Dan Marks, CMO of First Tennessee Bank, is a big believer in learning from his peers. Having seen him speak at The CMO Club Summit in NYC last year, I would say Dan gives as much as he gets, if not more. As such, I was delighted to be able to catch up with Dan a couple of weeks for a conversation about marketing metrics. Dan is also responsible for orchestrating one of the most effective marketing metrics program I’ve heard about, a program that can not only look backwards at the impact of 84% of his marketing spend but also has the ability to predict with “reasonable” accuracy what will happen when budgets get cut. If you are a marketer and don’t have a metrics program in place, you’ll read this and weep.
DN: Please speak to the advantages, to you as the CMO, of having a strong metrics program in place.
The advantage of having strong metrics in place is it helps you understand how good the creativity is and helps in conversations with the rest of the business. So for instance, when you’re talking about changing resourcing between business lines or overall budgets you’re able to quantify the impact of your actions, maybe not to an ultimate level of precision but good enough that it lets you have a comparable type conversation to other investments the company makes. At the end of the day, marketing is a huge line item at any company. And so having the same level of accountability and quantification that you might have in other areas puts you at equal conversation and helps raise the credibility of the conversation.
DN: Have you been able to move the conversation from where marketing is no longer just a cost center but is rather a revenue driver as a result of having the metrics in place?
We’re on that journey. I’m not sure we’re completely there yet, but we’re definitely on that journey to more precisely quantify the linkage to revenue and to be able to quantify the revenue impact of different marketing approaches. Marketing is a matter of talking the customer’s language, right? So when you are talking to sales and you can show a stack ranking of your marketing programs and their benefit, all of a sudden you’re talking their language because they stack rank their salespeople.
DN: One of the terms that you used that I really liked is the notion that creating a metrics program is a journey. Talk to me a little bit about the journey.
The revolution really is in saying, let’s not have a separate set of metrics or let’s, at the very least, connect the marketing metrics to the core bottom line revenue and costs and profit objectives. And so that’s the journey. The measurement approach varies by type of marketing activity and channel. So the stages of the journey start with direct marketing, where the linkages and the science are the most developed. Even in B2B, if I can quantify that I’m helping create opportunities from introduction or helping move things along the pipeline, all of a sudden now you are speaking the same language that sales is. One of the most elusive goals and one that’s still not there yet is the overall full media mix impact–what’s the cumulative impact of everything working together?
DN: If you could measure the impact of the full media mix, what would be the benefit of that?
Other places that spend cash have ability to quantify the impact of that cash. So in operation, it might be a cost per output or what my cost is to deliver a dollar of revenue. And so it allows that same sort of conversation around marketing, what is the revenue impact of a dollar spent with me as I make decisions and look to optimize it–is that getting better or worse? And so it’s several layers of precision, of getting to be more precise and being able to forecast the impact of different decisions. And then track what happens and continue to optimize– that just adds that much more credibility and confidence in making marketing decisions and the organization.
And related to that is giving you the confidence to be able to pursue it scientifically. So we can creatively think of a few different ideas and then decide based on the risk tolerance or the level of uncertainty we’re willing to approach. We may try a very uncertain idea at a lower spending level knowing that, okay, we’re going to take a chance on that huge one, but we’re not going to bet the farm on something that’s very unknown. Yet we’re going to take more incremental experiments around more proven ideas.
DN: I want to make sure that we clarify language. What’s the difference between an outcome measure and a diagnostic measure and then can you put them in a priority order relative to job security and doing your job well?
Sure. So when I think of outcome measures, [these have] impact on revenue profits and margins. These are the key results that the CEO and board ultimately care about. And so those are the cardinal metrics. Diagnostic measures are important to understand outcomes. So for example, we look at awareness. But my team still cringes when I say, ‘You can’t eat awareness.’ But it’s important to understand that customers do go through this buying process of awareness, consideration, purchase, all this kind of stuff. But our goal is not to create awareness. Our goal is to get people to buy stuff and generate revenue. We have to understand the buying process. We have to understand if we’re having trouble getting people to buy stuff, is it because the awareness low, do they not know about the product, or are they are trying it but not repeating it therefore the likelihood to recommend the product to others is low or the experience is bad? When I said diagnostic metrics, these are things that help us understand what the potential actions we should take are, and the prioritization of those actions based on understanding the customer, the customer and the marketplace, and the buying process and the competition.
DN: Do you use Net Promoter Score?
We look at likelihood to recommend, we look at it in the total likelihood and in net time basis. But we don’t just rely on that.
DN: Do you look at the various points of contact in the customer experience and measure each of those?
We look at it both overall and after a key experience point. So after you’ve had an interaction at a branch, after you’ve had an interaction with a business banker, after you’ve interacted with some of our online technology. So we do — we definitely understand how they are all different. And we’ve studied it. So we also know that our experience scores and our recommend scores strongly correlate/predict future changes in retention and revenue.
DN: So when you see your experience core decline, you can go to the CEO and say, ‘sales are going to be down next quarter?’
Well, maybe not quite that quickly! We know over time if scores are trending down or scores are trending up, that will translate into a strong probability of having lower or higher revenue in the future.
DN: Give me a sense of how often you’re looking at numbers.
Well, we do have an alert mechanism. So if poor scores are spiking, we know that pretty fast. But generally speaking, we look at our customer experience and customer buying metrics on a monthly basis– and that’s where you see trends.
DN: Is a commitment to a metrics space approach sort of a guarantee incrementalism
Well, that’s something that we talk about a great deal. And I think misunderstood, it could. But I would say it’s better to spend a little bit of time on testing than to take a huge leap of faith and fail. And usually your level of urgency is not so great that it doesn’t make sense to spend a little bit of time testing it. It’s a lot easier to scale something up that is successful than to pull back when it’s not.
DN: So at some point is it possible to spend too much on analytics?
At the end of the day, it’s some expensive people and some expensive technology but in the grand scheme of things that’s still, in the neighborhood of one or two percent of your budget. And I have not talked to anybody yet who didn’t say after they started getting better analytics, they weren’t able to reallocate at least 10 percent of budget. You spend one percent to find out that 10 percent of your budget is not working or not working as well as it could be. And, that’s a 10 to 1 return.
DN: I’m assuming that there was a budget cut at some point in the last three years?
That’s right because everybody had one.
DN: So were you able to predict how the marketing budget cut would impact your business?
Oh, yes. And the level of prediction was pretty close. I mean, not a hundred percent. No model is completely perfect, but it’s definitely useful.
DN: What three pieces of advice do you have for CMOs about to start the metrics journey?
First, definitely have the conversation with your key partners, whether it’s your CEO, CFO or sales leaders. Figure out who is going to judge your performance and collaborate with you because most of the time CMOs can’t actually sell stuff themselves. They’re influencing sales activities. Have that conversation early on, and ask what metrics are important to them and what are the outcomes that you should focus on. And number two, I would definitely commit to a program of optimization and continuous improvement of marketing results.
And then thirdly, I would say for sure, connect to and focus on giving back to the community. And there are a number of different ways to do that– The CMO Club is one example. There are also several great CMO type organizations that exist to help CMOs share information. And you’ve got to do that, carefully. You don’t want to give away trade secrets, but there are great resources out there to help talk about common challenges, common best practices. And every CMO has got something to add to the conversation, and what you give, you get back in spades.
You can follow Dan on Twitter @wdanmarks