Reading news headlines about the strike by the dockworkers of the International Longshore and Warehouse Union (ILWU), one is reminded of the Luddites of England, who, in the 19th Century, destroyed and vandalized labor saving machinery to try to save their jobs, which they thought the machines were taking away.
 The ILWU exhibits the Luddite viewpoint right here in the most technologically- advanced culture on earth. For example, they demand that tellers enter the numbers from containers into spreadsheets by hand, even though scanner technology is employed everywhere else in the world.
The metrics of productivity demonstrate the deleterious effect of this 19th Century mentality. The metric that was published in the San Francisco Chronicle to make this point was a world ranking of ports by TEU's, or "Twenty-Foot Equivalent Units" per gross acre, compiled by JWD Group of Oakland, a seaport architectural and consulting firm.
Oakland, one of the striking West Coast ports, handled 2,885 TEU's in 1999, versus Kaohsiung in Taiwan at 19,305 TEU's. Thus, the Taiwan port was more than six times as productive as the Oakland port that year (even in my old home country, Felixstowe, a dreadful place previously known only for soggy fish and chips, warm beer and wet weather, came in at 9,785 TEU's -- over three times as productive as Oakland).
A TEU per gross acre is a complex computation. It equivalizes non-standard container sizes, ignores irrelevant variables (e.g., weight), and introduces a variable that is, on the face of it, non-intuitive (the "per gross acre" concept -- why this as opposed to per day or per 1,000 employees?). This last attribute of the metric implies that a lot of thinking went into identifying key drivers and direct comparables.
What's all this got to do with marketing? Three things.
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- If the marketing community continues in its resistance to the adoption of technology to enhance marketing effectiveness and efficiency, we will justifiably be tagged with the title of Luddites. We're resisting for backwards looking reasons.
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- To be true to the concepts of effectiveness and efficiency, we must embrace measurement of marketing productivity. This means not just the productivity of the dollars we expend, but also the productivity of the people who spend them.
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- Measuring marketing productivity is hard. But it can't be any harder than figuring out that TEU's is the right metric for measuring the productivity of container-handling ports wherever in the world they operate..
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Today's CMO should be working hard to identify the metrics of effective and efficient marketing, and should be driving their corporations to focus on them. Winning on the basis of these objective metrics is also how CMO's should measure their own productivity.
Each enterprise will develop its own metrics. Here are some primary principles:
Real Growth. Marketing should be measured in terms of directly driving business results. We are enamored of measuring things like awareness or hits on the website, but these are, at best, intermediate values. They do not represent revenue or profit. Share comes close to being a direct driver of revenue or profit, but it doesn't address growth.
A brand can hide behind share growth in a static category, when it should really be focusing on where growth exists and how well (or badly) the brand is capitalizing on the opportunity. Ask yourself: does this measure show whether marketing is directly delivering the business results my corporation seeks?
Basic Metrics. Marketing metrics should be simple, clear and few. The success of metrics-based supply chain management -- which has been so successful over the past few years at squeezing out costs and improving performance -- lies in part in the ability of cross functional teams to focus on one, or a few, metrics and on the key drivers underlying those metrics. Everyone can agree on a single language, a common goal, and the nature of their (interlinked) contribution.
Today's CMO should be working hard to identify the metrics of effective and efficient marketing, and driving their corporations to focus on them.
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A good example that was shared with us recently was a metric for customer management: cash received minus the total associated cost. While a customer satisfaction measure is nice (and may be a driver), the reason we do customer management is to earn revenue. The cost of that revenue lies in not only cost of goods, but also in pricing, promotion, assortment, logistics, cost of dedicated sales teams, etc. If we measure and trend revenue, and measure and trend total cost, we are focusing directly on business results and not on some intermediate values.
Intangible Assets. Don't be afraid to measure what seems, at first, unmeasurable. For example, one of the supposed intangibles of marketing is insight. This is a "guru" capability, is it not, granted by the marketing gods to their chosen few, and not reducible to process or measurement?
Well, in fact, there are lots of ways we can tackle the measurement of insight. We can think about what results insight should generate. Perhaps we alight on better innovation and better communications.
For innovation: what percent of our revenues comes from new ideas brought to market in the past 24 months? Is that percentage rising or falling? What are the sizes (in revenue terms) of the ideas we are generating from insights? What is our rate of innovation versus the outside world? How much new revenue does the corporation generate from the dollars expended on R&D and new product development? Is this higher or lower than the ROI on other forms of investment the company makes? What is the capital efficiency of our innovation -- how much capital expenditure does it require and what is the return on that capital?
For communication: what is the increase in household penetration or in rate of use per million dollars of advertising expenditures? What is the profitability per million dollars of advertising budget for each of the brands that we advertise? What is the value of $1 invested in advertising or promotion of Brand A versus Brand B? What is the sales lift generated by communications made in advertising versus communications made in point-of-sale material? What percentage of the target population buys each successive brand extension we launch?
The Luddites of the ILWU are doomed for many reasons, but one of them is that they are leaving the definition of success to external forces, and then failing -- spectacularly -- to meet the external benchmark.
Let not marketers make the same mistake.
Hunter Hastings is managing partner of EMM Consulting Group, which advises companies on how to implement Enterprise Marketing Management, a multi-faceted system for global brand management combining marketing knowledge, best practice processes and training with collaborative software, marketing tools and infrastructure. He can be reached at HunterHastings@EMMConsulting.net
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