Measuring Marketing ROI Never before has there been as much scrutiny on the ROI of marketing activities or changes in the activities themselves. In the downturn of a business cycle, marketing is often the first department to suffer cuts. Within this cyclical process activities and campaigns are rationalized with greater focus on measurable cost/benefit. The difficulty, of course, is that the greatest returns from marketing invesments are often long term or intangible.
Marketing is undergoing a siesmic change, primarily driven by new technologies and customer shrewdness. New modes of communication allow new opportunities to interact with customers. Campaigns can be tracked and even automated. There has never been so much data available on customer interactions, preferences and perception. However, customers know they are being tracked and benefit from increased market transparency. Saavy customers have driven changes in what activities are effective, which presents complications for measuring ROI.
Here are the recent shifts in marketing activity and how they relate to measuring value:
- The Shift From Advertising to PR: Consumer sensitivity has decreased the effectiveness of advertising, especially relative to the third-party validation that PR provides. Advertising is easier to track, especially interactive forms or those designed with lead generation feedback, and reasonable statistical inference can project returns on investments. PR, on the other hand, is notoriously difficult to project. There is greater variability on if a journalist will pick up a story pitched by your PR firm, let alone slant it in your favor. With the greater returns for PR come greater risks.
- Direct marketing & Telemarketing on the rise: In the bottom of the business cycle, direct marketing rises to the top of activities -- primarily because it is easy to project and is ROI driven. However, customer sensitization has reduced response rates.
- Event marketing suffers: When the economy's growth isn't rapidly creating new customers to meet, the return on event marketing declines. Smart event marketers are moving to smaller seminar formats over broad conferences, and emphaizing lead generation over expensive brand placements.
- Product marketing becomes paramount: Relative to the costs/benefit MarCom, having the right product for the right customer segment, differentiated from competitors at the right price yields the greatest return. Problem is, these are somewhat internal activities and many companies dont invest enough in the right people to support this as a process. Tracking returns is actually relatively easy, especially through giving product managers P&L responsibility for the products they manage.
- Word of Mouth & Thought Leadership: In serious decline because benefits are hard to measure in the short term. Getting creative on how data can be gathered and applied to an existing ROI methodology to support these campaigns could yield differentiated returns.
- Channel Marketing: Biz Dev died as an occupation because of the lack of focus on ROI in activities. Gone are the partnerships for press-release sake, to the dustbin of illusiory perception. Now the focus is on channels with direct customer relationships generating revenues. Easy to track, sales based, and in a methodology that should be agreed upon with the partner from the outset. Problem arises when opportunties for whole product partnerships are missed in exchange for shorter term and smaller returns.
The best marketing activities are unique, requiring creativity in design and execution, and dont necessarily fall into the above buckets. Developing performance metrics and getting agreement on an ROI methodology is a key aspect of designing activities that is even more challenging and critical in today's market
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