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Moving up the Ladder of Insight

From Level 1 to Level 2 — Priority Action Steps

If you haven't already, begin to assemble sales and margin data in an accessible format with frequent refreshes. You might want to ask IT to help assemble a "datamart" for marketing purposes, which you can access directly and export into a desktop application like Microsoft Excel.
Set up job-cost accounting, so expenditures can be tracked back to specific initiatives.
Work with finance to adopt a flexible ROI modeling approach built on agreed definitions of gross margin, contribution margin, pre-tax profit, and net income. Agree on rates for cost of capital and target ROI hurdles. Secure their help in developing analyses, not just reviewing them.
Begin requiring all new programs, campaigns, or initiatives with expected completions of six months or less to submit an ROI analysis prior to funding approval, then match each pre-ROI forecast with a post-ROI analysis. Use gaps and differentials as the basis for continuing training.
After the first six-month cycle, institute quarterly project assessments mid-stream and introduce "Interim ROI" methods to re-examine the project commitment vis-à-vis changes in the investment opportunity horizon.
Resist the temptation to reward winning ROI initiatives in favor of visibly rewarding managers for support of and adherence to the system.
Although not required, many companies install campaign management software to help standardize tracking and reporting. This is particularly helpful if you are running dozens of concurrent marcom initiatives or customer promotions.
Begin correlating market research data on awareness, brand equity, purchase intentions, etc., (strategic factors) to financial results like sales and gross margins. Chart strategic and financial factors on the same axis and study for emerging patterns. Note significant events like competitive and regulatory activity, macro-economic and geo-political events, etc., on the same chart to help uncover relationships.

From Level 2 to Level 3 — Priority Action Steps

Continue to invest in the datamart, making it increasingly comprehensive and accessible. Consider adding an analytics package to help standardize access to data and ensure that comparisons between programs and initiatives compare apples to apples.
As you increase the percentage of total marketing spending subject to the ROI analysis process, work with accounting to devise a reasonable method of overhead allocation to each marketing project or initiative. Involve team leaders in defining overhead. Establish rules for which projects get allocated and which don't.
Introduce and train the team on the use of risk assessment tools to become part of each project funding request. Require that all ROI analysis be risk-adjusted and make larger projects subject to peer review to accelerate standardization of risk assessment process. (See How Much Unnecessary Risk Is in Your Marketing Plan?)
Apply optimization techniques to fund allocation between programs, customer segments, channels, acquisition vs. retention, media mix, or other areas where necessities or opportunities exceed available short-term funds.
Begin to measure and monitor correlations of interdependence between various marketing activities to ascertain which programs are complementary and related to the results.
Refine and test correlations between branding initiatives, strategic factors from earlier stages, and financial results to improve predictive/explanatory relationships.

From Level 3 to Level 4 — Priority Action Steps

Having laid the groundwork in Levels 1-3, correlations must be made between pure branding or corporate marketing initiatives and financial results.
Engage research, planning, and finance teams to work together to determine if branding expenditures can clearly be correlated to increases in profitability (even on a delayed basis) at acceptable ROI.
Charter (or shadow) the same team(s) to evaluate changes in market value of the company relative to comparable benchmarks to see if there's a correlation to branding activities.
Absent any clear determinations in either case above. CMO, CEO, and CFO must discuss the strategic benefits of continuing branding activities and decide if those activities should be held to a standalone measurement standard, allocated against other marketing activities or continued for qualitative reasons.
Cautionary note: Before agreeing to continue for qualitative reasons, consider bringing in several brand evaluation consulting firms and hear their different methodologies to see if one fits your situation. An agreement to a qualitative rationale leads to continued budget battles on the basis of emotional factors and harmony is sure to be forgotten with the first market tightening or change at the executive level.

From Level 4 to Level 5 — Priority Action Steps

Level 4 normally determines which of two avenues a company will take to achieve Level 5. Regardless of which path you choose, everything is measured both pre- and post-expenditure.

Companies that cannot fully quantify the financial benefit of branding or corporate marketing activities yet choose to continue them, should:

Adopt a balanced scorecard for integrated measurement with the heavy involvement of the marketing team, and the consensus of the CEO and CFO.
Define the scorecard with as few top-level objectives as possible, making sure each is quantified in terms of what is to be achieved, magnitude, and deadlines.
Align all marketing activities with one or more scorecard elements so relationships can be clearly defined and measured.
Design compensation and recognition programs for marketing team leaders to reinforce their relationships to specific scorecard elements, but also the balance of the team goals.

Companies that can quantify the financial benefit of branding or corporate marketing activities should:

Apply the same assessment methodology/ metric for all marketing expenditures.
Translate the expected return from brand or corporate marketing initiatives into these common metrics.
Allocate and reallocate resources regularly, optimizing the desired balance of short- and long-term results.
Link management compensation directly to incremental improvements in the selected metric(s).
Integrate marketing expenditure requests back into the corporate resource allocation process using the same metrics as IT, HR, or manufacturing.

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