Marketing ROI – The Most Important Measure of Marketing Success

IBM has conducted face-to-face interviews with 1,734 Chief Marketing Officers (CMOs) across 19 industries and 64 countries to understand the forces changing business and markets today – and how the marketing profession is changing in light of these.

The study points out that CMOs are generally feeling anxious about the level of complexity that is on the horizon.

But it also gives readers hope in drawing the conclusion that there is consensus as far as key areas of improvement are concerned, which can be summarised as:

• Understanding and delivering value to empowered customers
• Creating lasting relationships with those customers
• Measuring marketing’s contribution to the business in relevant, quantifiable terms.

I want to pick up on two themes here. Marketing ROI and Data.

CMOs Have to Show a Real Return on their Marketing Expenditure

Here’s a quote from the IBM study by Rob Colwell, Executive Manager – Commercial and Marketing, Qantas Frequent Flyer:

“The success of my role is far more about analytics and technology than it is about hanging out with my ad agency, coming up with great creative campaigns. We must increase campaign ROI.”

We are glad to hear industry leaders talk about marketing ROI.

We’ve been talking about it for a long time. Check out this post from June 2004 discussing our Media Tracker ROI tracking technology (now replaced by Google Analytics) and prior to that in November 2003 where First Rate’s founder Jon Ostler (now Group CEO of Q Ltd, First Rate’s parent) spoke on marketing ROI and the case study work we did for NZ Retirement Commision’s sorted.org.nz.

IBM makes the following observations as far as marketing ROI is concerned:

At one stage, it was enough to point to advertising recall, brand perception or website traffic. But CMOs are under increasing pressure to provide quantifiable evidence of how their marketing expenditure is helping the organisation achieve its goals.

If they are to use their budgets as wisely as possible, CMOs also need to know which initiatives deliver the best returns. In other words, they need to know what to stop investing in, as well as what to ramp up.

But here is the quote that really stood out for us:

CMOs are well aware they will have to be much more financially accountable in the future. In fact, 63 percent of respondents believe marketing ROI will become the most important measure of success over the next three to five years.

I have included a graph from IBM’s study, below, which puts the 63% in context.

Here are the seven most important measures to gauge marketing success:

Source: ibm.com/cmostudy2011

Outperforming Organisations Use Data Extensively

Clearly marketing ROI and the underlying data is (finally) becoming more and more important for organisations. What is equally important is that the correct analysis skills and interpretation is applied to extract valuable information – in turn influencing marketing decision making and company strategy.

IBM states that we now create as much information every two days as we did from the dawn of civilisation to 2003, quoting Eric Schmidt. That’s staggering!

The key is to ask yourself what you are doing with all that data that is being generated by YOUR organisation…?

Think about the various data repositories that exist. How well do you think you are currently extracting compelling insights that demand organisational change, to bring about an increase in sustainable competitive advantage?

Are you mining the new digital data sources to discover how your customers found your website, why they transact (or why not), how to best optimise along the entire purchase chain – from keywords to ad copy to landing pages to purchase funnels and beyond – and understanding what your customers really want from you?

Are you gaining true customer insights from your Google analytics configuration or are you simply comparing traffic levels year on year? – Similarly, are you tracking and taking action on what consumers are saying about your brand on review websites?

Outperforming organisations use data much more extensively than underperforming organisations throughout the entire customer lifecycle. The differences are particularly marked in the phases devoted to stimulating awareness and desire and building advocacy after the sale.

According to IBM’s study more than 70 percent of CMOs state that they aren’t fully prepared to deal with the data explosion that is currently happening, and this will only accelerate.

If you haven’t yet read the study, make sure you do. It’s quite an interesting read; you can download it from here.

Please contact us for a discussion around extracting insights and value from your web analytics or driving increased marketing ROI from optimised digital marketing campaigns and an ongoing CRO programme.