Today’s guest post comes to you from Bob Murphy, Managing Partner at Movéo.
In 1992, Peter Danaher and Roland T. Rust published a paper in the European Journal of Operational Research titled, “Determining the optimal return on investment for an advertising campaign.” They began with a point of view – “…advertising is an investment, and [we] propose a simple formula for calculating the level of media spending which maximizes the return on investment.”
That same year Gary Lilien and Philip Kotler published their important book Marketing Models, which provided quantitative foundations for marketing decisions.
As the 90s rolled on, talk about ROI – this time by agencies – became the rage. Largely fueled by the emergence of the Internet, agencies eager to take advantage of a newfound ability to measure communication performance more effectively did so faster than you can say “Google.” Reports on visits, impressions, time on site, CPC, etc., became de rigueur.
Real ROI? Not according to the true meaning of the phase. While these measures are useful in recognizing levels of engagement, they stop well short of proving whether a dollar is well spent.
We believe that marketers should move beyond these “expressions of interest” and look instead for something we’re calling Impact On Growth, or IOG. As technology platforms improve and data becomes more abundant, agencies will have fewer and fewer excuses as to why they aren’t proving marketing’s contribution to revenue – drawing a direct line to the bottom line.
If they continue on the current path it will be at their own peril – progressive CMO’s are transitioning away from these “soft success” metrics. They increasingly view marketing’s accountability in the same light as they view sales’ – show me the money! The agencies they partner with, if they want to be partners in the future, will need to be fluent in this new language.
While there has been some good thinking on this topic from both academics and practitioners, marketing, as a discipline, has been too slow to develop the progressive models that will provide a clear line of sight from effort to business impact.
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