The four dimensions of measurement that CMOs need to master to prove value and unlock growth in the digital age
As marketing becomes increasingly fragmented and complex, and as consumer demands and regulation around data privacy change, it’s becoming clear that measurement needs to change as well.
While it’s true that “what’s measured gets improved,” for too long too many marketers have reported on metrics that are easy to measure rather than those that reflect the genuine impact of marketing on brand performance.
Simply put, measurement for measurement’s sake doesn’t deliver value for brands.
Measurement is simply a stepping stone on the journey to generating insights that lead to real outcomes. As brand budgets increasingly shift into digital media and customer experience design, the time is right for a meaningful, impactful, and results-focused shift in the industry’s approach to marketing measurement.
Indeed, national and international bodies that represent advertisers are attempting to take the lead in harmonizing measurement across the wide variety of different channels and ways for brands to invest in marketing. Last October, the World Federation of Advertisers (WFA) announced the Cross Media Working Group (CMWG), a grand consortium of advertisers and national advertiser associations determined to establish universal measurement principles. Members of the CMWG include some of the world’s biggest advertising spenders, such as P&G, Unilever, and Mastercard, as well as national advertiser bodies in the U.S. (the ANA), the U.K. (ISBA), Canada, France, Germany, and Sweden.
This is a serious endeavor and an important initiative, one that brings together practitioners with different lines of thinking from multiple markets, multiple channels, and the latest best practices. Yet if the rate of change in the coming years is anything similar to the one the industry has experienced in the past decade, it’s quite possible that the CMWG will take some time — quite possibly years — to reach any helpful conclusions and meaningful recommendations.
In the meantime, CMOs need advice dealing with day-to-day realities of measuring what’s in the field today. What’s more, marketing budgets are increasingly split between investment for which existing performance benchmarks exist (in media) and investment for which there are no such benchmarks (in experience design). Whereas media investments in 2019 were expected to account for $563 billion, per Statista, customer experience, at $508 billion for last year, is now not that far behind. So, with marketing dollars split in this way, it’s possible that the desire to measure, compare, and calibrate such a diverse set of marketing strategies is being overtaken by events and shifts in investment.
In this context, CMOs need a robust and modern approach to marketing measurement, independent of any of the commercial interests in the ecosystem.
To achieve meaningful progress, there are four critical dimensions to measurement that marketers must now master: commerciality, quality, frameworks, and testing.
For CMOs to have genuine and enduring influence in the C-suite, they need to use language, arguments, and metrics that demonstrate the bottom-line impact of marketing investment. The rush to digital appeared to offer marketers the perfect combination of measurement and accountability, and clear oversight of the cause-and-effect relationship between marketing inputs and commercial impact.
Regrettably, measuring what can be easily measured rather than what matters sets marketing back in terms of C-suite credibility. This, combined with the fact that the three biggest online advertising businesses — Alphabet, Amazon, and Facebook — all operate within walled gardens and offer only a partial view of performance data, means that the term “KPI” has become somewhat devalued and tarnished of late. This is because the indicators are often neither of “performance,” nor are they “key,” and it’s been shown conclusively that “tracking” is not the same as “measurement.”
With CMOs looking for more meaningful commercial measures, brands are increasingly starting to use tools such as market mix modeling and brand equity modeling to build cause-and-effect explanations of marketing’s impact. With the use of rigorous testing, advertisers are also able to circumvent some of the primary measurement challenges that walled gardens present.
As brands allocate significant proportions of their media investment to digital media and customer experience channels, they need to home in on the quality of what they’re buying. With different platforms and channels constantly being developed, standards applied today may not be useful or helpful in terms of measurement tomorrow.
What’s more, the terminology is also in constant flux. While it’s tempting to try to apply the same old frames of reference to new channels — such as reach and frequency — marketers need to temper the natural and overwhelming desire to compare apples to apples.
To bring this to life, consider the fundamental difference between a person attentively watching and listening to an ad on a big-screen television and someone else being served just a second or two of an ad on a muted smartphone where half the ad appears on screen before they switch to another app. The two experiences are not comparable — and that’s before one considers the issues of audience targeting, viewability, brand safety, and ad fraud.
This is not to suggest that digital video advertising campaigns are not effective. But when reporting in to the C-suite, CMOs should make clear what’s expected of different media channels and how those channels differ in terms of viewer behavior.
In 2018, eMarketer reported that advertisers believe they are wasting more than a quarter (26 percent) of their budgets on ineffective channels and strategies. That’s a potential of more than a $250 billion each year. If advertisers are to minimize waste, make sense of their investments, and optimize performance, they need to develop a structured approach to measurement. This requires working with independent, knowledgeable advisers to build and operate a structured framework customized to their particular needs.
Not only is this not a case of “one size fits all,” it will also likely demand fundamental cultural change within a brand organization, cutting across silos and departments, requiring multiple hitherto incompatible departments to work together.
Disjointed, disunited business units are throwing money away by failing to optimize the user experience across every touchpoint in the customer journey. Silos are not the product of companies’ march toward digital marketing; rather, the rapid changes required to keep apace have, ironically, exacerbated or at least thrown the presence of those silos into high relief.
Breaking free of the swim-lane mentality and achieving a genuine cross-functional work culture will require a fundamental shift in both the attitude and behavior around organizational ownership, hierarchy, and responsibility. To achieve that, CMOs can use an integrated measurement framework as a foundation for aligning a wide array of disciplines with a stake in marketing. For example, insights from marketing mix modeling can play a pivotal role in helping sales teams understand trading. Testing programs can connect a number of internal teams by helping drive insights about the customer experience.
A clear measurement framework lays the foundations for success in an era that requires more agility and in situations where insights have to move across organizations at a rapid pace.
Testing and Learning
Because of their scale and reach, the triumvirate of Alphabet, Amazon, and Facebook account for more than two-thirds of all online ad spend, according to the latest figures from eMarketer. Although they all provide their own performance metrics, all three companies operate walled gardens and do not share all relevant performance data with advertisers. Despite advertiser-led calls to make the online advertising ecosystem more transparent and accountable — particularly in the wake of the 2016 ANA report and recommendations on media transparency — the data advertisers receive from these platforms do not yet allow measuring advertising effectiveness with forensic accuracy. In many ways, the data are unsatisfactory, particularly compared with other forms of media.
While econometrics is the best tool for understanding the impact that marketing has on business performance, testing is the gold standard for understanding and optimizing key marketing channels. Advanced techniques, such as pretest optimization using genetic algorithms and cluster analysis, minimize the sample sizes required to generate meaningful insights. This helps keep the potential for business disruption low while allowing businesses the opportunity to run tests more frequently and with greater precision.
Where walled gardens make it impossible to track and compare performance, properly developed testing helps advertisers understand the true commercial impact of any marketing investment. The type of questions testing can answer include:
- Is an investment in a new or emerging channel having an impact? In what ways?
- What is the impact of a brand’s video on-demand spend and how does it support or differ from its broader TV investment?
- What is the ROI for spend areas with a low level of transparency, such as programmatic media placements?
- How can the results from digital attribution measurement be calibrated with other media performance metrics?
It’s true that widespread testing is not yet commonplace. But there are reasons to be optimistic.
If testing does become more mainstream and walled garden platforms see their advertiser clients making decisions based on the real-world impact of their commercial investments, then the platforms may well be encouraged to share more complete data with clients.
Why This Matters for All Parties in the Marketing Ecosystem
Having an open, transparent, and, above all, effective marketing ecosystem is in everybody’s interest. It benefits media owners, media platforms, and publishers because they can be seen to provide environments in which brands can thrive and grow. It benefits media agencies and advertising and marketing technology businesses because they can prove the value of their recommendations in where to invest. And it benefits advertisers because the success and growth of their brands is predicated on making the most effective use of their marketing spend.
This is fundamentally why, in the ever-changing media and marketing landscape, measurement needs to evolve.
Ebiquity’s partnered with the Association of National Advertisers (ANA) through their Thought Leadership Program and will be curating several original thought leadership pieces to feature in the ANA’s Newsstand Forward section. This is our fourth article.
First featured in the ANA’s Forward magazine on 25th February 2020, available here.