Marketing professionals find it difficult to use Marketing ROI.
First, marketing ROI is not a sexy topic. Most marketing professionals love the creative process and output, campaigns, events and other exciting areas of marketing. Marketing’s purpose is not glitz and glamor, it is to bring profit to the company.
According to Philip Kotler, “marketing is the exploration, creation and delivery of value to satisfy the needs of the target market at a profit.”
In this light, marketing activities must provide profit to the company.
The challenge has always been how to determine the ROI of each marketing activities in the promotion mix?
According to Harvard Business Review (HBR), “Marketing ROI (MROI) is a way of measuring the return on investment from the amount a company spends on marketing. The MROI assess the return of a specific marketing program, or the firm’s overall marketing mix.”
MROI justifies the marketing budget to the management.
Also, It makes you maximize resource allocation. Leading companies practice resource allocation as a key strategy. The Corporate resources are finite. This is the reason why the Chief Finance Officer (CFO) and the Chief Marketing Officer (CMO) are, most of the time, at loggerheads.
Accountability of the Marketing Department
If ever there is one big reason why the practice of getting the Marketing ROI is important, it is to make the marketing department or team accountable to the money they spend.
The marketing professionals cannot be indifferent to the sales and profit contribution of the marketing activities.
Today, in a very competitive setting, if you are a marketing professional, you must be accountable and concern to the ROI of your marketing activities, and the Net Profit increase of your company.
What marketing mix is responsible for the sales increase? How much percentage should you give credit to a particular marketing activity? These are just two of the many questions about attribution.
The use of Google and Facebook make easy to track Marketing ROI. Digital Marketing makes measuring ROI easy.
Again, it is called Integrated Marketing Communication (IMC). IMC rules and digital is just one of the components. Having said this, we must verify the data.
The Story of the Two Marketing Gurus
I have two marketing gurus that encapsulate all the ideas of other marketing experts that I interviewed on one question – How do you get your company’s Marketing ROI.
The first marketing guru’s system is to place an ROI target per marketing activity or promotion mix they use. He impose this to all his marketing staff. And in my observation it is working.
The second marketing guru’s system is to wait for the final PNL. He checks the sales increase, if any. More importantly, he checks the profit increase. For him, the final PNL will show if the IMC is effective or not.
The second marketing guru values the AIDA process, the basis for IMC creation. He mentioned that a marketer couldn’t rely on one particular marketing mix or promotion mix. Each marketing mix has a function in fulfilling the AIDA process, or the customer purchase journey.
Brand Building – the long term view
Brand Building is a challenging issue for Marketing ROI. Marketing activities are not only instrumental on the short-term goals of the company. MROI plays an important role in the long-term goals of the company.
One consideration is the measurement of the Customer Lifetime Value (CLV). What is the impact of the marketing activities to the CLV?
Marketing ROI is difficult but…
What cannot be measured cannot be achieved.
In this light, this powerful management principle makes Marketing ROI compelling. Yes, it is difficult and full of challenges. MROI holds the key to the creation of an effective and efficient marketing and promotion mix.
Finally, in the book The End of Marketing as We Know it, Sergio Zyman said, “The marketing we know today is dead. What we have is a marketing that is back to the basics. A Marketing that puts premium to profit.”