The desire for marketers to be able to measure the success of their campaigns has been growing and growing. We recently released improved reporting functionality on our platform as a result of a clear demand for it.
Better reporting capabilities have some serious implications for marketers—less guesswork and more confidence in knowing what works.
It’s important to remember, though, measuring the success of your marketing campaigns is not an end in and of itself. The reports ultimately aren’t that important, it’s what you do with them that matters.
That is the difference between marketing performance management and marketing performance measurement.
So what is marketing performance management? CMG Partners, a marketing consulting firm define marketing performance management as “the discipline and practice of measuring, learning from and improving marketing strategies and tactics over time.”
This serves as a good definition to exhibit that it’s more than just measurement. Measuring marketing performance is just one component under the umbrella of marketing performance management.
Having said that, measurement and measurement planning is a good place to start when outlining your marketing performance management landscape.
Keys to Measuring Marketing Performance
When defining the performance measures, there are a few different things you should think about.
In the book Key Performance Indicators (KPI): Developing Implementing and Using Winning KPIs, David Parmenter identifies four types of performance measures:
- Key results indicators (KRI), which reflect performance related to a critical success factor.
- Result indicators (RI), which reflect what was done, what was achieved.
- Performance indicators (PI), which reflect what needs to be done.
- Key performance indicators (KPI), which indicate what needs to be done in order to increase performance dramatically.
In the book Marketing Management, it’s advised that all marketing measurements should have these qualities:
- Be as quantifiable financially as possible, so as to “speak the same language” with the other departments in the organization.
- Be future oriented (leading), rather than to reflect past performance (lagging).
- Allow a granular analysis of marketing performance (down to the level of individual client).
- Offer objective data, to enable accountability and benchmarking.
By combining these two philosophies, you’ll go a long way in establishing effective measurement strategies. And, in doing so, you’ll not only shed light on the value of your marketing team, but you’ll also put yourself in a good place to improve going forward.
If you’re looking for some specific metrics to implement into your strategy, take a look at this blog outlining nine must-know marketing metrics.
Analyzing your Marketing Metrics
Marketing teams play a role in helping to define the strategic direction of an organization. This being the case, it’s crucial that marketing departments use their resources to create an advantage over competitors—that, in a nutshell, is the primary function of marketing.
That means that the best marketing teams will have great insight into what initiative and campaigns were the most successful and contributed to the financial and overall success of a company.
In order to do that, all of the marketing metrics can’t exist in a vacuum, but rather an ecosystem in which they all are somehow related to one another.
This is why it’s smart to have a periodic audit of your marketing strategy and tactics, and this audit should be informed by the metrics you’ve been measuring. Use this audit to make sure that your strategies and objectives are working well, and make changes when necessary.
To make this more concrete, we can take a look at a hypothetical example. Let’s say you are a software company offering three different tiers of the same product with varying pricing and features.
Level One has the fewest features and is the cheapest. Level One customers aren’t particularly valuable to you because the cost to provide your product for them is about the same as the revenue you create from them.
Level Two and Three both offer more features and cost more for customers. These are much more valuable as the cost to provide your product is significantly outweighed by the amount they pay for the product.
Given what’s above, your Level One customers are really only valuable if they upgrade, and that tier’s main function is to get people using your product so that they eventually upgrade.
Now you run an AdWords campaign that at first seems wildly successful. It’s doubled your customer base during its run. However, upon digging deeper, you see that it, almost exclusively, brought in Tier One customers, and of the Tier One customers that came from this campaign, only a tiny percentage of them convert to Tier Two or Three.
So, while this campaign generated a ton of new customers and may be considered a success at first glance, it ultimately wasn’t very helpful for your business. This is why it’s key to consider all of your performance measurements as part of an ecosystem rather than in a vacuum.
By using all of your metrics rather than just “conversions from AdWords,” you can refine your objectives so you target “likely to upgrade” customers.
Market Like a Scientist
Once you’ve formalized the collection all of your metrics and analyzed them, the next step is to take action. But how do you know what to do with these numbers?
This is where you should think like a scientist.
If you took Biology in high school, you were probably introduced to the scientific method. If not, here’s a graphic explaining it:
This same method can, and should, be mapped onto your marketing strategy. Let’s take a look how to use the scientific method in your marketing.
You’re starting question is really more of an objective. If you want to increase the conversion rate of a certain page on your website, your question is simply “How do I increase conversions on my site?”
The background research is already done. You’ve collected all this data via the marketing metrics you are tracking. Use this information to inform the next step of your process.
Next, create your hypothesis.
This is where the experimentation really begins. It’s crucial that your hypothesis is testable. So, your hypothesis might be: people are more likely to convert when they’re happy. Well, that might be true, but it’s difficult to test. Even if you do test it, it’s hard to ensure that people interact with your landing pages while they’re happy.
A better hypothesis would be something like: our conversion rate will increase if we place a call-to-action button on the top of the page. That is something you can test.
Once you’ve developed your hypothesis, it’s time to get to testing. Implement your hypothesis on your site and collect the results. Once you’ve done that, draw your conclusion.
Did your conversion rate increase? If so, go ahead and implement the new call-to-action button. If not, go back to the drawing board and form a new hypothesis. Maybe a more aggressive copy or a video on your site will do the trick.
There are no shortage of things to test, and by forming hypotheses and testing them, you’ll get the most value out of your metrics.
It’s clear that collecting measurements is only part of the marketing performance management process—and an important part—but if you stop there, you won’t get any value out of them. By taking the next steps and taking actions based on those metrics, you’ll have the opportunity for huge gains that are tangible and easily communicated to the rest of your organization.