Forty-five percent of marketing executives view return on marketing investment (ROMI) as a top driver compelling their organizations to track and measure marketing performance, according to a recent Aberdeen Group survey of 728 companies. This begs the question: Can the implementation of a marketing dashboard help alleviate the pressure related to improving ROMI?
ROMI is commonly defined as the optimization of marketing spend through the creation of a model that uses valid and objective performance metrics. Increased marketing effectiveness, customer profitability and market share for the same amount of marketing spend are some of the results of improved ROMI.
Marketing dashboards can indeed help companies yield better results per dollar spent, according to MarketingNPV, a specialty consulting firm focused on measuring and improving the financial return from marketing investments.
“Marketing dashboards are the tangible manifestation of the underlying business process for measuring ROMI,” says Pat LaPointe, the group’s managing partner. “A good dashboard clearly establishes links between the relevant variables while continuing to sharpen hypotheses about what is known, anecdotally believed and unknown. That’s how progress in measurement is made.”
Sixty-seven percent of Best-in-Class companies, compared with 49 percent of Laggards, use ROMI as a metric for measuring the success of their marketing dashboard initiatives, according to Aberdeen survey results. At the same time, 53 percent of Best-in-Class companies, compared with only 4 percent of Laggards, report that their ROMI has improved by more than 5 percent over the past year. Nearly one-third (33 percent) of survey respondents report that their ROMI has improved by more than 10 percent. Also, 42 percent of Best-in-Class companies currently have defined performance metrics to determine ROMI compared with 17 percent of Laggards.
Taken together, these research findings suggest a strong correlation between implementation of a marketing dashboard and improvement in ROMI. The correlation is understandable, given that a marketing dashboard can provide insights into the relative performance of different marketing programs, channels and other levers over time and on an ongoing basis. It can also provide insights into the interconnectedness and “interaction effects” of these different programs, channels, and levers, as well as predict future outcomes based on different marketing tactics and different amounts of marketing spend.
Case in Point
Consider the experience of Discover Financial Services. With more than US$2.5 billion in revenues and 51 million cardholders, Discover ranks as the third largest credit card company in the United States. It also has one of the largest marketing budgets of any consumer brand, spending approximately $700 million per year on advertising and promotion.
In recent years, Discover has dramatically expanded the number of channels it uses for customer acquisition as well as the number of features and benefits in its product portfolio. To remain competitive and optimize returns, the company has also become increasingly sophisticated in terms of pricing strategy. This high level of business complexity, combined with an unwavering focus on business growth and performance optimization, has forced the company to become smarter and more disciplined about how it allocates assets across the business.
Discover refines its integrated marketing model on an ongoing basis by comparing the relative productivity of different media, channels and tactics for customer acquisition and retention, according to Margo Georgiadis, Discover’s chief marketing officer.
“In the old world, when we did almost all of our acquisition by direct mail, it was okay to be more siloed,” she noted. “But now that we’re using multiple channels to acquire customers, as well as to stimulate portfolio usage, all areas have to be tightly integrated from a business planning and analysis point of view.”
With different departments using similar media, the company needs to keep from over-investing and also from making conflicting investments. In addition, it needs to understand the interaction effects of mass marketing programs. “If you don’t lay that out in a disciplined way, you can lose control of what exactly is driving your results and where the next level of performance opportunity is,” says Georgiadis, noting that a channel that performs well initially can degrade over time, particularly within certain segments.
Hence, the need for a marketing dashboard that can be used to track and measure the relative productivity of a channel over time. At the highest level, Discover’s marketing dashboard captures virtually all of the data that the executive team requires to drive the business. This means tracking not only top-line revenue growth but also the key drivers beneath it to make sure that everything is in alignment for management planning purposes. Each area of the business also has its own separate scorecard. This allows the line executives that run the various business units (including customer acquisition, portfolio management and pricing) to understand how they’re contributing financially to the whole of the business.
Driving the Business Further
The marketing dashboard puts pertinent data at the fingertips of the product managers as well so that they can understand the financial impact of their potential decision-making today and in the future. Using the dashboard, they can make changes to key assumptions, look at the business over different time periods, and test different scenarios and pricing decisions. In short, it allows them to know the impact of key revenue drivers and to drive integrated decision-making and ownership.
“It’s very easy for people to get overly focused on their top-line revenue targets,” says Georgiadis. “What are my sales goals? What are my volume goals? How many new accounts did I bring in? But you also want them to understand: What did I do to yield? What did I do to my relative expense productivity? What’s going to happen in year one versus years two, three and four? Am I going to change structurally the payback of my investment? Putting a marketing dashboard in the hands of our key business teams forces them to think much more strategically about how to drive the business further and faster.”
Discover has vast resources, including a 150-person analytics team. However, Georgiadis dissuades her team from relying too heavily upon them when it comes to marketing performance reporting. “I think, as a business leader, if you look at those permutations yourself, you become much more insightful about your opportunities to improve,” she says.
The marketing dashboard makes the data actionable. It also makes the marketing team accountable for not only short-term profit but also long-term profit. “We can track all sales, all balances, the yield, and most of the key expense lines for the entire company,” she commented. “We can feed this information into campaign reporting and planning models and run scenarios quarter by quarter. Putting marketing dashboards at people’s desktops makes them smarter about how to manage the business over time.”
Smarter Marketing Decisions
More than just a technology for bringing data to life, marketing dashboards are a stimulus for disseminating marketing performance information to decision makers and other relevant stakeholders, for instilling an organizational focus on marketing accountability and performance measurement, and for defining marketing benchmarks and goals. Marketing dashboards are also a source for organizational learning and continuous process improvement.
Importantly, the color-coded bar charts, pies, icons and funnels that are dynamically generated by marketing dashboards allow executives to rely far less on intuition and anecdotal evidence and far more on scientific, fact-based evidence when it comes to making marketing decisions that minimize waste and maximize ROMI.
Jeff Zabin is a research fellow for the Aberdeen Group, where he covers customer management technology. His current research agenda includes such topics as social media monitoring, marketing dashboards, word of mouth marketing, customer feedback management and mobile marketing. He can be reached at [email protected].