Kellogg School Study Finds CMOs Still Struggling to Make Marketing Campaigns and ROI Transparent

Interest Soars But Significant Barriers Slow Process of Improving Linkage Between Marketing and the Bottom Line

CHICAGO, March 2 /PRNewswire-USNewswire/ --Chief Marketing Officers (CMOs) are struggling to both apply data-driven marketing principles to the business of running their marketing campaigns and operations and to capture their return on marketing investment (ROMI), according to new research conducted by the Kellogg School of Management at Northwestern University. Reluctant management support, a lack of financial skills necessary to quantify benefits, and shifting campaign goals all contribute to the challenge. The research appears in a new book, "Data-Driven Marketing – the 15 Metrics Everyone in Marketing Should Know," by Mark Jeffery, senior lecturer of technology at the Kellogg School (Wiley 2010).

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"Even though interest in driving campaign performance and ROMI has skyrocketed in recent years, few large companies are applying data-driven marketing principles and have the marketing campaign management capability to successfully drive value from their marketing dollars," said Jeffery. "In fact, analysis reveals that four out of five senior marketing executives have not adopted best-practice marketing campaign management. As a result, many marketing departments are struggling to get real results and make the value of their efforts transparent to the rest of the organization."

The Kellogg research looked to better understand why so few companies were optimizing marketing campaign management and do not measure ROMI successfully. The team surveyed 253 senior marketing executives, 92 percent of whom were CMOs or their direct reports. These executives are investing $400 million on average per year on marketing at companies whose average corporate sales exceed $5 billion. In aggregate, the respondents are responsible for more than $52 billion in annual marketing spending.

The research team defined marketing campaign management (MCM) capability as the combination of tools, methods and processes used to diagnose, control, and increase the return on marketing campaigns and programs. Furthermore, a key component of MCM capability, ROMI, encompassed the use of both financial and non-financial metrics to measure marketing performance.

According to Jeffery: "Unfortunately, one of the real benefits of MCM that CMOs seem to be missing is the means to quantify the actual return on marketing investments. An essential ingredient for MCM capability is the ability to measure marketing performance, but 57 percent of our respondents do not use business cases to evaluate marketing campaigns for funding. And more than half admitted they do not use metrics such as ROI to guide campaign selection. This suggests that many marketing executives may not be extracting the maximum value from their marketing portfolio."

Best-Practice Marketing Campaign Management Not A Big-Bang Proposition

The research revealed three distinct stages of MCM adoption, which suggests that bringing these new principles into an organization is not an all-or-nothing, big-bang proposition.

Stage One: Defined

The average organization in the "Defined" level focuses on developing processes and procedures that provide general objectives and goals to guide marketing campaign selection and management.

Stage Two: Intermediate

The average organization in the "Intermediate" level has already achieved a centralized view of marketing campaigns, assets, and resources. MCM efforts at this level are focused more on rigorous provision of objectives and goals regarding final deliverables of marketing investments and application of advanced metrics for planning, managing, and reviewing marketing investments.

Stage Three: Advanced

The most savvy marketing management teams distinguish themselves by their ability to track and monitor marketing campaign ROMI and dynamically act upon these data. "Advanced" level organizations use an enterprise data warehouse (EDW) and analytics to guide automated event driven marketing and utilize scorecards rating each campaign relative to key business objectives to guide campaign funding.

There are clear benefits to upgrading MCM capability. "In our sample of 253 firms, we show a very strong statistical link between MCM capability and sales growth, brand equity, and long term shareholder equity. Optimizing marketing campaign management provides real results to a firm's bottom line," said Jeffery.

So what's holding back adoption? The research points to cultural issues and an employee skills gap:

• 63 percent said that senior managers primarily make funding decisions for individual marketing campaigns based on their gut feel and intuition.
• 64 percent report that they do not have enough employees who have the skill to track and analyze complex marketing data.
• Almost 50 percent said that, overall, their marketing staff does not have sufficient working knowledge of financial concepts such as return on investment (ROI), net present value (NPV), and customer lifetime value (CLTV).

Other key findings reveal significant gaps in the effective use of technology to support MCM:

• 71 percent of respondents do not use an EDW and analytics to guide marketing campaign selection.
• 82 percent never track and monitor marketing campaigns and assets using automated software such as marketing resource management (MRM).

But just investing in technology is not the answer. The research shows that the direct link between technology and firm performance is exactly zero. That is, the link between technology and firm performance is indirect: Organizations that use technology to support MCM process capability are the ones that get the better firm performance.

Overcoming those obstacles will require a more incremental approach to upgrade MCM and implement data-driven marketing, the research team contends. "A company can't leapfrog to a high level of MCM sophistication," Jeffery said. "Yet the opportunity is in the execution: The leaders use a set of MCM processes that are easy to understand and apply in any marketing organization."

The Kellogg School of Management at Northwestern University was founded in 1908 and is widely recognized as a global leader in management education. For more information about the Kellogg School visit www.kellogg.northwestern.edu.

SOURCE Kellogg School of Management at Northwestern University