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Issue Date: April 2004

Marketing ROI - Accountability is Inevitable

April 2004
Megan Stark - CubicIce

Marketing can be measured and the saying, "I know 50% of my marketing works, but which 50% I couldn't tell you," has reached it's sell-by date. It is only a matter of time before we start asking hard questions on campaign profitability and comparing marketing mix expenditure to identify where acceptable returns on investment can be achieved.
There is a global trend for marketing departments to be a lot more accountable for the returns generated by marketing expenditure. I think it might be early for the South African market, but it is a matter of time before we are asked the same questions. I attended a seminar earlier this month presented by James D. Lenskold, from the USA, which addressed these exact issues. (See Marketing return on investment).
Marketers have always watched and measured the successes of marketing campaigns and how they have influenced lead generation and awareness, but they tend not to take into account the direct correlation between what was spent and the revenue generated. Marketers now need to develop ways of measuring a company's return on marketing investment (ROMI). Too often marketing campaigns are implemented without a clear business objective or financial objective in mind and, with no clear objective, it becomes more difficult to measure the results and, therefore, long term value of the campaign.
Marketing campaigns will, in the near future, be planned, implemented and measured according to clearly defined objectives, which support the business and financial goals of a company. At the same time, acceptable ROI percentages will be established up front, with each planned campaign being evaluated against the potential ROI percentage. With this in place, it will then become much easier to put simple measurements in place, enabling marketing managers to see which parts of the marketing mix are not only working, but providing the best returns for the organisation.
In his book, James Lenskold discusses "customer pathing," a concept whereby marketing, sales and CRM work closely together to optimise business profitability and follow a process where campaign expenditure and returns are tracked over a period of time and then related to customer value. In simple terms, a business creates a framework or model against which campaign expenditure and profitability can be evaluated and compared to customer value.
The concept is interesting in as much as campaigns are divided into stages of the customer life cycle, e.g. cultivation/ awareness, acquisition and development/ cross selling. It is then possible to evaluate marketing campaigns individually or collectively, based on customer segmentation and customer profitability development (customer pathing). The value is realised in the evaluation process. Example - In isolation, an awareness campaign could look unprofitable, yet when evaluated collectively with other campaigns (Without the initial awareness campaign, the sales lead would not have been generated) that generate ongoing sales, it clearly shows that the business objectives have been met and profitability is higher than ROI percentages established.
Marketing has become more than just advertising and PR. It should be an intricate part of the complete customer life cycle development. It begins with the creation of a perception (cultivation) in the market place. From this it creates the interest and enquiry (acquisition), which ultimately leads to a sale. This, in term, allows customer retention development (cross-selling). The lines between the sales, marketing and customer management departments are blurring and the divisions need to work closer together in order to achieve better ROMI.
ROMI is a marketing evaluation method that can improve the results of your marketing investment, but it requires a new way of thinking. It has to start at board level, with a concerted team effort between marketing, sales and finance. Each marketing program has to have defined goals and objectives, in alignment with the business goals and objectives, which are then implemented and managed and - most importantly - are then monitored and measured. If this is done on an on going basis, the decisions as to where and how the marketing budget is spent, becomes a lot more accurate and measurable, providing the organisation with insight that improves marketing ROI.



For details contact Megan Stark of CubicIce on tel: +27 11 705-2545, f: +27 11 705-2448, e-mail info@cubicice.com or visit www.cubicice.com.



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