IT'S A SHAME ABOUT ROI ... Why Marketing Analytics are not ALWAYS Reflective of Value

Heads of Marketing Departments (and perhaps even more so PRs dealing with offline conventional press) will understand the nightmare of trying to quantify the value of what they do and the Value they add. Of course there isn’t a company in the world (I hope) that believes it can subsist without any advertising or marketing at all.

But putting meaningful numbers on this can be difficult. And because this is so hard to do accurately, it can feed into a cynicism and even distrust about Marketing in general (just as Sales is somehow seen as a shady profession, unless of course it’s re-dubbed as Business Development). This is unfortunate given that without Sales & Marketing, PR and Business Development, there would be very few other ways to grow business (word of mouth alone?). As such, Marketing et al should be of central interest to all company Directors.

Yet Marketing has an unwarranted reputational problem. Too many, including (shockingly) some business leaders, perceive it as a cynical add-on – various strategies designed to sell a product or service to people that don’t want it and which have no direct relevance to that product or service. You’d be amazed, in fact, at some of the disparaging statements I’ve heard over the years, the worst and most direct being ‘marketing people are idiots’, from an architect. (That’s interesting to me, because I initially trained in Architecture but then moved into Publishing & Marketing. At what point overnight did I turn into ‘an idiot’, I wonder?!)

More worryingly, even where Marketing is not outright disparaged, it is still often nonetheless perceived as a necessary evil - a ‘money drain’ with spurious benefit - which is clearly absurd when Marketing departments are directly responsible for increasing Sales and therefore Bottom Lines. Actually, I’ve rarely met a successful MD or CEO or Founder who thinks this way – usually these people have a lively interest in Marketing – but sadly it remains a prevalent view amongst some aspects of dour Middle Management.

Nonetheless the fact that Marketing has never been taken entirely seriously must be addressed; as Peter Doyle put it in his classic book Value-Based Marketing:

‘A major problem for marketing is that it has not been integrated with the modern concept of financial value creation. This has handicapped the ability of marketing managers to contribute to top management decision-making. Yet marketing-led growth is at the heart of value creation’.

For strange reasons, Marketing is all too often perceived as separate from the ‘business of the business’ (aside from, perhaps, where it is taken to mean the initial work of segmentation and positioning, for example, in relation to new product or service offerings). And of course if Marketing is done badly (too much shoddy and meaningless Content aimed at nobody in particular and with no clear goal) then it is no wonder it is not taken seriously.

But we have to ask more broadly, where do these views come from? Why the belief that Marketing takes money rather than makes it? Of course poor marketing can certainly do so – but so can anything that’s poor quality or failing to function.

I have no definite answer. What I have noticed is a disdain for Marketing especially strongly amongst professions that, in the past, were ‘banned’ from marketing by their own accredited professional bodies. For example, within certain professions (operating almost like gentlemen’s clubs until the 70s), active marketing was prohibited, with word of mouth / referrals / reputation one’s only avenues. So perhaps some of that thinking persists. Marketing might also be seen as ‘too commercial’ for certain professions where they still perceive themselves as artists or social change advocates, rather than businesspersons per se. And of course it’s easier to push away or dismiss what you’re unfamiliar with than to learn about it.

But I also think there are more rational reasons and I can understand these.

It doesn’t help that the word Marketing is understood in 2 ways. In its deepest sense, it’s about how you position your Offer to which segment, which demographic, of the market: I’m not sure how any business could get away with not doing that, even if only intuitively, because not doing Marketing in this sense would require you to aim your offer at everybody on the planet! And I can’t think of a single product or service that is aimed at everyone.

Even products that arguably everybody needs – food and toilet paper, perhaps! – are highly differentiated by price point and luxury level and brand positioning, plus, in food, the very many sub-demographics from vegan through organic through budget ready meals aimed at those who like things cheap and cheerful. Truly, in my opinion, it is impossible to even exist as a business without Marketing in this fundamental sense because you would have to have a universally appealing product or service - and that’s impossible.

But often the term Marketing is used to refer only to what would be better termed ‘marketing materials’ or 'collateral', these being far too often seen as a random business add-on, rather than, as they should be, related in an in-depth way to what you actually do. If you feel unenthusiastic (or even embarrassed) about a Brochure you may have, for example, I’d have to question whether that’s because you are ’selling yourself’ (or trying to) in ways that are not really authentic to you or your business. If it was authentic, you’d absolutely feel proud of it.

Pinpointing the Figures

Nonetheless, the idea that Marketing takes money rather than makes money needs to be unpacked because it couldn’t be further from the truth unless, as I’ve said, the Marketing or Marketing Strategy is poor quality or failing. So where does this belief come from?

Likely, it’s because the direct connection between specific marketing endeavours and specific sales is hard to pinpoint – and the whole endeavour of building brand awareness can be even more difficult to meaningfully measure.

Certainly it’s not hard to put a number – overall – on the Marketing Cost per Client/Customer Acquisition in any given year – simply, what did you spend on Marketing  and how many Clients/Customers did you gain? Divide the one by the other and Boom! You have a figure. 

However, even on face value we can see that the solidity of this figure starts to crumble upon deeper enquiry: what if some of these acquisitions heard of you via word of mouth/personal referral, or simply by knowledge of your past work? You can’t be sure that every single client/customer was acquired via ‘Marketing’.

This may be nit-picking but it certainly gets more complex when you try to pinpoint the value of specific endeavours: unless you ask every single new Client/Customer, how do you know which specific piece of Marketing or PR triggered their interest? Of course there are those online forms asking ‘where did you hear of us?’ but they aren’t often used in B2B and, especially in mid-size firms, people often fail to ask new Clients how they came across them.

More to the point: people don’t purchase expensive services because of a single Marketing ‘exposure’. In fact, according to recent thinking, it can require 27 different Touchpoints, whilst an older source claims it can take 20 ‘exposures’ to an ad to shift someone from utter disinterest, even annoyance, through to keen to purchase! General Brand Awareness is even trickier to pinpoint, as is the exact moment that a desire to buy enters the picture.

In reality the exposures that made the difference can occur years before a purchase decision. For example, I have not needed a solicitor in over a decade. But the solicitor I intend to approach to help me on a house purchase in the short-term future I initially became aware of around eight years ago because of their incredibly helpful Thought Leadership materials. How will that figure in their annual acquisition costs? Note: I haven’t called them yet so they do not even know I exist! I’m about to become a customer based on a Marketing budget from almost a decade ago – yet most who are cynical about Marketing would claim their strategy was a waste of money if it didn’t produce clients / customers in the exact same financial year.

That figure can't easily be captured unless you start measuring returns in multi-year periods.

Another more obvious example of this might be within the luxury goods industry – where the initial step is in fact creating desire for the product ‘aspirationally’ – that is, in those who can’t even afford it yet. The years of aspiration – of saving money, or working towards a goal, perhaps getting a taste for the brand via associated cosmetics or accessories ranges - is part of what makes luxury goods so very desirable. Certainly the likes of Chanel and Porsche aren’t working on an annual basis when it comes to Customer Acquisition Costs!

Because of this complexity, Marketing teams have perhaps reactively become somewhat obsessed with peacocking online stats that may or may not be all that useful. There are of course very many ways that the effectiveness of Marketing can be measured, and very many metrics, especially in the digital arena, ranging from simple counts of Likes or Engagements on Socials via Analytics through to in-depth breakdowns of the stats on who is landing on what page of your website and how long they are spending there. The problem with some of these stats, though, is that when it comes to creating revenue, they may well be meaningless.

Monitoring clicks on landing pages is an example of an extremely useful – in fact essential – piece of numerical data. By contrast, how many X followers a Surveyor has may reveal almost nothing about their business (let alone the ROI) other than that that particular Surveyor is amusing, popular, good at 'Tweeting' and has a worrying amount of time on their hands.

My point is that you can have fantastic social media stats that in no way provide ROI or convert to Sales because much Social Media is of more use to B2C companies where the feedback of the customers is the key takeaway. (I remain unconvinced that ‘tweeting’ is a great use of time for many B2B companies, though I’m always happy to be proven wrong.)

And when it comes to what is conventionally called PR, engagement can be even harder to measure. Of course we can get from the publisher of a given industry journal the readership figures – but how many journals are you subscribed to that remain in their cellophane packets (highly unsustainable, by the way!), and even when you open and skim through a copy, how is anybody supposed to know which articles you read? What dollar figure, in any case, could you put on a fantastic Book Review of a business leader's book in a leading broadsheet?

In addition, if your goal is to build brand awareness over a multiyear period (which is how brand awareness is built), even if you ask a new Client how they know you, they may only be able to give you vague information such as ‘I see you write in Shower Cubicles Weekly a lot’ – even they can’t remember which article it was that ‘converted’ them!

What then is to be done about this obsession with numerical figures when it comes to Marketing and the difficulty in making them accurate? We know that Marketing has, indeed, a ROI (if it’s working!) but if we cannot measure it precisely, does it still exist?! It rather reminds me of the old adage about a person screaming in a forest. And it points to our obsession with KPIs.

Because of the difficulty in pinpointing figures, the ROI of Marketing (like the crazy valuations and projections involved in Unicorn companies, and the always vague guestimates on Balance Sheets of Good Will) is always going to involve Best Guesses. But we should also factor in the cost of Not Doing Marketing: companies who relegate the critical roles of Marketing & PR to peripheral functions purely because their ROI cannot always be quantified to the nth digit are putting themselves in a dangerous position in relation to their competitors. if you're not doing it, somebody else is. That 'Cost of Loss' is surely worth considering.

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*Extract* from our forthcoming SLTLA book: Thought Leadership Marketing: A Concise Guide