Measuring marketing ROI: Well, sometimes

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Marketing metrics: Measuring strategic alliance success — one of my earlier articles, written in December 2010. (You can click on the image for a pdf download)

A few years ago, I wrote a series of articles for The SMPS Marketer about marketing metrics; the obvious conclusion–not many marketers were doing it, and even fewer were doing it right.

The story today isn’t much improved. Following a survey last year reported recently in the same magazine, Ali Detar and Carl Hunt reported:

More than 38 per cent of survey respondents said they don’t effectively track ROI for proposal and marketing strategies. In addition, although firms ay track metrics on proposals, awareness campaigns and events, many firms aren’t sure they can get the data they need in the manner they need to see it — or what to do with the information if they can get it.

Ugh.

I would also suggest that some marketers are dressing up their numbers a bit to make things seem better than they are. Consider this “success story” reported from one practice’s measurement of marketing awareness campaigns.

One survey respondent approaches campaign tracking by evaluating the costs of human capital, in addition to campaign expenses. The marketer tallied the expenses of its eight full-time marketing employees — $580,000 for six months — compared to $1 million in revenue generated through in-bound marketing campaigns. The income, which represented almost double the investment, justified the marketing staff, resources and technology costs?

Huh. What business do you know would be profitable on that sort of margin? If marketing costs represent more than half of gross revenue, either the service is astoundingly profitable without marketing, there is some incredible overcapacity which has been absorbed by the marketing expense, or the new clients will generate enough lifetime revenue to justify the cost. (The latter is the only likely rational positive reason for this sort of marketing investment, and it seems that aspect wasn’t covered in the survey.)

The survey indicates far more marketers are tracking ROI effectively from shows and events — including lead management (good) — but relatively few seem to be calculating the true cost of preparing and managing proposals (this is strange, to me, because of the cost and marketing time invested in RFP responses).

Really, in some ways, the recent survey results reflect my earlier findings. “Some age-old questions arise time and time again: Why did the dinosaurs become extinct? How did the universe begin? Can yo measure your return on investment (ROI) for marketing initiatives?”

The writers suggest part of the problem could be in integrating data and finding the resources to measure things. I think the main reason, however, for the lack of measuring ROI, is that much of what passes for marketing would receive really low ROI scores, and no one involved in the process wants to share/broadcast that bad news, especially when their jobs might be at stake.

On a more positive side, however, the key to the problem may rest in that easy hay-seed answer about AEC marketing ROI: “It’s all in the relationships.”  Yes, there are studies which show that the success rate for RFP responses goes from near zero if you are just responding to a public bid, to almost 70 to 90 per cent if you’ve had a connection with the clients for more than six months. And one architectural practice devised an innovative Go/No Go grid based on the hours that its principals put into the initiative/relationship before reaching the formal RFP stage — the more hours, the better (reflecting passion, interest and presumably relationships.)

I suspect some of the 38 per cent who don’t measure marketing effectively spend their time instead cultivating the soft relationships between their organization and current and potential referred clients. It is hard to have a time clock or measure billing-time hours when you are with clients you enjoy, or contributing to community and cultural activities with others who share your values.

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