Increasing Marketing ROI

CMO Holding Marketing ROI in Hand

Amy Gallo, of the Harvard Business Review[i], uses the following equation to quantify Marketing ROI:

The main vaguery here is the definition of “Incremental Financial Value Gained as a Result of the Marketing Investment”. “Cost of the Marketing Investment” is certainly more easily quantified.  But that aside, and assuming we agree with the approach (which I do) there are ONLY three ways to improve your Marketing ROI:

  1. Improve the Incremental Financial Value of your efforts
  2. Reduce the cost of the investment
  3. Do both

Let’s start with the first approach, to improve the outcomes of your campaigns and marketing efforts. First, you’ll need a set of accessible metrics (see below) to determine a baseline of current performance against which to measure improvement. Hopefully, you’re already measuring outcomes in some fashion.

But, as you know, there are multiple difficulties involved in calculating the financial benefits of marketing such as:

  • Attributing the long-term contribution of Brand Awareness marketing
  • Multi-channel (online ads driving in-store purchases, etc.)
  • Uncalibrated metrics across lead gen, sales and marketing organization

So, being realistic, unless you are way ahead of this curve already, you should start with a simpler, but still effective, approach.  I think there are three key concepts underlying the process. Incremental Financial Value must be:

  1. Measurable
  2. Relevant
  3. Mutually agreed upon in advance

Beyond that, the structure must be fine-tuned for improved accuracy at regular, again mutually agreed upon, intervals.  Of course, “mutually agreed upon” is harder than it looks, right? Getting the CFO, CSO, COO, CMO and CIO to all agree on anything can be terribly difficult under even the best circumstances, so be sure to start with your set of proposed measures, and have data, theory, or even better (and maybe easier), examples of what world-class companies are using as measures. Oh, and you better be damn sure that you can measure the proposed metrics accurately, which means you have to be using best-practice analytics tools in your marketing organization.

The second approach is to reduce the investment side of the equation. There are, again, multiple ways of doing that:

  1. Reduce your media spend
  2. Automate more operational processes by using new, better tech (be prepared to show specific ROI on this one)
  3. Get rid of some people and do more with less.

Your annual pre-budget instructions will generally tell you to do some combination of #1 and #3 while telling you there is no way and no budget available to do #2. But we all know where that leads, getting your resume ready.

But quickly, reducing your media spend, outside of cleaning up low-efficiencies and “buddy-buys” is usually counterproductive, and in leading innovative organizations is generally considered taboo. Trying to do more with less is an equally poor choice. So, if you can’t convince your co-leaders to invest in new tech, you’re just kind of stuck. You’ll trim a little here or there, table that killer campaign you had planned, and call the Adobe salesperson to let them know you won’t be buying any new tools this year.

That leaves us with approach #3: Do Both. If you want to drive transformative change in your marketing team and its outcomes, then you need to step back, take a deep breath, and take a fresh look at the problem.

Recent studies by McKinsey[i] show that companies with strong, innovative, award-winning creative showed the following outcomes:

  1. 67% had above-average organic revenue growth
  2. 70% had above-average total return to shareholders
  3. 74% had above-average net enterprise value or NEV/forward EBITDA
  4. Score 16% higher in company-wide innovation performance than others

The promise of new marketing technology platforms has often been driven by phrases like, “Built with Marketer’s in mind” or “reduce your dependence on IT” with the corollary product functionalities of improved analytics, tighter targeting and improved customer experience.  But with the ever-broadening deployment of these platforms, there has been another, unintended effect.

“Reduced dependence on IT” has led to the marketing team requiring a much higher level of technical competence on the new tools, multiplied by the increasing number of different tools in use at any given time. The resource budget for the marketing team is a zero-sum game, so the increasing percentage of team time spent on technology reduces the amount of time available for the team to drive creativity, insight and innovation, the core skill sets of marketing.

The result promised by marketing technology platforms is disruptive and game changing. It’s exponential. But more complicated, multi-tool marketing technology stacks result in a logarithmic availability of resources.

It creates a paradox, you need the new marketing technologies to keep up or surpass your competitors, but you can’t find the right people, with the right skills and credentials, to operate the new platforms. The reality is that they are in short supply, a problem compounded for companies outside of the largest tech labor pools. So how can you get over this hurdle?


At TAOS, we have built your solution. We help you deploy the best-in-class Adobe Experience Cloud quickly and affordably, and provide you with the team to run it, all on a cost-effective subscription model. We empower your marketing team to focus on creativity, insight and innovation, while we enable your team with the best marketing tools in the world.

If you think you’re ready drive one of the best marketing teams in the world, we’re ready to help.

Sources:

A Refresher on Marketing ROI; Amy Gallo July 25, 2017  
https://hbr.org/2017/07/a-refresher-on-marketing-roi

[i] Creativity’s bottom line: How winning companies turn creativity into business value and growth  June 2017 | Marc Brodherson, Jason Heller, Jesko Perrey, and David Remley https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/creativitys-bottom-line-how-winning-companies-turn-creativity-into-business-value-and-growth