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Featured Links: Measurement

	Achieving Marketing ROI - Finally

	One of today's white-hot business issues is how to measure marketing return on investment (MROI). Indeed, for many of the most successful global companies, there has been a surprising lack of progress toward the age-old goal o fcorrelating inputs to outputs and in bringing the scientific method to bear on the black hole of marketing expense. Over 75 years ago, retail pioneer John Wanamaker famously issued the challenge to marketers everywhere when he declared: "I know that half my investment in advertising is wasted, but the trouble is, I don't know which half." Today, the marketing levers that companies must pull to generate demand and to create preference are significantly more complex than traditional marketing communications activities alone. Mass media continues to be the opiate of choice for many, but enough successful brands have emerged without big advertising budgets - Amazon, Starbucks, eBay, Pret A Manager et al. - to prove that there are many ways to create brand equity. Most companies now invest in a range of integrated marketing activities (advertising, promotions, direct marketing/Internet, sponsorships, etc.) designed to move prospects through a continuous process of awareness, consideration, purchase and loyalty, a.k.a. "the purchase funnel." And marketing practitioners all build some set of metrics for the funnel into their marketing plans. So, if most companies are utilizing a range of tactics and measuring the results, why do so few feel confident about proving MROI? BEYOND TRADITIONAL MARKETING What makes MROI so challenging is the reality that many of the traditional marketing levers are not working as they previously did. Conventional wisdom tells marketers to focus primarily on building emotional bonds between customers and their products and services; it is considered tasteless or futile to actually try and sell something. All products are the same, right? People with short attention spans want to be entertained, not educated. Yet the reality is that customers overwhelmingly assign their loyalty to the brands that actually deliver what they promeise, not the ones that are most clever or hyperbolic. With the explosion of touchpoints, or moments of customer-brand interaction, marketing communications are increasingly less relevant to people who can base their choice on empirical evidence or who can experience a brand in different ways, beyond passive message reception. REVISITING THE OLD STANDBYS Marketing executives, as well as senior management, collectively agree that the saturation effects of the traditional advertising and promotion (A&P) mix are undeniable. Let us start with advertising. Emotion and subjectivity do play a big role in brand decisions, but not necessarily in the way that adfvertisers like to think. Far too many companies rely on the same syndicated customer data and under-invest in primary research and true customer insight, so that advertising messages tend to sell the same category benefits (albeit in clever ways) and provide little branded differentiation. A recent U.S. study of seven major advertising categories revealed that consumers confused the top three brands in each category and that the advertising for each was attributed largely to the competitive brands. Undifferentiated messages and lack of customer insight lead to less relevance, as beer marketers chase the same frat boys with the same pitch, or auto manufacturers hype SUVs to the same soccer moms, or IT providers flog the magic of the network. Once a year, at Super Bowl time, advertisers compete to surpass each other in production values, anthemic proclamations, and surprise endings, but the balance of the year sees a hodgepodge of uninspired and derevative ads that come and go in mercifully short bursts. Network television audiences continue to erode while narrowcasting media cable and the Internet often allow viewers to skip ads altogether. The combination of less differentiated platforms, declining relevance, and lower viewership levels means that attitudes and behaviors are being shaped elsewhere and that MROI is an elusive thing when it comes to most advertising spending. PROMOTION HAS ITS OWN PROBLEMS Promotion also has its problems as a tool to generate MROI. While promotion is certainly more measurable than most activities because of its direct response mechanics and its finite timeframes, it is increasingly used as a discounting tool divorced from actual brand building. Mix modeling can quantify with reasonable accuracy the lift from promotional activity, but the benefits are always short-term. Furthermore, it has long been understood that giving away margin and training customers to shop on price is a loyalty-killer, antithetical to the whole notion of brand-building. Several recent studies have shown that customers are increasingly unwilling to redeem coupons and other response devices, since they now expect a discounted price to be standard - an every day occurence. Such disruption in promotional response deprives marketers of the ability to collect customer data and to prove MROI. The knowledge asset that promotion has long provided to companies - information on who's actually buying products - is steadily eroded at the same time that the ability of the brand to capture margin is receding. MARKETING = MEASUREMENT While the global economy seems to be on the upswing, one important outcome of the down cycle was a strong demand, continuing today, for more rigor around marketing investment. The bright lines that have separated finance and marketing are being crossed regularly, and perhaps, permanently. The business imperative is to pursue more profitable market segments instead of the monolithic mass market. This requires very different kinds of investment decisions that link business strategy to value creation and that demand a more analytical and systematic approach to setting budgets and tracking results. Marketers can no longer walk into the CFO's office and point to an increase in aided awareness as a rationale for increased investment. Here service businesses have a significant advantage over packaged good sbecause they know who their customers are and can be more rigorous about measuring the economic impact of different marketing activities. But all companies feel the need to be better able to measure ROI. To view the remainder of this article, you must be a TMCA member. Simply enter the Members Only Center, and click TMCA Library.
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