John Wanamaker, the famous retailer once quipped "Half the money I spend on advertising is wasted; the trouble is I don't know which half." For many years, it was a quote that marketers could rely on if their campaigns were unsuccessful or if they were unable to show a direct link between marketing expenditures and sales. As we all know, the days of not being able to measure the effectiveness of a media campaign have essentially disappeared over the last 5 to 10 years. Those days are so long gone, that the mantra is just the obvious as evidenced by an event I recently attended.
The Executives' Club of Chicago sponsored a breakfast entitled: "Accountable Marketing: What to Measure and How to Measure It" which featured Chief Marketing Officers from three of Chicago's largest companies, Aon, Walgreens and CDW. One of the panelists, Philip Clement, Global Chief Marketing and Communications Officer for Aon Service Corporation, started the breakfast off with his mantra "If you cannot measure it, don't do it." While perhaps not quite with the same emphasis, the other panelists echoed Clement.
The other theme that came through loud and clear is that the days of setting a marketing plan, putting it in motion and then waiting to see what happens are also long gone. The Chief Marketing Officers of all three companies emphasized the imperative to test new things, learn from what is tried and then modify and refine. The CMO from Walgreens explained that early in the 2008 Christmas season, as Walgreens started to see how poor retail sales were, the company's top managers got together in the room and totally revamped the company's marketing plans for the next sixty days. They put together a plan, almost on a day-by-day basis, looking to see what was working and what was not. As a result of the company's efforts, its year-end sales were better than the average retailer.
As I listened to the panelists, it was obvious that prediction markets could play a key role in executing a company's marketing plans. Since marketing activities can now be measured with accuracy, they can also be asked about in a prediction market. For example, a company might launch a marketing effort that is expected to generate sales of $4 for every dollar spent on the campaign. At the same time the campaign is launched, the company should start a prediction market that asks its salespeople, marketing professionals and customer service representatives about the campaign and the level of new sales that will be generated. With the help of a prediction market, well before all the money has been spent, the marketing executive can consider making changes or even evaluate discontinuing an effort if the prediction market starts to show results far less than the 4:1 goal. Alternatively, if the market predicts better than anticipated results, the executive can consider extending or expanding the effort because of its likely success.
With marketing dollars such a scarce resource these days, it obviously makes sense for a Chief Marketing Officer to closely scrutinize every dollar spent. Usually that process takes place before a campaign is launched and after all the money has been spent. Prediction markets are a great way to re-evaluate plans mid-course and take the necessary steps to help ensure that a greater percentage of a company's campaigns are successful.