ROI Marketing – Same as it used to be

Tue, Jan 17, 2006

Articles, Strategy + Marketing

Anyone who’s worked at an advertising agency knows that “creatives” and “suits” are customarily confined to separate spaces – often on separate floors. Living dangerously is walking your client through the creative offices unannounced – account people typically avoid it. Suits know that unless their client would eagerly cheer Copywriters or Art Directors to victory in a game of Foosball, it’s safer to arrange the creative tour in advance. This is a clear separation of marketing art and science but it’s not often a controversial one. The – at times – litigious argument occurs between the “show me the money” number crunchers and the “marketing is an art” obfuscators – however – either conflict can probably be portrayed as a left vs. right brain.

Marketing – still an investment in future sales – remains the sum of activities that keeps a company customer focused; nothing new to report. However, internet metrics, ever increasing competition, stockholder butt-kissing CEO’s, and that old John Wanamaker quote about the enigmatic half of advertising that’s a waste of money, have all helped birth the latest boardroom fixation with ROI Marketing or MPM [marketing performance measures].

No business goes through trends quite like the marketing biz, but presenting ROI marketing as something new is like wearing your hottest leisure suite and expecting Baby Boomers to marvel at your fashion forward savoir-faire. Back in the ‘60’s, Bill Bernbach warned us against believing that advertising is a measured science: “Advertising is fundamentally persuasion and persuasion happens to be not a science, but an art.” Still, one might argue that the degree to which persuasion is successful can and should be measured.

While advertising is just a portion of a marketing mix, it’s often one of the most expensive and thus receives its due scrutiny. A generation removed from Bill Bernach, ad guru Jack Trout writes: “It’s (ROI Marketing) a no-win deal. Too many variables can kill you, and the competition mucks things up. The only game you should play is return on perception—call that ROP. It’s a real problem to bet your program on those [ROI] numbers.” This may be true, yet, I’m sure Jack would accept that persuasion alters perception, and that brand owners need to measure perception; faith only goes so far.

Obsessive measurement can turn any visionary business leader into a reactionary follower. Consider Albert Einstein’s statement: “Not everything that can be counted counts and not everything that counts can be counted.” Marketing has always been tough to measure; it’s like measuring who won a Presidential debate. Who’d want to bet their careers on getting that right? Yet, in about ½ hour it’s not too tough to gauge the time needed to move Mt. Fuji 10 miles with a fleet of dump trucks, as long as you don’t expect results to be accurate to within a day, a decade, or two, or ten. Do you think Mr. Einstein would support the notion that order of magnitude is what really matters when dealing with large variables? I do.

In a harsh economy, predictable boardroom pressure will demand justification for marketing activities and programs rather than calling to optimize them based on faith in marketing talent. So – we need to measure, but what will improve your marketing, satisfy a bottom line prone upper management, and not send the company into a quagmire of useless eye glazing metrics? Sure – any CEO who questions the importance of marketing should fall on his sword, yet, progress is still vital even if the company’s marketing budget is controlled by a reactive financial chief with no sword in sight.

Marketing performance measures can be helpful when executed well but they are rarely executed well. Retailers are remarkable at optimizing store level marketing by determining why we buy. But then, they know what to measure: customer behavior. If 1000 people pass by that tie rack in men’s fashion without so much as a browse: change it, move it, paint it red.

Don’t over measure; reread Occam’s Razor, keep metrics simple and customer focused, not product focused. Successful measuring and change execution will vary with your company’s profit model, nevertheless, consider tracking these numbers:

* Customer acquisition cost (sales + marketing)
* Lifetime worth of a consumer (revenue)
* Expandability of annual consumption (wallet share)
* Customer churn rate (loyalty)

Perhaps the most important appraisal of marketing achievement – Brand Equity – is also one of the hardest to quantify. To this end, Young and Rubicam established a proprietary brand measurement tool in 1991: The Brand Asset Valuator. BAV is big. Conducted in 40 countries, it covers nearly 20,000 brands and questions 2 million consumers.

BAV successfully divides brand equity into two segments: Brand Strength [differentiation and relevance] and brand stature [esteem and knowledge]. Through these leading and lagging indicators [respectively], marketers and stake holders get a high level view of how their brand is perceived in the market place and, over time, how well their persuasion is affecting brand equity. More than an executive security blanket, the type of information amassed through BAV is essential when distributing millions in marketing dollars. Similar anecdotal and customer survey evidence can help those who have smaller scale budgets and brands not included in BAV.

Consider David Oglvy’s statement from decades ago: “I notice increasing reluctance on the part of marketing executives to use judgment; they are coming to rely too much on research, and they use it as a drunkard uses a lamp post for support, rather than for illumination.” Decades later we are in the same discussion and the best advice is comparable: use metrics in the hunt for enlighten business decisions but avoid waiting for justification.

Everything can be raised to the “art” level. Artists need a medium, a palate, a canvas – something that offers boundaries; a stage in which to perform or a frame in which to compose. Artists need resistance against which to push. In marketing we push against metrics framed by profit. Unmeasured metrics exist in latent form so there should be no controversy – we all desire the same outcome. Clamor amplifies when we use the wrong measures, forcing marketing artists to push against meaningless resistance. Use marketing ROI responsibly – if you find the need to hold onto something, it’s best to use a lamp post and seek help.

Branding, marketing, strategy

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