Marketing ROI - Lost in translation

   The buzzword is not web 2.0 or user generated content, or social media. Now is return-on-investment. Boards are demanding profitability, which I thought was always the case, but looks like the economic environment reminded people of some fundamentals. 

    I had a good conversation over lunch with Robert Bergquist, CEO of Widemile in Seattle and we discussed how most CMOs are struggling to show ROI because it is hard to measure effectiveness of most above-the-line marketing activities and below-the-line activities are traditionally not architected to be measured, unless one spends extra money on measuring things and in some cases that defies the purpose.

    In this scenario, companies that offer measurable marketing impact, like SEM, MVT, BT, etc are having a hard time reaching out to marketers and are turning to procurement or finance as the core decision makers “The CFO is taking on a more active role on Marketing spending” commented Bob. I concur with his observation as I have seen that happening in many local companies. The lack of “accountable” marketing practices is making many companies to revise their spending and the CFOs are getting well versed on below-the-line marketing, which is good, but the problem arises when they demand web 2.0 type of measurability for traditional marketing or awareness campaigns… and the technology is not there yet.

    Where to start? For once it is important to understand what are the core key-performance-indicators (KPIs) of the business, and how each element in the marketing mix affects those KPIs. This is not rocket science. If one cannot measure clearly how specific marketing activities drive 1) more active customers, 2) reduce churn, 3) increase revenue per customer, 4) increase the Net-Promoter-Score or 5) reduce COGS, then one should stop doing wasting marketing money.

    Most marketers fall in the trap of measuring activities rather than results and feel content by reporting participation in seven trade shows, two conferences, delivering 125,000 direct mailing pieces or buying keywords in Google to drive traffic to a web property that maybe does not need more traffic but needs better design to improve the customer experience and drive conversion rates up. When success is reported in terms of “activities”, we cannot articulate ROI and CFOs cannot see the impact. Most CMOs are lost in translation when reporting ROI.

    If we start measuring results, stop reporting on activities and focusing on the fundamentals things that can drive the KPIs of our business in the right direction, we will be a step ahead of the pack by using the scare resources more appropriately. When we speak in terms of financial results, it is easy to understand by both: CFOs and CMOs.