Creating a performance management system

The essence of performance management is suggested by this definition for performance measurement:

The process of qualifying the efficiency and effectiveness of past actions though acquisition, coalition, sorting, analysis, interpretation and dissemination of appropriate data (Nelly et al., 2002).

Performance management extends this definition to the process of analysis and actioning change in order to drive business performance and returns. Online marketers can apply many of the approaches of business performance management to digital marketing. As you can see from definition, performance is measured primarily through information on process effectiveness and efficiency.

The need for structured performance management process is clear if we examine the repercussions if an organisation does not have one. These include: poor linking of measured with strategic objectives or even absence of objectives; key data not collected; data inaccuracies; data not disseminated or analysed; or no corrective action. Many of these barriers to improvement of measurement systems reported by respondents in Adams et al. (2002) also indicate the lack of effective process. The barriers can be grouped as follows:

  • Senior management myopia – performance measurement not seen as a priority, not understood or targeted at the wrong targets – reducing costs rather than improving performance
  • Unclear responsibilities for delivering and improving measurement system
  • Resourcing issues – lack of time (perhaps suggesting lack of staff motivation), the necessary technology and integrated systems
  • Data problems – data overlay or poor quality, limited data for benchmarking

The Web Analytics Association (2011) Outlook survey of companies using web analytics gives insights on the specific challenges of performance management for digital marketing. The top 5 challenges were:

  • Actionability of data (36%)
  • Business decision driven by analytics (35.3%)
  • Social media (34.9%)
  • Executing management awareness and support for web analytics (34.9%)
  • Failure to take action on the data (31%)

In 2009, the largest hurdle organisations predicted was funding, but by 2011 this wasn’t in the top 10, suggesting more buy-in to use of web analytics tools. Instead, the top two issues reported suggest the problem of performance management, taking action based on the data.

To avoid these pitfalls, a coordinated, structured measurement process is required. There are four key stages in the measurement process. These were defined as key aspects of annual marketing plan control by Kotler (1997). Stage 1 is a goal-setting stage where the aims of the measurement system are defined – this will usually take the strategic digital marketing objectives as an input to the measurement system. The aim of the measurement system will be to assess weather these goals are achieved and specify the corrective marketing actions to reduce variance between target and actual key performance indicators. Stage 2, performance measurement, involves collecting data to determine the different metrics that are part of a measurement framework. Stage 3, performance diagnosis, is the analysis of results to understand the reason for variance from objectives (the ‘performance gap’ of Friedman and Furey, 1999) and selection of marketing solution to reduce variance. The purpose of stage 4, corrective action, according of Wister and Faxcett (1991), is:

To identify competitive position, locate problem areas, assist the firm in updating strategic objectives and making tactical decisions to achieve these objectives and supply feedback after the decisions are implemented.

In digital marketing context, corrective action is the implementation of these solutions as updates to content, design and associated marketing communications. At this stage the continuous cycle repeats, possibly with modified goals.

Chaffey, D. and Ellis-Chadwick, F., 2012. Digital marketing: strategy, implementation and practice (Vol. 5). Harlow: Pearson.

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