Number 28: Autumn 2004
Web Links
Moving Towards Branding Systems
By Nick Wreden
Editor's comment: How do you know your marketing is working? Marketing budgets are often the first to be cut in difficult times. However, evidence of effectiveness can help to prevent this as well as optimising the marketing operations.
Mark your calendars for October.
That is when the CMO (Chief Marketing Officer) Council will unveil a complete MPM (marketing performance management)
framework at its annual meeting. The CMO Council generated a lot of interest in June when it unveiled the results of a study
of more than 1,000 CMOs at technology firms representing more than $400 billion in revenue.
In essence, the survey revealed that almost all firms are attempting to brand based on little more than a brand equity wing and a "positioning" prayer. Few firms can collect the metrics required to justify substantial marketing investments. Some companies surveyed, for example, spent as much as 25% of revenue on marketing. The survey echoed others. Willott Kingston Smith and the PACE Partnership surveyed UK agencies, who ranked themselves highest in the ability to provide "good work" (such a shock) and lowest in the ability to measure outcomes.
CMOs are painfully aware of measurement failings. Lack of metrics prevents them from complete evaluations of program effectiveness and handicaps the trade-offs inevitable in any branding campaign. Nearly 40% of respondents were dissatisfied with their ability to measure. It also costs them executive support. In a survey among companies from The Times 1000, only 57% of finance directors believed marketing investments helped long-term corporate growth; 27% believed that marketing was only a short-term tactical measure; and 32% said marketing was the first budget they would cut in hard times (another shock).
The advantages of branding metrics are clear, according to the CMO Council study. Companies that had formal performance measurement systems were characterized by a higher level of CEO confidence in marketing. More important, companies using measurements tended to outperform competitors in terms of sales growth, market share and profitability. No wonder that nearly 90% of these top-ranking marketers considered marketing performance management a significant priority and that about 60% planned to increase spending in this area within two years.
Other findings of the report, entitled "Measures and Metrics: The Marketing Performance Measurement Audit":
The top five reasons for metrics were increased effectiveness of marketing organization and plans; ROI tracking; justification for marketing budgets, programs, and value; improved marketing resource allocation; and better ability to meet the demands for accountability from senior management and boards.
Measurements most frequently reported to management include qualified leads, revenue impact, feedback from sales and channels, and Web site traffic.
Easiest-to-measure activities were direct mail, email, telemarketing, Web activities and telemarketing. Hardest: advertising, sales and marketing collateral, and branding.
The least effective measures of brand performance included stock price and brand equity (yet another blinding glimpse of the obvious).
In October, the CMO Council will unveil an MPM Model, which "will help individual CMOs demonstrate tangible business value across multiple functional areas, cost justify investments, calculate ROI, better allocate and evaluate resources and spending, continuously adjust and fine tune the marketing mix, demonstrate improvements in brand equity, and importantly, command greater influence and stature in the management of global technology firms."
Quite a goal, especially since agreement on what and how to measure the forces that drive brands is hard to muster. But here is one suggestion: emphasize systems.
How is branding managed and executed today? With email, spreadsheets, calendars and even sticky notes. Those are tools, not systems. Branding systems have multiple advantages. They add structure and discipline to processes. They ensure uniformity in customer interactions. They institutionalize customer knowledge. They collect the data needed for accountability, which is becoming increasingly important in an era of regulatory oversight. Systems can automate such data collection, reducing corporate burdens.
There are two types of branding systems. The first is strategic. These consist of scorecards, which involve a matrix of interrelated goals, activities and measurements, and the well-known Six Sigma, which seeks to reduce defects through measurement and the elimination of variability. The second type is tactical. These enable managers to effectively handle the "blocking-and-tackling" activities involved in generating leads, converting them into customers and increasing their profitability. Tactical systems range from account management to territory management. The tactical systems most useful to branding managers are campaign management, lead management and CRM (customer relationship management). Lead management systems track a lead from prospect to customer; campaign management systems either attract prospects or increase the profitability of existing customers. Sometimes these are stand-alone systems; at other times, they are part of more complex CRM systems, which help leverage a common and comprehensive customer view.
A key finding of the CMO Council report was that "companies with a formal comprehensive MPM system significantly outperformed companies that had not even entered the consideration phase, with mean performance ratings 29%, 32% and 37% better in relation to sales growth, market share and profitability. CEO satisfaction with the marketing function varied in a statistically significant manner with adoption of MPM. Generally the greater the adoption of MPM, the more satisfied the CEO."
Sounds like a good argument for moving away from tools and toward systems. And for looking forward to October. The top luxury brands are driven to expand and grow, the world is progressively getting less secure and finally people buy to fulfil some need or void in their lives or as a form of entertainment. Mass market consumption of luxury is a new human capability and whether it is a good trend or something we will later regret will take some time to understand but we should be careful that we do not seek short gains at the expense of longer term vision. Tradition takes time and a great amount of care to create yet it can all be quickly destroyed if mishandled. Growth with purpose is of course the optimum goal but much of the growth has been lead by greed and history repeatedly teaches the lesson that greed, especially when combined with ego, can have very short sight and disastrous results. It may be time for some companies to look to create greater brand value by developing extreme scarcity not based upon price but upon limited production, reduced lines and access points. It will take a brave leader to convince shareholders that this is a way forward but for some I fear the time is near for this decision to be debated and seriously considered.
Pool Version 2.0
© Nick Wreden /
Through the Loop Consulting Ltd 1998-2004