On the Origin of Marketing Initiatives by Budget Allocation

Marketing is getting better at measuring itself.  The switch from broadcasting messages one to many, to one to one messaging we are often capable now of has made possible granularity we never even dreamed of ten years ago.  At CSG, we have been willing participants in this march and continue to measure everything we can.  We collect dozens of data points on each individual interaction with customers and partners, aggregate the data into campaigns, roll up campaigns into initiatives, and slice and dice and evaluate with the best of them.  However, it is probably a good idea to back away from this mountain of measurement every so often to gain a little bit of perspective. 

We should be asking: What impact does an obsession with measurement have on creativity and new initiatives?  At its root, measuring enables decision making.  The decisions made are usually about budget.  Marketing efforts that turn in good numbers get more budget, and those that do not get killed off.  Every large company marketing department has become an evolutionary machine.  Today’s Darwin would write a book about it and the title would be On the Origin of Marketing Initiatives by Budget Allocation.

In the wrong hands, this trend is more about cost reduction than about innovation.  Lowering costs and increasing efficiency are good things in any part of a business including sales and marketing.  Taking the idea to the extreme however is disastrous.  A company with no marketing would be infinitely efficient – for a quarter or two.  And then dead.  So what can marketing decision makers do to both embrace marketing measurement but avoid the trap of cutting too much?   Here are three ideas:

1. Big Picture Gut Check:  A regular high level review schedule where marketing decisions are evaluated in the context of the overall good of the brand and the enterprise is critical.  These sessions have to be rigorous, but also free flowing enough to allow the introduction of new ideas.  It would be at these sessions where someone should ask – are the good numbers over here the result of moving revenue measurement from over there – or are they actually good numbers?
2. Think Like a Portfolio Manager:  Portfolio theory in financial management balances risk and reward by looking at investments both individually and as a diverse pool of performance metrics.  Removing the lowest return investments and doubling down on the highest performing investments will increase the risk profile and may not even improve the results.  Just like in marketing, the past performance of an investment does not guarantee future results. 
3. KPI Free Zone:  Some CMOs have established KPI Free Zones where experimentation is encouraged and measurement of new initiatives is not tied so dramatically to budget allocation.  This practice reminds me of the Google 20% time – do whatever you want – but be prepared to talk about it at your review.  A healthy competitive culture doesn’t hurt either.

Top performing marketing organizations must use tactics like these to ensure that they are getting the benefit of measuring without going too far and undermining their creative engine.   Clearly our industry has embraced the movement started by Edwards Deming to “expect what you inspect” but we should also be vigilant to ensure that we are not losing in the highly creative part of marketing.  

Is your KPI an RBI or an OBP?

Some marketing departments are just glad to be able to say that they measure something.  The winners are measuring the right things. Everyone has their Key Performance Indicators (KPIs) and some of the measurements are based more on tradition than on relevant facts.

Over the last 10 years baseball has been turned up side down as traditional measures like Runs Batted In (RBI) have been supplanted by On Base Percentage (OBP).  The teams that figured out how to make their measurements more accurate won -- and the same thing is happening in technology marketing right now.  

Why is the OBP better than the RBI?

•  The OBP takes walks into consideration (after all, no matter how a batter got on base, he is on base)
• The OBP works no matter where you are in the line up (someone else has to be on base for you to get an RBI).

 Why doesn't the RBI go away?

•  Because everyone wants to compare to last year
• Because the competition is doing it
• Players are working to improve their RBI number

How many of your measures are quaint and traditional like the RBI?

Here are some of the traps we see people falling into on measurements: 

1. Better Than Last Year:  We have all done it.  If the numbers are better than last year it must be better right?  Well if you are talking about revenue -- yes.  If you are talking about an intermediate measurement like partner count, attendees at an event, or even satisfaction surveys -- better than last year may not mean the activity is worth doing.  We must take a step back and question the value of the activity before we congratulate ourselves for going in that direction even faster.
2. More Than the Competition: I am as competitive as the next guy and it is easy to think things are worth doing if the competition is doing them.  Just doing what the other guys do is not necessarily the highest value activity for your marketing effort.  So before you jump into the contest make sure the activity maps to your overall plan.
3. Assuming Ownership of the Best Looking Number:  It sure is tempting to take the best looking number you can find and make it the result of whatever campaigns have been running -- particularly when the executive review is looming and the other numbers don't look so good.  Unintended outcomes are great, we would not have Post It notes without them. but if you cannot convince yourself of the correlation and be confident that the outcome could be repeated, don't take credit for the number.

Just like in the majors, we should work to reduce everything to contributions to revenue.  This will reduce the tendency to fall into these traps.