Digital channels have enabled marketers to generate huge amounts of data, from number of followers to click-to-open rates. Although these metrics can be useful when analysing the performance of campaigns, they do not tell the whole story. Without context, many marketing metrics are meaningless, and frequently referred to as “vanity metrics”.
An Example of Meaningless Metrics
A great example would be one of our clients, who works in a specialist area where there are only a few thousand people globally who would be responsible for selecting their category of products. In this case, would having 50,000 followers be better than 40,000? It’s clear that not all of these followers are influential, so does more mean better? We need alternatives to these meaningless marketing metrics.
Return on Marketing Investment
The return on marketing investment (ROMI) is defined as the contribution to profit divided by the amount spent on the marketing campaign. Simple!
Although this feels like a good alternative to meaningless metrics, it can be very difficult to measure ROMI. In particular it’s hard to attribute sales or profit to a specific marketing activity as you rarely have a situation where it’s only the marketing that changes. For example, a campaign to launch a new product would typically be supported by sales training and incentives. It’s very difficult to separate the impact of the different types of investment.
Equally one marketing activity is unlikely to make all the different: typically, it’s the impact of many activities that ultimately causes someone to buy, particularly in a business-to-business environment with a long sales cycle. Discussing the challenges of attribution is beyond the scope of this blog post, so to learn more check out the Wikipedia article on marketing attribution.
The Metrics that CEOs Care About
Despite the many pretty presentations marketing departments produce based on the meaningless metrics described above, the reality is that the senior executives don’t take any notice of them. They care about financial metrics, for example Customer Acquisition Cost (CAC) and Customer Lifetime Value (LTV). Put simply, if it costs you less to acquire a customer as they are worth to you over their lifetime, then the marketing to get a new customer is worth doing. If it costs you more to acquire customers than they are worth, then you probably need to revisit your business model (although this often doesn’t apply to the over-hyped VC-funded start-up world).
Although financial metrics are great alternatives to meaningless marketing metrics, they don’t really help marketers. For example, when acquiring a customer, what activities have an impact? How much impact does each marketing tactic have? You simply can’t analyse your marketing performance with these high-level metrics.
AVE is a Meaningless Marketing Metric
If you talk to people about the measurement of PR, you’ll soon get on to the issue of advertising value equivalent (AVE). People try to measure what it would have cost to generate the same amount of “coverage” as the PR campaign by buying advertising instead. The logic is that if the PR campaign costs less than the value of the advertising, you’re getting a great deal.
This is just not true. Apart from the fact that the two are very different (and frequently the PR-types will multiply their value of coverage by a number they claim to represent the impact: I’ve seen anything from three to nine times used by other agencies), just because you got PR coverage, doesn’t mean that the publication would be the right one for advertising. Equally it’s almost impossible to judge AVE for PR that appears in places such as publication websites.
The amec Framework: An Alternative to Meaningless Metrics
One organisation that has made considerable progress in devising alternatives to meaningless metrics is the association for the measurement and evaluation of communications (amec). This organisation has built a framework for planning the evaluation of campaigns, and even has an online tool. The tool, however, only produces results that are as good as the inputs it receives, and it’s perfectly possible to generate a set of meaningless metrics by using the tool ineffectively. So, although the organisation made significant steps forward, it doesn’t have the full solution.
Business Thinking: The Alternative to Meaningless Marketing Metrics
The reality is that the alternative to using simplistic and meaningless metrics is thinking about what marketing is trying to achieve for the business. This needs marketers to consider a wide range of factors, from financial (such as LTV) to the customer journey or sales funnel.
Ultimately if you can show how you are moving prospects along the customer journey and driving them to become customers, then you can show value. To optimise each marketing tactic, you need to look at a small section of the journey, for example you might want to look at conversion rates for a landing page, but it’s critical you don’t forget the big picture. Increasing a landing page conversion rate only benefits the business if the additional contacts generated ultimately become profitable customers.
Being able to focus on a small aspect of your overall marketing activities and keep the big business picture in mind can be very difficult, but if you can do it then you are well on your way to finding your best alternative to meaningless marketing metrics.
