Where does ROI fit in your analytical toolkit?
A recent article in Marketing Week, reporting on a panel at AdWeek Europe, got us thinking about ROI—even more than we usually do.
Want to Know the Backstory?
First off, it’s important to be clear on what ROI is, and what it isn’t.
|ROI is the backstory to your marketing performance. ROI is derived from factors that existed in the past; things like your content, media buy and marketing emphasis, as well as other factors outside your control that may influence marketing performance.||ROI isn’t a crystal ball. As they say about any investment, past performance is not indicative of future results. Paul Davies, a participant in the panel discussion and consumer marketing director at Microsoft, says typical conversations are “very attribution-based and backward-looking.”|
That said, ROI can still offer value. It offers you a quantitative grasp on important aspects of your marketing mix. Even the worst ROI can be improved; the key is understanding how to do so. Any of the factors that drove poor ROI can change—even better, many of them can be changed; that is, they are within your control.
If you aren’t taking advantage of this kind of data-driven marketing analysis, you risk simply abandoning certain efforts that could be adapted and improved—and thus missing out on potential upside to optimizing viable, if under-performing programs.
It's a Paint-by-Numbers Short Story
In addition to its historical focus, typical ROIs only measure short-term impact, like 12-16 weeks, and fails to tie out to “the numbers.”. So lean too heavily on it and you'll risk ending up with a short-sighted plan that skews toward quick-return tactics at the cost of longer-term, equity-building strategies.
This ties to a point we’ve made in the past (more than once) and which this article reinforces as well: Marketers have to be able to communicate in ways the C-suite (the CFO in particular) understands and values. (Read CMOs' Survival Secret to explore this further.)
To quote former Heineken and Sainsbury’s marketer Sarah Warby:
Hitting numbers doesn’t just mean ROI, it’s your contribution to the objectives you agreed to with finance. As long as you have that credibility you can do anything.
(Maybe a little wishful thinking, but we appreciate the sentiment.)
From Here, the Plotline Grows
Once marketers and corporate execs begin speaking the same language, the conversations can grow ever more interesting—moving beyond how your marketing strategies have performed in the past to look at the big story:
How can your investments in marketing accelerate achievement of the business' long-term goals—growth opportunities and brand development?
Davies talked about his organization being more forward-looking these days, asking “What’s the next thing that’s coming?” For Claire Hilton, managing director of brand and insight at Barclays, being able to quantify gains in quarterly income made bigger brand-related discussions possible.
This is Not the End
ROI can be a useful tool for examining the short-term impact of marketing, as long as it’s part of a broader toolset that ties directly to overall financial impact, not only to measure the impact of what's been invested, but to help you determine where to invest next to help the business grow in a predictable and financially quantifiable way.
And in truth, this is essential in order to be seen as a credible authority by the Finance side of your business. As Warby put it:
You’ve got to have the credibility of hitting the numbers every day so you can have the fancier conversations…. Unless you’re hitting your numbers they aren’t going to be listening to you.
Building confidence through the numbers is essential to build more trust in the Marketing function and greater recognition of marketing's value to business performance.
How do you make this happen? Hard as it may be to believe, many marketers still don’t realize that there are, in fact, next-generation tools that let them link marketing directly to CFO-worthy financial objectives—data-driven systems that measure financial impact and optimize marketing efforts to improve their ability to hit agreed-upon financial goals.
Well, there's least one that we know of.
Download our free eBook: Marketing Metrics for Finance Leaders to learn how unified marketing metrics and optimization are equipping marketers to speak their CFOs language, not just in the rearview mirror, but for building forecasts and future investment plans as well.