Are you measuring the true value of your marketing?
Published in Convenience Store Products
The single most famous article in the history of academic marketing was written in the 1950s by Ted Leavitt, an iconic marketing professor at Harvard Business School. The article attributed the downfall of the Pennsylvania railroad to “marketing myopia,” which prevented management from seeing they were in the transportation business and not the railroad business. As a result, the railroad missed the transition to combination rail and trailer shipping, which revolutionized the railro—whoops, make that the transportation business.
Today’s marketers have an even more serious and pervasive disease. We call it “marketing dementia,” the loss of memory about what has worked in the store. Last week I was speaking with the director of category management for one of the largest and most successful retailers, and he lamented his company’s failure to become a “learning organization.”
“We never analyze anything,” he said. “When the promotion is over, we forget about measurement. Then the next year, we do the same thing all over again.” I assured him that his company was sadly not in the minority. This disappearance of memory, this failure to have the discipline to compile shopper response data, is truly the shame of marketing.
What can possibly be more important than avoiding what fails and repeating what works? What can possibly be more important than understanding the relative ROI of initiative A vs. initiative B? Funds spent promoting Category A vs. Category B?
Why is it so hard for companies and their marketers to learn from the past? The simple answer: Top management lacks the discipline, analytical protocols, data and in some cases the people to create a learning organization.
Perhaps this is changing. The same retailer who bemoaned his company’s failure to measure anything told me in the next breath that every expenditure going forward would require an ROI justification. This sounds like a step in the right direction, except when one realizes that for the past 10 years, this company has accumulated little in the way of analysis to make these ROI justifications anything more than a well-intentioned guess.
So how do we cure the disease of marketing dementia? First, make learning a corporate priority by empowering the research department. Let everyone know that every recommendation on every expenditure above X dollars in promotion, advertising or store operations must have a measurement protocol attached to it. If the retailer is promoting Coke at X, find out what it generated in terms of incremental sales.
Agree in advance what will be measured and how. If you don’t have the data, ask yourself what’s more expensive, the data you need or the continuing ignorance about what is working and not. One of the great sins of modern marketing is that management will spend hundreds of thousands of dollars on an initiative and nothing on measuring its appeal to the shopper. Someday, somewhere, some little old lady from Omaha who has her life savings in a stock is going to ask company management what marketing expenditure has worked relative to another. She will be shocked when management can’t explain what they are doing with her money!
One attractive, low-cost rapid-learning alternative is to enlist the vendors and other major solution-providers in the quest to find out what works. Unfortunately, most vendors are as irresponsible as retailers in measuring what works, but if you ask enough vendors enough times, you will begin to accumulate helpful answers.
At the Category Management Association, we grade vendors’ category management capabilities partly on their accumulation of “success models”: initiatives that have been proven to work repeatedly and reliably. Building “success models” in assortment, pricing, merchandising and promotion should be a goal for every retailer as well.
Curing marketing dementia is not easy. The disease has developed over many years and will take years of determined effort to cure. Unfortunately, the relatively high turnover in many organizations encourages continued mindless spending at the expense of the determined aggregation of reliable learning. The simple fact is that the only truly sustainable advantage is speed of learning. Embracing that truth is the first step in curing marketing dementia.
Gordon Wade is managing partner and director of best practices for the Category Management Association. He can be reached at firstname.lastname@example.org.