What is performance management system?

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Companies that have a successful approach to online marketing often seem to have common characteristic. They attach great importance and devote resources to monitoring the success of their online marketing putting in place the process to continuously improve the performance of their digital channels.

The importance of defining an appropriate approach to measurement and improvements is such that the term web analytics has developed to describe this key digital marketing activity. A web analytics association has been developed by vendors, consultants and researchers in this area to manage best practice. Their definition of web analytics is:

Web analytics is the measurement, collection, analysis and reporting of Internet data for the purpose of understanding and optimising web usage.

To succeed in a measured approach to improving results from Internet marketing there are four main organisational prerequisites including defining the right improvement measures and purchasing the right tools and the management processes – such as putting in place a process where staff review results and then modify their marketing activities accordingly.

Performance management for digital channels

To improve results for any aspect of any business, performance management is vital. The processes and systems intended to monitor and improve the performance of an organization, are known by business operations researchers as performance management systems and are based on the study of performance measurement systems.

A good starting point is to understand the current improvement process and the organizational barriers which prevent a suitable improvement process.

We will review approaches to performance management by examining three key elements of an Internet marketing measurement system. These are, first the process for improvement, and secondly, the measurement framework which specifies groups of relevant digital marketing metrics and, finally, an assessment of the suitability of tools and techniques for collecting, analyzing, disseminating and actioning results.

Performance measurement definition

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.

Organizational barriers

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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