Using Business Drivers to Guide Your Marketing

As marketers and business owners, we're all accustomed to hearing "buzzwords" - new words to describe the same old concepts in business and marketing. The term "business drivers" may sound like the next big buzzword to hit interviews and conference rooms this year, but when understood and used properly it can actually be the guiding principle to your next marketing plan. Harvard Business School Executive MBA Professor John A. Quelch speaks about business drivers when he teaches his students how to build a marketing dashboard. The marketing dashboard proves marketing's worth and importance so that even the CEO of a large organization can understand. In general, marketing is not measured adequately. We measure marketing based on ad impressions, website visitors, and so forth. Quelch calls it using "anecdotal customer observations" instead of using metrics. Not only do we need to measure marketing on metrics, but we need to measure it on the right metrics. So what are these metrics and how do we decide what to measure? Well the metrics Quelch speaks of are the business drivers of an organization. He defines business drivers as "leading indicators of financial performance" and qualifies them by 4 guidelines. The business drivers are metrics that:
  • the company can influence - eg: Average Customer Order Value for a retailer or manufacturer
  • vary by industry and by company - eg: Net Subscriber Growth for a subscription-based company
  • are specific to the company's business model - eg: $/Hour for a service firm
  • include customer and competitive metrics - eg: New Subscriptions & Viewing Share for a cable TV channel

Quelch puts business drivers as the first of the three pillars in the marketing dashboard and prescribes us to measure them on a monthly ongoing basis.

So now we know what business drivers are and how we should monitor them, but how do we pick them and how do we use them? Let's focus on picking them first.

Each time we prepare a proposal we follow the 3C Model to gain a 360 perspective on the organization's customers, competition, and company. From there we define the business drivers before moving into our most critical business problem and initial hypothesis. It's from the 3C Model that we determine the business drivers. We look at what the 2-4 most influential leading financial indicators are for the company that we can affect. This is what guides our marketing initiatives. Once we know the business drivers, marketing initiatives are simply plugged in as tactics to move the needle on those most important metrics.

I'll use a real client example to explain this - we worked with a kitchen faucet manufacturer and found that their two business drivers were average order value and number of customers. In order to move the needle on those we needed to figure out ways to increase average order value and the number of customers. To do this we engaged in conversion design focused on increasing average order value, social media targeting their customer segment with the highest average order value, and SEO designed to attract new customers to their website. Once these initiatives were in place, we could monitor them on a monthly basis and measure the affect they had on the economics of the company.

Monitored and measured business drivers are real numbers that you can show the CEO to prove the value of marketing in your organization's financials.

Source: Measuring Marketing Performance, By Gail McGovern & John A. Quelch

Chris Root, Associate Consultant, eBoost Consulting

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