4 Reasons Marketers Fail at ROI Evaluation

Marketers who spend their careers building brands go limp when it comes to analyzing the ROI on their marketing efforts. The CEOs wonder at what appears to be a conspiracy in the profession.

It seems like the marketers would rather talk about likes, customer feedback, web site click throughs, email open rates -- any thing but incremental revenue.

The CEO agrees to bottom line and top line revenue goals and ends up listening to an hour or more about everything except what he wants to know. What are your program's results to date?

As a marketing professional myself, I must confess that I side with the CEO and not the marketer on this critical issue.

But should the CEO blame the marketer or the culture of the company engendered by the CEO himself that makes it impossible for the marketer to be accountable for results?

I think the problem is not a conspiracy, but a general ignorance of how to set up marketing for short and long term success in the organization.

In a real sense, the CEO and other officers in the organization may have unwittingly sabotaged the marketers revenue-generating assignment. The mindset of marketing within the company inhibits ROI analysis.

Let's look at some of the barriers that disable the calculation of marketing ROI within many enterprises.

1. Silo myopia

For marketers, silos often exacerbate the problems they were designed to solve.

Organizations break down key areas of responsibility such as finance, IT, manufacturing, customer service, sales, legal and other silos as needed to make sure each of the sections' managers have clear accountability for the performance of their territories. Unfortunately, if left unchecked, the silo managers begin to think more about the success of their areas than the success of the whole company.

As with any other silo, marketing requires high level, quality support from all of these silos to function. It needs IT to track sales by individual and by channel. It requires budgeting from finance to create and implement revenue-generating strategies. Marketing also relies on customer service and sales to deliver on the promises made by the company's advertising.

Viewed holistically, all functions within the company rely upon marketing to deliver the revenue needed to operate and justify all activities within the company.

One reasonable perspective is that the company's reason for being depends upon the success or failure of marketing.

2. Out of balance sales processes

Sales come about as a result of creating products that customers want and are willing to pay for. The product must deliver on the promise that it will solve the customer's problem. The product's value to the customer depends on the company's ability to provide the tech support and other forms of customer service the customer expects.

To evaluate and improve the marketing programs, marking relies upon critical customer behaviors. Tracking follows all customer touch points revealing what they buy, how often they buy and how well they respond to certain offerings.

In the absence of this tracking, marketing cannot track the revenues or calculate ROI.

And even if they can track, the circle to success breaks as customers become dissatisfied or are not treated with respect by customer service. They may also not respond to an inadequate inbound telemarketing resource within the company loosing sales that marketing should have gotten credit for.

Management often complicates the problem by viewing the sales forces as something other than a marketing activity.

Even more offensive is the CEO who views marketing strictly as communications with accountability for sales results without the corresponding authority to assure the sales success of their marketing initiatives.

3. Inappropriate channel attribution

In today's marketing environment, it takes multiple channels to close the business.

There is no longer an option to isolate one channel from another. So channel attribution is not a viable way to evaluate the marketing strategies.

When evaluating marketing efforts, it is important to look at testing various "sales models."

For example, consider generating leads by mail overlaying email against the same names to lift response. Such a program would also include a social media effort run during the same time period. The marketer would also track all responses coming to the landing page, the in-house phone bank and return mail.

When the campaign has run it's course, the enabled marketer would look at the program's cost per sale versus a hold out list that received no mail or digital support except for the company's website.

Within the tracking, the marketer would also want to evaluate the responses by list source and any format or offer tests.

Structure all such models for back end evaluation.

Ongoing testing with appropriate tracking will eventually provide an accurate picture of how social media, various offers and other variables affect overall program profitability.

The testing variables are endless. The pervasive obstable is an inadequate tracking infrastructure and a lack of vision as it relates to the marketing role. 

4. Risk avoidance

One of the primary reasons marketers avoid tackling the validation of their marketing programs with ROI comes down to fear. Fear is not only human, but it is magnified when ROI accountability requires far more power than most CMOs enjoy.

It's not so much the fear of tracking sales results but rather the fear of failing to get the necessary management buy in of money, time and silo support to track sales from first contact through to the life of each customer's transactions.

For many companies, it will take great effort to set up the necessary tracking systems to analyze marketing programs by ROI.

This starts with getting the IT priorities strait. One of IT's primary missions is to provide the framework for business intelligence. In my opinion, no other IT goal trumps customer intelligence. 

The bottom line...

Peter Drucker's memorable statement about the role of marketing says it best.

Because the purpose of business is to create a customer, the business enterprise has two--and only two--basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.

Posted on June 7, 2014 and filed under Direct Marketing Strategy, Research.