Measuring the true ROI of marketing dollars

Citation

McNeilly, M. (2009), "Measuring the true ROI of marketing dollars", Strategy & Leadership, Vol. 37 No. 5. https://doi.org/10.1108/sl.2009.26137eae.002

Measuring the true ROI of marketing dollars

Article Type: The strategist’s bookshelf From: Strategy & Leadership, Volume 37, Issue 5

The Marketing Accountability Imperative: A Roadmap to More Effective Marketing Spending

Michael Dunn and Chris Halsall Jossey-Bass, 2009

One marketing measurement that has been increasing in importance in recent years is the impact of marketing spending. Today, the current economic climate makes it even more important that CEOs, CFOs, CMOs and all other executives involved in marketing ensure that every dollar is contributing to raising the ROI for the business. The Marketing Accountability Imperative by Michael Dunn and Chris Halsall provides the reader with the strategic viewpoint, frameworks and tools to do a better job of accomplishing this crucial task.

The bad news for marketers is that, according to a survey quoted by the authors, only 19 percent of companies currently can determine their return on investment from marketing activities. Clearly this contributes to the lack of company-wide respect reported by CMOs in another survey cited by the authors, and is also a likely reason why less than seven percent of CMOs view themselves as highly influential. The good news is that better information technology capabilities and new methods of marketing, such as the Internet, enable marketers to better capture data and analyze it. This, combined with a holistic approach to measuring ROI, provides new opportunities for marketers to measure impact.

The authors put forward six core principles of marketing accountability, each of which must have some level of measurement to ensure proper ROI:

1. 1.

   Strategy: Getting the most out of your marketing dollars starts with ensuring that the customers you are targeting are the most profitable, and that you have meaningful value propositions to attract them and the ability to reach them. Thoughtful and rigorous strategic analysis using buyer research and segmentation are crucial steps to making sure your marketing spend will pay off.

2. 2.

   Content: This step deals with ensuring the messages being conveyed to customers about your value proposition are compelling and drive the customer to action. Testing ad campaigns before launching is one way to ensure a better ROI.

3. 3.

   Marketing vehicles: Your media mix is the next step; which media you choose to deliver your messages will determine your success. Different types deliver various ROI. Before deciding which to utilize you need to examine expected returns for each possibility.

4. 4.

   Investment levels: Closely tied to the above step is how much to invest in each marketing vehicle. The best practice here is not just to look at the ROI of each vehicle but the integrated ROI of the different combinations.

5. 5.

   In-market execution: All the above is planning. Once the marketing is executed the next step is to check if the different vehicles are providing the expected return. New measurement capabilities enable better tracking of ROI and need to be leveraged here.

6. 6.

   Fixed cost management: Most of the above costs are variable; the in-market spending tap can be turned on or off. But you need to also look at your fixed costs and ensure they are paying off as well. Defining the ratio of “working” to “non-working” spend is one method of measurement the authors propose.

Companies have different levels of capability for measuring marketing ROI, and the authors recognize this. They therefore offer a three-phase approach to implementing marketing accountability that works for beginners or veterans.

The first phase is “Tackle the Basics.” This phase applies most to companies that have very little marketing data yet are seeking fast gains in marketing efficiency. Here, one should look for easy-to-fix problems in order to get a quick grasp of what’s happening in the six areas above and to put in place a few metrics to enable a fast pay-off. Analysis in this phase is at a high-level and should cover things such as a best-practices assessment, marketing spend alignment and a review of the marketing strategy.

The second phase, “Validate with Confidence” works best for companies that have a lot of data but haven’t applied the analytics to ensure their marketing investment is paying off. The focus here is analyzing messaging and marketing spending levels to determine if they are delivering the expected ROI, then adjusting as necessary.

The third phase, “Build Distinctive Advantage” applies to companies that have a good understanding of their marketing ROI but need a more integrated and holistic view of it. The intent here is to analyze the entire marketing system, not just individual elements, to ensure the best overall return on marketing.

By offering this new philosophy and tools The Marketing Accountability Imperative provides marketers a step-by-step method to deliver more effective and efficient marketing investments for their company.

Mark McNeillyVeteran marketing executive (mcneilly1@earthlink.net) and the author of Sun Tzu and the Art of Business: Six Strategic Principles for Managers (www.suntzu1.com).