Marketing Execs Struggle to Show ROI
Marketing executives are under increasing pressure from CEOs to show a return on investment for their programs, but many are struggling with complex processes, technological difficulties and internal resistance to measurement systems, according to a report from The Conference Board.
Because measuring marketing return on investment (MROI) is still relatively new, many executives say they lack the technological and institutional tools necessary to measure their programs, the study found.
Lack of resources, lack of connection with performance objectives and inadequate focus are some of the primary sources of frustration. Major barriers to implementing MROI programs - largely related to issues of business infrastructure - include problems with data availability or integrity (47%), technology/infrastructure (41%), resource dedication (39%), and methodology/know how (22%).
Though the report finds that the top driver of success is a strong commitment from leadership, many marketing execs face considerable internal resistance to MROI, while others report their organization lacks sufficient commitment to allocate the budget, time, and resources required to measure MROI.
ROI is a Slow Go
Half of the companies surveyed have been measuring MROI for less than two years, while more than one-third still report making no efforts to measure MROI at all, the study found. Among the companies that haveimplemented programs, none have yet achieved their goals in measuring ROI. Only one-quarter report making “good” progress, the survey found. The majority said they found the process more difficult than anticipated.
Additional survey findings:
- The most frequently used metrics for measuring MROI include customer loyalty/satisfaction, customer retention, market share, marketing spending, revenue, web page views and profits.
- Technology is key to measuring ROI effectively. More than half (55%) said that technological/infrastructural deficiencies have had “a lot” or a “significant” effect on their efforts.
- 73% of companies that have been measuring MROI for more than three years say they are making good progress, compared with 4% of those who have been at it for less than two years.
- 91% of companies who report “good progress,” and 67% of companies who report “some” progress, have incorporated marketing ROI into their performance objectives. More than half of those who report “good” progress have also put in place recognition programs for marketing ROI.
- The amount of time spent on MROI activities is a greater predictor of success than time spent in meetings.
- B2B companies lag behind B2B/B2C combination companies in measuring MROI. B2B companies do not report as much progress, nor have they been working at it as long.
- The most important competencies cited for success with MROI are decision-making, analytical thinking, collaboration, openness to change, and goal orientation.
- Those making the most progress toward measuring MROI say they have the necessary infrastructure/platform, data availability/integrity, and software/tools in place.
“In the past, marketing awareness and brand-building activities were enough to define marketing’s mission and role in a company, and to justify its budget,” said Lorrie Foster, VP of Councils and Research Working Groups at The Conference Board. “But the focus of marketing has evolved toward more strategic, value-added activities that can be quantified and linked to corporate goals. New approaches, methodologies and tools, and technologies are making it possible to link marketing investments directly to revenues and profits, holding marketing executives accountable for achieving expected results.”
Although the inputs and expenses associated with marketing can easily be measured on a monthly or quarterly basis, the results of a successful marketing effort — enhanced brand recognition and reputation, customer loyalty, improved market penetration, expanded networks and cross-selling opportunities -may not be realized in the form of increased revenue within a specific timeframe and may be difficult to forecast, the report noted. External economic forces, such as market movements, business cycles, and competitors’ marketing efforts, make it difficult to evaluate returns on specific marketing efforts in the near term. Internal factors, such as changes in product quality, delivery times or technical support, can also affect “returns,” making it difficult to attribute results to a specific marketing campaign.
“Progress in this area has been difficult,” says Foster. “Many of the expected returns from marketing efforts are intangible or long-term. Hence, measuring the return on investment in marketing is a more complex and less well-developed process than calculating investment returns in other business areas.”
About the research: To compile the report, “Managing and Measuring Return on Marketing Investment Research Approach,” the Conference Board distributed 7,842 surveys via e-mail and direct mail and obtained valid responses from 73 companies. Of these, 24 companies were not yet making any efforts to measure marketing investment, and hence completed only part of the survey. For purposes of analysis, these companies were treated separately as a control group. The discussion in the report relates to the remaining 49 companies that report some to significant efforts in measuring return on marketing investment. The research was conducted between April and July 2007.
You hit it spot on when you said that measurement of total actual return is not within full control of the marketers. Not to mention that the macro-level measurements like market share, brand loyalty, etc. are much too expensive for all but the biggest enterprises with the deepest pockets to truly measure. Marketing ROI is still more art than science at this point, and my personal explanation for that problem is that CMOs are being held accountable for delivering on goals that are more dependent on operations, sales, engineering, and even support in many cases. It makes sense to measure ROI, but we need to better understand exactly what Marketing’s objective is and what metrics will truly explain success or failure. And those metrics can’t be based on the success of other groups nor on results that will occur many months or even years down the road.
When will we start measuring against opportunities identified and fostered instead of raw sales? Many marketing groups ignore the nurturing piece of the equation, because they’re measured by how many leads they jam into sales early enough to make it through the system before the quarter ends. Makes no sense to me.
The struggle to prove marketing ROI is a bass-ackwards effort; any scientist who went looking to invent proof for a theory would get laughed at.
I maintain that behaviors — actions in the real world — are not a metric of brands, but rather evidence of brands. Behaviors are objective, measurable, and manageable. The ‘this is art’ excuse is getting old.
I completely agree with Tommy Landry’s comments. How could marketing be held accoutable for customer satisfaction/retention, loyalty, etc. What happened to common sense and good ole’ sales reports by market which compare pre- and post-marketing in that market? Do we really need all these incredibly complex names, acronyms and reports to tell us a product is moving off the shelf? Doesn’t a product that moves and continues to move tell us we hit our target, they are satisfied so now lets go find some more of those people? I respect that we need to research success and pinpoint what about that new effort moved the needle but somewhere in here we need to make a move after we have that 60% of knowledge.
You gotta love the web; either a potential customer clicked or did not and if he/she did, to where and did they drink the Koolade?
Sales and marketing are so often put at odds and at different corners of the building. The CMOs who are forced to function in a bubble-surrounded by the newest and greatest metrics- will always experience the issues noted in this article.
Respectfully disagree with Sallyann’s comment that product ‘moving off the shelf’ equates to marketing ROI. As both Sallyann and Tommy noted, lots of other factors contribute to that. If marketing can’t be held entirely responsible when product is not moving off the shelf, we also can’t assume it’s generating optimal return when it is.