As Fournaise reiterated in its recent report, CEOs are beginning to get a little fed up with marketers. The apparent cavalier approach to investment has led 75% of CEOs to state that their marketers misunderstand and misuse key terms like results, performance, and ROI. More damning, 65% describe the world that their marketers inhabit as “La La Land”.
I know from experience that many marketers do not fall into this frame. But I know also from personal experience that many in the marketing community (agencies and clients) struggle both against the need to be fiscally accountable, and the reality of what it actually means. Time and again I encounter marketers who unfortunately fail to consider the return on investment or use it incorrectly. Here are a couple of examples, to make the point
In the jury room of last year’s Asian Marketing Effectiveness Awards (a room populated with seasoned and respected professionals from agencies and clients) I overheard and quote:
“I think we can take effectiveness pretty much for granted”.
Yes. At an effectiveness award – we will ignore effectiveness.
On what is otherwise an interesting blog, this recent post suggested that it was OK that much of advertising money was wasted. The post uses maths to demonstrate that an ROI is delivered despite waste. Unfortunately the author measures the returns in sales, not in profit. Not only does this approach suggest that “OK performance” and waste is acceptable, but worse, it fulfills the belief that CEOs have that marketers really don’t know what ROI means. A sale is not a return. It is revenue. For advertising to pay back, it must deliver incremental profit.
Come on. It is time to step up. It is time for marketers to be fiscally responsible as well as creatively gifted.
What does this mean? Marketing needs to take on three key changes:
Accountable for our brands’ profitability:
Marketers need to acknowledge that they are accountable for the profitability of their brands. Incremental sales (and don’t get me started on cannibalization!) is not the same as incremental profit. We all know that, yet it appears we don’t practice. Most of the marketing effectiveness entries I reviewed at the AME awards did not even mention ROI – of those that did only a handful measured in terms of profit – the others all looked at sales (or worse, the Facebook “Likes” they had accumulated).
Total Marketing:
We live in a total marketing world, and to understand ROI the total cost needs to be understood. How many times is a cost of an activity limited to merely the media buy? Was there no other activity? No social component? No displays in-store; which of course had to be negotiated, and paid for? No other activity at all? Confining an understanding of brand economics just to one activity, or to the activities governed by one team, is damaging and misleading. To yield returns brands need to be marketed to consumers, shoppers and retailers. Total marketing demands total brand economics. There are many reasons for breaking down silos in organizations, but fiscal transparency should be one of the biggest.
Set real objectives and measure:
Let’s not just talk about the sales uplift or the profitability. But let’s also not simply assume that there must be other benefits in terms of brand consideration etc. Let’s measure. Setting clear objectives for consumer behavior and attitude; shopper behavior and attitude, and compliance would undoubtedly drive a better understanding of the true value of the total activity, as well is hint at the contribution of each element. How to pay for all this extra measurement? Well – by spending advertising money more effectively!
Do we as marketers have nothing else to spend that money on? Is it OK to say “well, loads of my investment is badly made, but it still pays back”? In an increasingly competitive world, where consumer goods margins are creeping lower all of the time, is it OK to be this cavalier towards corporate profit? Is it equally OK to say “Half of my team are useless, but that’s OK, as one or two are really good and they carry the rest”? Is it OK to say that half of my brand portfolio is rubbish; half of my customers make no money what so ever; half of my time is wasted. If we could just improve the effectiveness (or focus) of our advertising funds what else could we do with that money? Are there other priorities that have been ignored as there isn’t enough money to go around? Maybe more resources, or the ability to more actively support an under-valued brand in the portfolio. Maybe the chance to innovate or experiment with something new – that might just transform our world.
Recently The Harvard Business Review argued rather hyperbolically that “Marketing is Dead”. A title designed to create clicks for sure, but, if traditional marketing doesn’t wake up to the reality of today’s business and marketing, then perhaps this title is prophetic.
If marketers don’t embrace ROI, then when marketing does die, we’ll only have ourselves to blame.
image by DeviantArt User Jaysu
