What is Metrics Driven Marketing?

Metrics Driven Marketing is the marketing process that applies detailed metrics to every facet of marketing.  The goal of Metrics Driven Marketing is to better predict returns on marketing investments and thus drive superior overall marketing results.  Metrics Driven Marketing ranges from very quantifiable direct response marketing to more challenging measurement of brand awareness advertising. 

Metrics Driven Marketing can trace it roots to Claude C. Hopkins, who died in 1932.   His book, Scientific Advertising, was published in 1923 and was a major breakthrough in testing the effectiveness of advertising (Read it free at http://www.scientific-advertising.co.uk/ ).  Lester Wunderman was also a key driver of Metrics Driven Marketing, primarily through his advancement of direct marketing (a phrase he was believed to have coined in the early 1960s).  More recently Rex Briggs has carried the torch of better marketing accountability to broader reaching brand advertising.  His book “What Sticks” is a must read. 

The uniting goal of all these pioneers is a desire to push the tracking envelope in all marketing activities and drive better, more predictable results.

To achieve this goal of predictability, it is important that the majority of marketing funds are invested into proven activities.  Only 10-20% of the monthly marketing budget should be allocated to testing. Ideally the investment in each new test will provide a large enough sample size to accurately assess the performance, but will be small enough not to burn though a significant portion of the testing budget.  The majority of the marketing team’s time should be spent executing these tests.  Proven marketing activities can largely run on autopilot with periodic reviews of the performance reporting.

I am a big believer in the power of Metrics Driven Marketing.  It has helped my marketing teams overcome daunting odds to deliver back-to-back blowout successes at venture funded companies.  To understand the rarity of this, it is important to note that less than 10% of venture funded companies offer seed investors a return in excess of 10 times their original investment. The chances of doing it twice in a row are about one in one hundred.

At my most recent venture, my first marketing hire was trained as an actuary (actuaries are the math wizards at insurance companies who calculate premiums based on risks).  This highlights the importance top level mathematical and analytical skills to try to push marketing tracking to its limits.  We are now recruiting our third marketing analyst to the team in addition to a database analyst.  It’s almost impossible to have too many analytical minds.

In an early stage startup it is relatively easy to apply the principles of Metrics Driven Marketing.  That is because the purest form of Metrics Driven Marketing is direct response marketing – which should be the primary marketing approach of all startups.   Direct response marketing is a low risk approach that has been around for decades.  It favors the small budgets available to most startups.  It also supports a startup’s discovery process of identifying the right target customers and developing a powerful value proposition.  Additionally, it allows a marketing team to focus on refining the brand experience and if applicable helps them optimize website conversion rates.  As customer acquisition conversion rates improve, the ROI from the direct response marketing initiatives also improves.

Eventually a successful startups company will have to complement their direct marketing initiatives with more scalable branding campaigns.  That’s where Metrics Driven Marketing gets really tough.  Fortunately earlier efforts to refine the value proposition, brand experience and conversion metrics will pay dividends in broader reaching campaigns.  To track the effectiveness of these campaigns most savvy marketers use test markets and trend analysis.  Metrics Driven Marketing is not always about perfect ROI tracking – it’s about continuously pushing the tracking envelope and directing marketing funds to the most effective and accountable initiatives.  Rex Brigg’s book “What Sticks” provides excellent guidance for executing a Metrics Driven Marketing approach at scale. 

It is also challenging to analyze the marketing effectiveness of Blogs, viral marketing and word-of-mouth initiatives.  Fortunately most of these activities require relatively small finanicial investments, though the time investment can be quite large.  These activities require more creativity to determine appropriate measurable ROI targets than others.  For an example on tracking blogs see my post on measuring the loyalty impact of social media.  

What about marketing activities that provide important benefits that can’t be tracked?  I discuss this in another recent article.

Metrics Driven Marketing is surprisingly underused by many experienced marketers.  The marketing leaders who do use it (and succeed with it) generally have a good balance of analytical skills, discipline and a deep reservoir of creativity.  Not just the kind of creativity needed to come up with clever slogans, but rather business creativity to invent new marketing methods and tweak existing methods for cost-effectively reaching their target customers.  If this creativity runs dry, the testing halts and marketing results stop improving (and often start declining).

Of course, Metrics Driven Marketing is just the foundation of a strong integrated marketing approach.  Market research, particularly in depth customer research, is essential.  As is customer segmentation strategies, enhancing the brand experience, PR, mapping marketing objectives/strategies to overall company objectives/strategies…  But, these can all be strengthened by a foundation in Metrics Driven Marketing.