the branding surveys that the industry publishes each year to measure Arrow's brand awareness. We look at the overall branding results and tie those back to all marketing activities for that year (direct marketing, advertising, promotional activities, sales tools, etc.)
Do you choose certain media because they are more measurable and if so, which ones?
We do choose a certain medium in most cases and that is direct marketing print mail/materials (either directly mailed to customers or prospects, or sent to our field sales representatives to hand deliver to customers or prospects). The print mailers almost always direct the recipient to respond via our web site. We have developed a process in which this is a much faster to deliver fulfillment and follow-up on the leads. We do utilize other methods, however in most cases we still use print direct mail in combination with web-related response capture. In 75% of our print direct mail efforts we also integrate with internet e-mail messages to reiterate messaging and give target audience another, convenient way to "click over" and respond - just in case they missed that printed piece!
What are the first steps you take to make sure marketing activities are measurable?
1. Understand the goal/objective behind the requested marketing activity.
2. Once the objective is understood, choose correct marketing activity for the goal.
3. Outline the measurable components of the marketing activity.
4. Communicate clearly to marketing teams and management what will be measured, how often, and in what format/reporting.
5. Commit and uphold commitment to reporting and reporting schedule.
What types of metrics are hard to obtain and how do you get around the problem?
Final sales information on a specific product if it were not a registrable product. Some products are more commodity-type products and do not have a registration program through Arrow or the supplier-partner, therefore it makes it difficult to measure the marketing activity directly back to sales numbers. We get around this problem by identifying this type of product and campaign upfront during the planning process and agree with the marketing teams that other metrics will determine success or failure of marketing activity. The other type of metric that is some times difficult to obtain is lead follow-up information from the field. Again, we get around this problem by determining upfront if this metric is important and if so we develop a process to get the field to respond - or we measure something tied to the field activity in order to obtain our metrics.
Has having solid ROI data helped you gain (or keep) your marketing budget?
To sum it up in one word, yes. This is especially true when it comes to keeping or obtaining new budgets from our supplier-partners.
Yes and no. Our marketing communications group is divided between New York, Denver and California and my group here in Denver and California concentrates almost 100% on direct marketing efforts for Arrow and our suppliers. The New York group is split between promotions, meeting planning, media placement/scheduling, newsletter production, presentations, video production, and administrative. The Denver group has not been affected by the recent lay-offs, however the New York team has been. I believe this is due to the nature of the work that we do here and the fact that it is ROI-based, and unfortunately the New York team works on projects that don't have ROI closely tied to what they're doing.
Ariss Kahan Database Marketing Group
Ariss Kahan Database Marketing Group provides a complete complement of integrated database marketing services extending from database development and project management to print production, mail distribution, response tracking and analysis.
How do you determine the objectives of the marketing effort?
Marketing and sales objectives are set at Ariss Kahan by a cooperative account team comprised of client and agency personnel. Building a history of the client's past marketing strategies, objectives, implementation and experience (results) as well as researching the industries are our first work-effort towards defining objectives.
History, when not always readily available through results tracking, can be assembled electronically by accessing sales/accounting data from a client's operational system(s). This may or may not include enhancing the data with commercially available marketing data. Obviously, this portion of our research is not possible if the client doesn't have the history (i.e. new company or category).
As a precursor to this, we like to have an understanding of the client's expectations. In a number of instances, we need to advise the client to re-adjust their expectations based upon the results of the Information Gathering and Assessment phase of the engagement.
What metrics do you use to determine the effectiveness of the effort?
The metrics or analytical techniques employed are variant depending upon the objectives. And being that we are a database marketing company, many of our techniques are proprietary, as this is a large part of Ariss Kahan's unique selling proposition. Suffice it to say that we perform response and profitability analysis on our programs and campaigns, as well as acquisition, cost-per-sale, and lifetime value of the client's customer base, each down to the product or service offering (SKU) level.
Do you choose certain media because they are more measurable and if so which ones?
At Ariss Kahan, the large majority of what we do is direct response, which is inclusive of every media, if you know how to plan and set-up the tracking on the front end. I dislike the phrase "back end tracking", because it needs to woven into the effort from the front end, or it's not happening --- at least not well.
What are the first steps you take to make sure marketing activities are measurable?
Again, database marketing is all about leveraging intelligent data. Because data is such an integral part of what we do, we have a Data Pathing process which maps-out how responses will be captured, responded to and acted upon. A good data path will extend beyond an initial sale and encompass the entire experience/relationship between the responder and the client organization.
What types of metrics are difficult to obtain and how do you get around the problem?
The biggest issue regarding collecting response metrics involves the client's willingness, ability and access. The most consistent difficulties are in the industrial manufacturing category when you're dealing with convincing manufacturing representatives to take time away from selling and collect data. The organization needs to prove, with assistance, that their ability to sell, and therefore, generate income, is enhanced by the data collection process, or this leads to head-held customer information. When the data collection process breaks down, the remaining option is to pull data from the operational systems to perform the effectiveness analysis.
Has having solid ROI data helped you gain (or keep) your marketing budget?
Constantly.
Has the lack of ROI data resulted in budget or staff cuts?
This is, of course, at the center-point of Ariss Kahan's frustrations working with unenlightened clients who do not track ROI. Our biggest cause of client loss is when they don't track and we have no qualitative facts to discuss on improving the process. Luckily, this is also the exception with our clients. Usually a company doing business with a database marketing firm quickly comes to understand the critical nature of data collection. But, we still adhere by that old advertising/marketing adage:
"You can lead a client to water, and then you need to push them in."
HostWorks
HostWorks supplies Internet products and services to clients in over 60 industries throughout the United States and Europe. The company provides shared, dedicated and collocated web hosting, managed web services, custom web site development and software products.
How do you determine the objectives of the marketing effort?
HostWorks meets with the client to discuss the project. The project will usually entail creating a new web presence where one didn't exist before, re-building a currently existing web presence or adding new features and functionality to a currently existing web presence. During this meeting HostWorks, with the help of the client, will determine:
- Provide a summary and definition of the project.
- Identify the target audience for this project.
- Define main goals for this project.
- Provide examples of similar web sites where you like the look and feel and/or any navigational elements.
- What are the requirements for this site, such as corporate colors and standards, logos, layout, photos, screen size, download size and ease of use?
- Your organization will benefit from this project because:
- Your users will benefit from this project because:
What metrics do you use to determine the effectiveness of the effort?
In our industry, web site traffic reporting tools such as WebTrends are the number one tool for determining the effectiveness of a project. These log analyses tools, when interpreted correctly, can provide a client with an amazing amount of information on how the site is being found, how it is being used and whether it's reaching the intended audience.
Log analysis tools can also be used effectively for measuring the results of an email campaign. Currently HostWorks provides its clients with the following information at the end of every email campaign that it manages:
- Number of emails broadcast
- Number of emails opened
- Number of click-throughs (links embedded in the email that send the user to a web page)
- Number and list of email addresses that were bounced and reasons why: invalid, duplicate, unrecognized and blocked
Do you choose certain media because they are more measurable and if so which ones?
HostWorks deals only in the Internet media because of its business model. Most of the time the projects we do for clients are not standalone, but part of a larger campaign that might contain elements of advertising, direct mail and promotions. The client relies on us strictly for the reports that were described in our answer to question number two.
What are the first steps you take to make sure marketing activities are measurable?
The best example of the kind of preparation that we take before launching a project would be to focus on the email broadcasts that we provide a number of our clients.
The first step is for the client to provide us with the list of email addresses and the content of the email message itself. This message can be either text or HTML or both. HostWorks will then check all of the email addresses and eliminate any duplicates or invalids. At the same time we will look over the email message and provide any feedback on deliverability: issues such as recipient compatibility to receiving the message and spam blocking filter issues.
HostWorks will then take a graphic or even a single character from the message and put it on one of our servers. When the email message is opened, our logs capture the transfer of this graphic or character and that is how we measure how many times the email has been opened.
If the email had any links in it, then HostWorks will redirect those links to go through one of our servers first, then on to its intended destination page. This is invisible to the person clicking on the link within the email, but HostWorks can track that activity for the client.
The email is then sent to a test group and after its approval it is broadcast to the email list. About a week later, HostWorks will tally the bounced emails to then deliver the final report to the client.
What types of metrics are difficult to obtain and how do you get around the problem?
We have clients who want to know exactly who visited their site and where the person is located geographically. Software such as WebTrends cannot provide that type of data on a reliable basis since the Internet is so vast and can route a site visitor literally all over the world. We are now building applications within client web sites that allow visitors to register with the site. This works well for both the registered user and the client. The registered user obtains valuable and timely information such as jackpot alerts from the Colorado Lottery or snowfall amounts from Eldora Mountain Resort and the client begins building a database of qualified site users and can effectively market to them.
Has having solid ROI data helped you gain (or keep) your marketing budget?
The Colorado Lottery is a key client for HostWorks. Since we launched their new site two years ago, the site traffic increased to the point that it is now one of the highest trafficked sites in Colorado. Since launching the MyLottery feature the Lottery has now had success in creating its first ever players database that the Lottery is now marketing to via promotions and contests. The Lottery has signed a multi-year contract with us to continue expanding on these projects because of the specific data that they were able to receive on the success of the new site.
SageCircle
SageCircle delivers specialized business intelligence to information technology and telecom companies that sell to the Fortune 2000 and large government agencies. SageCircle's mission is to help technology providers drive sales through effective Analyst Relations. Editor's Note: SageCircle's clients measure effectiveness in terms of favorable recommendations of technology analysts who influence end user purchases. Therefore, this response focuses on how Sage Circle's clients measure the effect of analyst relationships on their businesses.
What metrics do you use to determine the effectiveness of marketing efforts?
SageCircle delivers specialized business intelligence to information technology and telecom companies that sell to the Fortune 2000 and large government agencies. Customers of these technology providers rate industry analysts the number two influence on purchasing decisions. (Peers are first.) Since the analysts influence up to 80% of their sales, these technology providers must monitor and shape analyst opinions to achieve and maintain competitive advantage.
SageCircle's flagship offering is SageTrack, a business intelligence service that captures influencer opinions in near real-time. The content resides in a dynamic database, making it easy for users to detect and demonstrates shifts in analyst opinions attributable to "influence the influencer" initiatives-and hence, ROI.
Timely intelligence from SageTrack allows technology providers to inform and assist their sales executives when an analyst opinion provides an opportunity for a relationship-building contact with a key prospect or puts a deal at risk. In addition, customers use SageTrack to monitor influencer opinions on emerging technologies, competitors, and high-level customer requirements.
SageCircle account executives use the company's copyrighted ROI model to demonstrate to prospects the importance of influencer-based initiatives and to estimate the impact of SageCircle's products and services on their effectiveness. They can use assumptions drawn from our extensive primary research or customers can suggest their own. The SageCircle ROI model incorporates a variety of potential "returns" for the technology provider. These include leads generated by analyst referrals and sales cycles accelerated by favorable analyst involvement. SageCircle clients have used a variant of this ROI model to set corporate objectives and to make the case for additional staffing and funding to support "influence the influencers" initiatives.
What types of metrics are difficult to obtain and how to you get around the problem?
In addition to providing formal ROI models, SageCircle trains its customers to create cross-functional processes to gather anecdotal evidence about the impact of influencer strategies on sales. One SageCircle client can directly trace a $400M deal to an analyst recommendation. Another was able to save a $35M deal through swift tactical response when an industry analyst excluded the company from a list of vendor candidates he prepared for a client.
Conclusion
These responses underscore an important point: that solid metrics drive the perception of value. Marketers are increasingly turning to media and methodologies that yield metrics such as direct marketing and the Web. However, there's more than one way to illustrate value, as SageCircle's anecdotal evidence shows. To ensure that the metrics will be there, develop measurable objectives from the outset, meticulously track costs and results, and report them to management and clients. The return on your time and efforts will be well worth the investment.
About the Authors
Lyla Hamilton
Lyla D. Hamilton is Director of Marketing at SageCircle. She previously served on the management team of an enterprise software startup that raised $11M in venture capital during the high-tech doldrums of 2000-2001. Lyla co-directed the worldwide product launch that enabled Convex Computer Corporation, an emerging supercomputer manufacturer, to sustain 50% annual growth.
Ron Kahan
Ron Kahan is president of Ariss Kahan Database Marketing Group which he founded in 1994. He is active within the marketing industry and is currently president-elect of the Business Marketing Association's Colorado Chapter. He is past president of the Rocky Mountain Direct Marketing Association (RMDMA). Kahan was named Direct Marketer of the Year by the RMDMA and presented with the much-coveted Grand Eagle award in 1999. In 2001, the company he co-founded was awarded the Supplier of the Year Eagle award from the RMDMA
Laurie Lavelle
Laurie Lavelle is a marketing and marketing communications professional with over 15 years' experience. Currently she is the Marketing Communications Manager for Arrow Electronics, Inc., North American Components Division based in Denver, Colorado. She has held various positions within marcom at Arrow for the last ten years both in New York and Denver, including direct marketing, advertising, creative design, and project management.
Ken Sabey
Ken Sabey is an account executive with HostWorks. He has been involved in providing Internet solutions to businesses since 1995. Ken helped start an Internet Service Provider that setup rural towns in Oklahoma with their first Internet access and web site hosting options. Later, he joined Verio where he helped companies gain high speed Internet access and develop dynamic web sites.
Compiled by Pam Greenberg, President, Marketing For Hire
Pam Greenberg specializes in writing, marketing project management and marketing consulting. She is a frequent contributor to the Advertising & Marketing Review as well as other business and trade publications. She is BMA's 2003 Communicator of the Year.
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