• by John Nardone , Op-Ed Contributor, August 24, 2006

The results of the association of national advertisers' third annual survey on marketing accountability reveal that marketers are slowly making progress in a crucial area: their accountability for the results of their spending. More marketers report they can measure ROI, and a growing percentage of them believe they can accurately forecast the sales impact of a budget cut. These are encouraging signs.

More than 100 senior marketers responded to the survey, conducted by the Mobile Marketing Association on behalf of the ANA. The study, released in July, tracked industry progress on accountability, identified requirements for success, and shared lessons learned.

The number of companies paying attention to marketing's impact on sales continues to grow, the survey found. About 65 percent of respondents said their senior management considers this an important metric, up from 56 percent a year ago. And the survey showed signs that marketers are responding:

• Twenty-three percent are satisfied with their ability to measure marketing ROI, up from just 13 percent.
• Thirty percent of respondents believed they could accurately predict the sales impact of a 10 percent budget cut, up from only 16 percent.

As in 2005, the study identified among the respondents those who were both capable (i.e., could predict the impact of the budget cut) and confident (i.e., felt they had management's confidence in the projections of marketing's impact on sales). This group did not increase significantly from last year (up three points to 28 percent), but their characteristics clearly differentiated them from the rest of the respondents, allowing us to identify the most important requirements for accountability.

Capable and confident marketers have significant advantages in the areas of data, tools, and metrics. Most significant, they are more likely to use metrics and tools that allow them to "look forward" rather than simply measure what has already happened. To wit:

• Capable and confident marketers tend to be significantly more satisfied with the access (48 percent versus 21 percent), accuracy (37 percent versus 19 percent), and timeliness (41 percent versus 13 percent) of their data.
• They outpace less capable companies in the use of predictive models for direct response (41 percent versus 19 percent), models identifying likely prospects (26 percent to 15 percent), and marketing mix models (37 percent to 16 percent).
• They take advantage of tools for predictive analytics (48 percent to 24 percent) and marketing simulation and optimization (52 percent to 13 percent).

Capable and confident marketers didn't gain this edge by accident. They built their capabilities by enacting formal, cross-functional programs with dedicated budgets and substantial funding.

About 63 percent of capable and confident marketers have enshrined formal marketing accountability programs, and about 64 percent have established cross-functional teams, often including marketing and finance in the effort. Only 24 percent of the other group had cross-functional programs in place.

It should come as no surprise that these marketers tend to have a dedicated budget that supports their efforts (60 percent versus 29 percent). But the magnitude of dollars committed may be a revelation: 55 percent of these marketers spent at least 1 percent of their total marketing budget to fund accountability, and 40 percent spent 2 percent or more.

To many marketers, these budgets seem large, but financial professionals point out that if a company invested in a new factory, it would consider a 1 to 2 percent budget for controls to ensure its success routine. Accountable marketers do well to follow this principle.

But one characteristic of success stands out as important above all others: naming a senior-level champion. About 46 percent of companies with formal accountability programs chose a C-level executive to champion the effort, and all of them named at least a vice president. This senior sponsorship ensures the basic conditions for building a successful accountability program.

Is the industry moving fast enough? I would say no, but I'm a zealot on the issue. But it's clear that industry leaders are blazing a positive trail. It will be interesting to see how quickly the others follow.

John Nardone is chief client officer for Marketing Management Analysis. (john.nardone@mma.com)