Marketing Metrics: Is the emphasis on ROI actually hurting Marketing?
In speaking with many, many marketers over the past year, two words — well, actually one word and one acronym — stand out in my mental word cloud when thinking about marketing in 2011: revenue and ROI (return on investment).
The first is a term more commonly seen in financial reports and tossed around the conference table during company meetings. The second is another financial term.
And I’m not just dreaming that these words have infiltrated marketing. Research from the 2012 B2B Marketing Benchmark Report found that 54% of surveyed marketers think “achieving or increasing measurable ROI from lead generation programs” is a top strategic priority for 2012.
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I know I’ve written about Marketing proving its worth within the company in terms of revenue generation or measuring ROI more than once over the last year.
Menno Lijkendijk, Director Milestone Marketing, a Netherlands-based B2B marketing company, says the emphasis on ROI in marketing should be reexamined.
Menno’s main point is unimpeachable — return on investment is a financial term with a specific definition that has a very specific meaning to the C-suite in general, and particularly to the CFO. His concern is, not only is the actual ROI of some marketing activities overemphasized, the term itself is gathering too much marketing “buzz.”
He provided an example of a comment left on an online video of his that referenced “intangible ROI,” something he (rightly) says does not exist.
“There is no such thing as intangible ROI. The whole definition of ROI is that it should be tangible,” Menno says.
He continues, “This term — ROI — is now starting to lead a life of its own, and is being used by email service providers to explain to their potential customers that doing business with them will give them great ROI on their marketing investment.” Menno also mentions email providers are not alone in using this sales pitch and cited search marketers, social media markers and other agencies.
“There is more than just ROI, and the real value of marketing may require a different metric, or a different scorecard, than just the financial one,” he states.
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Can the focus on ROI create problems?
Menno outlined two main areas where an emphasis can become an issue.
The first is that many marketing activities, especially e-marketing activities, offer the opportunity to track efforts in great detail because of the precise data collected during different campaigns. This ability might skew how marketers value some efforts over others.
“ROI makes us a little bit too narrow-minded,” Menno says. “Because we are so eager to get a good ROI score, we tend to zoom into those activities where we can actually get a good ROI score and try to prove a point.”
The second area is the reality of marketing as a discipline — at a high level marketing is cost, not an investment as Finance might define the term.
Menno explains, “We should accept that there are some costs involved.” And he adds that there may be some amount of misleading Finance within a company by presenting marketing as a measurable activity.
He states this miscommunication between Marketing and Finance can lead to problems at budget time when Finance might only want to fund activities with a high ROI, or even only activities that offer a trackable ROI.
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If not return-on-investment, then what?
Menno proposes, since marketing is seeking to “invoke certain customer behavior” and “in the end we want to make sure this customer has a transaction with us,” the answer is to look to engagement, or what some marketers might call attention.
“I call it engagement because it has an intrinsic action to it, and instead of focusing on the return-on-investment, we should start focusing on return-on-engagement,” he says. “What return do we get from certain engagement that we have over time with a certain customer or certain person?”
He offers two places to start: loyalty and satisfaction.
Menno adds, “It takes a change in thinking about, ‘How do we plan marketing?,’ ‘How do we fund marketing?,” and ‘How do we measure marketing?'”
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Buzzwords are easy, accurate KPIs are difficult
A large part of Menno’s concern about the overemphasis on marketing ROI is simply that it can cause miscommunication between Marketing and Finance when the marketing team is using financial terms incorrectly.
Taking his idea of measuring engagement instead of investment does not lead to any easy answers on what metrics need to be tracked by Marketing to show the entirety of the worth of all marketing efforts, not just those than can show actual ROI.
Menno admits, “I haven’t solved this myself, but I think we can actually come up with some kind of balanced scorecard for Marketing at a higher level, and not just individual campaigns of individual channels. And I think we, as a marketing community, need to start working on getting a more balanced scorecard, or metric, or whatever in the heads of our bosses, our money givers.”
I certainly don’t think ignoring the fact that Marketing actually can show actual, measurable results in the form of ROI for many efforts is going to help the discipline, but Menno offers some very interesting food for thought and his ideas pose an interesting challenge to a focus on ROI that, let’s face it, is in some danger of heading off down the buzzword path.
What do you think about Menno’s ideas? Is a focus on ROI-measurable activities a detriment to Marketing success? What other metrics should marketers be using to measure the overall success of all efforts?
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Related Resources:
Funnel Optimization: Why marketers must embrace change
Marketing Research Chart: CMO confidence in social media’s ability to produce ROI
B2B Social Media: Jay Baer discusses social media ROI and Facebook likes [Video]
Webinar Replay — How CMOs are Monetizing Social Marketing and Measuring ROI
Lead Marketing: Cost-per-lead and lead nurturing ROI
Menno Lijkendijk’s “Think, Feel, Marketing” blog
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Categories: Research And Measurement b2b, C-suite, KPI, lead generation, Marketing, metrics, optimization, ROI
Great blog post. The problem with basing a budgeting request on non-financial metrics like engagement is that such metrics often lead to decreases in funding.
The bigger problem is that marketing investments are often looked at in a vacuum. Unless you’re doing marketing for ecommerce, where their is a clear cause and effect, the investment marketers make are part of a larger investment in revenue production that includes the sales investment. In that context, the question is whether the mix of investments by sales and marketing create a return, not whether the marketing investment alone caused ROI.
Brian Carroll like to say marketing needs to help the sales people sell. That really is the question. Either we’re helping or we’re not. If we’re not, then funding will be hard to come by. If we are, we need to convince sales leadership so that we’re both talking to finance together.
Good post and I agree with Dave. ROI from marketing actions is not about generating incomes from that action itself, but it is more about the influence of marketing activities on the results of sales team. The good promotion should lead to increase in sales – this is how revenue will be created, while activity of marketing team will still remain as a cost in company’s balance sheet.
Dave, I think you really hit the nail on the head when putting this in the context of Marketing/Sales alignment. When you can reach a point where Sales is championing Marketing’s efforts, C-suite issues such as budget discussions and Marketing’s value in the company become a lot easier.
One internal “metric” to look at might be: do both Marketing and Sales have agreement and understanding on definitions for marketing-qualified leads and sales-qualified leads?
And going back to Menno’s idea of return-on-engagement, how is Marketing faring in turning new leads into marketing-qualified leads, and then engaging with those people into sales-qualified leads?
That is one way to show a clear return-on-engagement — conversion rate of marketing-qualified lead to sales-qualified lead.