Marketing accountability: beyond ROI: comprehensive measurement and reporting can lead to a broader understanding of marketing's relationship to success

Healthcare Financial Management, March, 2007 by Arthur C. Sturm, Jr.

Let's agree that ROI is the general yardstick for measuring a program's performance. But if you admit to that, you must also admit that it can be a rather ambiguous metric. Return on what--revenue, contribution margin, net? What's a good return rate? Could there perhaps be other, equally important measures to report? And so on and so on.

Several years ago, Bill Gombeski, director of strategic marketing at UK HealthCare in Lexington, Ky., came to the realization that ROI is not the last word in performance measurement, and he developed an innovative--indeed, telling way to measure marketing accountability.

At the time, he was working at the Cleveland Clinic and happened to meet Mohan Reddy, PhD, at Case Western Reserve University in Cleveland. Through discussions with Reddy, now dean of Case Western's Weatherhead School of Management, Gombeski said he found that the ROI argument was only part of the performance equation. "It became clear to me that if marketing is to succeed, it needs an expanded set of metrics," he said. "I discovered that the people in the healthcare organizations I worked for needed a broader view of cause-and-effect relationships in marketing, as well as some predictors of what management should expect downstream.

"In fact," he said, "we needed to take everything back to the basics so that people could see our structure and processes all the way through to high-level performance data."

The result of this epiphany and subsequent work is a seven-tiered system that offers a wide range of dimensions to demonstrate marketing and communication's accountability through appropriate measures. Space does not allow for a complete discussion of all seven, but at Gombeski's suggestion, and in the interest of our readers, this column focuses on leading-versus-lagging measures and on financial measures beyond ROI.

Most important, we will look at results.

Leading Versus Lagging: The Most Dynamic Indicator?

On the surface, the seven-tiered system looks complex, but in practice, it simply means that reports on different tiers are distributed to different audiences. One set of reports reaches senior managers, another goes to department heads, and so on. "It's not about how much data you can generate," said Gombeski. "It's about how you can provide relevant information to the right group to influence business development and help the organization achieve its goals."

That's a primary reason why Gombeski believes that leading-versus-lagging market indicators are perhaps the most dynamic of all those he produces. A "leading" indicator is a predictor of economic behavior--what will occur; a "lagging" indicator is a report on what has occurred. Leading indicators look for cause and effect versus correlations. "We use leading indicators to reflect processes that achieve outcomes," said Gombeski. "They tell the organization what it should be doing today to create value in the future."

"The comprehensive use of metrics, especially leading indicators, helps us appreciate how marketing works and how organizational goals are being supported," says Frank Butler, executive vice president for finance and administration and vice president for medical center operations at UK HealthCare.

Applying Leading/Lagging Metrics

Gombeski described in concrete terms how combining leading and lagging indicators can have a definite impact on business.

"When we looked at our lagging indicators, we found that December was historically a low-volume month for us--as it is for most organizations," he said. "Call volume to our call center was a key metric, as our lagging indicators show that historical volume for that month dropped to 3,200 calls from our average level in other months of about 8,000.

"But we decided to see if we could fly in the face of convention, so we heavied-up our schedule of lectures, direct mail, and screening programs for October and November [2006]. In addition, we ran a high number of television spots that simply listed the medical conditions we treat with our call center's number across the bottom of the screen.

"We saw strong consumer responses--a leading indicator--from all these efforts and were optimistic," said Gombeski. "December startled us when call volume zoomed to 7,200 calls and we had 50o admissions over budget--a lagging indicator." That activity is credited with helping push revenue way beyond initial forecasts for the year.

Financial Measures Beyond ROI

Gombeski admits that he, too, uses ROI reports simply because of their universal acceptance. "But I realized we need to go beyond those metrics to help our organization understand how other numbers can contribute to our success, and more important, our understanding of how we can improve our performance," he said.

As an example, by focusing on new patient activity, he can now track the influence that marketing has on steering new business to the organization. By having registrars ask new patients at registration what influenced them to choose UK HealthCare, he is able to assess the importance and impact of marketing to physicians and consumers, as well as the role of payers, word of mouth, and other channels of communication to patients. That analysis allows him and his team to assess current activities to create more effective programs and helps communicate success to individual departments.