• by John Nardone , Op-Ed Contributor, October 26, 2006

So who cares about measurement? Perhaps that's an odd question in a column called "Taking Measure." But the fact is that no one really wants to know the ROI of previous marketing efforts. What smart marketers want is to find indicators of what might or might not work in the future. And there's the rub: The past is not always a good indicator of the future. Things change. Strategies evolve. Competitors come and go. Technologies disrupt.

So marketers determined to improve marketing performance must look beyond simple measurement of past efforts to ask the question, "What if?" And then they should build tools and competencies, not to measure marketing success, but to predict it.

After spending the last few years developing measurement skills, a handful of the largest marketers are finding themselves at a crossroads. They are now convinced that traditional marketing plans are becoming less and less effective. They see that media fragmentation is increasing exponentially, and they know that consumer lifestyles and expectations are evolving almost as quickly. Yet the recent focus on measurement has their organizations looking backward, clinging to programs that worked last year and reluctant to try things that have not yet been measured or proven. As a result, some of these marketers are beginning to see measurement as a drag on marketing innovation, at a time when innovation is needed the most to keep up with the changing marketplace.

Don't let this happen to you.

Marketers simply cannot allow the measurement of ROI to become the organizational goal. It is all too easy for ROI scores to be pulled out of context - to become a marketing report card rather than a series of diagnostics and benchmarks to help anticipate and manage future performance. Avoid this trap by redirecting the organization's measurement effort to answer the following questions: 1) What is working now? 2) How can we course-correct what's not working? 3) Can we do something different next year?

To understand what is working now, marketers need current data to compare to historical benchmarks. Without that, they have no choice but to look backward to their last point of visibility, which is akin to driving by looking in the rear-view mirror. Unfortunately, too many organizations get stalled when trying to develop real-time data. Either they see the data effort as an intimidating challenge and spend years "getting ready" to attack it, or they jump into it wanting everything all at once, only to have the effort collapse. The best way to get real-time marketing data quickly is to outsource it to an expert who brings the know-how and experience to sanely scale the effort over time. With current data in place, course correction becomes a challenge of process and discipline. To move quickly and take advantage of opportunities, companies must establish a clear decision matrix that identifies who is responsible, accountable, consulted, and informed for each decision. All stakeholders must understand and buy into the decision matrix, and know that the matrix is applied on a consistent basis each time data are updated.

Anticipating "what if" is the toughest challenge, as it requires a solid base of historical learning, marketing econometric models, current data, simulation tools, and a thoughtful approach to assumptions. Models help anticipate the future to the extent that the underlying business dynamics haven't changed from the past. But as marketers change strategies, they assume that things are changing; they are either responding to an observed change in dynamics or are trying to proactively change dynamics themselves. As a result, "what if" scenarios should be built around a series of articulated assumptions.

By simulating the likely impact of different assumptions, marketers can triangulate on a range of most likely outcomes. This approach may not yield a definitive right answer, but it will increase the odds of getting it right. Importantly, it sidesteps the trap of backward-looking measurement and forces the marketer to think through all the things that might happen, and then create response scenarios for the best and most threatening cases. Then, if any of these worst-case scenarios do occur, pre-tested responses can be quickly put into action. In the end, marketing innovation is supported by the determined effort to test the possible and the confidence that mistakes can be quickly corrected.

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