Thursday, December 29, 2005

Measurement Does Not Replace Management

I found this statement in a PriceWaterhouseCoopers journal on risk management -- measurement does not replace management. I am the first to agree that it is not the most profound but it sure rings a bell. There is always a demand to measure public relations, advertising, direct mail, etc. and not surprisingly, no one has found the holy grail.

When it comes down to it, it's all about quality management. Measurement is important and my favorite CEOs all recite that you manage what you measure. But without good leadership, all the measurement in the world can't cut it. Numbers can fail. I can't help recall the terrific quantification and forecasting by Cisco that held us all spellbound until the numbers did not do their job. Thankfully Cisco is back on its feet with the deft leadership of John Chambers.

We were recently asked about measurement, in particular marketing mix modeling (MMM). This is the new craze ever since P&G's new research found that public relations can have a significant effect on sales. Bravo to P&G for these results which help to validate public relations and other "below the line" marketing.

Key to conducting marketing mix modeling, however, is the availability of extensive, detailed data that can be fed into the model. The process requires entering large amounts of data (usually broken down by week) covering a considerable time span -- several years in many cases -- for each type of channel involved. The model also incorporates broader economic and competitive data to take external factors into account. Needless to say, not every company has reams of detailed data that can be thrown into the MMM hopper.

While the model may be able to determine public relations’ contribution to sales, increased sales may not be the prime objective of public relations such as building reputation, building equity with key communities and forging relationships with allies.

I leave you with my thought for the day: Good management trumps measurement. Maybe not profound but certain.


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