In the third article looking at OC&C Strategy Consultants' research into CMO's top priorities, Fergus Jarvis, partner at OC&C Strategy Consultants, discusses the trials and tribulations of measuring ROI.
CMOs from across a range of brands ranked measuring the ROI of marketing spend second only to personalising the customer experience
Measuring ROI is in every CMO’s DNA and an essential part of their role. Today’s CMO is one of the most measured board members - and scrutiny from across boards is continuing to increase, with the return on every pound spent examined in detail. In many ways, the cult of ROI has been the saviour of marketing by answering questions that were once unanswerable about the real effect of campaigns - however it is not always a panacea.
Realising the importance
When we spoke to over 50 CMOs from across a range of brands big and small, measuring the ROI of marketing spend ranked second only to personalising the customer experience when it came to their highest priorities. But because ROI has been such a central concern over many years, the CMOs we interviewed felt that they had the processes in place to manage it and make informed and dynamic decisions about how to optimise spend.
In their view, competent marketers have worked out how to use the models and data sources available to provide measures of success that justify spend levels, and these tools are now fully embedded in their day-to-day routine.
However, this confidence might be misplaced. While simple metrics like revenue growth are effective measures of overall business performance, it’s becoming increasingly difficult to understand what really moves the needle with ROI when it comes to specific marketing initiatives, as potential exposure to different media types continues to proliferate. Importantly, the question posed to marketers by the business is increasingly less one about customer acquisition and top-line growth alone, but one about the profitability of the customers acquired through different channels.
As digital and social media have become fundamental components of integrated campaigns over the last five years, the interrelatedness of different channels has become a bigger issue and remains poorly understood. What’s more, there continues to be a real issue around the measures available for each media channel and the extent to which these are comparable, or more simply the right measures.
Many of the CMOs we spoke to stressed the importance of nimbleness, speed and the need to calibrate campaigns in real time. The days of a six monthly marketing plan are long gone; CMOs are now working dynamically, making decisions quickly and making them happen on the spot. Some of the companies we spoke to tweaked their spending profile on a weekly or monthly basis, while others don’t have set campaign plans in place but iterate ‘live’. The implication of these changes can be profound in some instances, especially in the role that traditional buying agencies play for their clients.
In many ways, this is no bad thing. The data CMOs can capture by measuring how their campaigns are performing across digital and social channels is allowing them to tweak them in real time to ensure they’re reaching their customers in a more effective way. But there is also the risk that the cult of ROI and pressure to prove value at every point could lead CMOs into the trap of directing marketing spend into approaches with easily measurable outcomes – like digital and social for instance – at the expense of long-term brand building, where return is not so easily quantifiable.
Blinded by ROI
Many CMOs believe that the ROI-led approach to marketing has left some of the more traditional skills of brand marketing and customer engagement delivered through more traditional media underplayed as part of the marketing mix. Despite this belief, it remains very hard to win spend to fund these types of campaigns in a business ecosystem that increasingly obsesses about ROI and doesn’t recognise that the bias towards measurability may be flawed.
CMOs may be feeling comfortable with the notion of ROI, but there are still challenges ahead. There remains plenty of mileage to drive improvements in ROI to enable better decision making - but this is going to require more integrated and complex approaches than segment and sub-segment customer types to determine the optimal marketing messages, channels (and mix of channels) and campaign execution. This next wave of innovation will require more concerted investment to continue to drive the productivity gains from spend on marketing achieved historically.
- Article 1 of the series: Major trends impacting Chief Marketing Officers.
- Article 2 of the series: Personalisation priority for Chief Marketing Officers.
This article was previously posted by Fergus Jarvis in Marketing Magazine.