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Marketing: Fluffy or providing Return on Investment?

Posted on 14/04/2015, 13:27

An oft quoted phrase from William Lever, the First Lord Leverhulme and founder of Unilever is “Half the money I spend on advertising is wasted; the trouble is I don’t know which half”. It is a common jibe that marketing and in particular marketers are “fluffy”; generally this means that the discipline is unaccountable and that marketers don’t add value.

But the world of marketing has moved on and the days of “hit and hope” advertising are long gone. Today’s large company marketers talk about ROI (return on investment) and ROMI (return on marketing investment) and the tools developed by the big boys are even more appropriate in the world of hard pressed SMEs where budgets are tight and marketing must contribute to the business.

So where do you start?

To manage and improve your marketing you need management information. Key Performance Indicators (KPIs) are an important ruler that you can use to measure progress in all areas of your business. Your KPIs should all be looked at and measured periodically (weekly, monthly, quarterly, annually).  Once you are armed with this information you can direct your efforts more accurately and then targets can be set. Because targeted work is more productive work.

Sales and marketing are essential to every company, no matter what your trade; the following 5 Key Areas related to sales and marketing should be part of the Key Performance Indicators of any business and they need to be measured in your business.

  • Leads Generated
  • Conversion of Leads to Sales
  • Number of Transactions
  • Average Sale Value
  • Margins

Return on investment (or ROMI) is a way of measuring the contribution attributable to marketing effort and can be calculated in a number of different ways according to what suits your business objectives. Perhaps the easiest way to think about it is

  • Sales (net of marketing spending) divided by the marketing ‘invested’ or risked.

But it could also be a measure of leads generated, margin, brand share gain or any other KPI you consider to be important. ROMI can be measured in at least two ways

  • Short Term: a simple index measuring the £s of revenue (or market share, contribution margin or other desired outputs) for every £ of marketing spend.
  • Long Term: can be used to determine less tangible aspects of marketing effectiveness. E.g. increased brand awareness

If you aren’t using KPIs to measure your marketing efforts or calculating the return on your marketing investments how do you know if you are doing well; if you need to improve; or if the money you are spending is giving any benefit at all.

The on-line world of digital marketing is a science of measurement but even the old and trusted off-line marketing activities can be measured!

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