Professional Development

December 2003—Services marketers are making modest progress in measuring performance and results, but they still have a long way to go, according to ITSMA's latest survey on marketing metrics. More than two-thirds of companies responding to the survey reported that senior executives are now holding marketing accountable for return on marketing investment, up from just over half the respondents in 2002. Not surprisingly, more marketers are now developing and refining measurement systems to track and evaluate the impact of marketing programs.

When you dig into the details of what and how companies are measuring, though, it becomes clear that many organizations are still early into the metrics game. Brand equity, for example, is increasingly recognized by marketing experts as a critical predictor of future business success. Yet fewer than one-third of respondents to ITSMA's survey are routinely quantifying core marketing assets such as brand equity and corporate reputation. Fewer still can use their measuring system to quantify the potential benefits of changes in marketing investments.

The bottom line is that marketers are still not very confident they are doing a good job in measuring the value of marketing. Indeed, survey participants rated themselves only 2.9 on a 5-point scale when asked, "How well are you doing at measuring your marketing performance?" This is better than the 2.5 rating in last year's survey, but it is far from sufficient, given the mounting pressure from the executive suite.

Marketers typically make four types of mistakes in implementing a measurement system, according to Jeff Lowe of Venture Communications, a partner with ITSMA in designing and building such systems:

1. Compiling a comprehensive list of metrics. There is no end to the data that most marketers potentially could analyze. The key is to select a core set of metrics that provide insight into performance around the most critical business goals and objectives. More is often not better; measurement systems should mask complexity while highlighting those data that support useful change.
2. Demonstrating marketing efficiency. Systems that emphasize marketing activities (e.g., trade shows attended, collateral created, money spent) are much less useful than those measuring business results (e.g., incremental revenue, brand equity, share of customer wallet).
3. Living and dying by your metrics. Measurement systems are most useful as a guide to what's working, what's not, and what might be changed. Red lights on a dashboard might be more helpful than green lights, but in all cases leadership still must rely on a wider variety of inputs, experience, and judgment to make the right decisions.
4. Buying the latest silver bullet measurement tool. Marketing dashboards can be extremely helpful but only after a measurement system and process has been carefully designed. Making marketing accountable generally requires significant cultural and operational change. Good tools make the job easier, but they are not at all the most important element.

Building an effective measurement system for marketing is a substantial endeavor, best undertaken with executive support and dedicated staff. It's not a one-time initiative, either. Taking full advantage of marketing metrics requires consistent input, analysis, and action. Yet the payoff in terms of improved performance and increased internal credibility can be enormous. And with the pressure for metrics only likely to build next year, making further progress in 2004 is essential.

—Steve Hurley, shurley@itsma.com

About ITSMA
ITSMA specializes in helping companies market and sell services and solutions more effectively. As a membership organization, we provide research, consulting, and training to the world's leading technology, communications, and professional services providers to generate increased demand, strengthen customer relationships, and improve brand differentiation. ITSMA is based near Boston, and has offices in London and Tokyo. Learn more at www.itsma.com.