Is Marketing ROI Dead?
Used to be that getting lift on your creative tests, great response rates, or a positive return on investment (ROI) on a specific campaign was good enough for marketing to declare success. Unfortunately, that isn’t cutting it these days because of the increasing scrutiny being placed on marketing organizations as a whole. The chief marketing officer (CMO) and senior marketing executives are under constant pressure to prove their impact on overall business.
Pinpointing the specific event that shifted the microscope to the CMO and the rest of the marketing team is hard. It’s likely the culmination of a series of events, such as endlessly increasing competition; increasing business complexity; more demanding customers; increased regulatory scrutiny; the proliferation of products and channels; growing shareholder activism; and so on.
What makes gauging accountability for marketers difficult is the isolation of needed information. Marketers need to realize that it’s not realistic to function long term in a silo where you can’t align your activities and successes with the rest of the organization.
For example, a campaign manager at a retail bank runs a campaign for a no annual fee credit card to all existing checking account customers. She gets a high response rate and positive return on investment for that specific campaign. What she doesn’t know, however, is that she cannibalized the response rates from one of their higher margin product campaigns, and sold the product to a segment of customers that utilizes more costly transaction channels and that is costing the company a great deal of money from a customer service perspective. Even worse, she has very little insight on how this campaign aligns with sales programs, broader marketing activities, and has no idea of the impact that this campaign may have on strategic marketing goals.
So, what should marketers do to avoid the challenges faced in the above example? The key is to shift the measurement thinking from being so campaign- and product-ROI focused to being more customer centric. Granted there are often organizational and cultural challenges surrounding such a profound shift in thinking. But there are steps managers can take to evolve their marketing departments into this new frame of mind for managing performance.
First, establish what the goals, objectives and key performance indicators (KPIs) should be for the marketing organization. The only way for marketing organizations to truly evolve how they manage performance is to attack it from all levels of the team, so you’ll need to ensure there’s executive sponsorship. Also, keep in mind that tying incentives to these goals and KPIs will increase the likelihood of adoption. Once marketing executives define the overall goals and strategic objectives of the department they must commit to ensuring alignment occurs downstream.
For example, if the CMO’s key goal for the year is to grow customer profitability, then there needs to be a clearly defined set of metrics that will help enable that. Instead of measuring a campaign on the response rates or ROI it achieved for that specific credit card campaign, it needs to be measured on how much it was able to grow customer profitability across that customer segment, or some other metric that can tie back to customer profitability growth.
Next, managers need to establish a marketing performance management (MPM) framework to define, manage and improve those metrics. While defining objectives and metrics on paper is a start, it will not enable you to manage the metrics over time. By building a framework for MPM, you will have the ability to define your goals, objectives and supporting metrics, and then manage them over time to ensure that you are able to meet – or exceed – expectations. And, in doing so, you have a system of record for marketing’s success that the CMO can take back to the boardroom.
So, is marketing ROI really dead? Hardly. But clearly the importance of standalone campaign and other one-off ROI measurement will diminish. As we continue to evolve to more customer centric organizations and can better measure and manage the value of our customers over time through marketing performance management systems, campaign ROI will gain new life as a key driver for the overall impact marketing has on your organization: It just won’t be the only driver.
Michele Eggers is the Customer Intelligence marketing strategist at SAS, Cary, NC. She can be reached at [email protected] Copyright © 2006 SAS Institute Inc., Cary, NC, USA. All Rights Reserved.