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.