Marketing Executives Under Growing Pressure to Show Return on Investment
Conference Board Reports
The report is based on a survey of 73 companies conducted by The Conference Board Research Working Group on Measuring and Managing Return on Marketing Investment. Two-thirds of these companies have implemented marketing return on investment programs in recent years. The Research Working Group, which includes senior executives from 17 leading companies, examined different approaches for measuring and managing marketing ROI across industries and companies. The most frequently used metrics include customer loyalty/satisfaction, customer retention, market share, marketing spending, revenue, web page views and profits.
"In the past, marketing awareness and brand-building activities were enough to define marketing's mission and role in a company, and to justify its budget," said Lorrie Foster, Vice President of Councils and Research Working Groups at The Conference Board. "But the focus of marketing has evolved toward more strategic, value-added activities that can be quantified and linked to corporate goals. New approaches, methodologies and tools, and technologies are making it possible to link marketing investments directly to revenues and profits, holding marketing executives accountable for achieving expected results."
But The Conference Board report emphasizes that measuring marketing ROI is still in its early stages. Thirty-seven percent report measuring ROI less than a year. Forty percent report measuring ROI over the last one or two years. But less than a quarter have been at it for more than three years.
More than one-third of companies report making no efforts to measure marketing return on investment. Among the remaining companies, which had implemented programs, none have yet achieved their goals in measuring ROI. Only one-quarter report making "good" progress. The majority said they found the process more difficult than anticipated.
Ninety-one percent of companies who report "good progress," and 67 percent of companies who report "some" progress, have incorporated marketing ROI into their performance objectives. More than half of those who report "good" progress have also put in place recognition programs for marketing ROI.
Marketing ROI Faces Some Resistance
Most companies experience cultural resistance when moving to marketing ROI. Lack of resources, linked to performance objectives, and lack of focus were some of the primary sources of individual or cultural resistance. Major barriers to implementing marketing ROI programs, largely related to issues of business infrastructure, include problems with data availability or integrity (47 percent), technology/infrastructure (41 percent), resource dedication (39 percent), and methodology/know how (22 percent). The report finds that technology is key. More than half (55 percent) said that technological/infrastructural deficiencies have had "a lot" or a "significant" effect on their efforts.
Leadership commitment (63 percent) is the most important driver of marketing ROI. An additional 37 percent said that executive sponsorship in particular is an important driver, supporting findings that identify senior leadership as the most important component of the business environment for the advancement of an ROI-driven marketing effort.
Although the inputs and expenses associated with marketing can easily be measured on a monthly or quarterly basis, the results of a successful marketing effort — enhanced brand recognition and reputation, customer loyalty, improved market penetration, expanded networks and cross-selling opportunities — may not be realized in the form of increased revenue within a specific timeframe and may be difficult to forecast, notes the report. External economic forces, such as market movements, business cycles, and competitors' marketing efforts, make it difficult to evaluate returns on specific marketing efforts in the near term. Internal factors, such as changes in product quality, delivery times or technical support, can also affect "returns," making it difficult to attribute results to a specific marketing campaign.
"Progress in this area has been difficult," says Foster. "Many of the expected returns from marketing efforts are intangible or long-term. Hence, measuring the return on investment in marketing is a more complex and less well-developed process than calculating investment returns in other business areas."
For a copy of the report please email Carol Courter: firstname.lastname@example.org.
Source: Managing and Measuring Return on Marketing Investment
Report No. 1435, The Conference Board