One of the frequent things I get asked is how to make sure Marketing is providing an adequate return on investment. Measuring is the keyword, and everybody wants to know if we are collecting the fruits from the invested effort.
Measuring ROI for marketing can sometimes be easy, sometimes hard. This is so due to the multifaceted nature of the performed activity, which can vary according to each company's objectives as well as understanding of the Marketing function.
From my experience, companies broadly attribute to marketing generally the following functions, which can be measured differently:
1) Market understanding type of activity
- Description: in this bucket, companies attribute to marketing the responsibility generation of understanding and formulation of a strategy based on market and customer needs, therefore companies are focusing on the "input variables" from the marketing mix i.e. product and price (i.e. formulating the offer)
- Measuring return: hard to measure, since this is a strategic function setting out broad lines of operation, nevertheless probably nobody would argue regarding the importance of this type of activities
2) Brand awareness creation type of activity
- Description: to generate a strong brand and brand awareness is the "most typical" or "traditional" type of understanding companies had (and still have) about the marketing function. The idea is to "indirectly generate a lead" based on a more sophisticated "top of mind" or "first choice" approach when the customer need comes to the fruition of a purchase
- Measuring return: medium difficulty to measure. Here brand awareness surveys and other type of research can be used, or proxies such as buyer pattern analysis. Usually surveys need themselves some kind of investment (agency, tools, etc) to be performed
3) Lead generation type of activity
- Description: to generate prospects and sub-sequentially leads out of very practical oriented type of activities e.g. telemarketing, email campaigns, PPC. This approach has a more "brute force" kind of nature given its need to have a direct touch-point with the customer which will sub-sequentially generate a business opportunity, but it can be very effective in generating and nurturing sales-ready leads. In this approach marketing is seen mostly as an inside sales fuction
- Measuring return: easy. For each type of campaign, it is easy to measure the input cots in terms of time, budget, etc, and compare these cots with the generated revenue.
A company which wants to have a sophisticated approach to marketing and be ahead of the competition will see the value in all types of "marketing understanding", and will recognise the challenges involved when it comes to measuring marketing ROI.
Fernando Damiani