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Marketing performance measurement and management (MPM) is a term used by marketing professionals to describe the analysis and improvement of the efficiency and effectiveness of marketing.[1] This is accomplished by focus on the alignment of marketing activities, strategies, and metrics with business goals.[2] It involves the creation of a metrics framework to monitor marketing performance, and then develop and utilize marketing dashboards to manage marketing performance.[3][3][4][5]
Performance management is one of the key processes applied to business operations such as manufacturing, logistics, and product development. The goals of performance management are to achieve key outcomes and objectives to optimize individual, group, or organizational performance. MPM however, is more specific. It focuses on measuring, managing, and analyzing marketing performance to maximize effectiveness and optimize the return of investment (ROI) of marketing.[6] Three elements play a critical role in managing marketing performance—data, analytics, and metrics.[3]
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One of the core methodologies to measure marketing effectiveness is the collection of appropriate data.[3] The gathering of right types of data, and its accuracy, is crucial in measuring the marketing performance. Agreement between the marketing department and the senior management is important in selecting appropriate data to be collected.[1][7]
While data collection is relatively simple, a thorough analysis to make sense of collected data is critical. By thoroughly analyzing the data, organizations can gather actionable business insights to improve the marketing effectiveness and marketing efficiency. For example, organizations can use the analytics to drive the marketing return on investment, and make faster and better business decisions.[5]
One common use of these analytics is optimizing marketing spending by using market mix models--models that measure the impact of marketing activities, competitive effects, and market environment on sales of a product. The consumer packaged goods (CPG) industry extensively uses this method, and it is now being adopted elsewhere. These models use data to create a model that establishes the link between spend in various channels, geographies and so on with incremental sales. The concepts and tools of these models date back over 30 years. With the increased usage of the Internet, social networking sites, mobile advertising, and text messaging, interest in them is increasing. models.[5]
Measurement and metrics enable marketing professionals to justify budgets based on returns and to drive organizational growth and innovation. As a result, marketers use these metrics and performance measurement as way to prove value and demonstrate the contribution of marketing to the organization.[1][6]
Popular metrics used in analysis include activity-based metrics that involves numerical counting and reporting. For example, tracking downloads, Web site visitors, attendees at various events are types of activity-based metrics. However, they seldom link marketing to business outcomes. Instead, business outcomes such as market share, customer value, and new product adoption offer a better correlation. MPM focuses on measuring the aggregated effectiveness and efficiency of the marketing organization.[4] Some common categories of these specific metrics include marketing's impact on share of preference, rate of customer acquisition, average order value, rate of new product and service adoptions, growth in customer buying frequency, volume and share of business, net advocacy and loyalty, rate of growth compared to competition and the market, margin, and customer engagement.[4] In addition, MPM is used to measure the monitoring of operational efficiency and external performance.[1]
Operations performance metrics is a term used when organizations manage marketing functions as a business. Organizations committed to implementing MPM may create positions such as marketing operations director and marketing finance director. Program-to-people ratios, awareness-to-demand ratios, the cost vs lead, the cost vs sale, and conversation rates are the typical data collected and analyzed. Operational performance metrics, however, primarily provide the organization with a way to rationalize marketing investments, but do not correlate marketing to business strategy and business performance.
MPM tightly focuses on these operating measures to help marketers view how efficiently resources of the organization such as people, facilities, and capital are used. External performance measures aligned with business outcomes assess things such as the value an organization provides to customers or the performance of an organization relative to its competitors.[4]
By using a top-down approach, marketers develop metrics and specific performance targets known as key performance indicators (KPI).[6] First business decisions are made to define the scope. To create metrics and KPIs, marketeers involved in MPM try to first brainstorm on the business outcome that they are trying to impact. This is followed by asking the opposite questions that need to be answered to determine if the questions have an impact on this outcome, and the necessary supporting data required to answer these questions. After determining what data is needed, marketeers need to search for this data, and determine the decisions and actions that must to be enforced as a result of this data mining.
One way of displaying the performance measurements is with a dashboard.[8] The dashboard is where all data and metrics are collated and presented as useful information for the organization. Marketing professionals create these dashboards from metrics and KPIs. Organizations can then use this information to proceed with their marketing. In essence, a dashboard is a multilayered performance management tool that enables organizations to measure, monitor and manage business activity by using both financial and non-financial measures. The dashboard provides analysis into the progress of the organization toward achieving each defined objectives.[5]
A good dashboard consists of three layers:[5]
| Level | Function | Description |
|---|---|---|
| Executive level | Strategic level | Monitors and measures performance against business outcomes and marketing objectives |
| Operational level | Marketing management | Tracks performance of core marketing strategies and processes |
| Tactical level | Functions and individuals | Analyzes performance at project or activity level as they relate to the first two |
An ideal dashboard should show the progress of marketing, help assess productive areas, and help in the decision making. In addition, dashboards provide an indication on the value of marketing and also helps to align marketing with the business.[5]
MPM professionals develop closed-loop business processes for data collection, performance target setting, measurement and reporting.[1][5][9]
Processes must describe a document outlining the step-by-step actions that marketing must take to follow the process consistently. A valuable aid is the process map. Process mapping is a technique to create a clearly defined objective to meeting business results. It provides a systematic description of the actions taken by marketing personnel as they use a specific set of activities to produce a defined set of outcomes. It can also help identify skills the organization may need to implement the plan. In addition, an organization can use the process map to identify technology and training requirements. For organizations committed to implementing ISO 9001, process maps are an integral part of quality management.[1]
The marketing metrics continuum provides a framework for how to categorize metrics from the tactical to strategic. By navigating this metrics continuum, from activity-based to predictive, marketers can move towards more effective marketing measurement and align measurement and metrics with business outcomes.[5]
According to Marketing Metrics in Action: Creating a Performance-Driven Marketing Organization,[5] the creation of a performance-driven organization requires two elements: a set of standards and processes for identifying and accessing relevant data, and the ability to generate performance metrics from the data.[5]
A Forrester Research and Heidrick and Struggles study titled The Evolved CMO, found that 20% of the 115 chief and senior marketing professionals needed a further understanding in marketing measurement, customer relationship management (CRM), and customer data analytics.[10] Marketing professionals must be able to tap into customer information that enables them to provide a strategic guidance the organization requirements. This allows them to extend business into emerging markets and bring innovative products to market.[11]
Marketing professionals can then assess how to measure the impact of marketing on the business and translate the metrics to simple charts, data, and figures that the top management of the organization (CEOs, CFOs, and other CxOs) can understand.[5]
A United States-based study conducted by management consultants Bersin and Associates states that "today more than 40% of US corporations believe that 'driving a performance-based culture' is one of their top three talent strategies."[12] Cultures that foster an environment of teamwork and employee development, and resource empowerment achieve higher quality outcomes. Similar to other optimization processes (for example a six sigma quality management program), MPM requires a culture of accountability within the organization.[2] Without a disciplined approach, success of implementation of MPM to drive productivity would not yield tangible results.[1]
Stakeholders for MPM implementation include the Chief Marketing Officer (CMO), Chief Financial Officer (CFO), and marketing operations professionals.[5]
Marketing accountability of an organization lies with the CMO. CMOs are deeply involved with the MPM professionals to define marketing objectives, determine investments and prove the value of marketing in the organization. Marketing operations and analysis professionals are responsible for the creation of new metrics and processes to measure and improve operations performance. They are expected to evaluate and implement systems to improve marketing efficiency and effectiveness.[6] In addition, they are faced with the challenges of collecting data and analytics essential to the development, and the deployment of marketing dashboards and creating the marketing operations road map. The chief financial officer of a company or public agency is the corporate officer primarily responsible for managing the financial risks of the business or agency. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management. As marketing is a crucial vertical of any organization, the CFO is an important stakeholder for any marketing and other finance-related tasks.[5]