Where Marketing Metrics Go Wrong

Where Marketing Metrics Go Wrong:from Business 2 Community by Jon Miller
I recently wrote about how to build a data-driven marketing team. But what metrics should that team track? There are literally hundreds if not thousands of possible marketing management metrics to choose from, and almost all of them measure something of some kind of value. The problem is that most of them relate very little to the revenue and profitability metrics that concern the CEO, CFO and the board.
Of course, it’s okay to track some of these metrics internally within your department (we call these “boiler room metrics”) if they help you make better marketing decisions. But it’s best to avoid sharing them with other executives unless you’ve previously established why they matter.
Here are the top categories of metrics to avoid.

Vanity metrics

Too often, marketers rely on “feel good” measurements to justify their marketing spend. Instead of pursuing metrics that measure business outcomes and improve marketing performance and profitability, they opt for metrics that sound good and impress people. Some common examples include press release impressions, Facebook “Likes”, and names gathered at tradeshows.

Measuring what is easy

When it is difficult to measure revenue and profit, marketers often end up using metrics that stand in for those numbers. This can be OK in some situations, but it raises the question in the mind of fellow executives whether those metrics accurately reflect the financial metrics they really want to know about. This forces the marketer to justify the relationship and can put a strain on marketing’s credibility.

Focusing on quantity, not quality

The number one metric used by lead generation marketers is lead quantity; too few companies measure lead quality. Focusing on quantity without also measuring quality can lead to programs that look good but don’t deliver profits. (To take this idea to the extreme, the phone book is an abundant source of “leads” if you only measure quantity, not quality.)

Tracking activity not results

Marketing activity is easy to see and measure (costs going out the door), but Marketing results are hard to measure. In contrast, Sales activity is hard to measure, but Sales results (revenue coming in) are easy to measure. Is it any wonder, then, that Sales tends to get the credit for revenue, but Marketing is perceived as a cost center?

Efficiency instead of effectiveness

In a related point, Kathryn Roy of Precision Thinking says, pay attention to the difference between effectiveness metrics (doing the right things) and efficiency metrics (doing – possibly the wrong – things well). Having a packed event is no good if it’s full of all the wrong people. Effectiveness convinces sales, finance and senior management that Marketing delivers quantifiable value. Efficiency metrics are likely to produce questions from the CFO and other financially-oriented executives; they are no defense against efforts to prune your budget in difficult times.

Cost metrics

In my opinion, the worst kinds of metrics to use are “cost metrics” because they frame Marketing as cost center. If you only talk about cost and budgets, then no doubt others will associate your activities with cost. Let’s take a look at a real-life example, courtesy of the inimitable Anne Holland:
Recently, a marketer improved his lead quality and simultaneously reduced his cost-per-lead to $10. Thrilled with his results, he went to the CEO to ask for more money to spend on this highly successful program.
Did the marketer get his budget? No. The CEO decided the reduced lead cost meant Marketing could deliver the same results with fewer dollars – and so she cut the marketing budget and used the extra funds to hire new sales people.

What went wrong here? The marketer performed well, but he made the mistake of not connecting his marketing results to bottom-line metrics that mattered to the CEO. By framing his results in terms of costs, he perpetuated the perception that Marketing is a cost center. Within this context, it’s only natural that the CEO would reduce costs and reallocate the extra budget to a “revenue generating” department such as sales.

Get More

If you like this post, get more marketing ROI best practices by downloading my free 70-page eBook, The Definitive Guide to Marketing Metrics and Analytics.
Also, please share your tips. What metrics have led your marketing department astray?