More than 80 percent of CMOs were dissatisfied with their ability to measure marketing ROI and less than 20 percent said their company employed meaningful metrics according to a CMO council study quoted in Harvard Business Review.
The same article cited Copernicus Marketing Research findings that noted that most acquisition efforts fail to break even, no more than ten percent of new products succeed, most sales promotions are unprofitable, and advertising ROI is below four percent.
There is no absence of metrics or measurement tools. The problem is less one of analytics than of lack of alignment across the enterprise as to ROI goals.
But how can that alignment be attained?
There is a need for a common vocabulary and shared buy-in as to key performance indicators (KPIs). It is commonly assumed that all can be resolved if the VP of Sales and the VP of Marketing just go off and have a beer together. This rarely works. A better way to achieve alignment is to borrow from the toolbox of strategic planning and to use scenarios.
Scenario planning is a discipline popularized by Royal Dutch Shell in the ‘80s that has become a standard tool of strategic planning professionals. It is the process in which managers invent and consider the implications of alternate assumptions and futures. As a team-building exercise, it can remove the barriers that office politics, turf wars, and loyalty to current vendors bring to the effort to align goals and assumptions.
As consultant Juergen Daum has written, “The purpose of scenario planning is to help managers to change their view of reality, to match it up more closely with reality as it is, and reality as it is going to be. The end result, however, is not an accurate picture of tomorrow, but better decisions about the future.”
Scenario planning session
A Scenario planning session can be done over a one- or two-day off-site:
- Start by modeling a scenario in which the current ROI goals and benchmarks are accurate and lead to a positive future. This is the “rosy scenario” that is implicitly guiding current thinking.
- The team can then turn, in a politically non-threatening way, to alternate scenarios – those in which current goals and assumptions can be challenged. This process surfaces doubts and uncertainties while clarifying disconnects among the team as to definitions and priorities. Whatever the outcome, the very process builds agreement and understanding.
This process allows managers to confront, without defensiveness, the essential question:
“What if our current assumptions and procedures are wrong?”
Contemplating a scenario without a “rosy” outcome forces participants to both question current practices and to work together to forecast outcomes. The implications of using “wrong” ROI goals can be discussed collaboratively, fostering collaboration and understanding. Ideally, new metrics can be identified and outmoded ones discarded. Inevitably, participants emerge with greater understanding of their goals, of their key performance indicators, and of each other.
Bob Heyman is a keynote speaker at Optimization Summit 2011, and all attendees will receive a copy of his book, “Marketing by the Numbers: How to Measure and Improve the ROI of Any Campaign,” provided by HubSpot.
Gary Angel, President and CTO, Semphonic, contributed heavily to this blog post as well.
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