Metrics, External Data and the Road to Innovation
By Samantha Beavers
In a world saturated with data, communication channels and digital platforms, marketers have more resources at their disposal than ever before. But which metrics should businesses be paying attention to? What kinds of external resources can they leverage? How can they harness all the available tools to spark innovation?
And where do they start?
For Poole College of Management associate professor of marketing Michael Stanko, the first step is building a portfolio of goals and metrics most relevant to the marketing team.
“Certainly, the ultimate goal of marketing analytics is to maximize ROI. However, there are all kinds of possibilities for goal setting and performance analysis, and it’s critical to look beyond end-result metrics measured after the transaction – like ROI – to track more granular, in-process metrics as well,” Stanko says.
“It’s important for marketers to focus on the most relevant goals and metrics for their particular team. This allows them to zero in on areas they can control, whether that’s improving consumer perception, achieving better margins or increasing share of shelf. You can’t manage what you don’t measure.”
Evaluating Key Metrics
One innovation-relevant metric companies are often familiar with is the share of revenue coming from new products. If a large portion of revenue comes from new products that have been launched in the last five years, for example, this can indicate a company’s growth trajectory.
At the same time, Stanko says this metric has several potential misuses and pitfalls.
“One of the things I want my students to be conscious of – and this is where I really hope to add value in the classroom – is that each metric has its own side effects. For example, some firms have a really low percentage of revenue coming from new products and that may trigger alarm. You could say, ‘Oh, all their sales are coming from all the old products. They don’t have anything new.’ But if they have an existing roster of products that are selling well, that may not be such a bad thing,” Stanko explains.
“So if that’s the only metric they’re chasing, it could give rise to some dangerous behaviors – like not promoting legacy products that might be more profitable. On the flip side, if a company doesn’t have a lot of existing revenue, it may be very easy for them to get a large percentage of revenue from newly launched products. So when it comes to this metric, you have to view it within the totality of what’s going on in a business,” he continues.
Another key metric affecting innovation is customer satisfaction – but this, too, needs to be handled carefully. Low customer satisfaction rates may indicate a need to innovate, but not necessarily.
“It’s counterintuitive, but the relationship between customer satisfaction and profit is lower than most people think. Take the American Customer Satisfaction Index, for example. You’ll find that many industry sales leaders regularly lag behind their smaller competitors in terms of customer satisfaction. Customer satisfaction is important, but customers buy for a multitude of reasons – like price sensitivity and convenience – and are not always driven by satisfaction.”
To that end, businesses not only need to be aware of the uses for each metric, but also of their pitfalls and how they work alongside other metrics in a portfolio.
An Ear to the Ground
Beyond building a better portfolio of metrics, marketers can also pursue innovation by utilizing the myriad external resources available. As with metrics, the key lies in using these resources in the right way.
For Stanko, this means leveraging resources as two-way streets.
Results from The Chief Marketing Officer Survey, for example, showed that most marketers use social media to spread messages and talk about their brands. Very few, however, use it to learn from their target customer base.
“To me, this reveals what I see as a huge shortcoming of the discipline. We often see a herd effect to spend more on social media promotion, and it’s not always accompanied with the recognition that social media should be a two-sided conversation,” Stanko explains. “Marketers are prone to look at social media as just another way to blast out messages to customers. This isn’t necessarily wrong. But it’s not recognizing its full potential. Social media is more than a megaphone – it’s also a listening tool.”
Full of potential ideas and criticisms, it provides a window into consumers and allows marketers to come up with better solutions.
“Marketers need to say, ‘Hey, we can learn from this.’ In addition to becoming more customer-focused in general, they can use these ideas to foster the next generation of products and make real-time improvements in current ones,” Stanko says. “There’s a wealth of information out there, and utilizing resources like text analytics can help us tap into it, draw out the important insights and come up with new ideas.”
As another example, Stanko points to the importance of listening in the crowdfunding domain.
In a study of 200+ Kickstarter alumni who used crowdfunding to bring their products to market, he found that the resource offered much more than access to capital. It also played a key role in fostering innovation through backers’ feedback and ideas.
The entrepreneurs who were most radically innovative in their subsequent product development ventures, Stanko found, were ones that were most open to ideas during the crowdfunding process. These entrepreneurs tended to crowdfund early on in the product development life cycle, which allowed backers to play a larger role.
“Crowdfunding backers bring so much more to the table than cash,” Stanko says. “Yes, these financial contributions are incredibly valuable in getting early stage products to market, but entrepreneurs need to realize that listening to an invested group of early customers – who are truly the early adopters – could be even more valuable.”
Leaving Nothing on the Table
At the end of the day, Stanko encourages businesses to embrace an open innovation mix, where they engage with ideas other than their own. Specifically, businesses chasing innovation need to tap into all the external resources available to them.
This includes web analytics tools like Alexa, which helps companies analyze web traffic and start to consider the customer journey to purchase; online communities such as Innocentive, where solvers assist product developers with technical challenges; and acquisitions of smaller competitors with promising new ideas.
“Marketers who are most innovative see themselves as data scavengers – they engage with brilliant ideas both inside and outside the company. And in doing so, they come up with the smartest products for tomorrow.”