by David A. Sutton, CEO, Marketing Scientists, LLC
The First Step to ROI-Centered Marketing – The Marketing Investment Profile
Marketing doesn’t work.
As it’s practiced today, Marketing is deeply flawed. Poor investment choices, poorly executed strategies, poor financial oversight—in most cases, companies would be better served buying lottery tickets with their Marketing budgets, where at least the chance exists of a return on investment.
However, discipline is coming to Marketing—and with it, the opportunity for real ROI—in the form of Enterprise Marketing Management, a marketing discipline that gives every company the tools it needs to drive organic growth and profitability. EMM focuses on both overall marketing effectiveness (are my marketing efforts selling more? am I allocating investments wisely?) and marketing efficiency (am I making smart trade-offs between cost, time, and quality?). In a field long watered down with talk of “awareness” and “brand recognition,” EMM keeps you focused on a very simple Marketing proposition—if it’s not bringing in revenue, it’s not working.
Putting Your Marketing Money To Work
One of the key elements of marketing effectiveness is making intelligent investment allocations. Much as with the stock market, there’s only so much that a company can do to peer into the future and see how individual marketing investments will play out. However, most marketers don’t even take the most basic forecasting steps, instead relying on simple “gut checks” to guess whether they’ve put their company’s money into profitable marketing investments.
To make intelligent investment allocations, you must understand which specific benefits you must communicate to your customers to drive purchase intent. In other words, if you don’t know what bait to put on your hook, then searching out the best fishing holes is a complete waste of time. You must develop a comprehensive, penetrating understanding of your brand architecture and the benefits that drive customer purchase intent. Once you do, you can make marketing investments with confidence—you’ll know that whenever and wherever you communicate with customers, you’re sending them messages that are proven to induce them to buy.
Developing Marketing Investment Profiles For Investment And Return
Whether you’re running an ad in the Yellow Pages or planning for the next trade show, every marketing investment should carry with it a package of tangible investment tracking methods. In far too many cases, CEO’s and marketing leaders make decisions without knowing the basic units of measurement and comparison necessary for smart investment allocations. You need to apply the same financial oversight to Marketing spending as you would to any other investment. Rationalizations like “sales may be low, but awareness is through the roof!” won’t fly anymore, not with a rigorous focus on Marketing spending.
The first step in improving your Marketing investment is to make Marketing Investment Profiles the center of every action that your Marketing department takes. To develop a Marketing Investment Profile, answer the following questions on a month-by-month basis:
- What are the investment commitments and outflows required?
a. Commitment represents the requirement to pay
b. Outflow is the actual disbursement of funds
- What is the expected incremental return?
a. What return will be provided by Sales?
b. What percentage is Operating Profit?
- What is the expected variation of investment and return based on experience?
a. How have similar investments behaved in the past?
Sample Marketing Investment Profile: If you’re not profiling your marketing investments, you’re flying blind when it comes to marketing investment allocations
The Marketing Investment Profile represents the basic unit of measure for every Marketing activity. Use the sample figures above to evaluate your own marketing spending. Are your Marketing costs on the path to returning profits? If they’re not—or if you have no way of tracking whether they are or not—it’s time to apply some more rigor to your Marketing efforts. Break down successes and failures alike to learn from each. Don’t be satisfied until you know where every dollar goes—and whether it’s doing its job when it gets there. Of course, you need to apply some common sense regarding what is measurable and what it costs to actually measure a specific marketing activity. In some cases, it may not be worth it. That said, you need to keep your guard up against “lazy marketing” — making excuses for not measuring simply because it is hard to do.
- Researching, developing, and implementing Marketing Investment Profiles will create a virtuous cycle within your company:
Marketers will be more realistic about the investments they propose and will feel committed to results
- Past learning about marketing vehicles will be applied
- Marketers will make logical and rational marketing allocations when making the decisions to increase—or terminate—further investments
- CEOs will have what they need to evaluate Marketing’s performance based on its ability to achieve expected returns, investment by investment
You don’t need expensive systems. You don’t have to hire new people. All you have to do is make the commitment to putting ROI at the center of everything that marketing does. Enterprise Marketing Management involves bringing scientific discipline to marketing and abandoning the secretive “black box” approaches of the past. Marketing Investment Profiles are your first step in this profitable, efficient new discipline. So what are you waiting for?
Dave Sutton is the co-author of Enterprise Marketing Management: The New Science of Marketing (John Wiley & Sons, 2003) and the co-founder of Marketing Scientists, LLC, a strategic consulting firm dedicated to growing your business by bringing scientific rigor and discipline to your sales and marketing activities.