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There is an ongoing argument that ROI threatens brand performance....


The concern expressed is that measuring return on investment for certain advertising and marketing initiatives does not take into account the long-term contribution to the brand. There was an article last month where this message was being expressed at a publishing conference and it really got me concerned. You can't put ROI and branding up against one another when in reality the two belong together.
In a head-to-head battle, supporting the brand argument of not measuring or analyzing ROI will hurt executive confidence and leave too much room for ineffective marketing to continue regardless of its ability to contribute more than its cost back to the business. ROI measures that are purely short-term and do not take into account the role of building a brand position or how brand advertising can lift the impact of other marketing initiatives will make decisions that ultimately hurt future sales performance.
Publishers are not helping their cause by arguing against ROI measures. With comments that suggest counting leads from ads is "stupid," that ROI is only for manufacturing, and that those people asking for ROI measures are not responsible for growing the company come across as whining from an industry whose product value is being challenged (read the full article Executives Address Marketers' ROI Demands at WPA Annual Conference). Do they really expect the business community to say, "Your right, let's just continue to spend our marketing budgets and have blind faith that our brand value will grow."
Why don't publishers get smart about this and help marketers get the insight they need to have confidence that financial returns will follow? Marketing is about a lot more than just impressions and takes more than awareness to achieve results. When a marketing initiative is not intended to drive short-term results, marketers need to present their case that makes it clear what impact will be made in the short term and how that ultimately leads to incremental sales. Whether it is a rough assumption or a fact-based plan, an ROI analysis that extends across many months or many years will still help align the spending level with the expected return. It also helps define key metrics and checkpoints over time.
One of the biggest mistakes of those arguing against ROI as a measure is that they are not arguing for an alternative measure. Awareness comes up but that is still more of a short-term impact than long-term impact. "Brand-building" is presented as a generally unmeasurable objective but that needs a definition along the lines of competitive positioning or preference at which point there is at least some potential connection to long-term sales growth.
Here are a few quick thoughts that both marketers and publishers can consider to help close the gap between ROI and branding.
* Be clear on what impact is expected and how that contributes to business performance. If leads or sales are coming in future periods, or incremental impact will come through other marketing initiatives, make this your strategy so the executives have realistic expectations.
* Don't let metrics that are input-driven (GRPs, impressions, etc) become the objectives. Make sure the objectives are driven by the audience response to the marketing. You need to determine if the marketing is effective with metrics that link to the bottom-line. Metrics such as ad recall, likeability, awareness and intentions are good at diagnosing where the marketing initiatives may be weak but these are not good as objectives unless there is a correlation with purchasing behavior.
* Look closely at your targeting and outline how current customers will be impacted differently than former customers, competitor customers and non-category purchasers that you want to attract. Will putting your name in front of everyone influence all of their behaviors the same? What about high value customers that either purchase more or are more likely to become repeat purchasers?
* If your marketing initiative will build brand awareness and interest but not motivate incremental purchases, determine what other marketing initiatives will and map out the integration so that the ROI of the combined marketing mix can be assessed.
* Measure, test, and analyze. Don't accept that brand advertising is not measurable (and shame on those in the publishing industry that believe this is the case). You may not be able to measure absolutely every marketing initiative but there are plenty of measurements to help determine if you are overspending or under-spending on select media, the contribution of select media channels within the overall marketing mix, the impact of integrated marketing, or how well your marketing impacts different market segments.
* Run ROI projections that reflect your strategy and assumed impact. It's incredible how often a basic ROI calculation (taking into account short-term and long-term impact) will show that there is little or no opportunity to ever recover the budgets spent. This does not kill good marketing initiatives; it leads to better strategies and tactical plans that come from having better insight into how incremental transactions and customers are generated.
* And yes, there are other forms of financial contribution that come from strong brands beyond just incremental sales (stock value, premium pricing, etc.). We'll save that for a future discussion. For now, don't pass off your contribution as brand equity or other assets unless you know enough to show the financial impact.
Don't be threatened by ROI measurements. Yes, they can be harmful if used incorrectly. Smart marketers must build enough understanding of ROI to demonstrate that they have a clear plan for wisely spending marketing budgets to achieve business objectives.

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ABOUT THE AUTHOR
image of Jim Lenskold

JIM LENSKOLD has brought 20 years of innovation in marketing ROI measurements and analysis into the mainstream marketing organizations through consulting, publishing, speaking and workshops around the world. His book Marketing ROI: The Path to Campaign, Customer, and Corporate Profitability is translated into eight languages and was named one of the
five most influential marketing books of 2004.

Founded in 1997, the Lenskold Group helps Fortune 1000
and emerging mid-size companies adopt advanced marketing ROI capabilities and build greater accountability and credibility for marketing. Lenskold Group specializes in practical measurements, ROI planning tools, and financial impact analysis to guide profitable acquisition, retention, and
growth strategies.

Jim's career began at AT&T where he helped evolve the telecommunications leader from a monopoly to a well-respected competitive marketer in the mid-1980s through early 1990s. He helped form the customer acquisition and customer retention organizations and managed a $20 million marketing budget for retention strategy and customer loyalty marketing. He also successfully launched and grew a technology firm before starting the Lenskold Group.

The Lenskold Group serves Fortune 1000 and emerging companies in the US, Canada and UK. Jim can be reached at jlenskold@lenskold.com or (+1) 732-223-8886.