Every other year, accountability makes a resurgence. "Like it or not, CMOs still have to prove their worth" reads a recent headline in one major ad industry publication. But even as ad agencies work overtime in an attempt to link data with the machinery of statistics, the big question remains, how do you calculate, monitor and manage accountability?
In the world of mass consumer products, the best known technique is still some form of marketing mix modeling, which uses statistics to examine how a variety of marketing techniques, including ads, promotions, trade and pricing, impact people's purchases.
Looking at the past few years, marketing mixes provide broad guidance on communications planning in mature marketplaces. In this hotly contested $100 million business, many mix modelers have taken to turbocharging their techniques to make them handier and timelier. They provide software that allows brand managers to envision different scenarios with advertising, trade and promotions, to see how they affect sales. And they pump new monthly, and sometimes weekly, data into these models to update sales projections.
The more cutting-edge vendors provide services that include frequent model updates in addition to the data updates. Marketing mix has been a growing business for 15 years, and its level of refinement - squeezing every ounce of value out of these techniques - is causing a debate about how far you can analyze statistical relationships across data sources.
In the past, there have been numerous halfway solutions that evaluate the connectedness of communications. These assorted techniques offer insights into how media and sometimes media messages engage people, but without evaluating how they impact sales.
Mix considers the relationships between total advertising, total promotions, total trade and total sales, often associating 6- to 12-month chunks of data even when updating weekly. These findings provide a broad view of general business performance, but with a lot of noise around the particular effectiveness of specific marketing and communications on different consumers.
The next battleground will be understanding accountability by consumer group. While media analytic techniques push toward more effective targeting of media with the Internet setting the pace, the conundrum of sales response drags on. For all the hype about the Internet's new level of "accountability," it still does not provide real return on investment information on sales - just fleeting interest reported in click-throughs or small change response of direct sales. The new Internet metric of time spent takes us back to television's exposure time. While targeting efficiencies improve, the core machinery of planning marketing and communications to drive short-term and long-term sales remains a challenge. The answer lies in integrated granular data, where you can mine short and long-term relationships between advertising, promotions, trade, competition and sales across a spectrum of consumers.
With yearly, monthly, weekly and daily interactions between marketing, competitors, and sales by consumer in hand, manufacturers can finally start completing the machinery of marketing accountability. These new ledgers will report weekly marketing performance and profits by consumer group, providing guidance on short-term tactics and long-term strategies.
In the short-term, the main questions are: what immediate adjustments will maximize profits? What organizational and operational changes need to take place in order to leverage weekly accountability?
And in the long-term, the pressing issues are: What are strategic consumer segments for the company? What product portfolios make sense for the company? What consumer relationships make sense?
The final battleground of consumer profitability will be disruptive. It will entail a rethink of the marketing and sales silos. And the outcome will require agencies to get closer to manufacturer business operations or resolve into a negotiating agent for media and creative agent for messaging. It will recast brand managers into business managers. And it will finally put marketing on a par with other assets and liabilities for profit management on the CFO's ledger.
Mark Green is senior vice president, Strategic Measurement Initiatives, The Nielsen Company. (email@example.com)