A CEO walks into a CMO’s office.
CEO: Is our marketing working?
CMO: What?! Yes, business is good, we are growing, and all the KPIs are positive. You’ve seen the data, why do you ask?
CEO: True. All indicators are positive, it is a good year, but is our marketing effective?
CMO: What do you mean by is our marketing effective? You’ve seen the results.
CEO: Yes, but how do we know that it’s the marketing that’s driving this growth and not market conditions? Our product/service quality beats the competition, our service reviews are high, our price is right, and even the market environment is favourable. What about marketing communications?
Marketing leaders have heard this question often, even when business is growing. A study by The Fournaise Group found that of the 1200 CEOs interviewed, 80 did not trust the ability of their marketing to deliver growth, whereas 91% trust the value and opinion of their CFOs and CIOs.[i]
Translation. Here’s what the CEO really wants to know:
- What is marketing’s contribution to sales, share and profit?
- How effective is our marketing? This means, is marketing’s contribution optimal, are we getting the most out of our marketing?
- How can we improve marketing ROI?
- Do we know which marketing activity is working and is there any wasted spend that we can redirect?
- Is our investment in marketing adequate?
The fact is there are only three revenue scenarios that exist in three market conditions. Your business situation could fall into one of these nine scenarios. Either your revenue is growing, is flat or declining in either a growing, flat or declining market conditions, complicating our understanding of our marketing’s contribution and effectiveness.
Demonstrating your marketing’s contribution is relatively easier if your business is growing in a flat or declining market, but it is difficult in the other six scenarios. It is even harder to identify which variable from the marketing mix and media (promotional) mix is working and the contribution of specific marketing activities.
CHALLENGE OF PROVING MARKETING CONTRIBUTION (MROI)
Markets are much more dynamic today than any other time in history; every marketing activity works differently in different conditions. Just because a marketing activity delivered excellent results in the past, it does not guarantee the same results in the future even if marketing conditions remain the same. In a 2018 State of Inbound study by HubSpot discovered that at 46%, proving the ROI of marketing (MROI) remains the second most significant challenge facing marketers, second only to generating traffic and leads, which came in at 64%.[ii]
Multiplications in marketing channels/ Marketing channels and data sources have multiplied.
According to a report from IBM Marketing Cloud, 90% of the data in the world today was created in the last two months. As technology continues to fuel the rapid growth of data sources and marketing channels, the job of marketers has grown broader, become more complex and even more accountable.
The “State of the Customer Journey 2019 report published by Arm Treasure Data showed that 47% of marketers believe their information is siloed and difficult to access, which was hurting their ability to leverage the data.[iii] The explosion in Operational (O-data) and Experience data (X-data) has led to the silo-fication of data. These data silos are rigidly compartmentalized; they don’t join up with other parts of the information system, which further compounds the task of proving Marketing ROI and informing decision making.
Marketing ROI comes in various sizes
Proving the exact marketing contribution and relative effectiveness of the marketing to its potential is also challenging because Marketing ROI comes in different sizes. A marketing ROI of 2.5x would be enough reason to invest more in marketing but the question remains, is this a good ROI? Should marketing be yielding an ROI of 5x or 8x or more? What is the reasonable potential, the ceiling?
Imperfect Marketing Attribution
Despite the availability of mountains of data, Marketing attribution remains a problem, especially at the granular level. Which marketing variables are driving growth, which ones are not contributing continues to challenge marketers. A collaborative 2018 survey 370 marketing professionals by Clikz and Fospha indicated that only 33% of brands believe that their current solutions perform accurate attribution of all media and data.[iv]
If marketers cannot identify how well each marketing variable like strategy, creative, marketing mix and media (promotional) mix is working, they cannot improve effectiveness. It’s simple; you can’t treat something that you have not diagnosed first.
Marketing Effectiveness Audits help diagnose the strengths and weakness of your marketing, proves marketing ROI and provides recommendations to improve the effectiveness of your marketing.
WHAT IS A MARKETING AUDIT?
Marketing Audit is also known as Marketing Effectiveness Audit, Marketing Review, Marketing Analysis, Marketing Diagnostics or a Marketing Value Audit.
A Marketing Effectiveness Audit is a comprehensive, systematic and independent examination of a company’s macro and micro marketing environment, objectives, strategies, and promotional activities to identify problem areas and opportunities and recommends a plan of action to improve the company’s marketing performance.
A Marketing Effectiveness Audit is not a new idea nor a unique methodology. Originating in the early 1950s, it became mainstream during the turbulent 1970s. Today, with the incredible growth and access we have to Operational and Experience data, marketing audits have reached a high degree of methodological sophistication, but attribution challenges persist. Marketing Audits include qualitative (non-numerical) and quantitative data from a variety of sources, like secondary data, customer data, market research, competitive intelligence, sales, transactions, interactions, testimonials, customer ratings, digital analytics, and marketing metrics.
The definition of a Marketing Effectiveness Audit in this paper is comprehensive (Horizontal); it covers the entire extent of a company’s marketing, not just its promotional mix (marketing communications). It is a review of the macro and micro marketing environment, objectives, strategies, creative and content, marketing mix, analogue and digital media/channel mix, and promotional and retention tactics.
In contrast, a vertical audit is conducted when management wants to deep dive into a specific marketing function, like Sales, Product, Pricing, Distribution, or Marketing Communications (promotion). A vertical Marketing Communications Audit would include a review of the Brand, Messaging, Creative and Content, Digital and Traditional media mix. A comprehensive Marketing Audit evaluates all vertical components of marketing.
WHO SHOULD DO A MARKETING AUDIT?
Marketing leaders can do a self-audit using a template or have their marketing services provider like a media, digital or creative agency do the audit. However, most experts agree that a self-audit or an audit done by their marketing service provider would likely lack objectivity and independence. To improve the effectiveness and quality of the diagnosis, marketers are better off using independent marketing auditors. Using independent experts ensures objectivity and enhances the quality and efficiency of the audit because an independent and specialized marketing auditor will apply a systematic and orderly sequence of diagnostic steps.
Every marketing auditor will apply their proprietary evaluation and analytical processes and achieve an approximately similar outcome, but they must be an independent third party to avoid bias. It is also vital that their process incorporates an orderly sequence of diagnostic steps.
HOW DOES A MARKETING AUDIT HELP?
Marketing Audit findings and outcomes help the top line by improving marketing performance and, in some cases, also the bottom line through marketing efficiencies.
The primary reason for doing a Marketing Audit is to evaluate marketing effectiveness and further improve it. To that end, a marketing audit will identify problems that are unfavourable to marketing effectiveness, and opportunities that are favourable. Implementing the recommendations from a Marketing Audit should improve marketing effectiveness and marketing contribution (MROI).
Apart from the most critical use of proving and improving marketing effectiveness, marketing audits provide many other significant benefits to marketers by helping them:
- Spend marketing dollars wisely by channelling resources from less productive to more productive areas, thereby reducing pressure on finite marketing resources.
- Gain a fresh perspective and an independent second opinion on marketing.
- Support critical decision-making and to build consensus in the c-suite.
- Align marketing strategy with business strategy and help set realistic goals.
- Tune the marketing strategy to the dynamic environment to stay relevant, and identity and defend against disruptive threats.
- Recalibrate marketing touchpoints in the customer journey to improve customer experience.
- Inform strategic planning and marketing planning.
- Build a benchmark for future performance tracking.
WHEN IS A MARKETING AUDIT REQUIRED?
Vertical level functional reviews like digital, media or brand audits are typically done annually as a precursor to marketing planning. However, the horizontal level, comprehensive, Marketing Effectiveness Audits, as defined in this paper, are best done every few years as discovered by our own research to realign the marketing to business goals and the environment.
In addition to scheduling a Marketing Audit every few years, there are a few specific occasions when a Marketing Audit provides additional value.
During a change in leadership
New leaders arrive with a new vision, new goals, and allocation of monetary and other resources. Marketing audits help onboard senior executives, like CEOs, CMOs and even CFOs, by providing a comprehensive and diagnostic view of a firm’s marketing effort, new knowledge, and a fresh perspective to reshape the firm’s marketing.
Before making significant strategic changes
Marketing Audits are necessary at any point when making major marketing decisions. Decisions like rebranding, repositioning, targeting a new segment, drastically changing the marketing mix or promotional mix, and when reviewing external marketing service providers like your creative, digital, media or experiential marketing agencies.
When competition is heating up
After a new competitive entry, or when existing competition becomes more aggressive, a Marketing Environment Audit can help marketers understand competitive strategies, find defensive and offensive solutions.
If your business has been declining or flat for some time
If your business is trending downwards or has been flat for several years, it is time for a comprehensive diagnosis of the marketing. A Marketing Audit can identify potential problems and find tangible solutions to improve its effectiveness.
Even when business is growing
Sales can grow for many reasons. It could be a result of good marketing or some change in the marketing environment or both. Understanding which variable of the marketing is working can be pivotal in improving marketing effectiveness.
Marketing has become relatively more scientific and predictable today, but it is still mostly art. Every marketer’s situation is unique, and countless variables influence the impact of marketing, some in our control and some outside our control.
Today advanced and automated tools help marketers monitor and analyze the marketing effort more efficiently than any other time in history, but there are gaps, overlaps and variations in data. Not every touchpoint is measurable or measured, attribution is imperfect, and data silos make it difficult to get a comprehensive view of marketing. Without a complete diagnosis of marketing from the environment to execution, it is challenging to improve marketing effectiveness. A Marketing Audit is a solution.
[i] “Marketing Effectiveness News & Releases.” Fournaise, 10 July 2012, www.fournaisegroup.com/ceos-do-not-trust-marketers/.
[ii] Kolowich, Lindsay. “8 Of the Top Marketing Challenges Marketers Continuously Face [New Data].” HubSpot Blog, 2018, blog.hubspot.com/blog/tabid/6307/bid/33820/5-Major-Challenges-Marketers-Face-And-How-to-Solve-Them.aspx.
[iii] “The State of the Customer Journey in 2019.” Treasure Data, 2019, www.treasuredata.com/resources/2019-state-of-the-customer-journey/.
[iv] “The State of Marketing Measurement, Attribution & Data Management.” ClickZ, 2018, www.clickz.com/resources/the-state-of-marketing-measurement-attribution-data-management/.