DECEMBER 14, 2004

By Christopher Kenton

Marketing Finally Measures Up

A tougher economy has made it evolve into a leaner, performance-driven business, with a focus on technology that finely tracks results

For the past two years, I've written at various times in this space about marketing's future. A sea change is under way, I observed, and marketing will be redefined by performance metrics. I didn't need a crystal ball: Businesses were responding to tighter capital and consumer markets by demanding greater accountability from those managing their largest discretionary budgets. Measures of brand awareness and preference were no longer enough -- managers and investors wanted to see a tangible return on investment (ROI).

I've gone a step further by saying this isn't a fad but an evolutionary trend, driven not only by market conditions, but by advances in business processes and technologies that allow complex metrics to be tracked by mainstream companies. "Mousy marketers" who wither in the boardroom but complain in the staff room would give way, I believe, to business-minded marketers who drive budgets into measurable profits. I predicted that the "small view" of marketing -- as a cost center for promotion and lead generation -- would give way to the "large view" of it as a whole business function designed to optimize each customer relationship.

WATCHING THE BELL-COWS. But it wasn't until a week ago, when I attended a marketing-metrics conference in San Francisco, that I saw firsthand how quickly the future has arrived. The conference was part of the American Marketing Assn.'s Hot Topics series, and focused on improving marketing ROI by using software dashboards. Admittedly, my expectations weren't high. I've attended and presented at too many conferences that were high on buzzwords and light on practical application, and I've been critical of the AMA at times for the same reasons. This conference was different.

What I saw was a summit of bell-cows -- people who the industry watch to figure out where to go next -- moving aggressively toward a marketing paradigm with metrics at the core. Executives from outfits like Cisco (CSCO ), Wells Fargo (WFC ), and Microsoft (MSFT ) engaged with presenters, offering insight on marketing frameworks featuring financial and statistical models.

While the presentations often zeroed in on that remarkably resilient but slippery concept called "brand," the discussions moved beyond the typical fodder of positioning and differentiation to focus on valuation and performance. How do you know what your current investments in marketing are worth? How do you know where you should focus your efforts to produce results? How can you reliably monitor progress in order to make timely adjustments?

SHIFT TO LEAD GENERATION. These are questions I've been looking at deeply for years, as have many others. Research into marketing measurement go back decades. I'm not talking about tracking campaign results or forecasting demand, but having a holistic view of marketing effectiveness that spans business functions. For the first time a convergence has emerged, bringing these concepts within reach of mainstream businesses right at the time demand is about to accelerate.

Why now? Economics and opportunity. During the go-go '90s, businesses were flush with cash and didn't need to restrict their marketing budgets. There was plenty of room to be creative, to focus on brand as a question of image and customer experience. Don't snicker -- lots of valuable knowledge about brand experience came out of those days of excess.

When the market crashed, three years of famine followed in which many businesses turned their marketing focus exclusively to lead generation and little else. None of the businesses I dealt with -- primarily on the business-to-business side -- wanted to even talk about brand. Everything was about price and the resulting sales generated, which is when the rise of financial language like ROI really came to the fore.

TECH DRIVERS. The past year seems to have been a time for taking stock about what marketing means to businesses today while they hope and prepare for a recovery. Economic growth hasn't been exciting, which has kept the need for measuring marketing performance relevant. Promising new pay-for-performance channels have emerged, like paid online search, only to become rapidly saturated and costly.

What's less obvious, but even more important, is that during the eight years of growth and three years of decline, marketing technology and metric models have been on a steady evolutionary curve upward. This is thanks in large part to the same advancements in computer technology that fueled the dot-com boom.

So here we are at the end of 2004 with businesses focusing on their hopes for the coming year. The picture doesn't look rosy enough for most boards to take the leash off their marketing teams, but after four years of stagnation, they have to do something.

PROFIT PROPHETS. Enter a new wave of marketing theorists who speak the language of finance and statistics, offering tools that promise to help outfits find and wind the operational dials that drive market value. This is the next big thing in marketing, and though it has been simmering for a while, it's about to boil.

I certainly have a vested interest in making this reality come true, as I'm one of those theorists. But there are others, whom I'll introduce you to over the next few weeks, who have some very powerful ideas that will reshape the practice of marketing. And since I made such a big deal at the outset of this column of how I saw it all coming, I promise to tell you soon how it'll all come apart. Isn't it obvious?