Thursday, November 28, 2013

In Search of the Formula for Communications Measurement

I utter the word measurement with a degree of trepidation. The word can mean many different things depending on who we talk to. To many it’s a perfect way to put a Communications/ PR person in the dock since they argue that the results of communications are not directly measurable in terms of business results. And that which can’t be measured stays at the periphery.

What set me thinking on this topic was when a senior marketing executive at a forum commented that Communication practitioners seem to be scared of being measured on ROI. What does he mean by that, I said to myself. And so began the quest to find the formula for communications measurement.

Unfortunately, many communications practitioners have heard similar criticism from clients/ stakeholders so often that they’ve begun to dislike the word ROI. But is it really such a dreaded thing? Can communications be measured in business terms? And what’s the most acceptable methodology?

Before getting into the method, let’s understand the context. Till any function is measured with regard to business impact, it is a tendency to look at it as a cost centre which needs to be closely scrutinized, and more so in times of margin pressure. An apt example is that of the HR function. Isn’t it ironic that in PR and advertising firms where talent is the primary resource, HR teams have an average size of less than 2% of the total headcount. In fact, most PR firms with 50-100 people have a one-member HR Team with the KPI defined primarily as recruitment and back-filling. One would think the role of HR would be more expansive in a people-centric business such as PR and so HR departments would be better staffed. But that has rarely been the case despite the healthy growth seen by the PR industry during the last decade.

PR and communications departments face a similar situation in the corporate structure where sales teams tend to be more powerful. It is a fact that most CEOs have a sales background. So, it becomes even more crucial for the communications team to show measureable business results if it wants to have a seat at the business decision making table.        

So, what's the ROI of Corporate Communications

Even if we acknowledge that the results of communications efforts at reputation management cannot be directly correlated to quarterly sales targets and bottomlines, no-one can and should deny or belittle the long-term impact of this effort on a company’s overall performance. Companies that have measured corporate communications through tactical short-term metrics have seen their brand values erode in the longer term. The best examples are many Japanese brands that have built their communications campaigns primarily focusing on product visibility in the short-term - a very transactional approach to communications. While immediate visibility for product may be needed during market entry, it cannot remain the sole driver of communications efforts. With the onslaught of the more nimble Korean brands, those Japanese brands are today fast losing the audience mindshare.

As per the Interbrand best global brands, only two Japanese brands are in the current top 20 namely Toyota and Honda. Most brands that have endured over time are American ones because they understood the value of long-term reputation building early on. Reputation is a brand’s most powerful defense to crises and competitor onslaught. So by that analogy, reputation management is as important to a brand as its defense forces are to a nation. Can a nation ask its defense forces for a Return on Investment?     

Measuring Marketing Communications

Marketing communications, which is primarily aimed at supporting marketing efforts, can be measured by understanding the impact of communications on specific marketing campaigns that directly impact sales of a product or service offering. One such method uses regression analysis which is a statistical process for estimating the relationship amongst variables. The measurability increases significantly in the case of social media promotions particularly in measuring efficacy of message delivery on a real-time basis.

Many companies particularly those in the consumer space use audience audits as a means for measuring the success of communications and marketing campaigns. The logic being that if the audience does not associate the brand with the key messages or ‘terms’ that the brand aims to stand for, it defeats the purpose of the communications and marketing effort. This has its clear merits. 

The other methodology includes a weighted average of multiple factors such as media circulation/viewership of coverage, number of social media mentions/ comments, tonality, share of voice and key messages/terms captured to arrive at a score. These have their merits too just that it doesn't necessarily show how the audience reacted to the messages.

At the end of the day, its all about the target audience and whether they absorbed the message which the brands tried very hard to deliver.

So is there a formula?

For those readers who believe the argument is endless, here’s the simplest answer for any communications measurement to be successfully applied.

The key lies in goal setting. The metrics must be agreed during the stage at which goals are being set. Each goal must have a clearly stated and agreed success criterion. What’s also important is to agree on the assumptions being made, the limiting factors and where one stands on the goal at the beginning of the period. If the probability of occurrence of any significant limiting factor is high, it is imperative to have a Plan B. One may argue that when a client hires a strategy advisory firm such as McKinsey, does a strategy advice always fit into an ROI metrics? Not necessarily. The thing that the strategy consultants get right is the assessment of the client’s market dynamics at play, the risk factors and their impact which is used to arrive at a highly measurable plan of action. And they are paid basis hours spent not on ROI. So, we needn't get caught up in the ROI model.

The disconnect actually lies at this juncture since many in-house communications teams have not taken the pains to discuss and agree on the success metrics and assess limiting factors with the senior management. Everyone loves ambiguity since it gives them the space to present results in their favour. Similar is the case with PR firms. And when the desired results are not achieved, the blame game begins.

The greatest enemy of measurement is improper goal setting. Most communicators tend to believe that they know the goals so why spend so much time in goal setting. The broad brush approach is what sets them up for failure. 

So folks, that’s as close as I could get. Love to hear your thoughts. As I said, the search is on for that ever elusive formula…And when we get it, we wouldn’t be too far from communications’ very own God Particle!