4 Methods for Measuring Marketing’s Impact
Marketing budgets in the United States fell to 10.5 percent of company revenue in 2019, down from 11.2 percent the previous year, but Gartner was expecting that to change in 2020. In its “CMO Spend Survey, 2019-2020,” the research firm identifies four methods for marketing leaders to measure impact and achieve maximum insight.
Gartner found that market research/competitive insights and marketing analytics now absorb more than 13 percent and 16 percent of marketing budgets, respectively.
According to the study, marketing spending is directly related to the amount of confidence executives have in the effort. A little more than half (56 percent) of CEOs said they expected to increase investment in marketing. “This is significantly behind the proportion of CEOs that expect to increase spending in other capabilities, like IT (74 percent), people and culture (64 percent), and R&D and innovation (60 percent). Alongside challenges from the office of the CEO, a broader set of environmental issues come into play,” says Ewan McIntyre, a Gartner vice president and analyst and co-author of the report.
Among the challenges are changes in the business environment, challenging economic signals, and an unprecedented competitive environment. And the research was completed before the shutdown of many businesses as a result of the coronavirus pandemic.
The Gartner research shows that 61 percent of chief marketing officers expect budgets to increase in 2020, while 21 percent expect their budgets will stay the same. A successful strategy is paramount in maintaining or increasing a marketing budget.
McIntyre recommends auditing the environmental indicators used to build marketing strategies; locating the gaps in the marketing team’s knowledge of the internal and external factors that impede strategic planning, decision making, and optimization; and expanding thinking beyond access to data sources, also considering the quality, reliability, and timeliness of those sources.
After defining the gaps, marketers should collaborate with key stakeholders on the indicators that count, McIntyre adds.
“In some instances, data sources may already exist with key stakeholders in the organization, such as the finance or legal team,” he says. “In other instances, look to your partners, such as martech vendors and agencies, which may have a broader perspective on the environment.”
Gartner also found a continuing trend toward moving marketing in-house. In a separate report, Gartner’s “Magic Quadrant for Global Marketing Agencies,” the company identifies a shift in focus for the major agency players. Higher-margin, longer-term strategic engagements, such as digital transformation, strategy, or technology projects, have largely replaced lower-margin work and commoditized services, it said.
Even companies with modest budgets can now handle their own media planning and buying, so much of the work is no longer going to outside agencies, according to Gartner.
McIntyre puts forth the following four recommendations for CMOs to deliver near-term results balanced with long-term growth:
• Prepare contingency plans for future budgetary uncertainty. He pointed out that future economic uncertainty could be different from past periods and urged CMOs to adapt quickly if the scenario requires.
• Build a budgetary benchmark, looking past current-versus-prior-year comparisons and instead focusing on the budget’s overall direction and its drivers for movements over time.
• Establish a function to drive operational excellence in planning and execution across the entire organization, including large areas of investment, such as martech spending.
• Optimize the organization’s marketing agency spend.
To get the most out of their investments, McIntyre also recommends that marketers focus on the following:
• Marketing mix modeling, a top-down methodology that uses time series, aggregated data, aggregated media spending by channel or geography, competitor promotional events, pricing, and econometrics techniques to generate models.
• Multitouch attribution, a bottom-up approach requiring user-level data to identify the relative contributions of consumer touchpoints along the path to a goal.
• Holdout testing, a crucial method for testing hypotheses. When done correctly, holdout testing enables marketing leaders to quantify the incremental impact of marketing investments across channels and tactics.
• Unified measurement approaches, which answer questions spanning the tactical and strategic impacts of marketing to resolve the challenges of disparate, unlinked methodologies and insights.