Drawing a Bead on ROI in Marketing.
By Vijay Dandapani
Tuesday, 5th June 2012
The old saw attributed among others to Henry Ford and Lord Leverlhume about not being able to figure out which 50% of their advertising/marketing dollars works apparently endures. 

Among the surpising findings in a new survey by Balihoo, a provider of Local Marketing Automation (LMA) technology and services to national brands comes is that a majority of them do not invest enough in developing ROI metrics whether for national or local marketing dollars.

Notably, the survey revealed that many national brands lack insight into local marketing return on investment (ROI).

At a more global level McKinsey & Company's Quarterly of a couple of years ago noted that " Marketing may be hard to measure, but many companies aren't even using the tools available to them." The consulting company conducted its own survey of company chief marketing officers to "assess their marketing campaigns, make their budgets, and plan new campaigns, as well as how their plans have changed as a result of the economic crisis."

Distressingly, they found that many "don't use basic best practices such as clearly allocating—or even defining—marketing spending  or regularly reviewing the results. Further, they allocate their marketing budgets based on historical allocation levels rather than campaign effectiveness."

A more recent Quarterly following up on the same vein noted what may seem obvious to many: "that a firm can't spend wisely without understanding marketing's full impact". The journal posed five questions with a view to developing a plan that helps maximize the bang for (marketing) bucks. The queries included  "what influences customers in today's environment".

Despite troves of data companies don't seem able to wrap their arms around it, a point that also emerged from a Financial Times  survey of luxury brands: "digital luxury is already a much more important market than many executives have acknowledged" and growing three times as fast as offline.

The Quarterly also underscored the fact that "marketing has always combined facts and judgment" with judgement, heretofore, influenced by the use of old traditional platforms. The advent of new media and its continually changing platforms sets limits on the ability to use judgement based on experience despite the presence of vast amounts of data.

Which raised the important issue of what metrics to use. Although "nothing approaches a definitive metric for social media and other emerging communication channels, and no single metric can evaluate the effectiveness of all spending" companies must find a way to track progress and hold marketers accountable. 

Apropos that luxury retailers, many of whom were initially skeptical of the web, invested vast amounts on social media only to find via an Altagamma survey that tens of millions of Facebook fans had very little effect on direct sales.  It is a finding that could perhaps apply to a variety of industries including the vast service sector.

Vijay is Chief Operating Officer and part-founder of Apple Core Hotels- a chain of 5 midtown Manhattan hotels offering value and comfort in the heart of the city.Member of the board of Directors - Hotel Association of New York.

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