Marketing Accountability and ROI, Part I
In the last few years, marketing accountability has evolved from being a directive of industry analysts and thought leaders to become a full-fledged strategic imperative for corporations. There is no better evidence of this than a recent survey of senior marketing executives by the Association of National Advertisers (ANA) that found marketing accountability is ranked as the top issue facing marketers today. The fact is, Chief Marketing Officers (CMOs) and other senior marketing executives have helped propel marketing accountability out of the starting gate from a genuine desire for improved financial and strategic performance across all areas of business.
In an effort to accelerate progress and share best practices, trade associations like the ANA and analysts across many industries now promote early success stories across industries like consumer packaged goods (CPG), financial services, high tech, automotive, and life sciences.
ROI as a Driver of Financial and Strategic Performance
These successes have taught us about two critical areas of marketing accountability. First, marketing organizations must be accountable to the financial goals of the firm. This responsibility emanates from the financial side of the executive suite in the form of marketing ROI, also known as return-on-marketing-investment (ROMI). Second, the marketing team must align with the strategic objectives of the firm where the chief executive is most focused. What good is fiscal responsibility if strategic goals related to customer acquisition and market leadership are not met? In this article, we will focus on marketing ROI as an enabler of enhanced fiscal performance. Last issue’s article, “Is Marketing ROI Dead?”, addresses how marketing accountability is driving the strategic goals of the firm.
In the last decade, Chief Financial Officers (CFOs) directed their energy toward cost savings and improved internal execution across financial and operational functions of the firm. As we approach 2007, the industry continues to seek productivity gains in other areas, most notably, marketing.
Today’s CFOs, in particular, are demanding greater financial responsibility across the marketing discipline as well as a clearer expectation of forecasted performance.
Comprehensive ROI measured across all of Marketing
In order to truly evaluate the net present value of future marketing investments, organizations need to look across the entire marketing mix, not just a single category. In other words, firms need to evaluate returns, and cash flows, resulting from above-the-line activities (that drive brand awareness) to below-the-line marketing campaigns (that drive measured response).
A comprehensive evaluation of ROI across all of marketing provides many advantages. First, there are inherent relationships between mass marketing activities, direct marketing campaigns, and promotions. For instance, generating awareness can improve the effectiveness of related campaigns. Secondly, it enables more useful marketing decisions like those associated with reallocation of funds. For example, a marketing or brand manager can more easily reallocate marketing dollars from an underperforming activity, like Spot TV, to a new campaign that emails special offers to a specific region or demographic segment.
To illustrate the power of reallocating funds to more effective and efficient forms of media, marketers need look no further than a recent beauty aid campaign. While attending a recent media conference, I learned about how Dove, a leading brand for Unilever, recently created a 75-second film that could have aired on television first, but instead was made available on the video-sharing website YouTube. As a result of allocating resources to this “social marketing” activity, Dove generated three times more web traffic to their website (CampaignForRealBeauty.com) than a comparable Super Bowl advertisement, at a fraction of the cost. Now that is marketing ROI!
In order to execute to this holistic approach to measuring and improving marketing ROI, organizations must blend their various data sources then apply them across multiple analysis techniques. Once marketing insights have been captured, the organization will need to share lessons learned and put new plans into action. Sharing what works and what doesn’t ultimately enables more accurate predictions of sales performance.
For instance, for capturing ROI on mass marketing, large advertisers and agencies deploy marketing mix analysis, long utilized for optimizing the media mix for leading consumer-based industries like consumer packaged goods (CPG) and automotive. Large manufacturers can make smarter decisions about what areas of their advertising (like television, radio, and print) and campaigns (like sending samples) are most effective and efficient.
In the previous Dove example, Unilever was able to simultaneously enhance brand awareness and identify specific consumers that wanted samples of Dove products.
Thanks to a growing supply of relevant data sources, established marketing analytic models, and web-based marketing applications, leading marketers are now able to execute positive changes to their marketing plan and share these improvements with fellow executives, agencies, and other marketing partners.
By fusing these capabilities within their business, innovative marketing organizations may fully enable better decision-making to generate greater return-on-marketing investments (ROMI). Greater effectiveness and efficiency ultimately will enable the CMO and the CFO to enhance shareholder value together.
Mark A. Chaves is a Customer Intelligence product manager at SAS Institute, Cary, NC. He can be reached at [email protected] Copyright © 2006 SAS Institute Inc., Cary, NC, USA. All Rights Reserved.
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