I talked with Edgar Baum, brand economist and Founder and CEO of Avasta Incorporated, about the CMO Knowledge Gaps (see here). As part of that discussion, Baum suggested that there are a number of areas that prevent marketers from generating accurate insight. Below is Baum’s insight.
1. Vertical reporting. This means that the entire supply chain, value chain, is created with little to no regard for the brand. As an example, when I was at P&G, there were challenges for major brands like Tide. You would think that the Brand Manager owned everything related to Tide. But you would have a Walmart person on Tide. That Walmart person would just look at Walmart data. All of their conversations would be about driving more volume through Walmart. It was literally high volume at Walmart at everyday low pricing. That was their universe. They frequently knew little about what was happening at grocery or drug and so they didn’t have cross conversations within the organization (they weren’t allowed to or they hadn’t been in a brand role yet that looked across all brands, even anecdotally). Their mandate wasn’t integrated with the total brand management view. This is important. There was no single view of the category of consumption or how their individual strategies would impact the efforts of other brand initiatives, e.g. low pricing at Walmart could potentially erode the premium performance perceptions of Tide, and therefore impact business performance elsewhere.
2. People are comparing themselves against themselves. Companies measure versus year ago, quarter ago, or budget. Or they measure performance versus the consumption that is happening in the category. Many companies are trapped in the historical definition of consumption when there was less competition, and different consumer expectations. They need to compare themselves against the nature of the consumption that they are competing in. For example, Vitamin Water is competing against other flavored waters. But in reality, they are competing against other beverages like prestige beverages. There is overlap with Gatorade. Now it is the “share of throat” or “share of beverages.” These are different ways of thinking about how to define your competitors—your consumption dynamic. Think about Cirque De Soleil – who is their competition? They are really competing against the highlight entertainment of the local geography. In Las Vegas, it’s against the strip, in London, it might be the theater, but they know the cascade of consumption and understand it has become elastic.
Companies are not well-versed in tracking the elasticity of purchase. Brands need to be measured on other metrics like how good they are at preventing customer dissatisfaction and their ability to stay relevant when innovation is on their doorstep. Because most category growth comes from cannibalization within the category—when other brands address a point of dissatisfaction.
3. Using single, cross-industry metrics instead of relevant industry metrics. It terrifies me to hear people try to compare impressions, like Apple impressions versus Starbucks. One is consumed every few years, while the other is consumed daily. You need to overlay consumption frequency to any universal metric like awareness, interest, purchase consideration, etc. to understand its true value.
As an example, I was at a conference earlier this year and there were multiple ad agencies speaking. One showed us all of their awards and talked about generating 380 million impressions. The second company presented their results of 163 million impressions and didn’t get nearly the same oohs and ahhhs. The first was a mass brand and the second was a niche brand. In reality, the brand with 163 million impressions had much better business results than the mass brand with 380 million. So what is the real value of an impression? Across industries, impressions are not comparable and they have different levels of impact. There is an absolutism bias that needs to be addressed. In this case, it’s not about how many impressions. It’s all about paired metric. If you use a universal metric, you have to pair it with a finance, sales or operations metric to make it meaningful.
4. Different standards of precision throughout an organization. What is so ironic in the lack of precision expected from financial reporting vs. marketing. If you talk to the senior folks at consulting firms that conduct audits they actually don’t look at the detailed numbers—they estimate the financials. For example, they will report a value of $400 million +/- $20 million for inventory and then state it as $400 million. That’s about 95% level of accuracy. If a CMO reports that same level of confidence in their metrics, it is deemed unacceptable. There shouldn’t be different rules for degrees of accuracy.
Join the Discussion: @KimWhitler
