Make Marketing History

The views of a marketing deviant.

Thursday, December 07, 2006

Marketing ROI 2.0.

For myself and some readers, the most contentious point of my J Train minifesto was Le ROI Est Mort in which I suggested that

"Marketing cannot be a measurement-free zone, but increasingly its overall impact is indirect and qualitative. However, as engagement methods are less expensive than advertising, ROI will almost certainly rise and crucially, with no increase in spending, it will continue to rise as your engagement intensifies."

Now, I didn't mean to suggest that marketing ROI could not be calculated.

Indeed, I believe marketers should repeatedly measure everything that can be measured effectively. Measure the response to alternative advertisements, measure the effectiveness of various adwords and measure how users use your products and services. Improve and re-test. There is always potential for greater optimisation.

But I did mean to suggest that we should not be beholden to this concept of a measurable ROI.

The fundamental issue is that it is very difficult to enumerate an accurate "gain from investment" when it is clear that a lot of the new marketing has an almost osmotic effect and works indirectly. This may lead to questioning from finance types but it should be steadfastly defended.

And the defence is this. If the "cost of investment" is low, as is clearly the case in much of the new marketing, then it is equally clear that only a small impact on revenues will generate an impressive ROI. Indeed, I'd go as far as to suggest that if the marketing is well founded, then the ROI must inevitably be high in comparison with old-style marketing.

So, I was essentially making a point about the self-esteem of marketers. While marketing is a qualitative skill as much as it is a quantitative one, it is, I believe, the most crucial aspect of any business and yet its practitioners often exhibit an inferiority complex vis a vis financiers.

Consequently marketers seek to measure the unmeasurable in an attempt to justify their actions using the same parameters as financiers but without knowing their tricks. As any VC, Board member or Guy Kawasaki will tell you, number-crunchers frequently reverse-engineer their business plan assumptions in order to generate a nominal ROI figure which they know to be the threshold for box-ticking approval. It will be a nice figure, but it may never come to fruition.

Thus marketers should have the confidence not to rush to generate spurious numbers simply to justify actions based upon their qualitative understanding of how consumers think and how markets are changing. If financiers can approve fees for "strategic" initiatives, you can justify much smaller expenditures in pursuit of more immediate cash-flow positive outcomes.


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