Metrics Can Drive UP Marketing EffectivenessOne of the things that attracted me to the catalog business was the industry's ability to measure results in a clear, no nonsense manner. With the help of some fairly basic reports, it's possible to quickly ascertain whether the six-month $50+ select from Bloomingdale's by Mail performed as well as the three-month $75+ select from Spiegel. Or whether or not the wall calendar on page 31 paid for the advertising space we allotted for it.
The concept of using metrics to drive marketing and merchandising effectiveness can also be translated to critical operating areas; you can measure telephone abandon rate, backorder rate, 24-hour shipping rate and a host of other operating statistics to determine whether you are servicing customers at the desired level. You also can adapt the use of measurements to some of the softer issues. Whether you are frustrated over the inability to maintain catalog-production schedules, struggling with the challenges of finding the right mix of new merchandise for your next catalog, or losing sleep over the slow build of obsolete inventory in your warehouse, you can develop a system of measuring and reporting to come to grips with these problems.
If you are thinking at this point that you can't possibly take the time to put a whole new system of metrics in place, you have succeeded in identifying the first major philosophical and cultural change that you must be willing to embrace in order for this process to work. You and the small group of analysts, and accountants that you may have at your disposal can't possibly keep track of, nor perhaps even identify, all the things that need to be measured in your company. Nor would you want to. The measuring needs to be done by the individual who is responsible for the performance.
The next question to be discussed is who this information should be reported to, and this is the second area where you may need to rethink current practices. Typically, information is reported to a small group of senior executives, and the combination of self-measurement and broadcast reporting of results is a powerful motivator to improve performance. Will it make people nervous at first? It absolutely will. But once you are measuring and reporting on the right things, it will also provide a level of empowerment, which will actually make people feel good!
In most businesses, at every level of the organization, there are perhaps four- to six-key business drivers that will determine that individual or area's success. For a catalog CEO, some of these drivers will be found on monthly financial statements: advertising to sales ratios, current assets to current liabilities, etc. Others might include overall response rates, customer service levels or product sales by category.
The first major step, then, is to have each of your key departments or employees come up with a list of their key success drivers. This step alone can be an enlightening experience for a senior executive or department manager in a business. The important thing is for everyone to do it. You will either be pleasantly surprised to learn that the people in your company really do know what is important, or you will learn about some remarkable misconceptions about what is critical to you and your business.
The next step is to translate those performance drivers into easily measurable events. Once the drivers have been identified, what to measure and how to do it are often fairly obvious. And once the metrics have been identified, a strong discipline must be established to assure that these metrics are reported and discussed on a regular basis. Company bulletin boards work fairly well, but I have always preferred to have the reporting done face to face at staff meetings, where each participant has an opportunity to report on his areaís performance to a peer group.
Although you will undoubtedly experience some bumps in the road when you first try this approach, the benefits you will ultimately realize are worth some initial discomfort:
* By asking people to verbalize the business drivers in their area, you will learn quite a bit about what is important to them, and whether those things are in sync with general department or business goals.
* You will generate some lively discussions about what is really important and what is not, which can be quite healthy when done in a constructive way.
* You will learn quite a bit about the interaction between areas, since the cause of one area's problems is often sitting in the room with you. This will lead to some rapid root cause problem solving.
* Everyone will become much more understanding of the other guy's trials and tribulations, and as a result will begin addressing issues as opposed to personalities.
* Your department or company will spend more time on the things that are really important.
* And best of all, when you succeed in making this work, you will find things getting fixed without you having to do anything at all, except making an occasional policy decision!