How to Really Measure Engagement

What is Enterprise Marketing Management and will it change the game?

At a recent ad:tech conference, Hunter Hastings, CEO and Co-Founder of The EMM Group, gave a show-stopping keynote presentation defining the metrics, technology and business processes behind the hotly debated concept of consumer "engagement." David Hutchinson, Senior Vice President of Program Partners followed up with Hastings to help further define this topic within the broader context of enterprise marketing management.

Hunter Hastings is CEO and Co-Founder of the Enterprise Marketing Management Group, a firm dedicated to integrated demand process management.

David Hutchinson: So for starters, please share with us Hunter Hastings' up-to-the-minute definition of enterprise marketing management.

Hunter Hastings: Enterprise Marketing Management (EMM) is the systematic management of the entire integrated demand process (marketing and sales). It takes its cue from the productivity revolution on the supply side that took place over the last 30 years, driven by a single unified enterprise supply chain vision. Enterprise marketing management combines marketing process engineering, robust and scientific measurement and customer-centric organization, and it enables them all via technology.

Hutchinson: Sounds a lot like Customer Relationship Management (CRM), or the Integrated Marketing Communications principles advocated by IMC sages like Don E. Schultz. Is EMM somehow better or more germane to today's marketing centric organizations than these other, three letter acronyms?

Hastings: CRM and IMC are components of enterprise marketing management, but they are unable to help clients manage the entire demand generation system.

Enterprise marketing management helps clients: 1) generate insights (and understand the value of their insights portfolio), 2) advance from insights to brand domains and brand equity frameworks and innovation platforms, 3) to create long-term equity appreciation plans and annual marketing plans, and 4) to implement those plans effectively as well as measuring their performance accurately for continuous improvement.

The magic of supply-side optimization is that supply-siders figured out how to optimize for the entire system. The magic of enterprise marketing management lies in the same secret: it's a holistic management system, not a component view.

Hutchinson: So tell us about the EMM Group. Where "EMM" companies like Unica seem to be more about enterprise software, your company advocates the use of software, but only as a support system for leveraging customer insights, which, if done correctly, seem ultimately to be about crafting and refining internal processes to increase brand equity. Fair?

Hastings: Right on. Enterprise marketing management is process + metrics + organization + technology. You can't apply the technology until the process is in place (that's one of the lessons of the supply-side revolution: it's dangerous to automate a bad process).

Sound marketing process begins with customer insights (at EMM Group, we have an insights generation process). These insights are turned into innovation, and the innovation is delivered to customers via the go-to-market process. Brand building (a term we believe applies to both B2C and B2B marketing) is another process.

All of these processes should be captured and turned into standards; the roles and responsibilities of the organization should be defined to implement the processes effectively. And the metrics of the process and t
heir outcomes must be defined. Only then does it make sense to apply technology: software embeds the process and puts it on everyone's desktop so that they can follow it, collaborate around it and implement it.

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A sound and universal way to measure engagement

Hutchinson: In a noisy attention economy, the metrics of reach, frequency, impressions and click through seem to be crumbling beneath a growing need for more relevant metrics, like say, (drum roll please) "engagement."

Of course, the trouble with engagement is that it's tough to measure. But at a recent ad:tech conference, you presented to a full house what seemed like a perfectly sound and universal way to measure engagement. Has EMM Group split the atom here?

Hastings: I like the analogy (especially since it was a scientist from my Alma Mater, Cambridge University, who identified the nucleic model of the atom).

The analogy we used at ad:tech was another scientific one: the transition from one S-Curve to another. In technology, the S-curve portrays the life of a technology that starts with a disruptive innovation, advances through competitive exploration of possibilities to achieve the breakthrough to industry standards, and then reaps its economic rewards in maturity.

As it does so, the next S-curve starts to form as a new disruptive cycle begins, and will eventually replace the old one.

Marketing is at the end of its old S-curve, where no matter how much effort we put into it, we will not improve returns.

One of the phenomena of the old S Curve is the model of marketing communications as a funnel. We put communications in at the top, and it gurgles through the funnel to turn -- by increasingly smaller percentages -- communications into awareness, and then awareness into consideration, trial, repeat purchase and loyalty.

It's frighteningly inefficient, and the inefficiency is designed in!

The new S-curve is based on the new concept of customer engagement. Engagement is a dialog conducted via a multiplicity of contact points, selected by the customer. Engagement is built around two key changes in the operating environment:

1) First, the addressable consumer or customer. Increasingly, we are able to reach our customer individually as an electronic address as that consumer moves between a desktop computer attached to the internet, a laptop on the go, a web-enabled mobile hand held communications device or an iPod. They might be using email, instant messenger, blogging, knowledge management tools, collaborative business software or shopping. We can reach them at most times and follow them around the web to analyze behavior that reveals their needs.

2) Second, customer control over the content they choose to receive. Advertising -- or indeed anything that we might typically have thought of as "marketing communications" that simply interrupts them before they have put their hands up to say "please tell me something" -- is anathema.

Engagement is customer controlled. To engage with a customer, we must understand their needs and preferences pretty much as individuals, or at least in very, very finely segmented groups, and communicate with them when they choose, rather than when the brand owner chooses. Engagement requires personal, individual meaning, and therefore it requires personal, individual understanding.

In order to become a standard for marketing, the first requirement of customer engagement as a marketing tool is that we have measures of engagement. At ad:tech, we introduced the concepts of :
Customer Engagement Points
Share of Customer Engagement
Engagement Conversion Rate

These are the cornerstones of the new engagement measurement system. They generate derivative measures like cost per engagement point and cost per share point of engagement.

It's a complete new paradigm, and it unleashes the new marketing S-Curve. Its key points are:
It embraces all contacts with the consumer from the web to word of mouth to conventional communications. The customer tells us what qualifies as a contact.
Every contact has a value, weighted by combining cognitive value (information generating a rational shift in favor of the brand), affective value (generating a positive feeling about the brand) and persuasive value (generating a shift in behavior towards the brand).
All the values roll up to a total brand engagement score. This is a global currency. A brand engagement point in Berlin can be compared to a brand engagement point in Beijing, or Buffalo or Buenos Aries.

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What does this do to the brand-agency relationship?

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Hutchinson: So what does this new environment, or discipline of process, metrics and "hyper-trackability" in modern marketing do to the brand-agency relationship?

Hastings: The old form of agency relationship is at the top of the old S-curve. It's run out of steam.

The new relationship has to be built around integrated marketing: how to get the most Brand Engagement Points (BEP) from the array of communications, website contacts, CRM, trade shows, word-of-mouth, product placement and product-in-use experience, all at the most efficient cost per BEP.

That requires a complex integration algorithm, and it requires a single role of integrator.

It remains to be seen if any agency can operate the new algorithm. They can run the model and do the math, but can they play the integrator role? That requires the objective allocation of dollars between all the methods of contacting the customer for engagement. It requires that the choice of contact precede the choice of creative theme, a difficult shift of priorities for agencies.

It was thought that the creation of the new conglomerates like WPP and Omnicom would offer integration to the client but it has not happened yet. We see the integrator role being played inside the client organization. That makes the agency just one of a choice of vendors, and a choice that is governed by scientific resource allocation methods.

On what will the new relationship be built? We believe it will be in efficiency (cost of service optimization) rather than creativity. We don't see a lot of agencies stepping up to the plate.

Hutchinson: Perhaps these pressures between the new and old S Curves are also contributing to the grim statistics we keep seeing from Spencer Stuart, wherein the average tenure of today's CMO keeps dropping: from 23.6 months in 2004 to 23.2 months in 2006?

Hastings: The CMO is not a real "C" in many organizations. The idea of having a head of marketing on a par with the CFO, CTO and so on is a vaguely nice concept, but the responsibilities are not well defined.

And the reason for that is that most CEOs don't understand marketing and its role in the corporation. They appoint CMOs and expect some kind of a miracle to happen, such as great PR or a brand turnaround, and get impatient very quickly when it doesn't happen. They fail to think hard enough about the organization design, process, technologies and other needs of the CMO to have a true impact.

There's a ton of resistance to CMOs from business unit heads who want command of their P&L and budgets. Unless organization design and process design ferrets this out, the BU heads will win.

Hutchinson: Your book, "The New Marketing Mission," was the first book I had ever read by a group of marketing executives to deliberately include the practices of project and program management as a means to organizationally align or "re-shape" the company around customer insights and brand.

Typically, marketing and project management have been diametrically opposed cultures and communities. Is enterprise marketing management changing this?

Hastings: Enterprise marketing management combines process, metrics, organization and technology. It employs one sub-process to generate insights and another, linked sub-process to go from insights to innovation, and a third sub-process to get the innovation to market. It develops repeatable capabilities and models such as product launch models that can be used again and again as templates. It absolutely uses project and program management principles, tools, methods, measurements and technologies.

When you see the new organizational construct of Marketing Operations popping up in technology companies, those are built on project and program management principles.

Marketing Operations will be a new dominant paradigm in marketing: highly disciplined, highly scientific, highly measured, highly enabled with technology. The old idea of marketing as an ad hoc, "pull it out of thin air" creative artistry is dead. Creativity has its role, but it plays the same role as it does in architecture: it's a contribution to a scientific and technically robust engineering process that produces a building that is beautiful but also functional, reliable, and built on a solidly engineered foundation.

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