Top Marketers Can Forecast Spending Impact: Survey

If it were necessary to cut marketing spending by 10%, would you be able to forecast the impact on sales?

Marketers answering yes are part of a small-but-growing crowd. While only 15.6% said they could in a 2005 survey, nearly double that amount indicated they could this year. And while 23% said senior management was confident in the impact forecasts a year ago, that figure jumped to 27% in 2006.

Marketers that can answer affirmatively to both questions—they know the impact, and management trusts their view—are "capable and confident," or C & C, according to Marketing Management Analytics' (MMA) chief client officer John Nardone and chief operating officer Ed See.

Companies that are C & C make use of a wider range of metrics, in some cases significantly so. For instance, they are more than twice as likely to use response prediction; marketing spending; likely prospect; and media mix and marketing mix models. And they are three times as likely to use recency, frequency and monetary analysis.

What else defines a capable and confident marketer? They embrace technology that allows them to get a handle on data and perform analytics much more enthusiastically than other firms. They are more than half again as likely to use marketing dashboards—30% do, compared with 18% of the other firms.

And twice as many – 48%, compared with 24% of the others — use data mining, modeling or predictive analytics. But the biggest difference comes among those firms that explore marketing simulation and optimization: While just over half of the C & C marketers examine this, only 13% of the others do.

One of the critical steps in becoming capable and confident is building relationships between business units.

Sixty-four percent of these respondents have a dedicated cross-function team that bridges the gap between marketing and finance, and nearly 40% report "full cooperation" between these two units. This cooperation should extend to as many units that can influence marketing results, including IT, collections, and senior management.

Not quite at the C & C level yet? Basic ROI measurement is taking even among companies not staffed by capable and confident marketers. MMA found that 36% of all respondents now agree on the definition of ROI, and 32% change strategies based on their ROI findings.

Another 24% move quickly to address new return on investment opportunities, and 20% take steps to optimize sales or profits. All of these figures are up from the levels seen in MMA’s 2005 study by significant amounts. Why now? Well, the biggest push came from outside the company: 2002's Sarbanes-Oxley act demanded more accountability from firms, and its requirements have tickled throughout corporate cultures, according to See.

That bit of legislation spurred growth in the technology that supports accountability, and the past year has seen acceleration in the number of firms embracing this technology, adds Nardone.

The increase in accountability isn’t free: 60% of capable and confident marketers have a dedicated budget for accountability, compared with 29% of the others. And more than half of the upper-crust marketers spend at least 1% of their total marketing spend on measurement, compared with 23% of the others.

What do they get for their money? Marketing based on continuous improvement, as opposed to one-off programs; analytics that look forward, rather than rely entirely on backward-focused measurement; shared accountability across the entire company, as opposed to within a single silo, and data and tools that provide a common foundation for decision making.

All this results in a corporate culture that actively analyzes risk and reward, and both long- and short-term returns.

Who should lead such an effort? A strong senior official who can crack the whip within the finance, marketing and IT departments, say See and Nardone.

Allowing any one of these supremacy has pitfalls—finance tends to be wary of innovation, and to be focused on the next quarter, rather than overall brand building. Marketers tend to be very “gut-level feeling” oriented, and to disdain metrics and analysis – and many marketing departments tend to be light on strong quantitative analytic skills. And IT.

Well, they are definitely part of the solution, and can help in building tools and providing places to store the data, but if finance is from Mars and marketing is from Venus, IT is from Pluto, or some equally distant, out-in-the-cold section of the galaxy where reports are structured based on what is easiest for them to output, deadlines are tentative and the need for proper documentation trumps expediency.

So who is taking responsibility for coordinating these efforts? Most often a high-level marketing official. CMOs and senior VPs or VPs of marketing make up 73% of those leading these efforts, followed by CEOs (16%); senior finance officials (8%) and senior research executives (3%).

The research, which was sponsored by the Association of National Advertisers, was culled from 101 online questionnaires followed by 14 in-depth interviews with respondents who opted in to be interviewed.

One-quarter of all respondents have marketing budgets in excess of $200 million, with another 14% spending between $50 million and $200 million, 18% earmarking between $15 and $50 million, and 36% spending less than $15 million. The remainder did not report how much they spent. Industries surveyed included apparel, automotive, financial services, food and beverage, manufacturing, retail and others.