Oh Marketing ROI, Where Art Thou?

By Jerry Rackley

Chief Analyst John Follett and myself recently convened the first Demand Metric Marketing Lab – an open forum for discussing marketing issues. We opened the session with a poll, and the issue identified by attendees as the most problematic was showing ROI for marketing efforts. This surely surprises no one who is a marketing professional.

Brady Bonus, creative and user experience director for Zmags, has captured the essence of this issue in the cartoon we’re sharing with you here. (See more of Brady’s creativity and artistic talent at his personal website.) The cold hard fact of marketing ROI is that it remains elusive. This is not a new development. John Wanamaker, considered the father of modern advertising, was referring to ROI when he said, “Half the money I spend on advertising is wasted; the trouble is I don't know which half.”

What can we say with certainty about marketing ROI?

• Measuring marketing ROI is a good idea. We as marketers cannot exempt ourselves from the accountability of ROI measurement just because we fervently believe in the goodness and value of our work.
• Measuring marketing ROI with 100% certainty is difficult, if not impossible. While the systems and disciplines are getting better, and we’re getting better at using them, you just can’t capture all the results and translate them into an ROI measurement. All the website activity your recent campaign generated? Got it! That one is easy. The moms talking your company or product up while in the stands at the soccer game? Good luck capturing that data. And even if it was possible, you probably couldn’t afford to collect all the data needed to measure your ROI.
• Anecdotal information is inadequate. When backed against the wall, we marketers have been known to toss out some great anecdotes we’ve collected about the effectiveness of our work. These are encouraging, even inspiring, but they’re not a substitute for real ROI measurements.
• Anecdotal information is helpful. When ROI data is available, anecdotal information provides some welcome color to the data.
• Marketing ROI is an afterthought during prosperous times. When the firm is firing on all cylinders, with revenue records being set each month, not too many people care about the ROI of the marketing effort. The underlying assumption is that marketing must be doing a great job. Often, this is true! Marketing is so busy keeping the revenue engine revved that it is given a free pass on ROI. We shouldn’t take it.
• Marketing ROI is front and center during hard times. When there is a sales drought, marketing usually gets asked why it isn’t helping make rain. Hard questions about expenses, budget, staffing and results are inevitable. Suddenly, marketing is everyone’s business and most people in the company, through some mysterious transformation, become marketing experts. In the absence of supporting ROI data to provide cover, the marketing team often becomes a casualty.
• Firms with finance or engineering cultures often don’t “get it” when it comes to the value of marketing. Good luck getting your marketing budget approved, because marketing = fluff in these cultures. If you don’t have some ROI data to prove you’re helping the cause, you’re not going to get the resources to make a meaningful difference.
• Firms with sales and marketing cultures “get it” when it comes to the value of marketing. These cultures place a high value on marketing, and intuitively understand that marketing is the oil in the sales engine – even if you can’t see it, you know it’s there doing its job, and we can’t run the engine without it. ROI? Sure, show us your data, but marketing is an imperative, so we’re going to do it regardless.

If I’m honest, I’m not sure what the best approach is when it comes to measuring marketing ROI. There are some best practices, which we can explore in a future post. I think the right position for most marketing departments is to invest meaningfully in measuring ROI, understanding that not everything you can measure is worth measuring. And, knowing that you should ignore ROI at your own peril, while also understanding that there is a point of diminishing returns on your measurement efforts. I guess that puts me squarely on the fence – who’ll join me?